UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2018~~2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-36787

RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP

(Exact Name of Registrant as Specified in its Charter)



~~Ontario~~Canada		98-1206431
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)



~~226 Wyecroft Road~~130 King Street West, Suite 300 ~~Oakville,~~Toronto, Ontario		~~L6K 3X7~~M5X 1E1
(Address of Principal Executive Offices)		(Zip Code)

(905) 845-6511

(Registrant’s telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbols	Name of each exchange on which registered
Class B exchangeable limited partnership units	QSP	Toronto Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” ~~and~~ “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(check one);~~




Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐

Emerging growth company ☐

~~Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒~~

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April ~~19, 2018,~~22, 2019, there were ~~217,654,367~~207,380,043 Class B exchangeable limited partnership units and 202,006,067 Class A common units outstanding.

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

TABLE OF CONTENTS




		Page

	PART I – Financial Information
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3736
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	49

	PART II – Other Information
Item 1.	Legal Proceedings	51
Item 5.	Other Information	51
Item 6.	Exhibits	5152
	Signatures	5254

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PART I — Financial Information

Item 1. Financial Statements

RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In millions of U.S. dollars, except unit data)

(Unaudited)


	As of						As of
	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	821.5		$	1,097.4		$	902		$	913
Accounts and notes receivable, net of allowance of $19.5 and $16.4, respectively	467.6			488.8
Accounts and notes receivable, net of allowance of $14 and $14, respectively							441			452
Inventories, net	74.6			78.0			74			75
Prepaids and other current assets	87.8			85.4			63			60
Total current assets	1,451.5			1,749.6			1,480			1,500
Property and equipment, net of accumulated depreciation and amortization of $651.7 and $623.3, respectively	2,072.7			2,133.3
Property and equipment, net of accumulated depreciation and amortization of $645 and $704, respectively							2,011			1,996
Operating lease assets							1,148			—
Intangible assets, net	10,904.6			11,062.2			10,427			10,463
Goodwill	5,693.5			5,782.3			5,555			5,486
Net investment in property leased to franchisees	66.9			71.3			50			54
Other assets, net	570.7			425.2			622			642
Total assets	$	20,759.9		$	21,223.9		$	21,293		$	20,141
LIABILITIES AND EQUITY
Current liabilities:
Accounts and drafts payable	$	416.4		$	496.2		$	451		$	513
Other accrued liabilities	636.6			865.7			689			637
Gift card liability	107.3			214.9			112			167
Current portion of long term debt and capital leases	78.8			78.2
Current portion of long term debt and finance leases							94			91
Total current liabilities	1,239.1			1,655.0			1,346			1,408
Term debt, net of current portion	11,788.1			11,800.9			11,747			11,823
Capital leases, net of current portion	236.6			243.8
Finance leases, net of current portion							287			226
Operating lease liabilities, net of current portion							1,046			—
Other liabilities, net	1,820.4			1,455.1			1,531			1,547
Deferred income taxes, net	1,432.9			1,508.1			1,563			1,519
Total liabilities	16,517.1			16,662.9			17,520			16,523
Partners’ capital:
Class A common units; 202,006,067 issued and outstanding at March 31, 2018 and December 31, 2017	4,117.2			4,167.5
Partnership exchangeable units; 217,679,492 issued and outstanding at March 31, 2018; 217,708,924 issued and outstanding at December 31, 2017	1,189.7			1,276.4
Class A common units; 202,006,067 issued and outstanding at March 31, 2019 and December 31, 2018							4,423			4,323
Partnership exchangeable units; 207,382,401 issued and outstanding at March 31, 2019; 207,523,591 issued and outstanding at December 31, 2018							737			730
Accumulated other comprehensive income (loss)	(1,066.6		)	(884.3		)	(1,389		)	(1,437		)
Total Partners’ capital	4,240.3			4,559.6			3,771			3,616
Noncontrolling interests	2.5			1.4			2			2
Total equity	4,242.8			4,561.0			3,773			3,618
Total liabilities and equity	$	20,759.9		$	21,223.9		$	21,293		$	20,141

See accompanying notes to condensed consolidated financial statements.

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In millions of U.S. dollars, except per unit data)

(Unaudited)


	Three Months Ended March 31,						Three Months Ended March 31,
	2018			2017			2019			2018
Revenues:
Sales	$	547.8		$	550.4		$	522		$	548
Franchise and property revenues	706.0			450.2			744			706
Total revenues	1,253.8			1,000.6			1,266			1,254
Operating costs and expenses:
Cost of sales	429.1			423.4			406			429
Franchise and property expenses	104.4			111.0			133			104
Selling, general and administrative expenses	301.3			121.9			312			301
(Income) loss from equity method investments	(14.3		)	(5.7		)	(2		)	(14		)
Other operating expenses (income), net	12.7			13.8			(17		)	13
Total operating costs and expenses	833.2			664.4			832			833
Income from operations	420.6			336.2			434			421
Interest expense, net	140.1			111.4			132			140
Loss on early extinguishment of debt	—			20.4
Income before income taxes	280.5			204.4			302			281
Income tax expense	1.7			37.8			56			2
Net income	278.8			166.6			246			279
Net income attributable to noncontrolling interests	0.2			0.4			—			—
Partnership preferred unit distributions	—			67.5
Net income attributable to common unitholders	$	278.6		$	98.7		$	246		$	279
Earnings per unit - basic and diluted
Class A common units	$	0.73		$	0.25		$	0.67		$	0.73
Partnership exchangeable units	$	0.60		$	0.21		$	0.53		$	0.60
Weighted average units outstanding - basic and diluted
Class A common units	202.0			202.0			202			202
Partnership exchangeable units	217.7			226.9			208			218
Distributions per unit
Class A common units	$	0.55		$	0.21
Partnership exchangeable units	$	0.45		$	0.18

See accompanying notes to condensed consolidated financial statements.

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In millions of U.S. dollars)

(Unaudited)


	Three Months Ended March 31,						Three Months Ended March 31,
	2018			2017			2019			2018
Net income	$	278.8		$	166.6		$	246		$	279

Foreign currency translation adjustment	(215.6		)	105.8			159			(217		)
Net change in fair value of net investment hedges, net of tax of $(8.6) and $10.7	2.5			(43.5		)
Net change in fair value of cash flow hedges, net of tax of $(9.1) and $0.9	24.9			(2.6		)
Amounts reclassified to earnings of cash flow hedges, net of tax of $(2.1) and $(1.3)	5.7			3.7
Gain (loss) recognized on defined benefit pension plans, net of tax of $0.0 and $0.3	0.2			(0.3		)
Net change in fair value of net investment hedges, net of tax of $26 and $(9)							(76		)	3
Net change in fair value of cash flow hedges, net of tax of $12 and $(9)							(34		)	25
Amounts reclassified to earnings of cash flow hedges, net of tax of $0 and $(2)							(1		)	6
Other comprehensive income (loss)	(182.3		)	63.1			48			(183		)
Comprehensive income (loss)	96.5			229.7			294			96
Comprehensive income (loss) attributable to noncontrolling interests	0.2			0.4			—			—
Comprehensive income attributable to preferred unitholder	—			67.5
Comprehensive income (loss) attributable to common unitholders	$	96.3		$	161.8		$	294		$	96

See accompanying notes to condensed consolidated financial statements.

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

(In millions of U.S. dollars, except units)

(Unaudited)


	Class A Common Units				Partnership Exchangeable Units					Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest		Total			Class A Common Units				Partnership Exchangeable Units					Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest		Total
	Units	Amount			Units		Amount			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest		Total			Units	Amount			Units		Amount			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest		Total
Balances at December 31, 2017	202,006,067	$	4,167.5		217,708,924		$	1,276.4		$	(884.3	)	$	1.4	$	4,561.0
Balances at December 31, 2018																		202,006,067	$	4,323		207,523,591		$	730		$	(1,437	)	$	2	$	3,618
Cumulative effect adjustment	—	(132.0		)	—		(117.8		)	—			—		(249.8		)	—	12			—		9			—			—		21
Distributions declared on Class A common units	—	(112.1		)	—		—			—			—		(112.1		)
Distributions declared on partnership exchangeable units	—	—			—		(98.0		)	—			—		(98.0		)
Distributions declared on Class A common units ($0.63 per unit)																		—	(127		)	—		—			—			—		(127		)
Distributions declared on partnership exchangeable units ($0.50 per unit)																		—	—			—		(104		)	—			—		(104		)
Exchange of Partnership exchangeable units for RBI common shares	—	1.7			(29,432	)	(1.7		)	—			—		—			—	9			(141,190	)	(9		)	—			—		—
Capital contribution from RBI Inc.	—	44.3			—		—			—			—		44.3			—	71			—		—			—			—		71
Restaurant VIE contributions (distributions)	—	—			—		—			—			0.9		0.9
Net income	—	147.8			—		130.8			—			0.2		278.8			—	135			—		111			—			—		246
Other comprehensive income (loss)	—	—			—		—			(182.3		)	—		(182.3		)	—	—			—		—			48			—		48
Balances at March 31, 2018	202,006,067	$	4,117.2		217,679,492		$	1,189.7		$	(1,066.6	)	$	2.5	$	4,242.8
Balances at March 31, 2019																		202,006,067	$	4,423		207,382,401		$	737		$	(1,389	)	$	2	$	3,773



	Class A Common Units				Partnership Exchangeable Units						Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest		Total
	Units	Amount			Units		Amount				Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest		Total
Balances at December 31, 2017	202,006,067	$	4,168		217,708,924		$	1,276			$	(884	)	$	1	$	4,561
Cumulative effect adjustment	—	(132		)	—		(118		)		—			—		(250		)
Distributions declared on Class A common units ($0.55 per unit)	—	(112		)	—		—				—			—		(112		)
Distributions declared on partnership exchangeable units ($0.45 per unit)	—	—			—		(98		)	��	—			—		(98		)
Exchange of Partnership exchangeable units for RBI common shares	—	2			(29,432	)	(2		)		—			—		—
Capital contribution from RBI Inc.	—	44			—		—				—			—		44
Restaurant VIE contributions (distributions)	—	—			—		—				—			1		1
Net income	—	148			—		131				—			—		279
Other comprehensive income (loss)	—	—			—		—				(183		)	—		(183		)
Balances at March 31, 2018	202,006,067	$	4,118		217,679,492		$	1,189			$	(1,067	)	$	2	$	4,242

See accompanying notes to condensed consolidated financial statements.

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In millions of U.S. dollars)

(Unaudited)


	Three Months Ended March 31,						Three Months Ended March 31,
	2018			2017			2019			2018
Cash flows from operating activities:
Net income	$	278.8		$	166.6		$	246		$	279
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization	47.0			43.4			47			47
Premiums paid and non-cash loss on early extinguishment of debt	—			17.9
Amortization of deferred financing costs and debt issuance discount	7.2			8.5			7			7
(Income) loss from equity method investments	(14.3		)	(5.7		)	(2		)	(14		)
Loss (gain) on remeasurement of foreign denominated transactions	16.4			10.4			(15		)	16
Net losses on derivatives	1.9			5.8
Net (gains) losses on derivatives							(20		)	2
Share-based compensation expense	13.3			16.5			22			13
Deferred income taxes	(19.0		)	15.3			38			(19		)
Other	3.7			3.6			3			4
Changes in current assets and liabilities, excluding acquisitions and dispositions:
Accounts and notes receivable	15.4			47.8			14			15
Inventories and prepaids and other current assets	(7.0		)	7.8			(13		)	(7		)
Accounts and drafts payable	(72.8		)	38.9			(69		)	(73		)
Other accrued liabilities and gift card liability	(374.7		)	(82.6		)	(126		)	(374		)
Tenant inducements paid to franchisees							—			(2		)
Other long-term assets and liabilities	(37.8		)	20.1			22			(36		)
Net cash (used for) provided by operating activities	(141.9		)	314.3
Net cash provided by (used for) operating activities							154			(142		)
Cash flows from investing activities:
Payments for property and equipment	(7.0		)	(4.1		)	(5		)	(7		)
Proceeds from disposal of assets, restaurant closures, and refranchisings	1.6			6.8
Net payment for purchase of Popeyes, net of cash acquired	—			(1,635.9		)
Return of investment on direct financing leases	4.2			4.1
Net proceeds from disposal of assets, restaurant closures, and refranchisings							4			2
Settlement/sale of derivatives, net	3.0			5.2			11			3
Other investing activities, net	0.1			(0.8		)	1			4
Net cash provided by (used for) investing activities	1.9			(1,624.7		)	11			2
Cash flows from financing activities:
Proceeds from issuance of long-term debt	—			1,300.0
Repayments of long-term debt and capital leases	(21.7		)	(319.9		)
Payment of financing costs	—			(31.8		)
Distributions on common, preferred and Partnership exchangeable units	(96.9		)	(145.9		)
Payments in connection with repurchase of partnership preferred units	(33.6		)	—
Repayments of long-term debt and finance leases							(23		)	(22		)
Distributions on Class A common and Partnership exchangeable units							(207		)	(97		)
Distributions to RBI for payments in connection with redemption of preferred shares							—			(34		)
Capital contribution from RBI Inc.	25.2			8.0			42			25
Other financing activities, net	(0.6		)	(1.1		)	6			—
Net cash (used for) provided by financing activities	(127.6		)	809.3			(182		)	(128		)
Effect of exchange rates on cash and cash equivalents	(8.3		)	3.3			6			(8		)
Increase (decrease) in cash and cash equivalents	(275.9		)	(497.8		)	(11		)	(276		)
Cash and cash equivalents at beginning of period	1,097.4			1,435.8			913			1,097
Cash and cash equivalents at end of period	$	821.5		$	938.0		$	902		$	821
Supplemental cash flow disclosures:
Interest paid	$	128.9		$	80.1		$	140		$	129
Income taxes paid	$	304.0		$	24.1		$	45		$	304

See accompanying notes to condensed consolidated financial statements.

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

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 March 31, ~~2018,~~2019, we franchised or owned ~~4,774~~4,866 Tim Hortons restaurants, ~~16,859~~17,823 Burger King restaurants, and ~~2,926~~3,120 Popeyes restaurants, for a total of ~~24,559~~25,809 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 “$” or “dollars” are to the currency of the United States unless otherwise indicated. All references to ~~Canadian dollars~~“Canadian dollars” or C$“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 ~~23, 2018.~~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 March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, we determined that we are the primary beneficiary of 2318 and 3117 Restaurant VIEs, ~~respectively. As Tim Hortons, Burger King,~~respectively, and ~~Popeyes franchise~~accordingly, have consolidated the results of operations, assets and ~~master franchise arrangements provide the franchise~~liabilities, 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~~cash flows of ~~any such entity that might be a VIE.~~these Restaurant VIEs in our Financial Statements. Material intercompany accounts and transactions have been eliminated in consolidation.

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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.

~~Table of Contents~~

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 ~~December 31, 2017~~ reclassification of ~~Advertising fund restricted assets to Cash and cash equivalents, Accounts and notes receivable, net and Prepaids and other current~~$2 million from changes in Other long-term assets and liabilities in the ~~reclassification~~Condensed Consolidated Statement of ~~Advertising fund liabilities~~Cash Flows for the three months ended March 31, 2018 to ~~Accounts and drafts payable and Other accrued liabilities as detailed below (in millions).~~Tenant inducements paid to franchisees. These reclassifications had no effect on previously reported net income.

December 31, 2017 December 31, 2017
As Reported Reclassification As Adjusted
Current assets:
Cash and cash equivalents $ 1,073.4
$ 24.0
$ 1,097.4
Accounts and notes receivable, net 455.9
32.9
488.8
Inventories, net 78.0
—
78.0
Advertising fund restricted assets 83.3
(83.3 ) —
Prepaids and other current assets 59.0
26.4
85.4
Total current assets $ 1,749.6
$ —
$ 1,749.6

Current liabilities:
Accounts and drafts payable $ 412.9
$ 83.3
$ 496.2
Other accrued liabilities 838.2
27.5
865.7
Gift card liability 214.9
—
214.9
Advertising fund liabilities 110.8
(110.8 ) —
Current portion of long term debt and capital leases 78.2
—
78.2
Total current liabilities $ 1,655.0
$ —
$ 1,655.0

Note 3. New Accounting Pronouncements

~~Revenue Recognition~~Lease Accounting – In ~~May 2014,~~February 2016, the Financial Accounting ~~Standards~~Standard Board (the “FASB”) issued a new ~~single comprehensive model for entities to use in accounting for revenue arising from contracts with customers.~~guidance on leases. We adopted this new guidance on January 1, ~~2018.~~2019. See Note 4, ~~Revenue Recognition~~Leases, for further information about our transition to this new ~~revenue recognition model using the modified retrospective transition method.~~

~~Lease Accounting~~ – In February 2016, the FASB issued new guidance on leases. 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, as well as enhanced disclosures, and is effective commencing in 2019. The amendment required a modified retrospective transition approach with application in all comparative periods presented. In March 2018, the FASB approved an amendment to permit a company to use its effective date as the date of initial application without restating comparative period financial statements. We expect this new guidance to cause a material increase to our assets and liabilities on our consolidated balance sheet since we have a significant number of operating lease arrangements for which we are the lessee. We are currently evaluating the impact that adoption of this guidance will have on our consolidated statements of operations and the transition approach to use. We do not expect the adoption of this new guidance to have a material impact on our cash flows and liquidity.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.

~~Table~~ The adoption of ~~Contents~~

~~Hedge Accounting~~ – In August 2017, the FASB issued an accounting standards update to improve the transparency and understandability of information conveyed to financial statement users about an entity's risk management activities and simplify the application of hedge accounting by preparers. We adopted this ~~guidance on January 1, 2018 (the “Adoption Date”).~~

~~The~~ new guidance eliminates the requirement to separately measure and report hedge ineffectiveness for cash flow and net investment hedges that are deemed effective. Most notably, for our cross-currency swaps designated as net investment hedges, the new guidance permits the exclusion of the interest component (the “Excluded Component”) from the accounting hedge without affecting net investment hedge designation. The initial value of the Excluded Component may be recognized in earnings on a systematic and rational basis over the life of the derivative instrument.

Subsequent to the Adoption Date, we changed the method of assessing effectiveness for net investment hedges using derivatives from the forward method to the spot method. We de-designated the cross currency-swaps and re-designated them as of March 15, 2018 (the "Re-designation Date"). As a result of adopting the new guidance and the re-designation of our cross- currency-swaps, we will recognize a benefit from the amortization of the initial value of the Excluded Component as a component of Interest expense, net in our condensed consolidated statements of operations rather than as a component of other comprehensive income. All changes in fair value of the instruments related to currency fluctuations will continue to be recognized within other comprehensive income.

~~The impact of adoption did~~ not have a material ~~effect~~impact on our Financial Statements as of the Adoption Date. We recorded a $3.6 million net benefit to Interest expense, net from the Re-designation Date through March 31, 2018 in our condensed consolidated statements of operations for the amortization of the initial value of the Excluded Component, as described above. We believe the new guidance better portrays the economic results of our risk management activities and net investment hedges in 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.~~income (loss). The amendment is effective commencing in 2019 with early adoption permitted. ~~We are currently evaluating the impact that the~~The adoption of this new guidance ~~will~~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.

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Note 4. Leases

As of March 31, 2019, we leased or subleased 5,339 restaurant properties to franchisees and 155 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 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.

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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	—			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			(e)	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		)	(f)	11,758
Finance leases, net of current portion	226			62			(f)	288
Operating lease liabilities, net of current portion	—			1,028			(g)	1,028
Other liabilities, net	1,547			(132		)	(d)	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.

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(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 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.


(e)	Represents the current portion of operating lease liabilities.


(f)	Represents the net change in liabilities recorded in connection with build-to-suit leases.


(g)	Represents the recognition of operating lease liabilities, net of current portion.


(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 inproperty revenueover 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 a ROU asset and lease liability at lease commencement, which is measured by discounting lease payments using our incremental borrowing rate applicable to the lease term and currency of the lease as the discount rate. 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. 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.

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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
	March 31, 2019
Land	$	912
Buildings and improvements	1,127
Restaurant equipment	18
	2,057
Accumulated depreciation and amortization	(415		)
Property and equipment leased, net	$	1,642

Our net investment in direct financing leases is as follows (in millions):



	As of
	March 31, 2019
Future rents to be received:
Future minimum lease receipts	$	57
Contingent rents (a)	25
Estimated unguaranteed residual value	16
Unearned income	(32		)
	66
Current portion included within accounts receivables	(16		)
Net investment in property leased to franchisees	$	50


(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 March 31, 2019
Lease income - operating leases
Minimum lease payments	$	111
Variable lease payments	84
Amortization of favorable and unfavorable income lease contracts, net	2
Subtotal - lease income from operating leases	197
Earned income on direct financing leases	2
Total property revenues	$	199

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Partnership as Lessee

Lease cost and other information associated with these lease commitments is as follows (in millions):

Lease Cost (Income)



	Three months ended March 31, 2019
Operating lease cost	$	53
Operating lease variable lease cost	50
Finance lease cost:
Amortization of right-of-use assets	7
Interest on lease liabilities	5
Sublease income	(155		)
Total lease cost (income)	$	(40	)

Lease Term and Discount Rate



Weighted-average remaining lease term (in years):
Operating leases	11.3 years
Finance leases	11.2 years
Weighted-average discount rate:
Operating leases	7.6	%
Finance leases	6.6	%

Other Information



Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	47
Operating cash flows from finance leases	$	5
Financing cash flows from finance leases	$	7
Right-of-use assets obtained in exchange for new finance lease obligations	$	1
Right-of-use assets obtained in exchange for new operating lease obligations	$	30

Maturity Analysis

As of March 31, 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	$	11	$	314	$	35		$	143
2020	10		396		45			183
2021	7		371		43			171
2022	5		346		42			158
2023	5		324		39			144
Thereafter	19		1,821		264			909
Total minimum receipts / payments	$	57	$	3,572	468			1,708
Less amount representing interest (b)					(155		)	(543		)
Present value of minimum lease payments					313			1,165
Current portion of lease obligations					(26		)	(119		)
Long-term portion of lease obligations					$	287		$	1,046


(a)	Minimum lease payments have not been reduced by minimum sublease rentals of $2,332 million due in the future under non-cancelable subleases.


(b)	Calculated using the interest rate for each lease.

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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 payments have not been reduced by minimum sublease rentals of $2,290 million due in the future under non-cancelable subleases.

Note 4.5. Revenue Recognition

~~Revenue from Contracts with Customers~~

~~We transitioned to FASB Accounting Standards Codification (“ASC”) Topic 606,~~ ~~Revenue From Contracts with Customers~~ ~~(“ASC 606”), from ASC Topic 605,~~ ~~Revenue Recognition~~ ~~and ASC Subtopic 952-605,~~ ~~Franchisors - Revenue Recognition~~ (together, the “Previous Standards”) on January 1, 2018 using the modified retrospective transition method. Our Financial Statements reflect the application of ASC 606 guidance beginning in 2018, while our consolidated financial statements for prior periods were prepared under the guidance of Previous Standards. The $249.8 million cumulative effect of our transition to ASC 606 is reflected as an adjustment to January 1, 2018 Partners' capital.

Our transition to ASC 606 represents a change in accounting principle. ASC 606 eliminates industry-specific guidance and provides a single revenue recognition model for recognizing revenue from contracts with customers. The core principle of ASC 606 is that a reporting entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the reporting entity expects to be entitled for the exchange of those goods or services.

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~~Revenue Recognition Significant Accounting Policies under ASC 606~~

~~Our revenues are comprised of sales and franchise and property revenues, which are detailed as follows:~~

~~Sales~~

Sales consist primarily of supply chain sales, which represent sales of products, supplies and restaurant equipment to franchisees, as well as sales to retailers. Orders placed by customers specify the goods to be delivered and transaction prices for supply chain sales. Revenue is recognized upon transfer of control over ordered items, generally upon delivery to the customer, which is when the customer obtains physical possession of the goods, legal title is transferred, the customer has all risks and rewards of ownership and an obligation to pay for the goods is created. Shipping and handling costs associated with outbound freight for supply chain sales after control of a product has transferred to a customer are accounted for as a fulfillment costs and classified as cost of sales.

Commencing on January 1, 2018, we classify all sales of restaurant equipment to franchisees as Sales and related cost of equipment sold as Cost of sales. In periods prior to January 1, 2018, we classified sales of restaurant equipment at establishment of a restaurant and in connection with renewal or renovation as Franchise and property revenues and related costs as Franchise and property expense.

To a much lesser extent, sales also include Company restaurant sales (including Restaurant VIEs), which consist of sales to restaurant guests. Revenue from Company restaurant sales is recognized at the point of sale. Taxes assessed by a governmental authority that we collect are excluded from revenue.

~~Franchise and Property Revenues~~

~~Franchise revenues~~

Franchise revenues consist primarily of royalties, advertising fund contributions, initial and renewal franchise fees and upfront fees from development agreements and master franchise and development agreements (“MFDAs”). Our performance obligations under franchise agreements consist of (a) a franchise license, including a license to use one of our brands and, where our subsidiaries manage an advertising fund, advertising and promotion management, (b) pre-opening services, such as training and inspections, and (c) ongoing services, such as development of training materials and menu items and restaurant monitoring and inspections. These performance obligations are highly interrelated so we do not consider them to be individually distinct and therefore account for them under ASC 606 as a single performance obligation, which is satisfied by providing a right to use our intellectual property over the term of each franchise agreement.

Royalties, including franchisee contributions to advertising funds managed by our subsidiaries, are calculated as a percentage of franchise restaurant sales over the term of the franchise agreement. Under our franchise agreements, advertising contributions paid by franchisees must be spent on advertising, product development, marketing and related activities. Initial and renewal franchise fees are payable by the franchisee upon a new restaurant opening or renewal of an existing franchise agreement. Our franchise agreement royalties, inclusive of advertising fund contributions, represent sales-based royalties that are related entirely to our performance obligation under the franchise agreement and are recognized as franchise sales occur. Additionally, under ASC 606, initial and renewal franchise fees are recognized as revenue on a straight-line basis over the term of the respective agreement. Under the Previous Standards, initial franchise fees were recognized as revenue when the related restaurant commenced operations and our completion of all material services and conditions. Renewal franchise fees were recognized as revenue upon execution of a new franchise agreement. Our performance obligation under development agreements other than MFDAs generally consists of an obligation to grant exclusive development rights over a stated term. These development rights are not distinct from franchise agreements, so upfront fees paid by franchisees for exclusive development rights are deferred and apportioned to each franchise restaurant opened by the franchisee. The pro rata amount apportioned to each restaurant is accounted for as an initial franchise fee.

We have a distinct performance obligation under our MFDAs to grant subfranchising rights over a stated term. Under the terms of MFDAs, we typically either receive an upfront fee paid in cash or receive noncash consideration in the form of an equity interest in the master franchisee or an affiliate of the master franchisee. We previously accounted for noncash consideration as a nonmonetary exchange and did not record revenue or a basis in the equity interest received in arrangements where we received noncash consideration. These transactions now fall within the scope of ASC 606, which requires us to record investments in the applicable equity method investee and recognize revenue in an amount equal to the fair value of the equity interest received. Upfront fees from master franchisees, including the fair value of noncash consideration, are deferred and amortized over the MFDA term on a straight-line basis.

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The portion of gift cards sold to customers which are never redeemed is commonly referred to as gift card breakage. Under ASC 606, we recognize gift card breakage income proportionately as each gift card is redeemed using an estimated breakage rate based on our historical experience. Under the Previous Standards, we recognized gift card breakage income for each gift card's remaining balance when redemption of that balance was deemed remote.

~~Property Revenues~~

~~Property revenues are accounted for in accordance with applicable accounting guidance for leases and are excluded from the scope of ASC 606. See Note 2,~~ ~~Significant Accounting Policies, to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 for our property revenue accounting policies.~~

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 ~~the date of adoption (January 1, 2018)~~December 31, 2018 and March 31, ~~2018~~2019 (in millions):


	Contract Liabilities
Balance at January 1, 2018	$	455.0
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	(12.2		)	(2		)	(9		)	—		(11		)
Increase, excluding amounts recognized as revenue during the period	14.3			2			5			1		8
Impact of foreign currency translation	0.6			1			(4		)	—		(3		)
Balance at March 31, 2018	$	457.7
Balance at March 31, 2019				$	63		$	397		$	20	$	480

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 March 31, ~~2018~~2019 (in millions):


Contract liabilities expected to be recognized in	Amount		TH		BK		PLK		Consolidated
2018	$	24.7
2019	32.4
Remainder of 2019			$	6	$	22	$	1	$	29
2020	31.7		7		28		2		37
2021	31.1		7		28		1		36
2022	30.4		7		27		1		35
2023			6		27		1		34
Thereafter	307.4		30		265		14		309
Total	$	457.7	$	63	$	397	$	20	$	480

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Disaggregation of Total Revenues

Total revenues consist of the following (in millions):

Three Months Ended
March 31,
2018 2017
Sales $ 547.8
$ 550.4
Royalties 510.4
242.0
Property revenues 177.8
175.0
Franchise fees and other revenue 17.8
33.2
Total revenues $ 1,253.8
$ 1,000.6

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~~Financial Statement Impact of Transition to ASC 606~~

As noted above, we transitioned to ASC 606 using the modified retrospective method on January 1, 2018. The cumulative effect of this transition to applicable contracts with customers that were not completed as of January 1, 2018 was recorded as an adjustment to Partners' capital as of this date. As a result of applying the modified retrospective method to transition to ASC 606, the following adjustments were made to the consolidated balance sheet as of January 1, 2018 (in millions):

As Reported Total Adjusted
December 31, 2017 Adjustments January 1, 2018
ASSETS
Current assets:
Cash and cash equivalents $ 1,097.4
$ —
$ 1,097.4
Accounts and notes receivable, net 488.8
—
488.8
Inventories, net 78.0
—
78.0
Prepaids and other current assets 85.4
(23.0 ) 62.4
Total current assets 1,749.6
(23.0 ) 1,726.6
Property and equipment, net 2,133.3
—
2,133.3
Intangible assets, net 11,062.2
—
11,062.2
Goodwill 5,782.3
—
5,782.3
Net investment in property leased to franchisees 71.3
—
71.3
Other assets, net 425.2
106.6
531.8
Total assets $ 21,223.9
$ 83.6
$ 21,307.5
LIABILITIES AND EQUITY
Current liabilities:
Accounts and drafts payable $ 496.2
$ —
$ 496.2
Other accrued liabilities 865.7
8.9
874.6
Gift card liability 214.9
(43.0 ) 171.9
Current portion of long term debt and capital leases 78.2
—
78.2
Total current liabilities 1,655.0
(34.1 ) 1,620.9
Term debt, net of current portion 11,800.9
—
11,800.9
Capital leases, net of current portion 243.8
—
243.8
Other liabilities, net 1,455.1
425.7
1,880.8
Deferred income taxes, net 1,508.1
(58.2 ) 1,449.9
Total liabilities 16,662.9
333.4
16,996.3
Partners' capital
Class A common units 4,167.5
(132.0 ) 4,035.5
Partnership exchangeable units 1,276.4
(117.8 ) 1,158.6
Accumulated other comprehensive income (loss) (884.3 ) —
(884.3 )
Total Partners' capital 4,559.6
(249.8 ) 4,309.8
Noncontrolling interests 1.4
—
1.4
Total equity 4,561.0
(249.8 ) 4,311.2
Total liabilities and equity $ 21,223.9
$ 83.6
$ 21,307.5

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~~Franchise Fees~~

~~The cumulative adjustment for franchise fees consists of the following:~~

A $320.7 million increase in Other liabilities, net for the cumulative reversal and deferral of previously recognized franchise fees related to franchise agreements in effect at January 1, 2018 that were entered into subsequent to the acquisitions of BK in 2010, TH in 2014 and PLK in 2017 (net of the cumulative revenue attributable for the period through January 1, 2018), with a corresponding decrease to Partners' capital.

A $106.6 million increase in Other assets, net for the previously unrecognized value of equity interests received in connection with MFDA arrangements. This increase resulted in a corresponding increase in Other liabilities, net of $105.0 million and an adjustment to Partners' capital of $1.6 million for the cumulative effect of revenue attributable for the period between the inception of each such arrangement and January 1, 2018.

~~A $67.1 million decrease to Deferred income taxes, net for the tax effects of the two adjustments noted above, with a corresponding increase to Partners' capital.~~

~~Advertising Funds~~

The cumulative adjustment for advertising funds reflects the recognition of cumulative advertising expenditures temporarily in excess of cumulative advertising fund contributions as of January 1, 2018, which is reflected as a $23.0 million decrease in Prepaids and other current assets and a $23.0 million decrease to Partners’ capital.

~~Gift Card Breakage~~

The adjustment for gift card breakage reflects the impact of the change to recognize gift card breakage proportionately as gift card balances are used rather than when it is deemed remote that the unused gift card balance would be redeemed, as done under the Previous Standards. The cumulative effect of applying ASC 606 accounting to gift card balances outstanding at January 1, 2018 is reflected as a $43.0 million decrease in Gift card liability, an $8.9 million increase in Other accrued liabilities, an $8.9 million increase in Deferred income taxes, net and a $25.2 million increase in January 1, 2018 Partners' capital.

~~Comparison to Amounts if Previous Standards Had Been in Effect~~

The following tables reflect the impact of adoption of ASC 606 on our condensed consolidated statements of operations and cash flows from operating activities for the three months ended March 31, 2018 and our condensed consolidated balance sheet as of March 31, 2018 and the amounts as if the Previous Standards were in effect (“Amounts Under Previous Standards”) (in millions):

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~~Condensed Consolidated Statement of Operations~~

Total Amounts Under
As Reported Adjustments Previous Standards
Revenues:
Sales $ 547.8
$ —
$ 547.8
Franchise and property revenues 706.0
(182.0 ) 524.0
Total revenues 1,253.8
(182.0 ) 1,071.8
Operating costs and expenses:
Cost of sales 429.1
—
429.1
Franchise and property expenses 104.4
(0.2 ) 104.2
Selling, general and administrative expenses 301.3
(190.5 ) 110.8
(Income) loss from equity method investments (14.3 ) —
(14.3 )
Other operating expenses (income), net 12.7
—
12.7
Total operating costs and expenses 833.2
(190.7 ) 642.5
Income from operations 420.6
8.7
429.3
Interest expense, net 140.1
0.5
140.6
Income before income taxes 280.5
8.2
288.7
Income tax expense 1.7
2.1
3.8
Net income 278.8
6.1
284.9
Net income attributable to noncontrolling interests 0.2
—
0.2
Net income attributable to common unitholders $ 278.6
$ 6.1
$ 284.7

Earnings per unit - basic and diluted:
Class A common units $ 0.73
$ 0.75
Partnership exchangeable units $ 0.60
$ 0.61

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~~Condensed Consolidated Statement of Cash Flows~~

Total Amounts Under
As Reported Adjustments Previous Standards
Cash flows from operating activities:
Net income $ 278.8
$ 6.1
$ 284.9
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Depreciation and amortization 47.0
—
47.0
Amortization of deferred financing costs and debt issuance discount 7.2
—
7.2
(Income) loss from equity method investments (14.3 ) —
(14.3 )
Loss (gain) on remeasurement of foreign denominated transactions 16.4
—
16.4
Net losses on derivatives 1.9
—
1.9
Share-based compensation expense 13.3
—
13.3
Deferred income taxes (19.0 ) 2.1
(16.9 )
Other 3.7
—
3.7
Changes in current assets and liabilities, excluding acquisitions and dispositions:
Accounts and notes receivable 15.4
—
15.4
Inventories and prepaids and other current assets (7.0 ) (4.7 ) (11.7 )
Accounts and drafts payable (72.8 ) 1.9
(70.9 )
Other accrued liabilities and gift card liability (374.7 ) (0.9 ) (375.6 )
Other long-term assets and liabilities (37.8 ) (4.5 ) (42.3 )
Net cash (used for) provided by operating activities $ (141.9 ) $ —
$ (141.9 )

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~~Condensed Consolidated Balance Sheet~~

Total
As Reported Adjustments Previous Standards
ASSETS
Current assets:
Cash and cash equivalents $ 821.5
$ —
$ 821.5
Accounts and notes receivable, net 467.6
—
467.6
Inventories, net 74.6
—
74.6
Prepaids and other current assets 87.8
27.7
115.5
Total current assets 1,451.5
27.7
1,479.2
Property and equipment, net 2,072.7
—
2,072.7
Intangible assets, net 10,904.6
—
10,904.6
Goodwill 5,693.5
—
5,693.5
Net investment in property leased to franchisees 66.9
—
66.9
Other assets, net 570.7
(106.6 ) 464.1
Total assets $ 20,759.9
$ (78.9 ) $ 20,681.0
LIABILITIES AND EQUITY
Current liabilities:
Accounts and drafts payable $ 416.4
$ 1.9
$ 418.3
Other accrued liabilities 636.6
(10.4 ) 626.2
Gift card liability 107.3
43.6
150.9
Current portion of long term debt and capital leases 78.8
—
78.8
Total current liabilities 1,239.1
35.1
1,274.2
Term debt, net of current portion 11,788.1
—
11,788.1
Capital leases, net of current portion 236.6
—
236.6
Other liabilities, net 1,820.4
(430.2 ) 1,390.2
Deferred income taxes, net 1,432.9
60.3
1,493.2
Total liabilities 16,517.1
(334.8 ) 16,182.3
Partners' capital
Class A common units 4,117.2
136.6
4,253.8
Partnership exchangeable units 1,189.7
119.3
1,309.0
Accumulated other comprehensive income (loss) (1,066.6 ) —
(1,066.6 )
Total Partners' capital 4,240.3
255.9
4,496.2
Noncontrolling interests 2.5
—
2.5
Total equity 4,242.8
255.9
4,498.7
Total liabilities and equity $ 20,759.9
$ (78.9 ) $ 20,681.0

The following summarizes the adjustments to our condensed consolidated statement of operations for the three months ended March 31, 2018 to reflect our condensed consolidated statement of operations as if we had continued to recognize revenue under the Previous Standards:

As described above, our transition to ASC 606 resulted in the deferral of franchise fees, recognition of franchise fees in connection with MFDAs where we received an equity interest in the equity method investee, and a change in the timing of recognizing gift card breakage income. The adjustments for the three months ended March 31, 2018 to reflect the recognition of this revenue as if the Previous Standards were in effect consists of a $3.9 million increase in Franchise and property revenue and a $1.1 million increase in Income tax expense.

As described above, under the Previous Standards our statement of operations did not reflect gross presentations of advertising fund revenue and expenses. Our transition to ASC 606 requires the presentation of advertising fund

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contributions and advertising fund expenses on a gross basis. The adjustments for the three months ended March 31, 2018 to reflect advertising fund contributions and expenses as if the Previous Standards were in effect consist of a $185.9 million decrease in Franchise and property revenues, a $0.2 million decrease in Franchise and property expenses, a $190.5 million decrease in Selling, general and administrative expenses, a $0.5 million increase in Interest expense, net and a $1.0 million increase in Income tax expense.

The transition to ASC 606 had no net impact on our cash used for operating activities and no impact on our cash provided by investing activities or cash used for financing activities during the three months ended March 31, 2018.



	Three Months Ended March 31,
	2019		2018
Sales	$	522	$	548
Royalties	528		510
Property revenues	199		178
Franchise fees and other revenue	17		18
Total revenues	$	1,266	$	1,254

Note 5.6. 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 March 31,				Three Months Ended March 31,
	2018		2017		2019		2018
Allocation of net income among partner interests:
Net income allocated to Class A common unitholders	$	147.8	$	50.2	$	135	$	148
Net income allocated to Partnership exchangeable unitholders	130.8		48.5		111		131
Net income attributable to common unitholders	$	278.6	$	98.7	$	246	$	279

Denominator - basic and diluted partnership units:
Weighted average Class A common units	202.0		202.0		202		202
Weighted average Partnership exchangeable units	217.7		226.9		208		218

Earnings per unit - basic and diluted:
Class A common units(a)	$	0.73	$	0.25	$	0.67	$	0.73
Partnership exchangeable units(a)	$	0.60	$	0.21	$	0.53	$	0.60

(a) Earnings per unit may not recalculate exactly as it is calculated based on unrounded numbers.

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Note 6.7. Intangible Assets, net and Goodwill

Intangible assets, net and goodwill consist of the following (in millions):


	As of														As of
	March 31, 2018							December 31, 2017							March 31, 2019							December 31, 2018
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Identifiable assets subject to amortization:
Franchise agreements	$	724.7	$	(176.5	)	$	548.2	$	724.7	$	(168.0	)	$	556.7	$	706	$	(200	)	$	506	$	705	$	(194	)	$	511
Favorable leases(a)	448.4		(200.8		)	247.6		455.7		(193.7		)	262.0		133		(62		)	71		407		(200		)	207
Subtotal	1,173.1		(377.3		)	795.8		1,180.4		(361.7		)	818.7		839		(262		)	577		1,112		(394		)	718
Indefinite lived intangible assets:
Tim Hortons brand	$	6,574.3	$	—		$	6,574.3	$	6,727.1	$	—		$	6,727.1	$	6,378	$	—		$	6,378	$	6,259	$	—		$	6,259
Burger King brand	2,179.6		—			2,179.6		2,161.5		—			2,161.5		2,117		—			2,117		2,131		—			2,131
Popeyes brand	1,354.9		—			1,354.9		1,354.9		—			1,354.9		1,355		—			1,355		1,355		—			1,355
Subtotal	10,108.8		—			10,108.8		10,243.5		—			10,243.5		9,850		—			9,850		9,745		—			9,745
Intangible assets, net						$	10,904.6						$	11,062.2						$	10,427						$	10,463

Goodwill
Tim Hortons segment	$	4,232.0						$	4,325.8						$	4,111						$	4,038
Burger King segment	615.7							610.7							598							602
Popeyes segment	845.8							845.8							846							846
Total	$	5,693.5						$	5,782.3						$	5,555						$	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 ~~$18.0~~$11 million for the three months ended March 31, ~~2018~~2019 and ~~$17.5~~$18 million for the same period in the prior year. The change in the brands and goodwill balances during the three months ended March 31, ~~2018~~2019 was due to the impact of foreign currency translation.

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Note 7.8. Equity Method Investments

The aggregate carrying amount of our equity method investments was ~~$272.2~~$256 million and ~~$155.1~~$259 million as of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, and is included as a component of Other assets, net in our accompanying condensed consolidated balance sheets. The increase in the carrying amount of our equity method investments as of March 31, 2018 compared to December 31, 2017 is primarily attributable to the recognition of investments received in connection with master franchise and development arrangements as a result of our transition to ASC 606. See Note 4, ~~Revenue Recognition~~. 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 ~~$2.9~~$2 million and ~~$2.4~~$3 million during the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively.

The aggregate market value of our ~~20.7%~~20.5% equity interest in Carrols Restaurant Group, Inc. (“Carrols”) based on the quoted market price on March 31, ~~2018~~2019 was approximately ~~$105.4~~$94 million. The aggregate market value of our 10.1% equity interest in BK Brasil Operação e Assessoria a Restaurantes S.A. based on the quoted market price on March 31, ~~2018~~2019 was approximately ~~$107.6~~$127 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 March 31,				Three Months Ended March 31,
	2018		2017		2019		2018
Revenues from affiliates:
Royalties	$	68.2	$	38.5	$	78	$	68
Property revenues	8.8		6.3		8		9
Franchise fees and other revenue	2.3		5.7		3		2
Total	$	79.3	$	50.5	$	89	$	79

We recognized ~~$4.5~~$4 million and ~~$4.5~~$5 million of rent expense associated with the TIMWEN Partnership during the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively.

At March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, we had ~~$33.5~~$33 million and ~~$31.9~~$41 million, respectively, of accounts receivable, net from our equity method investments which were recorded in ~~accounts~~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 months ended March 31, 2019 we did not record a non-cash dilution gain. During the three months ended March 31, 2018 we recorded an increase to the carrying value of our equity method investment balance and a non-cash dilution gain of ~~$20.4~~$20 million on the initial public offering by one of our equity method investees.

2018

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Note 8.9. Other Accrued Liabilities and Other Liabilities, net

Other accrued liabilities (current) and other liabilities, net (noncurrent) consist of the following (in millions):


	As of				As of
	March 31, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Current:
Dividend payable	$	210.0	$	96.9	$	231	$	207
Interest payable	93.0		88.6		92		87
Accrued compensation and benefits	36.6		66.6		41		69
Taxes payable	112.3		401.0		66		113
Deferred income	28.7		42.9		37		27
Accrued advertising expenses	27.9		27.5		11		30
Closed property reserve	12.4		10.8
Restructuring and other provisions	11.2		12.0		9		11
Current portion of operating lease liabilities (a)					119		—
Other	104.5		119.4		83		93
Other accrued liabilities	$	636.6	$	865.7	$	689	$	637
Noncurrent:
Derivatives liabilities	$	458.1	$	498.5
Taxes payable	478.3		495.6		$	512	$	493
Contract liabilities, net	457.7		10.0		480		486
Unfavorable leases	236.9		251.8
Unfavorable leases (b)					118		192
Derivatives liabilities					278		179
Accrued pension	70.3		72.0		64		64
Accrued lease straight-lining liability(b)	48.5		46.4		—		69
Deferred income	23.6		27.4		32		22
Other	47.0		53.4		47		42
Other liabilities, net	$	1,820.4	$	1,455.1	$	1,531	$	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 decrease in unfavorable leases and accrued lease straight-lining liability reflects 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.

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Note 9.10. Long-Term Debt

Long-term debt consists of the following (in millions):


	As of						As of
	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Term Loan Facility (due February 17, 2024)	$	6,372.6		$	6,388.7		$	6,322		$	6,338
2017 4.25% Senior Notes (due May 15, 2024)	1,500.0			1,500.0			1,500			1,500
2015 4.625% Senior Notes (due January 15, 2022)	1,250.0			1,250.0			1,250			1,250
2017 5.00% Senior Notes (due October 15, 2025)	2,800.0			2,800.0			2,800			2,800
Other(a)	85.2			89.1			81			150
Less: unamortized deferred financing costs and deferred issue discount	(163.1		)	(170.1		)	(138		)	(145		)
Total debt, net	11,844.7			11,857.7			11,815			11,893
Less: current maturities of debt	(56.6		)	(56.8		)	(68		)	(70		)
Total long-term debt	$	11,788.1		$	11,800.9		$	11,747		$	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.

Revolving Credit Facility

As of March 31, ~~2018,~~2019, we had no amounts outstanding under our senior secured revolving credit facility (the "Revolving Credit Facility"). Funds available under the Revolving Credit Facility may be used to repay other debt, finance debt or RBI share repurchases, fund acquisitions or capital expenditures and for other general corporate purposes. We have a ~~$125.0~~$125 million letter of credit sublimit as part of the Revolving Credit Facility, which reduces our borrowing availability thereunder by the

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cumulative amount of outstanding letters of credit. As of March 31, ~~2018,~~2019, we had ~~$4.6~~$2 million of letters of credit issued against the Revolving Credit Facility, and our borrowing availability was ~~$495.4~~$498 million.

TH Facility

During 2018, one of our subsidiaries entered into a non-revolving delayed drawdown term credit facility in a total aggregate principal amount of C$100 million 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 and will be secured by certain parcels of real estate. As of March 31, 2019, we had drawn down the entire C$100 million available under the TH Facility with a weighted average interest rate of 3.37%.

Fair Value Measurement

The following table presents the fair value of our variable rate term debt and senior notes, is estimated using inputs based on bid and offer prices that are Level 2 inputs, and ~~was $11.7 billion and $12.0 billion at March 31, 2018 and December 31, 2017, respectively, compared to a~~ principal carrying amount (in billions):



	As of
	March 31, 2019		December 31, 2018
Fair value of our variable term debt and senior notes	$	12	$	11
Principal carrying amount of our variable term debt and senior notes	12		12

Table of ~~$11.9 billion and $11.9 billion, respectively, on the same dates.~~Contents

Interest Expense, net

Interest expense, net consists of the following (in millions):


	Three Months Ended March 31,						Three Months Ended March 31,
	2018			2017			2019			2018
Debt(a)	$	129.4		$	100.0		$	124		$	130
Capital lease obligations	6.1			5.0
Finance lease obligations							5			6
Amortization of deferred financing costs and debt issuance discount	7.2			8.5			7			7
Interest income	(2.6		)	(2.1		)	(4		)	(3		)
Interest expense, net	$	140.1		$	111.4		$	132		$	140


(a)	Amount includes $18 million and $4 million benefit during the three months ended March 31, 2019 and 2018, respectively, from our adoption of a new hedge accounting standard in 2018.

Note ~~10.~~11. Income Taxes

Our effective tax rate was 18.7% for the three months ended March 31, 2019. The effective tax rate for this period was primarily a result of the mix of income from multiple tax jurisdictions and the impact of internal financing arrangements and stock option exercises.

Our effective tax rate was 0.6% for the three months ended March 31, 2018. The effective tax rate during this period was primarily a result of ~~benefits from stock option exercises that reduced the effective tax rate by 22.7% and the benefit from reserve releases due to audit settlements.~~

~~Our effective tax rate was 18.5% for the three months ended March 31, 2017. The effective tax rate during this period was primarily a result of~~ the mix of income from multiple tax jurisdictions and the favorable impact ~~of our financing structure and benefits~~ from stock option exercises ~~that~~and reserve releases from audit settlements. Specifically, the benefit associated with stock option exercises reduced the effective tax rate by ~~3.9%, partially offset by non-deductible transaction related costs.~~22.7%.

Note ~~11.~~12. Equity

During the three months ended March 31, ~~2018,~~2019, Partnership exchanged ~~29,432~~141,190 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 was accounted for as a capital contribution by RBI to Partnership. The exchanges of Partnership exchangeable units were recorded as increases to the Class A common units balance within partner’s 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 partner’s capital of our consolidated balance sheet in an amount equal to the cash paid by Partnership 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.

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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)			Derivatives			Pensions			Foreign Currency Translation			Accumulated Other Comprehensive Income (Loss)
Balances at December 31, 2017	$	176.8	$	(28.8	)	$	(1,032.3	)	$	(884.3	)
Balances at December 31, 2018												$	454		$	(27	)	$	(1,864	)	$	(1,437	)
Foreign currency translation adjustment	—		—			(215.6		)	(215.6		)	—			—			159			159
Net change in fair value of derivatives, net of tax	27.4		—			—			27.4			(110		)	—			—			(110		)
Amounts reclassified to earnings of cash flow hedges, net of tax	5.7		—			—			5.7			(1		)	—			—			(1		)
Pension and post-retirement benefit plans, net of tax	—		0.2			—			0.2
Balances at March 31, 2018	$	209.9	$	(28.6	)	$	(1,247.9	)	$	(1,066.6	)
Balances at March 31, 2019												$	343		$	(27	)	$	(1,705	)	$	(1,389	)

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Note ~~12.~~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

During ~~2015,~~2018, we entered into a series of receive-variable, pay-fixed interest rate swaps with a notional value of ~~$2,500.0~~$3,500 million to hedge the variability in the interest payments on a portion of our senior secured term loan facility (the "Term Loan Facility") beginning ~~May 28, 2015~~March 29, 2018 through the expiration of the final swap on ~~March 31, 2021,~~February 17, 2024, resetting each ~~March 31.~~March. At inception, 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 ~~$84.6~~$85 million in AOCI at the date of settlement. This amount ~~will be~~gets reclassified into Interest expense, net as the original hedged forecasted transaction affects earnings. The amount of pre-tax losses in AOCI as of March 31, ~~2018~~2019 that we expect to be reclassified into interest expense within the next 12 months is ~~$12.3~~$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 March 31, ~~2018,~~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 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.

We terminated and settled our previous cross-currency rate swaps in June 2017, with an aggregate notional value of $5,000.0 million, between the Canadian dollar and U.S. dollar. In connection with this termination, we received $763.5 million which was reflected as a source of cash provided by investing activities in the condensed consolidated statement of cash flows. The unrealized gains totaled $533.4 million, net of tax, as of the termination date and Such amounts will remain in AOCI until the complete or substantially complete liquidation of our investment in the underlying foreign operations. ~~Additionally,~~

At March 31, 2019, we ~~entered into new~~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$~~6,753.5~~6,754 million for quarterly fixed-rate interest payments we receive on the U.S. dollar notional amount of ~~$5,000.0~~$5,000 million through the maturity date of June 30, 2023. ~~In making such changes, we effectively realigned our Canadian dollar hedges to reflect our current cash flow mix and capital structure maturity profile.~~

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At March 31, ~~2018,~~2019, we also had outstanding a cross-currency rate ~~swap~~swaps in which we pay quarterly fixed-rate interest payments on the Euro notional value of ~~€1,107.8~~€1,108 million and receive quarterly fixed-rate interest payments on the U.S. dollar notional value of ~~$1,200.0~~$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, during 2018 we entered into cross-currency rate swaps in which we receive quarterly fixed-rate interest payments on the U.S. dollar notional value of $400 million through the maturity date of ~~March 31, 2021.~~February 17, 2024. At inception, ~~this~~these cross-currency rate ~~swap was~~swaps were designated as a hedge and isare 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. ~~We also~~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~~Excluded Component over the life of the derivative instrument. The amortization of the ~~excluded component~~Excluded Component is recognized in Interest expense, net in the condensed consolidated statement of operations. The

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change in fair value that is not related to the ~~excluded component~~Excluded Component is recorded in AOCI and will be reclassified to earnings when the foreign subsidiaries are sold or substantially liquidated. ~~See Note 3,~~ ~~New Accounting Pronouncements, for further information on the adoption of this new guidance.~~

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 March 31, ~~2018,~~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 ~~$188.0~~$130 million with maturities to ~~July 2019.~~May 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.

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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)					Gain or (Loss) Recognized in Other Comprehensive Income (Loss)
	Three Months Ended March 31,					Three Months Ended March 31,
	2018		2017			2019			2018
Derivatives designated as cash flow hedges⁽¹⁾
Interest rate swaps	$	28.7	$	(5.0	)	$	(44	)	$	29
Forward-currency contracts	$	5.3	$	1.5		$	(2	)	$	5
Derivatives designated as net investment hedges
Cross-currency rate swaps	$	11.1	$	(54.2	)	$	(102	)	$	11


(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 March 31,
		2019			2018
Derivatives designated as cash flow hedges
Interest rate swaps	Interest expense, net	$	(1	)	$	(6	)
Forward-currency contracts	Cost of sales	$	2		$	(2	)

	Location of Gain or (Loss) Recognized in Earnings	Gain or (Loss) Recognized in Earnings (Amount Excluded from Effectiveness Testing)
	Location of Gain or (Loss) Recognized in Earnings	Three Months Ended March 31,
		2019			2018
Derivatives designated as net investment hedges
Cross-currency rate swaps	Interest expense, net	$	18		$	4

Location of Gain or (Loss) Reclassified from AOCI into Earnings Gain or (Loss) Reclassified from AOCI into Earnings
Three Months Ended March 31,
2018 2017
Derivatives designated as cash flow hedges⁽¹⁾

Interest rate swaps Interest expense, net $ (5.5 ) $ (5.9 )
Forward-currency contracts Cost of sales $ (2.3 ) $ 0.9

Location of Gain or (Loss) Recognized in Earnings (Amount Excluded from Effectiveness Testing) Gain or (Loss) Recognized in Earnings (Amount Excluded from Effectiveness Testing)
Three Months Ended March 31,
2018 2017
Derivatives designated as net investment hedges
Cross-currency rate swaps Interest expense, net $ 3.6
$ —



	Fair Value as of
	March 31, 2019		December 31, 2018		Balance Sheet Location
Assets:
Derivatives designated as cash flow hedges
Foreign currency	$	3	$	7	Prepaids and other current assets
Derivatives designated as net investment hedges
Foreign currency	17		58		Other assets, net
Total assets at fair value	$	20	$	65

Liabilities:
Derivatives designated as cash flow hedges
Interest rate	$	118	$	72	Other liabilities, net
Derivatives designated as net investment hedges
Foreign currency	160		107		Other liabilities, net
Total liabilities at fair value	$	278	$	179

Fair Value as of
March 31, 2018 December 31, 2017 Balance Sheet Location
Assets:
Derivatives designated as cash flow hedges
Foreign currency $ 4.2
$ 0.5
Prepaids and other current assets
Total assets at fair value $ 4.2
$ 0.5

Liabilities:
Derivatives designated as cash flow hedges
Interest rate $ 10.9
$ 42.1
Other liabilities, net
Foreign currency 1.2
5.1
Other accrued liabilities
Derivatives designated as net investment hedges
Foreign currency 447.2
456.4
Other liabilities, net
Total liabilities at fair value $ 459.3
$ 503.6

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Note ~~13.~~14. Other Operating Expenses (Income), net

Other operating expenses (income), net consist of the following (in millions):


	Three Months Ended March 31,					Three Months Ended March 31,
	2018			2017		2019			2018
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings	$	1.7		$	2.9	$	3		$	2
Litigation settlements (gains) and reserves, net	(6.1		)	—		—			(6		)
Net losses (gains) on foreign exchange	16.4			10.4		(15		)	16
Other, net	0.7			0.5		(5		)	1
Other operating expenses (income), net	$	12.7		$	13.8	$	(17	)	$	13

Net losses (gains) on disposal of assets, restaurant closures, and refranchisings represent sales of properties and other costs related to restaurant closures and refranchisings. Gains and losses recognized in the current period may reflect certain costs related to closures and refranchisings that occurred in previous periods.

~~The current year litigation settlement gain~~Litigation settlements (gains) and reserves, net primarily reflects accruals and proceeds received ~~from the successful resolution of a legacy BK litigation.~~in connection with litigation matters.

Net losses (gains) on foreign exchange is primarily related to revaluation of foreign denominated assets and liabilities.

Note ~~14.~~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 June 19, 2017, a claim was~~In March 2019, Partnership settled the two class action lawsuits filed in the Ontario Superior Court of ~~Justice.~~Justice against The ~~plaintiff,~~TDL Group Corp., a ~~franchisee~~subsidiary of ~~two Tim Hortons restaurants, seeks to certify a class of all persons who have carried~~Partnership (“TDL”), and certain other defendants, as described in Partnership’s Annual Report on ~~business as a Tim Hortons franchisee in Canada at any time after December 15, 2014. The claim alleges various causes of action against~~Form 10-K filed with the ~~defendants in relation to~~SEC on February 22, 2019. Under the ~~purported misuse of amounts paid by members~~terms of the ~~proposed class~~settlement, TDL will contribute C$10 million to the Tim Hortons Advertising Fund in Canada ~~advertising fund (the “Ad Fund”).~~over two years, such amount to be spent on marketing activities. In addition, TDL will pay C$2 million for legal and administrative expenses. The ~~plaintiff seeks to have~~court approved the Ad Fund franchisee contributions held in trust for the benefit of members of the proposed class, an accounting of the Ad Fund, as well as damages for breach of contract, breach of trust, breach of the statutory duty of fair dealing, and breach of fiduciary duties.

~~On October 6, 2017, a claim was filed in the Ontario Superior Court of Justice. The plaintiffs, two franchisees of Tim Hortons restaurants, seek to certify a class of all persons who have carried~~settlement on business as a Tim Hortons franchisee at any time after March 8, 2017. The claim alleges various causes of action against the defendants in relation to the purported adverse treatment of member and potential member franchisees of the Great White North Franchisee Association. The plaintiffs seek damages for, among other things, breach of contract, breach of the statutory duty of fair dealing, and breach of the franchisees’ statutory right of association.

While we believe the claims are without merit and we intend to vigorously defend against both lawsuits, we are unable to predict the ultimate outcome of these cases or estimate the range of possible loss, if any.April 29, 2019. These amounts were accrued by TDL during 2018.

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Note ~~15.~~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

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sublease to franchisees; and (iii) sales at restaurants owned by us ("Company ~~restaurants.~~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.

Each brand is managed by a brand president that reports directly to our Chief Executive Officer, who is our Chief Operating Decision Maker. Therefore, we have three operating segments: (1) TH, which includes all operations We manage each of our ~~Tim Hortons~~ ~~brand, (2) BK, which includes all operations of our~~ ~~Burger King~~ ~~brand, and (3) PLK, which includes all operations of our~~ ~~Popeyes~~ ~~brand. Our three operating segments represent our reportable segments.~~

~~As stated in Note 4,~~ ~~Revenue Recognition~~, we transitioned to ASC 606 on January 1, 2018 using the modified retrospective transition method. Our Financial Statements reflect the application of ASC 606 guidance beginning in 2018, while our Financial Statements for prior periods were prepared under the guidance of Previous Standards. For comparability purposes, we have disclosed 2018 total revenues bybrands as an operating segment ~~under Previous Standards as well as~~and each operating segment ~~income with~~represents a ~~reconciliation to net income under Previous Standards. See Note 4,~~ ~~Revenue Recognition, for further details of the effects of this change in accounting principle on total revenues and net income.~~reportable segment.

The following ~~table presents~~tables present revenues, by segment and by country (in millions):


	Three Months Ended March 31,						Three Months Ended March 31,
	2018 As Reported		2018 Amounts Under Previous Standards		2017		2019		2018
Revenues by operating segment:
TH	$	763.5	$	711.8	$	733.6	$	749	$	763
BK	389.9		292.8		267.0		411		390
PLK	100.4		67.2		—		106		101
Total revenues	$	1,253.8	$	1,071.8	$	1,000.6	$	1,266	$	1,254


	Three Months Ended March 31,				Three Months Ended March 31,
	2018		2017		2019		2018
Revenues by country (a):
Canada	$	692.4	$	657.0	$	676	$	692
United States	420.7		232.4		444		421
Other	140.7		111.2		146		141
Total revenues	$	1,253.8	$	1,000.6	$	1,266	$	1,254


(a)	Only Canada and the United States represented 10% or more of our total revenues in each period presented.

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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”), ~~and~~ 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.~~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 March 31,									Three Months Ended March 31,
	2018 As Reported			2018 Amounts Under Previous Standards			2017			2019			2018
Segment income:
TH	$	245.2		$	250.5		$	256.2		$	237		$	245
BK	214.1			215.0			187.1			222			214
PLK	38.5			40.8			—			41			39
Adjusted EBITDA	497.8			506.3			443.3			500			498
Share-based compensation and non-cash incentive compensation expense	15.3			15.3			18.5			25			15
PLK Transaction costs	5.1			5.1			34.4			—			5
Corporate restructuring and tax advisory fees	7.1			7.1			—			6			7
Office centralization and relocation costs										4			—
Impact of equity method investments (a)	(10.0		)	(10.0		)	(2.9		)	1			(10		)
Other operating expenses (income), net	12.7			12.7			13.8			(17		)	13
EBITDA	467.6			476.1			379.5			481			468
Depreciation and amortization	47.0			46.8			43.3			47			47
Income from operations	420.6			429.3			336.2			434			421
Interest expense, net	140.1			140.6			111.4			132			140
Loss on early extinguishment of debt	—			—			20.4
Income tax expense	1.7			3.8			37.8			56			2
Net income	$	278.8		$	284.9		$	166.6		$	246		$	279


(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.

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Note ~~16.~~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 that provides for obligations under the Credit Facilities. 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 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.

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidating Balance Sheets

(In millions of U.S. dollars)

As of March 31, ~~2018~~2019


	Consolidated Borrowers			RBILP			Eliminations			Consolidated			Consolidated Borrowers			RBILP			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	821.5		$	—		$	—		$	821.5		$	902		$	—		$	—		$	902
Accounts and notes receivable, net	467.6			—			—			467.6			441			—			—			441
Inventories, net	74.6			—			—			74.6			74			—			—			74
Prepaids and other current assets	87.8			—			—			87.8			63			—			—			63
Total current assets	1,451.5			—			—			1,451.5			1,480			—			—			1,480
Property and equipment, net	2,072.7			—			—			2,072.7			2,011			—			—			2,011
Operating lease assets													1,148			—			—			1,148
Intangible assets, net	10,904.6			—			—			10,904.6			10,427			—			—			10,427
Goodwill	5,693.5			—			—			5,693.5			5,555			—			—			5,555
Net investment in property leased to franchisees	66.9			—			—			66.9			50			—			—			50
Intercompany receivable	—			210.0			(210.0		)	—			—			231			(231		)	—
Investment in subsidiaries	—			4,242.8			(4,242.8		)	—			—			3,773			(3,773		)	—
Other assets, net	570.7			—			—			570.7			622			—			—			622
Total assets	$	20,759.9		$	4,452.8		$	(4,452.8	)	$	20,759.9		$	21,293		$	4,004		$	(4,004	)	$	21,293
LIABILITIES AND EQUITY
Current liabilities:
Accounts and drafts payable	$	416.4		$	—		$	—		$	416.4		$	451		$	—		$	—		$	451
Other accrued liabilities	426.6			210.0			—			636.6			458			231			—			689
Gift card liability	107.3			—			—			107.3			112			—			—			112
Current portion of long term debt and capital leases	78.8			—			—			78.8
Current portion of long term debt and finance leases													94			—			—			94
Total current liabilities	1,029.1			210.0			—			1,239.1			1,115			231			—			1,346
Term debt, net of current portion	11,788.1			—			—			11,788.1			11,747			—			—			11,747
Capital leases, net of current portion	236.6			—			—			236.6
Finance leases, net of current portion													287			—			—			287
Operating lease liabilities, net of current portion													1,046			—			—			1,046
Other liabilities, net	1,820.4			—			—			1,820.4			1,531			—			—			1,531
Payables to affiliates	210.0			—			(210.0		)	—			231			—			(231		)	—
Deferred income taxes, net	1,432.9			—			—			1,432.9			1,563			—			—			1,563
Total liabilities	16,517.1			210.0			(210.0		)	16,517.1			17,520			231			(231		)	17,520
Partners’ capital:
Class A common units	—			4,117.2			—			4,117.2			—			4,423			—			4,423
Partnership exchangeable units	—			1,189.7			—			1,189.7			—			737			—			737
Common shares	3,560.0			—			(3,560.0		)	—			3,142			—			(3,142		)	—
Retained Earnings	1,746.9			—			(1,746.9		)	—			2,018			—			(2,018		)	—
Accumulated other comprehensive income (loss)	(1,066.6		)	(1,066.6		)	1,066.6			(1,066.6		)	(1,389		)	(1,389		)	1,389			(1,389		)
Total Partners' capital/shareholders' equity	4,240.3			4,240.3			(4,240.3		)	4,240.3			3,771			3,771			(3,771		)	3,771
Noncontrolling interests	2.5			2.5			(2.5		)	2.5			2			2			(2		)	2
Total equity	4,242.8			4,242.8			(4,242.8		)	4,242.8			3,773			3,773			(3,773		)	3,773
Total liabilities and equity	$	20,759.9		$	4,452.8		$	(4,452.8	)	$	20,759.9		$	21,293		$	4,004		$	(4,004	)	$	21,293

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidating Balance Sheets

(In millions of U.S. dollars)

As of December 31, ~~2017~~2018


	Consolidated Borrowers			RBILP			Eliminations			Consolidated			Consolidated Borrowers			RBILP			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	1,097.4		$	—		$	—		$	1,097.4		$	913		$	—		$	—		$	913
Accounts and notes receivable, net	488.8			—			—			488.8			452			—			—			452
Inventories, net	78.0			—			—			78.0			75			—			—			75
Prepaids and other current assets	85.4			—			—			85.4			60			—			—			60
Total current assets	1,749.6			—			—			1,749.6			1,500			—			—			1,500
Property and equipment, net	2,133.3			—			—			2,133.3			1,996			—			—			1,996
Intangible assets, net	11,062.2			—			—			11,062.2			10,463			—			—			10,463
Goodwill	5,782.3			—			—			5,782.3			5,486			—			—			5,486
Net investment in property leased to franchisees	71.3			—			—			71.3			54			—			—			54
Intercompany receivable	—			96.9			(96.9		)	—			—			207			(207		)	—
Investment in subsidiaries	—			4,561.0			(4,561.0		)	—			—			3,618			(3,618		)	—
Other assets, net	425.2			—			—			425.2			642			—			—			642
Total assets	$	21,223.9		$	4,657.9		$	(4,657.9	)	$	21,223.9		$	20,141		$	3,825		$	(3,825	)	$	20,141
LIABILITIES AND EQUITY
Current liabilities:
Accounts and drafts payable	$	496.2		$	—		$	—		$	496.2		$	513		$	—		$	—		$	513
Other accrued liabilities	768.8			96.9			—			865.7			430			207			—			637
Gift card liability	214.9			—			—			214.9			167			—			—			167
Current portion of long term debt and capital leases	78.2			—			—			78.2			91			—			—			91
Total current liabilities	1,558.1			96.9			—			1,655.0			1,201			207			—			1,408
Term debt, net of current portion	11,800.9			—			—			11,800.9			11,823			—			—			11,823
Capital leases, net of current portion	243.8			—			—			243.8			226			—			—			226
Other liabilities, net	1,455.1			—			—			1,455.1			1,547			—			—			1,547
Payables to affiliates	96.9			—			(96.9		)	—			207			—			(207		)	—
Deferred income taxes, net	1,508.1			—			—			1,508.1			1,519			—			—			1,519
Total liabilities	16,662.9			96.9			(96.9		)	16,662.9			16,523			207			(207		)	16,523
Partners’ capital:
Class A common units	—			4,167.5			—			4,167.5			—			4,323			—			4,323
Partnership exchangeable units	—			1,276.4			—			1,276.4			—			730			—			730
Common shares	3,515.7			—			(3,515.7		)	—			3,071			—			(3,071		)	—
Retained Earnings	1,928.2			—			(1,928.2		)	—			1,982			—			(1,982		)	—
Accumulated other comprehensive income (loss)	(884.3		)	(884.3		)	884.3			(884.3		)	(1,437		)	(1,437		)	1,437			(1,437		)
Total Partners' capital/shareholders' equity	4,559.6			4,559.6			(4,559.6		)	4,559.6			3,616			3,616			(3,616		)	3,616
Noncontrolling interests	1.4			1.4			(1.4		)	1.4			2			2			(2		)	2
Total equity	4,561.0			4,561.0			(4,561.0		)	4,561.0			3,618			3,618			(3,618		)	3,618
Total liabilities and equity	$	21,223.9		$	4,657.9		$	(4,657.9	)	$	21,223.9		$	20,141		$	3,825		$	(3,825	)	$	20,141

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidating Statements of Operations

(In millions of U.S. dollars)

Three Months Ended March 31, 2019



	Consolidated Borrowers			RBILP		Eliminations			Consolidated
Revenues:
Sales	$	522		$	—	$	—		$	522
Franchise and property revenues	744			—		—			744
Total revenues	1,266			—		—			1,266
Operating costs and expenses:
Cost of sales	406			—		—			406
Franchise and property expenses	133			—		—			133
Selling, general and administrative expenses	312			—		—			312
(Income) loss from equity method investments	(2		)	—		—			(2		)
Other operating expenses (income), net	(17		)	—		—			(17		)
Total operating costs and expenses	832			—		—			832
Income from operations	434			—		—			434
Interest expense, net	132			—		—			132
Income before income taxes	302			—		—			302
Income tax expense	56			—		—			56
Net income	246			—		—			246
Equity in earnings of consolidated subsidiaries	—			246		(246		)	—
Net income (loss)	246			246		(246		)	246
Net income (loss) attributable to noncontrolling interests	—			—		—			—
Net income (loss) attributable to common unitholders	$	246		$	246	$	(246	)	$	246
Comprehensive income (loss)	$	294		$	294	$	(294	)	$	294

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidating Statements of Operations

(In millions of U.S. dollars)

Three Months Ended March 31, 2018

Consolidated Borrowers RBILP Eliminations Consolidated
Revenues:
Sales $ 547.8
$ —
$ —
$ 547.8
Franchise and property revenues 706.0
—
—
706.0
Total revenues 1,253.8
—
—
1,253.8
Operating costs and expenses:
Cost of sales 429.1
—
—
429.1
Franchise and property expenses 104.4
—
—
104.4
Selling, general and administrative expenses 301.3
—
—
301.3
(Income) loss from equity method investments (14.3 ) —
—
(14.3 )
Other operating expenses (income), net 12.7
—
—
12.7
Total operating costs and expenses 833.2
—
—
833.2
Income from operations 420.6
—
—
420.6
Interest expense, net 140.1
—
—
140.1
Income before income taxes 280.5
—
—
280.5
Income tax expense 1.7
—
—
1.7
Net income 278.8
—
—
278.8
Equity in earnings of consolidated subsidiaries —
278.8
(278.8 ) —
Net income (loss) 278.8
278.8
(278.8 ) 278.8
Net income (loss) attributable to noncontrolling interests 0.2
0.2
(0.2 ) 0.2
Net income (loss) attributable to common unitholders $ 278.6
$ 278.6
$ (278.6 ) $ 278.6
Comprehensive income (loss) $ 96.5
$ 96.5
$ (96.5 ) $ 96.5

~~Table of Contents~~

~~RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES~~

~~Condensed Consolidating Statements of Operations~~

~~(In millions of U.S. dollars)~~

~~Three Months Ended March 31, 2017~~


	Consolidated Borrowers			RBILP		Eliminations			Consolidated			Consolidated Borrowers			RBILP		Eliminations			Consolidated
Revenues:
Sales	$	550.4		$	—	$	—		$	550.4		$	548		$	—	$	—		$	548
Franchise and property revenues	450.2			—		—			450.2			706			—		—			706
Total revenues	1,000.6			—		—			1,000.6			1,254			—		—			1,254
Operating costs and expenses:
Cost of sales	423.4			—		—			423.4			429			—		—			429
Franchise and property expenses	111.0			—		—			111.0			104			—		—			104
Selling, general and administrative expenses	121.9			—		—			121.9			301			—		—			301
(Income) loss from equity method investments	(5.7		)	—		—			(5.7		)	(14		)	—		—			(14		)
Other operating expenses (income), net	13.8			—		—			13.8			13			—		—			13
Total operating costs and expenses	664.4			—		—			664.4			833			—		—			833
Income from operations	336.2			—		—			336.2			421			—		—			421
Interest expense, net	111.4			—		—			111.4			140			—		—			140
Loss on early extinguishment of debt	20.4			—		—			20.4
Income before income taxes	204.4			—		—			204.4			281			—		—			281
Income tax expense	37.8			—		—			37.8			2			—		—			2
Net income	166.6			—		—			166.6			279			—		—			279
Equity in earnings of consolidated subsidiaries	—			166.6		(166.6		)	—			—			279		(279		)	—
Net income (loss)	166.6			166.6		(166.6		)	166.6			279			279		(279		)	279
Net income (loss) attributable to noncontrolling interests	0.4			0.4		(0.4		)	0.4			—			—		—			—
Partnership preferred unit distributions	—			67.5		—			67.5
Net income (loss) attributable to common unitholders	$	166.2		$	98.7	$	(166.2	)	$	98.7		$	279		$	279	$	(279	)	$	279
Comprehensive income (loss)	$	229.7		$	229.7	$	(229.7	)	$	229.7		$	96		$	96	$	(96	)	$	96

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidating Statements of Cash Flows

(In millions of U.S. dollars)

Three months ended March 31, ~~2018~~2019


	Consolidated Borrowers			RBILP			Eliminations			Consolidated			Consolidated Borrowers			RBILP			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	278.8		$	278.8		$	(278.8	)	$	278.8		$	246		$	246		$	(246	)	$	246
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Equity in loss (earnings) of consolidated subsidiaries	—			(278.8		)	278.8			—			—			(246		)	246			—
Depreciation and amortization	47.0			—			—			47.0			47			—			—			47
Amortization of deferred financing costs and debt issuance discount	7.2			—			—			7.2			7			—			—			7
(Income) loss from equity method investments	(14.3		)	—			—			(14.3		)	(2		)	—			—			(2		)
Loss (gain) on remeasurement of foreign denominated transactions	16.4			—			—			16.4			(15		)	—			—			(15		)
Net losses on derivatives	1.9			—			—			1.9
Net (gains) losses on derivatives													(20		)	—			—			(20		)
Share-based compensation expense	13.3			—			—			13.3			22			—			—			22
Deferred income taxes	(19.0		)	—			—			(19.0		)	38			—			—			38
Other	3.7			—			—			3.7			3			—			—			3
Changes in current assets and liabilities, excluding acquisitions and dispositions:
Accounts and notes receivable	15.4			—			—			15.4			14			—			—			14
Inventories and prepaids and other current assets	(7.0		)	—			—			(7.0		)	(13		)	—			—			(13		)
Accounts and drafts payable	(72.8		)	—			—			(72.8		)	(69		)	—			—			(69		)
Other accrued liabilities and gift card liability	(374.7		)	—			—			(374.7		)	(126		)	—			—			(126		)
Other long-term assets and liabilities	(37.8		)	—			—			(37.8		)	22			—			—			22
Net cash (used for) provided by operating activities	(141.9		)	—			—			(141.9		)
Net cash provided by (used for) operating activities													154			—			—			154
Cash flows from investing activities:
Payments for property and equipment	(7.0		)	—			—			(7.0		)	(5		)	—			—			(5		)
Proceeds from disposal of assets, restaurant closures, and refranchisings	1.6			—			—			1.6			4			—			—			4
Return of investment on direct financing leases	4.2			—			—			4.2
Settlement/sale of derivatives, net	3.0			—			—			3.0			11			—			—			11
Other investing activities, net	0.1			—			—			0.1			1			—			—			1
Net cash provided by (used for) investing activities	1.9			—			—			1.9			11			—			—			11
Cash flows from financing activities:
Repayments of long-term debt and capital leases	(21.7		)	—			—			(21.7		)
Distributions on common, preferred and Partnership exchangeable units	—			(96.9		)	—			(96.9		)
Payments in connection with repurchase of partnership preferred units	—			(33.6		)	—			(33.6		)
Repayments of long-term debt and finance leases													(23		)	—			—			(23		)
Distributions on Class A common, preferred and Partnership exchangeable units													—			(207		)	—			(207		)
Capital contribution from RBI Inc.	25.2			—			—			25.2			42			—			—			42
Distributions from subsidiaries	(130.5		)	130.5			—			—			(207		)	207			—			—
Other financing activities, net	(0.6		)	—			—			(0.6		)	6			—			—			6
Net cash provided by (used for) financing activities	(127.6		)	—			—			(127.6		)	(182		)	—			—			(182		)
Effect of exchange rates on cash and cash equivalents	(8.3		)	—			—			(8.3		)	6			—			—			6
Increase (decrease) in cash and cash equivalents	(275.9		)	—			—			(275.9		)	(11		)	—			—			(11		)
Cash and cash equivalents at beginning of period	1,097.4			—			—			1,097.4			913			—			—			913
Cash and cash equivalents at end of period	$	821.5		$	—		$	—		$	821.5		$	902		$	—		$	—		$	902

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidating Statements of Cash Flows

(In millions of U.S. dollars)

Three Months Ended March 31, ~~2017~~2018


	Consolidated Borrowers			RBILP			Eliminations			Consolidated			Consolidated Borrowers			RBILP			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	166.6		$	166.6		$	(166.6	)	$	166.6		$	279		$	279		$	(279	)	$	279
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Equity in loss (earnings) of consolidated subsidiaries	—			(166.6		)	166.6			—			—			(279		)	279			—
Depreciation and amortization	43.4			—			—			43.4			47			—			—			47
Premiums paid and non-cash loss on extinguishment of debt	17.9			—			—			17.9
Amortization of deferred financing costs and debt issuance discount	8.5			—			—			8.5			7			—			—			7
(Income) loss from equity method investments	(5.7		)	—			—			(5.7		)	(14		)	—			—			(14		)
Loss (gain) on remeasurement of foreign denominated transactions	10.4			—			—			10.4			16			—			—			16
Net losses on derivatives	5.8			—			—			5.8
Net (gains) losses on derivatives													2			—			—			2
Share-based compensation expense	16.5			—			—			16.5			13			—			—			13
Deferred income taxes	15.3			—			—			15.3			(19		)	—			—			(19		)
Other	3.6			—			—			3.6			4			—			—			4
Changes in current assets and liabilities, excluding acquisitions and dispositions:
Accounts and notes receivable	47.8			—			—			47.8			15			—			—			15
Inventories and prepaids and other current assets	7.8			—			—			7.8			(7		)	—			—			(7		)
Accounts and drafts payable	38.9			—			—			38.9			(73		)	—			—			(73		)
Other accrued liabilities and gift card liability	(82.6		)	—			—			(82.6		)	(374		)	—			—			(374		)
Tenant inducements paid to franchisees													(2		)	—			—			(2		)
Other long-term assets and liabilities	20.1			—			—			20.1			(36		)	—			—			(36		)
Net cash provided by operating activities	314.3			—			—			314.3
Net cash (used for) provided by operating activities													(142		)	—			—			(142		)
Cash flows from investing activities:
Payments for property and equipment	(4.1		)	—			—			(4.1		)	(7		)	—			—			(7		)
Proceeds from disposal of assets, restaurant closures, and refranchisings	6.8			—			—			6.8			2			—			—			2
Net payment for purchase of Popeyes, net of cash acquired	(1,635.9		)	—			—			(1,635.9		)
Return of investment on direct financing leases	4.1			—			—			4.1
Settlement/sale of derivatives, net	5.2			—			—			5.2			3			—			—			3
Other investing activities, net	(0.8		)	—			—			(0.8		)	4			—			—			4
Net cash provided by (used for) investing activities	(1,624.7		)	—			—			(1,624.7		)	2			—			—			2
Cash flows from financing activities:
Proceeds from issuance of long-term debt	1,300.0			—			—			1,300.0
Repayments of long-term debt and capital leases	(319.9		)	—			—			(319.9		)
Payment of financing costs	(31.8		)	—			—			(31.8		)
Distributions on common, preferred and Partnership exchangeable units	—			(145.9		)	—			(145.9		)
Repayments of long-term debt and finance leases													(22		)	—			—			(22		)
Distributions on Class A common, preferred and Partnership exchangeable units													—			(97		)	—			(97		)
Distributions to RBI for payments in connections with redemption of preferred shares													—			(34		)	—			(34		)
Capital contribution from RBI Inc.	8.0			—			—			8.0			25			—			—			25
Distributions from subsidiaries	(145.9		)	145.9			—			—			(131		)	131			—			—
Other financing activities, net	(1.1		)	—			—			(1.1		)
Net cash provided by (used for) financing activities	809.3			—			—			809.3			(128		)	—			—			(128		)
Effect of exchange rates on cash and cash equivalents	3.3			—			—			3.3			(8		)	—			—			(8		)
Increase (decrease) in cash and cash equivalents	(497.8		)	—						(497.8		)	(276		)	—			—			(276		)
Cash and cash equivalents at beginning of period	1,435.8			—						1,435.8			1,097			—			—			1,097
Cash and cash equivalents at end of period	$	938.0		$	—		$	—		$	938.0		$	821		$	—		$	—		$	821

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Note ~~17.~~18. Subsequent Events

Cash Distributions/Dividends

On April ~~2, 2018,~~3, 2019, RBI paid a cash dividend of ~~$0.45~~$0.50 per RBI common share to common shareholders of record on March 15, ~~2018.~~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 ~~$0.45~~$0.50 per exchangeable unit to holders of record on March 15, ~~2018.~~2019.

~~On April 24, 2018, the~~The RBI board of directors has declared a cash dividend of ~~$0.45~~$0.50 per RBI common share, which will be paid on July 3, ~~2018~~2019 to RBI common shareholders of record on ~~May 15, 2018.~~June 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 ~~$0.45~~$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.

*****

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion together with our unaudited condensed consolidated financial statements and the related notes thereto included in Part I, Item 1 “Financial Statements” of this report.

The following discussion includes information regarding future financial performance and plans, targets, aspirations, expectations, and objectives of management, which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of Canadian securities laws as described in further detail under “Special Note Regarding Forward-Looking Statements” set forth below. Actual results may differ materially from the results discussed in the forward-looking statements. Please refer to the risks and further discussion in the “Special Note Regarding Forward-Looking Statements” below.

We prepare our financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP” or “GAAP”). However, this Management’s Discussion and Analysis of Financial Condition and Results of Operations also contains certain non-GAAP financial measures to assist readers in understanding our performance. Non-GAAP financial measures either exclude or include amounts that are not reflected in the most directly comparable measure calculated and presented in accordance with GAAP. Where non-GAAP financial measures are used, we have provided the most directly comparable measures calculated and presented in accordance with U.S. GAAP, a reconciliation to GAAP measures and a discussion of the reasons why management believes this information is useful to it and may be useful to investors.

Operating results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for the fiscal year and our key business measures, as discussed below, may decrease for any future period. Unless the context otherwise requires, all references in this section to ~~“Partnership,” “we,” “us,”~~“Partnership”, “we”, “us” or “our” are to Restaurant Brands International Limited Partnership and its subsidiaries, collectively.

Overview

We are a limited partnership originally formed to serve as the indirect holding company for Tim Hortons and its consolidated subsidiaries and Burger King Worldwide and its consolidated subsidiaries. We were formed on August 25, 2014 as a general partnership and registered on October 27, 2014 as a limited partnership in accordance with the laws of the Province of Ontario generally, and the ~~Ontario Limited Partnerships Act~~ ~~specifically. We are a subsidiary of RBI, our sole general partner. On March 27, 2017, we acquired Popeyes Louisiana Kitchen, Inc. and its consolidated subsidiaries.~~ We are one of the world’s largest quick service restaurant (“QSR”) companies with more than $30 billion in system-wide sales and over ~~24,000~~25,000 restaurants in more than 100 countries and U.S. territories as of March 31, ~~2018.~~2019. Our Tim Hortons®, Burger ~~King~~King®®, and ~~Popeyes~~Popeyes®® brands have similar franchised business models with complementary daypart mixes and product platforms. Our three iconic brands are managed independently while benefiting from global scale and sharing of best practices.

Tim Hortons restaurants are quick service restaurants with a menu that includes premium blend coffee, tea, espresso-based hot and cold specialty drinks, fresh baked goods, including donuts, Timbits®, bagels, muffins, cookies and pastries, grilled paninis, classic sandwiches, wraps, soups, and more. Burger King restaurants are quick service restaurants that feature flame-grilled hamburgers, chicken and other specialty sandwiches, french fries, soft drinks, and other affordably-priced food items. Popeyes restaurants are quick service restaurants featuring a unique “Louisiana” style menu that includes spicy chicken, chicken tenders, fried shrimp and other seafood, red beans and rice, and other regional items.

We have three operating and reportable segments: (1) Tim Hortons (“TH”); (2) Burger King (“BK”); and (3) Popeyes Louisiana Kitchen (“PLK”). Our business generates revenue from the following sources: (i) franchise revenues, consisting primarily of royalties based on a percentage of sales reported by franchise restaurants and franchise fees paid by franchisees; (ii) property revenues from properties we lease or sublease to franchisees; and (iii) sales at restaurants owned by us (“Company restaurants”). In addition, our Tim Hortons business generates revenue from sales to franchisees related to our supply chain operations, including manufacturing, procurement, warehousing and distribution, as well as sales to retailers.

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Operating Metrics

We evaluate our restaurants and assess our business based on the following operating metrics:

System-wide sales growth refers to the percentage change in sales at all franchise restaurants and Company restaurants in one period from the same period in the prior year.

Comparable sales refers to the percentage change in restaurant sales in one period from the same prior year period for restaurants that have been open for 13 months or longer for TH and BK and 17 months or longer for PLK.

System-wide sales growth and comparable sales are measured on a constant currency basis, which means the results exclude the effect of foreign currency translation (“FX Impact”). For system-wide sales growth and comparable sales, we calculate the FX Impact by translating prior year results at current year monthly average exchange rates.

Unless otherwise stated, system-wide sales growth, system-wide sales and comparable sales are presented on a system-wide basis, which means they include franchise restaurants and Company restaurants. System-wide results are driven by our franchise restaurants, as approximately 100% of current system-wide restaurants are franchised. Franchise sales represent sales at all franchise restaurants and are revenues to our franchisees. We do not record franchise sales as revenues; however, our royalty revenues are calculated based on a percentage of franchise sales.

Net restaurant growth reflects the percentage change in restaurant count (openings, net of closures) over a trailing twelve month period, divided by the restaurant count at the beginning of the trailing twelve month period.

Recent Events and Factors Affecting Comparability

Transition to New ~~Revenue Recognition~~Lease Accounting Standard

We transitioned to Accounting Standards Codification Topic ~~606,~~842, ~~Revenue from Contracts with Customers~~Leases (“ASC ~~606”~~842”), effective January 1, ~~2018~~2019 on a modified retrospective basis using the ~~modified retrospective~~effective date transition method. Our consolidated financial statements ~~for 2018~~ reflect the application of ASC ~~606~~842 guidance beginning in 2019, while our consolidated financial statements for ~~2017~~prior periods were prepared under the guidance of a previously applicable accounting ~~standards.~~standard.

The most significant effects of this transition that affect comparability of our results of operations between ~~2018~~2019 and ~~2017~~2018 include the following:

~~Franchise fee revenue for franchise agreements entered into subsequent to the acquisitions of BK in 2010, TH in 2014~~

Beginning on January 1, 2019, we record lease income and PLK in 2017 are deferred and amortized over the franchise agreement term beginning in 2018 compared to upfront recognition in 2017 under previously applicable accounting standards. Franchise fees associated with acquired franchise agreements are not included in franchise fee revenue under ASC 606. Consequently, we expect the impact to be greater in those periods in which more openings occur.

~~Advertising fund contributions and advertising fund expenses are reflected~~lease cost on a gross basis for lessee reimbursements of costs such as property taxes and maintenance when we are the lessor in the lease. Although there is no net impact to our ~~2018~~consolidated statement of operations from this change, the presentation resulted in a total increase of $34 million, of which $21 million is related to our TH segment and ~~there may be a difference~~$13 million is related to our BK segment, in ~~timing for recognition of advertising fund contributions~~franchise and ~~advertising fund~~property revenues and franchise and property expenses beginning in 2018. Under previously applicable accounting standards, our statement of operations did not reflect gross advertising fund contributions and advertising fund expenses and temporary net differences between contributions and expenses dueduring the three months ended March 31, 2019 compared to the ~~timing~~three months ended March 31, 2018, when such amounts were recorded on a net basis.

As described in Note 4, Leases, to the accompanying unaudited condensed consolidated financial statements, the transition provisions of ~~expenses were reflected~~ASC 842 required the reclassification of favorable lease assets and unfavorable lease liabilities where we are the lessee in the underlying lease to the right-of-use (“ROU”) asset recorded for the underlying lease. As a result of this reclassification, the amortization period for certain favorable lease assets and unfavorable lease liabilities was reduced, resulting in a $2 million net increase in non-cash amortization expense during the three months ended March 31, 2019 compared to the three months ended March 31, 2018. We expect an increase in amortization expense of up to $10 million in 2019 compared to 2018. We also expect the increase in amortization to decline over time, as ~~current~~underlying leases reach the end of their term, and reclassified balances are fully amortized. Favorable lease assets ~~or current~~and unfavorable lease liabilities onassociated with leases where we are the lessor are not impacted by our ~~consolidated balance sheet.~~transition to ASC 842.

The portion of gift cards sold to customers which are never redeemed is commonly referred to as gift card breakage. Under ASC 606, we recognize gift card breakage income proportionately as each gift card is redeemed using an estimated breakage rate based on our historical experience. Under the Previous Standards, we recognized gift card breakage income for each gift card’s remaining balance when redemption of that balance was deemed remote. This change may impact the timing of when gift card breakage income is recognized.

Please refer to Note 4, ~~Revenue Recognition~~Leases, to the accompanying unaudited condensed consolidated financial statements for further details of the effects of this change in accounting principle.

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~~Popeyes Acquisition~~PLK Transaction Costs

On March 27, 2017, we completed the acquisition of Popeyes (the ~~“Popeyes Acquisition”~~"Popeyes Acquisition"). The changes in our results of operations for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017 are partially driven by the inclusion of the results of operations of PLK. The PLK statement of operations data for the three months ended March 31, 2018 is summarized as follows:

PLK Segment (in millions of U.S. dollars) Three months ended March 31, 2018
Revenues:
Sales $ 20.8
Franchise and property revenues 79.6
Total revenues 100.4
Cost of sales 16.8
Franchise and property expenses 2.4
Segment SG&A 45.4
Segment depreciation and amortization ^(a)
2.7
Segment income 38.5


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

~~PLK Transaction Costs~~

In connection with the Popeyes Acquisition, we incurred certain non-recurring fees and expenses (“PLK Transaction costs”) totaling ~~$5.1 million and $34.4~~$5 million during the three months ended March 31, 2018 ~~and 2017, respectively,~~ consisting primarily of professional fees and compensation related expenses, all of which are classified as selling, general and administrative expenses in the condensed consolidated statements of operations. We ~~expect to~~did not incur ~~additional~~any PLK Transaction costs ~~in 2018 as we complete~~during the ~~integration of the operations of PLK.~~three months ended March 31, 2019.

Tax Reform

OnIn December ~~22,~~ 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) that significantly revises the U.S. tax code generally effective January 1, 2018 by, among other changes, lowering the federal corporate income tax rate from 35% to 21%, limiting deductibility of interest expense and performance based incentive compensation and implementing a modified territorial tax system. As a Canadian entity, we generally would be classified as a foreign entity (and, therefore, a non-U.S. tax resident) under general rules of U.S. federal income taxation. However, we have subsidiaries subject to U.S. federal income taxation and therefore the Tax Act impacted our consolidated results of operations in 2018 and the current period, and is expected to continue to impact our consolidated results of operations in future periods.

~~Also on December 22, 2017, the Securities~~We recorded $6 million and ~~Exchange Commission (the “SEC”) staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application~~$7 million of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. SAB 118 provides that companies (i) should record the effects of the changes from the Tax Act forcosts, which ~~accounting is complete (not provisional), (ii) should record provisional amounts for the effects of the changes from the Tax Act for which accounting is not complete,~~are classified as selling, general and ~~for which reasonable estimates can be determined,~~administrative expenses in the ~~period they are identified,~~condensed consolidated statements of operations, arising primarily from professional advisory and (iii) should not record provisional amounts if reasonable estimates cannot be made for the effects of the changes from the Tax Act, and should continue to apply guidance based on the tax law in effect prior to the enactment on December 22, 2017. In addition, SAB 118 established a one-year measurement period (through December 22, 2018) where a provisional amount could be subject to adjustment, and requires certain qualitative and quantitative disclosures related to provisional amounts and accounting during the measurement period.

~~We recorded $7.1 million of costs~~consulting services associated with corporate restructuring initiatives ~~and professional advisory and consulting services~~ related to the interpretation and implementation of the Tax Act (“Corporate restructuring and tax advisory fees”) during the three months ended March 31, ~~2018.~~2019 and 2018, respectively. We expect to continue to incur additional Corporate restructuring and tax advisory fees related to the Tax Act in ~~2018.~~2019.

Office Centralization and Relocation Costs

In connection with the centralization and relocation of our Canadian and U.S. restaurant support centers to new offices in Toronto, Ontario, and Miami, Florida, respectively, we incurred certain non-operational expenses ("Office centralization and relocation costs") totaling $4 million during the three months ended March 31, 2019 consisting primarily of moving costs and relocation-driven compensation expenses, which are classified as selling, general and administrative expenses in the condensed consolidated statements of operations. We expect to continue to incur additional Office centralization and relocation costs in 2019.

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Results of Operations for the Three Months Ended March 31, ~~2018~~2019 and ~~2017~~2018

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

Consolidated Three Months Ended
March 31, Variance FX Impact (b) Variance Excluding FX Impact
2018 2017 Favorable / (Unfavorable)
Revenues:
Sales $ 547.8
$ 550.4
$ (2.6 ) $ 21.7
$ (24.3 )
Franchise and property revenues 706.0
450.2
255.8
15.9
239.9
Total revenues 1,253.8
1,000.6
253.2
37.6
215.6
Operating costs and expenses:
Cost of sales 429.1
423.4
(5.7 ) (16.6 ) 10.9
Franchise and property expenses 104.4
111.0
6.6
(3.9 ) 10.5
Selling, general and administrative expenses 301.3
121.9
(179.4 ) (2.8 ) (176.6 )
(Income) loss from equity method investments (14.3 ) (5.7 ) 8.6
(0.1 ) 8.7
Other operating expenses (income), net 12.7
13.8
1.1
(1.3 ) 2.4
Total operating costs and expenses 833.2
664.4
(168.8 ) (24.7 ) (144.1 )
Income from operations 420.6
336.2
84.4
12.9
71.5
Interest expense, net 140.1
111.4
(28.7 ) (0.2 ) (28.5 )
Loss on early extinguishment of debt —
20.4
20.4
—
20.4
Income before income taxes 280.5
204.4
76.1
12.7
63.4
Income tax expense 1.7
37.8
36.1
(1.3 ) 37.4
Net income $ 278.8
$ 166.6
$ 112.2
$ 11.4
$ 100.8

TH Segment Three Months Ended
March 31, Variance FX Impact (b) Variance Excluding FX Impact
2018 2017 Favorable / (Unfavorable)
Revenues:
Sales $ 508.3
$ 527.4
$ (19.1 ) $ 21.4
$ (40.5 )
Franchise and property revenues 255.2
206.2
49.0
8.4
40.6
Total revenues 763.5
733.6
29.9
29.8
0.1
Cost of sales 395.9
402.5
6.6
(16.4 ) 23.0
Franchise and property expenses 69.5
77.7
8.2
(3.2 ) 11.4
Segment SG&A 82.3
25.1
(57.2 ) (0.7 ) (56.5 )
Segment depreciation and amortization^(a)
26.3
25.1
(1.2 ) (1.0 ) (0.2 )
Segment income ^(c)
245.2
256.2
(11.0 ) 10.6
(21.6 )

BK Segment Three Months Ended
March 31, Variance FX Impact (b) Variance Excluding FX Impact
2018 2017 Favorable / (Unfavorable)
Revenues:
Sales $ 18.7
$ 23.0
$ (4.3 ) $ 0.3
$ (4.6 )
Franchise and property revenues 371.2
244.0
127.2
7.5
119.7
Total revenues 389.9
267.0
122.9
7.8
115.1
Cost of sales 16.4
20.9
4.5
(0.2 ) 4.7
Franchise and property expenses 32.5
33.3
0.8
(0.7 ) 1.5
Segment SG&A 140.3
38.2
(102.1 ) (1.4 ) (100.7 )
Segment depreciation and amortization ^(a)
12.2
12.5
0.3
(0.3 ) 0.6
Segment income ^(d)
214.1
187.1
27.0
5.8
21.2

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Consolidated	Three Months Ended March 31,						Variance			FX Impact (a)			Variance Excluding FX Impact
	2019			2018			Favorable / (Unfavorable)
Revenues:
Sales	$	522		$	548		$	(26	)	$	(22	)	$	(4	)
Franchise and property revenues	744			706			38			(23		)	61
Total revenues	1,266			1,254			12			(45		)	57
Operating costs and expenses:
Cost of sales	406			429			23			17			6
Franchise and property expenses	133			104			(29		)	3			(32		)
Selling, general and administrative expenses	312			301			(11		)	5			(16		)
(Income) loss from equity method investments	(2		)	(14		)	(12		)	(3		)	(9		)
Other operating expenses (income), net	(17		)	13			30			1			29
Total operating costs and expenses	832			833			1			23			(22		)
Income from operations	434			421			13			(22		)	35
Interest expense, net	132			140			8			—			8
Income before income taxes	302			281			21			(22		)	43
Income tax expense	56			2			(54		)	1			(55		)
Net income	$	246		$	279		$	(33	)	$	(21	)	$	(12	)


~~(b)~~(a)	~~For items included in our results of operations, we~~We calculate the FX Impact by translating prior year results at current year monthly average exchange rates. We analyze these results on a constant currency basis as this helps identify underlying business trends, without distortion from the effects of currency movements.



TH Segment	Three Months Ended March 31,				Variance			FX Impact (a)			Variance Excluding FX Impact
	2019		2018		Favorable / (Unfavorable)
Revenues:
Sales	$	483	$	508	$	(25	)	$	(22	)	$	(3	)
Franchise and property revenues	266		255		11			(11		)	22
Total revenues	749		763		(14		)	(33		)	19
Cost of sales	372		396		24			17			7
Franchise and property expenses	87		70		(17		)	3			(20		)
Segment SG&A	82		82		—			3			(3		)
Segment depreciation and amortization (b)	26		26		—			1			(1		)
Segment income (c)	237		245		(8		)	(11		)	3


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


(c)	TH segment income includes ~~$3.1 million and $2.8~~$3 million of cash distributions received from equity method investments for the three months ended March 31, ~~2018~~2019 and ~~2017, respectively.~~2018.

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BK Segment	Three Months Ended March 31,				Variance			FX Impact (a)			Variance Excluding FX Impact
	2019		2018		Favorable / (Unfavorable)
Revenues:
Sales	$	19	$	19	$	—		$	—		$	—
Franchise and property revenues	392		371		21			(12		)	33
Total revenues	411		390		21			(12		)	33
Cost of sales	18		16		(2		)	—			(2		)
Franchise and property expenses	43		32		(11		)	—			(11		)
Segment SG&A	141		140		(1		)	1			(2		)
Segment depreciation and amortization (b)	13		12		(1		)	—			(1		)
Segment income (d)	222		214		8			(11		)	19


(d)	BK segment income includes ~~$1.2~~$1 million of cash distributions received from equity method investments for the three months ended March 31, 2019 and 2018.

Three Months Ended
March 31,
Key Business Metrics 2018 2017
System-wide sales growth
    TH 2.1 % 3.3 %
    BK 11.3 % 6.2 %
    PLK ^(e)
10.9 % 6.1 %
System-wide sales
    TH $ 1,607.7
$ 1,514.0
    BK $ 5,148.9
$ 4,477.0
    PLK ^(e)
$ 903.7
$ 835.8
Comparable sales
    TH (0.3 )% (0.1 )%
    BK 3.8 % (0.1 )%
    PLK ^(e)
3.2 % (0.2 )%

As of
March 31, 2018 March 31, 2017
Net restaurant growth
    TH 2.8 % 4.6 %
    BK 6.9 % 5.1 %
    PLK ^(f)
6.7 % 5.8 %
Restaurant count
    TH 4,774
4,644
    BK 16,859
15,768
    PLK ^(f)
2,926
2,743



PLK Segment	Three Months Ended March 31,				Variance			FX Impact (a)		Variance Excluding FX Impact
	2019		2018		Favorable / (Unfavorable)
Revenues:
Sales	$	20	$	21	$	(1	)	$	—	$	(1	)
Franchise and property revenues	86		80		6			—		6
Total revenues	106		101		5			—		5
Cost of sales	16		17		1			—		1
Franchise and property expenses	3		2		(1		)	—		(1		)
Segment SG&A	49		46		(3		)	—		(3		)
Segment depreciation and amortization (b)	3		3		—			—		—
Segment income	41		39		2			—		2


~~(e)~~	~~For 2017, PLK figures are shown for informational purposes only and are consistent with PLK's former fiscal calendar. Consequently, results for 2018 may not be comparable to those of 2017.~~


~~(f)~~	~~For 2017, PLK net restaurant growth is for the period from April 17, 2016 through March 27, 2017.~~

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	Three Months Ended March 31,
Key Business Metrics	2019			2018
System-wide sales growth
TH	0.5		%	2.1		%
BK	8.2		%	11.3		%
PLK	6.8		%	10.9		%
Consolidated	6.4		%	9.2		%
System-wide sales
TH	$	1,547		$	1,608
BK	$	5,289		$	5,149
PLK	$	955		$	903
Consolidated	$	7,791		$	7,660
Comparable sales
TH	(0.6		)%	(0.3		)%
BK	2.2		%	3.8		%
PLK	0.6		%	3.2		%

	As of March 31,
	2019			2018
Net restaurant growth
TH	1.9		%	2.8		%
BK	5.7		%	6.9		%
PLK	6.6		%	6.7		%
Consolidated	5.1		%	6.1		%
Restaurant count
TH	4,866			4,774
BK	17,823			16,859
PLK	3,120			2,926
Consolidated	25,809			24,559

Comparable Sales

TH comparable sales ~~of (0.3)~~were (0.6)% during the three months ended March 31, ~~2018 was primarily driven by relatively flat~~2019, including Canada comparable sales ~~and softness in the U.S. Our first quarter results in Canada reflect softness in coffee sales, partially offset by growth in our breakfast foods.~~

of (0.4)%. BK comparable sales ~~of 3.8%~~were 2.2% during the three months ended March 31, ~~2018 was primarily driven by~~2019, including U.S. comparable sales of 4.2% and continued growth in many of our large international markets. In the U.S., our sales growth was a result of impactful marketing, product innovation and balanced menu offerings. Internationally, our0.4%. PLK comparable sales were ~~strong in many~~0.6% during the three months ended March 31, 2019, including U.S comparable sales of our largest markets around the world, including Brazil, Russia, Spain and the U.K., which was driven by a balance of compelling value offerings as well as innovative limited time offers that resonated well with our guests.0.4%.

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PLK comparable sales of 3.2% during the three months ended March 31, 2018 was primarily driven by U.S. comparable sales of 2.3% and continued sales momentum internationally. Our results in the U.S. reflect a better balance between value and premium offerings than we had during prior quarters.

Sales and Cost of Sales

Sales include TH supply chain sales and sales from Company restaurants. TH supply chain sales represent sales of products, supplies and restaurant equipment, as well as sales to retailers. In periods prior to January 1, 2018, we classified revenues derived from sales of equipment packages at the establishment of a restaurant and in connection with renewal or renovation as franchise and property revenues. Sales from Company restaurants, including sales by our consolidated TH Restaurant VIEs, represent restaurant-level sales to our guests.

Cost of sales includes costs associated with the management of our TH supply chain, including cost of goods, direct labor and depreciation, as well as the cost of products sold to retailers. Cost of sales also includes food, paper and labor costs of Company restaurants. In periods prior to January 1, 2018, we classified costs related to sales of equipment packages at the establishment of a restaurant and in connection with renewal or renovation as franchise and property expenses.

During the three months ended March 31, ~~2018,~~2019, the decrease in sales was driven by a ~~$40.5~~decrease of $3 million ~~decrease~~ in our TH segment, ~~and~~ a decrease of ~~$4.6~~$1 million in ~~our BK segment, partially offset by the inclusion of $20.8 million from~~ our PLK segment and ~~a favorable~~an unfavorable FX Impact of ~~$21.7~~$22 million. The decrease in our TH segment was driven by a $25.0 million decrease in supply chain sales, including a lapping of last year's roll-out of espresso equipment and related espresso inventory which benefited our results in the first quarter of 2017, and a $15.5$6 million decrease in our TH Company restaurant revenue, primarily from Company restaurant refranchisings and the conversion of Restaurant VIEs to franchise ~~restaurants.~~restaurants in prior periods, partially offset by a $3 million increase in supply chain sales. The decrease in our PLK segment was due primarily to Company restaurant refranchisings in prior periods.

During the three months ended March 31, ~~2018,~~2019, the ~~increase~~decrease in cost of sales was driven primarily by ~~the inclusion~~a decrease of ~~$16.8~~$7 million ~~from~~in our TH segment, a decrease of $1 million in our PLK segment and a ~~$16.6~~$17 million ~~unfavorable~~favorable FX Impact, partially offset by a ~~$23.0~~$2 million ~~decrease in our TH segment and a $4.7 million decrease~~increase in our BK segment. The decrease in our TH segment was primarily due to a ~~$9.6~~decrease of $5 million ~~decrease in supply chain cost of sales driven by the decrease in supply chain sales described above and a $13.4 million decrease~~ in Company restaurant cost of sales, primarily from Company restaurant refranchisings and the conversion of Restaurant VIEs to franchise ~~restaurants.~~restaurants in prior periods.

Franchise and Property

Franchise and property revenues consist primarily of royalties earned on franchise sales, rents from real estate leased or subleased to franchisees, franchise fees, and other revenue. Franchise and property expenses consist primarily of depreciation of properties leased to franchisees, rental expense associated with properties subleased to franchisees, amortization of franchise agreements, and bad debt expense (recoveries). In periods prior to January 1, 2018, franchise and property revenues and franchise and property expenses included revenues and cost of sales, respectively, related to equipment packages sold at establishment of a restaurant and in connection with renewals or renovations.

During the three months ended March 31, ~~2018,~~2019, the increase in franchise and property revenues was driven by ~~a $119.7~~an increase of $33 million ~~increase~~ in our BK segment, ~~the inclusion~~an increase of ~~$79.6~~$22 million ~~from our PLK segment, a $40.6 million increase~~ in our TH segment, and an increase of $6 million in our PLK segment, partially offset by a ~~$15.9~~$23 million ~~favorable~~unfavorable FX Impact. The ~~increase~~increases in our BK and PLK segments were primarily driven by increases in royalties driven by system-wide sales growth. Additionally, the increases in our BK and TH segments ~~was primarily due to~~reflected the ~~inclusion~~gross recognition of ~~advertising fund contributions~~property income from ~~franchisees~~lessee reimbursements of costs such as property taxes and maintenance when we are the lessor in the lease as a result of the application of ASC ~~606~~842 beginning January 1, 2018 and, to a lesser degree, an increase in royalties driven by system-wide sales growth. The increase in our TH segment was partially offset by the inclusion of revenue in connection with sale of equipment packages in the prior year period within franchise and property revenues that was included in sales beginning January 1, 2018.2019.

During the three months ended March 31, ~~2018,~~2019, the ~~decrease~~increase in franchise and property expenses was driven by an ~~$11.4~~increase of $20 million ~~decrease~~ in our TH segment, ~~and a $1.5~~an increase of $11 million ~~decrease~~ in our BK segment, and an increase of $1 million in our PLK segment, partially offset by ~~the inclusion of $2.4~~a $3 million ~~from our PLK segment and a $3.9 million unfavorable~~favorable FX Impact. The ~~decrease~~increase in our TH ~~segment was primarily due to~~and BK segments reflected the ~~inclusion~~gross recognition of ~~expenses in connection with sale of equipment packages~~property expense for costs such as property taxes and maintenance paid by us and reimbursed by lessees when we are the lessor in the ~~prior year period within franchise and property expenses that was included in cost~~lease as a result of ~~sales~~the application of ASC 842 beginning January 1, ~~2018.~~2019.

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Selling, General and Administrative Expenses

Our selling, general and administrative expenses were comprised of the following:


	Three Months Ended March 31,				Variance			Three Months Ended March 31,				Variance
	Three Months Ended March 31,				$			Three Months Ended March 31,				$			%
	2018		2017		Favorable / (Unfavorable)			2019		2018		Favorable / (Unfavorable)
Segment SG&A:
TH	$	82.3	$	25.1	$	(57.2	)	$	82	$	82	$	—		—	%
BK	140.3		38.2		(102.1		)	141		140		(1		)	(0.7	)%
PLK	45.4		—		(45.4		)	49		46		(3		)	(6.5	)%
Share-based compensation and non-cash incentive compensation expense	15.3		18.5		3.2			25		15		(10		)	(66.7	)%
Depreciation and amortization	5.8		5.7		(0.1		)	5		6		1			16.7	%
PLK Transaction costs	5.1		34.4		29.3			—		5		5			100.0	%
Corporate restructuring and tax advisory fees	7.1		—		(7.1		)	6		7		1			14.3	%
Office centralization and relocation costs								4		—		(4		)	NM
Selling, general and administrative expenses	$	301.3	$	121.9	$	(179.4	)	$	312	$	301	$	(11	)	(3.7	)%

~~Upon our transition to ASC 606 on January 1, 2018, segment~~Segment selling, general and administrative expenses (“Segment SG&A”) include segment selling expenses, which consist primarily of advertising fund expenses, and segment general and administrative expenses, which are comprised primarily of salary and employee-related costs for non-restaurant employees, professional fees, information technology systems, and general overhead for our corporate offices. Prior to our transition to ASC 606 on January 1, 2018, our statement of operations did not reflect advertising fund contributions or advertising fund expenses, since such amounts were netted under previously applicable accounting standards. Segment SG&A excludes share-based compensation and non-cash incentive compensation expense, depreciation and amortization, PLK Transaction costs, ~~and~~ Corporate restructuring and tax advisory ~~fees.~~fees and Office centralization and relocation costs.

During the three months ended March 31, ~~2018, TH and BK Segment SG&A increased primarily due to~~2019, the ~~inclusion of advertising fund expenses from the application of ASC 606 beginning January 1, 2018 and an unfavorable FX Impact.~~

~~During the three months ended March 31, 2018, the decrease~~increase in share-based compensation and non-cash incentive compensation expense was due primarily to ~~a decrease~~an increase in the number of equity awards granted during 2019 and an increase associated with equity award modifications ~~and a decrease related to~~in the ~~remeasurement of liability-classified and non-employee equity awards to fair value.~~current year.

(Income) Loss from Equity Method Investments

The change in (income) loss from equity method investments during the three months ended March 31, ~~2018~~2019 was primarily driven by the ~~current year~~ recognition of a ~~$20.4~~$20 million non-cash dilution gain during 2018 on the initial public offering by one of our equity method investees ~~partially offset by~~and an increase in equity method investment net losses that we recognized during the current year.

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Other Operating Expenses (Income), net

Our other operating expenses (income), net were comprised of the following:


	Three Months Ended March 31,					Three Months Ended March 31,
	2018			2017		2019			2018
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings	$	1.7		$	2.9	$	3		$	2
Litigation settlements (gains) and reserves, net	(6.1		)	—		—			(6		)
Net losses (gains) on foreign exchange	16.4			10.4		(15		)	16
Other, net	0.7			0.5		(5		)	1
Other operating expenses (income), net	$	12.7		$	13.8	$	(17	)	$	13

~~The current year litigation settlement gain~~Litigation settlements (gains) and reserves, net primarily reflects payments made and proceeds received ~~from the successful resolution of a legacy BK litigation.~~in connection with litigation matters.

Net losses (gains) on foreign exchange is primarily related to revaluation of foreign denominated assets and liabilities.

Interest Expense, net

Our interest expense, net and the weighted average interest rate on our long-term debt were as follows:


	Three Months Ended March 31,						Three Months Ended March 31,
	2018			2017			2019			2018
Interest expense, net	$	140.1		$	111.4		$	132		$	140
Weighted average interest rate on long-term debt	4.6		%	5.0		%	5.0		%	4.7		%

During the three months ended March 31, ~~2018,~~2019, interest expense, net ~~increased~~decreased primarily due to ~~higher outstanding debt from incremental term loans and the issuance of senior notes during 2017, partially offset by a decrease in the weighted average interest rate and a $3.6~~an $18 million benefit ~~for~~during the three months ended March 31, 2019 compared to a $4 million benefit during the period from March 15, ~~through~~2018 to March 31, 2018 from our adoption of a new hedge accounting ~~standard. Subject to foreign exchange~~standard in 2018, partially offset by an increase in the weighted average interest rate ~~movements and other factors, we expect a benefit to continue during 2018.~~

~~Loss on Early Extinguishment of Debt~~

~~During~~in the three months ended March 31, 2017, we recorded a $20.4 million loss on early extinguishment of debt, which primarily reflects the write-off of unamortized debt issuance costs and discounts in connection with the refinancing of our senior secured term loan facility.current year.

Income Tax Expense

Our effective tax rate was 18.7% and 0.6% for the three months ended March 31, 2019 and 2018, respectively. The increase in our effective tax rate was primarily due to a lower tax benefit from stock option exercises and ~~18.5%~~the benefit from reserve releases in 2018 due to audit settlements, partially offset by the benefits of internal financing arrangements. The effective tax rate was reduced by 4.1% and 22.7% for the three months ended March 31, ~~2017. The effective tax rate was reduced by 22.7%~~2019 and ~~3.9% for the three months ended March 31,~~ 2018, ~~and 2017,~~ respectively, as a result of benefits from stock option exercises. ~~Additionally,~~We expect quarter-to-quarter volatility in the impact of stock option exercises on our effective tax rate ~~for the three months ended March 31, 2018 benefited from reserve releases due to audit settlements.~~based on fluctuations in stock option exercises.

Net Income

We reported net income of ~~$278.8~~$246 million for the three months ended March 31, ~~2018,~~2019, compared to net income of ~~$166.6~~$279 million for the three months ended March 31, ~~2017.~~2018. The ~~increase~~decrease in net income is primarily due to ~~the inclusion of $38.5~~a $54 million ~~of PLK segment income, a $36.1 million decrease~~increase in income tax expense, an $11 million unfavorable change from the impact of equity method investments, a ~~$29.3~~$10 million increase in share-based compensation and non-cash incentive compensation expense, an $8 million decrease in ~~PLK Transaction costs, a $27.0 million increase in BK~~TH segment income, and ~~the non-recurrence of $20.4~~$4 million of ~~loss on early extinguishment~~

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~~of debt.~~Office centralization and relocation costs. These factors were partially offset by a ~~$28.7~~$30 million favorable change in the results from other operating expenses (income), net, an $8 million increase in ~~interest expense, net, and~~BK segment income, an ~~$11.0~~$8 million decrease in THinterest expense, the non-recurrence of $5 million of PLK Transaction costs incurred in the prior period, a $2 million increase in PLK segment ~~income.~~income and a $1 million decrease in Corporate restructuring and tax advisory fees.

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Non-GAAP Reconciliations

The table below contains information regarding EBITDA and Adjusted EBITDA, which are non-GAAP measures. These non-GAAP measures do not have a standardized meaning under U.S. GAAP and may differ from similar captioned measures of other companies in our industry. We believe that these non-GAAP measures are useful to investors in assessing our operating performance, as ~~it provides~~they provide them with the same tools that management uses to evaluate our performance and is responsive to questions we receive from both investors and analysts. By disclosing these non-GAAP measures, we intend to provide investors with a consistent comparison of our operating results and trends for the periods presented. EBITDA is defined as earnings (net income or loss) before interest expense, net, loss on early extinguishment of debt, income tax expense, and depreciation and amortization and is used by management to measure operating performance of the business. Adjusted EBITDA is defined as EBITDA excluding the non-cash impact of share-based compensation and non-cash incentive compensation expense and (income) loss from equity method investments, net of cash distributions received from equity method investments, as well as other operating expenses (income), net. Other specifically identified costs associated with non-recurring projects are also excluded from Adjusted EBITDA, including PLK Transaction costs associated with the Popeyes Acquisition, ~~and~~ Corporate restructuring and tax advisory fees related to the interpretation and implementation of the Tax ~~Act.~~Act, including Treasury regulations proposed in late 2018, 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. Adjusted EBITDA, as defined above, also represents our measure of segment income for each of our three operating segments.


	Three Months Ended March 31,						Variance					Three Months Ended March 31,						Variance
	Three Months Ended March 31,						$			%		Three Months Ended March 31,						$			%
	2018			2017			Favorable / (Unfavorable)					2019			2018			Favorable / (Unfavorable)
Segment income:
TH	$	245.2		$	256.2		$	(11.0	)	(4.3	)%	$	237		$	245		$	(8	)	(3.3	)%
BK	214.1			187.1			27.0			14.4	%	222			214			8			3.9	%
PLK	38.5			—			38.5			NM		41			39			2			5.4	%
Adjusted EBITDA	497.8			443.3			54.5			12.3	%	500			498			2			0.5	%
Share-based compensation and non-cash incentive compensation expense	15.3			18.5			3.2			17.3	%	25			15			(10		)	(66.7	)%
PLK Transaction costs	5.1			34.4			29.3			85.2	%	—			5			5			NM
Corporate restructuring and tax advisory fees	7.1			—			(7.1		)	NM		6			7			1			14.3	%
Office centralization and relocation costs												4			—			(4		)	NM
Impact of equity method investments (a)	(10.0		)	(2.9		)	7.1			NM		1			(10		)	(11		)	NM
Other operating expenses (income), net	12.7			13.8			1.1			8.0	%	(17		)	13			30			NM
EBITDA	467.6			379.5			88.1			23.2	%	481			468			13			2.8	%
Depreciation and amortization	47.0			43.3			(3.7		)	(8.5	)%	47			47			—			—	%
Income from operations	420.6			336.2			84.4			25.1	%	434			421			13			3.1	%
Interest expense, net	140.1			111.4			(28.7		)	(25.8	)%	132			140			8			5.7	%
Loss on early extinguishment of debt	—			20.4			20.4			NM
Income tax expense	1.7			37.8			36.1			95.5	%	56			2			(54		)	NM
Net income	$	278.8		$	166.6		$	112.2		67.3	%	$	246		$	279		$	(33	)	(11.8	)%

NM - not meaningful


(a)	Represents (i) (income) loss from equity method investments and (ii) cash distributions received from our equity method investments. Cash distributions received from our equity method investments are included in segment income.

The increase in Adjusted EBITDA for the three months ended March 31, ~~2018~~2019 reflects the ~~inclusion of PLK segment income and the increase~~increases in segment income in our BK ~~segment,~~and PLK segments, partially offset by a decrease ~~in segment income~~ in our TH segment.

The increase in EBITDA for the three months ended March 31, ~~2018~~2019 is primarily due to favorable results from other operating expenses (income), net in the ~~inclusion of PLK segment income,~~current period, an increase in segment income in our BK segment, ~~and a decrease in~~the non-recurrence of PLK Transaction costs, and an increase in segment income in our PLK segment, partially offset by unfavorable results from the impact of equity method investments, an increase in share-based compensation and non-cash incentive compensation expense, a decrease in segment income in our TH ~~segment.~~

~~Liquidity~~segment and ~~Capital Resources~~the inclusion of Office centralization and relocation costs.

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Liquidity and Capital Resources

Our primary sources of liquidity are cash on hand, cash generated by operations, and borrowings available under our Revolving Credit Facility (as defined below). We have used, and may in the future use, our liquidity to make required interest and/or principal payments, to make distributions to RBI for RBI to repurchase its common shares, to repurchase Class B exchangeable limited partnership units of Partnership (“Partnership exchangeable units”), to voluntarily prepay and repurchase our or one of our affiliate’s outstanding debt, to fund our investing activities, and to make distributions on Class A common units and distributions on the Partnership exchangeable units. As a result of our borrowings, we are highly leveraged. Our liquidity requirements are significant, primarily due to debt service requirements.

As of March 31, ~~2018,~~2019, we had cash and cash equivalents of ~~$821.5~~$902 million, ~~and~~ working capital of ~~$212.4~~$134 million and borrowing availability of ~~$495.4~~$498 million under our Revolving Credit Facility. Based on our current level of operations and available cash, we believe our cash flow from operations, combined with availability under our Revolving Credit Facility, will provide sufficient liquidity to fund our current obligations, debt service requirements and capital spending over the next twelve months.

On August 2, 2016, the RBI board of directors approved a share repurchase authorization wherein RBI may purchase up to $300 million of RBI common shares through July 2021. Repurchases under RBI’s authorization will be made in the open market or through privately negotiated transactions. If RBI repurchases any RBI common shares, pursuant to the partnership agreement, Partnership will, immediately prior to such repurchase, make a distribution to RBI on its Class A common units in an amount sufficient for RBI to fund such repurchase.

Prior to the Tax Act, we provided deferred taxes on certain undistributed foreign earnings. Under our transition to a modified territorial tax system whereby all previously untaxed undistributed foreign earnings are subject to a transition tax charge at reduced rates and future repatriations of foreign earnings will generally be exempt from U.S. tax, we wrote off the existing deferred tax liability on undistributed foreign earnings and recorded the impact of the new transition tax charge on foreign earnings during the fourth quarter of 2017. We will continue to monitor available evidence and our plans for foreign earnings and expect to continue to provide any applicable deferred taxes based on the tax liability or withholding taxes that would be due upon repatriation of amounts not considered permanently reinvested.

~~On August 2, 2016, the RBI board~~

Table of directors approved a share repurchase authorization wherein RBI may purchase up to $300.0 million of RBI common shares through July 2021. Repurchases under RBI’s authorization will be made in the open market or through privately negotiated transactions. If RBI repurchases any RBI common shares, pursuant to the partnership agreement, Partnership will, immediately prior to such repurchase, make a distribution to RBI on its Class A common units in an amount sufficient for RBI to fund such repurchase.Contents

Debt Instruments and Debt Service Requirements

As of March 31, ~~2018,~~2019, our long-term debt ~~is comprised~~consists primarily of borrowings under our Credit Facilities, amounts outstanding under our 2017 4.25% Senior Notes, 2015 4.625% Senior Notes, ~~and~~ 2017 5.00% Senior Notes and TH Facility (each as defined below), and obligations under ~~capital~~finance leases. For further information about our long-term debt, see Note 910 to the accompanying unaudited condensed consolidated financial statements included in this report.

Credit Facilities

As of March 31, ~~2018,~~2019, there was ~~$6,372.6~~$6,322 million outstanding principal amount under our senior secured term loan facility (the "Term Loan Facility") with ~~a weighted average~~an interest rate of ~~4.29%~~4.75%. Based on the amounts outstanding under the Term Loan Facility and LIBOR as of March 31, ~~2018,~~2019, subject to a floor of 1.00%, required debt service for the next twelve months is estimated to be approximately ~~$276.8~~$304 million in interest payments and ~~$51.1~~$65 million in principal payments. In addition, based on LIBOR as of March 31, ~~2018,~~2019, net cash settlements that we expect to pay on our ~~$2,500.0~~$3,500 million interest rate swap are estimated to be approximately ~~$7.8~~$9 million for the next twelve months.

As of March 31, ~~2018,~~2019, we had no amounts outstanding under our senior secured revolving credit facility (the "Revolving Credit Facility" and together with the Term Loan Facility, the "Credit Facilities"), had ~~$4.6~~$2 million of letters of credit issued against the ~~facility,~~Revolving Credit Facility, and our borrowing availability was ~~$495.4~~$498 million. Funds available under the Revolving Credit Facility may be used to repay other debt, finance debt or RBI share repurchases, fund acquisitions or capital expenditures, and for other general corporate purposes. We have a ~~$125.0~~$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.

The interest rate applicable to borrowings under our Credit Facilities is, at our option, either (i) a base rate plus an applicable margin equal to 1.25% for the Term Loan Facility and ranging from 0.25% to 1.00%, depending on our leverage ratio, for the Revolving Credit Facility, or (ii) a Eurocurrency rate plus an applicable margin of 2.25% for the Term Loan Facility and ranging from 1.25% to 2.00%, depending on our leverage ratio, for the Revolving Credit Facility. Borrowings are subject to a floor of 2.00% for base rate borrowings and 1.00% for Eurocurrency rate borrowings.

Senior Notes

~~Two of our subsidiaries (the "Borrowers")~~The Borrowers are party to (i) an indenture (the “2017 4.25% Senior Notes Indenture”) in connection with the issuance of ~~$1,500.0~~$1,500 million of 4.25% first lien senior secured notes due May 15, 2024 (the “2017 4.25%

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Senior Notes”), (ii) an indenture (the “2015 4.625% Senior Notes Indenture”) in connection with the issuance of ~~$1,250.0~~$1,250 million of 4.625% first lien senior notes due January 15, 2022 (the “2015 4.625% Senior Notes”) and (iii) an indenture (the “2017 5.00% Senior Notes Indenture”) in connection with the issuance of ~~$2,800.0~~$2,800 million of 5.00% second lien senior secured notes due October 15, 2025 (the “2017 5.00% Senior Notes”). No principal payments are due on the 2017 4.25% Senior Notes, 2015 4.625% Senior Notes and 2017 5.00% Senior Notes until maturity and interest is paid semi-annually.

Based on the amounts outstanding at March 31, ~~2018,~~2019, required debt service for the next twelve months on all of the Senior Notes outstanding is approximately ~~$261.6~~$262 million in interest payments.

TH Facility

Restrictions and Covenants

As of March 31, ~~2018,~~2019, we were in compliance with all debt covenants under the Credit Facilities, the TH Facility, 2017 4.25% Senior Notes Indenture, 2017 5.00% Senior Notes Indenture and 2015 4.625% Senior Notes Indenture, and there were no limitations on our ability to draw on the remaining availability under our Revolving Credit Facility.

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Cash Distributions/Dividends

On April ~~2, 2018,~~3, 2019, RBI paid a cash dividend of ~~$0.45~~$0.50 per RBI common share. 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 ~~$0.45~~$0.50 per exchangeable unit.

In addition, because we are a holding company, our ability to pay cash distributions on our Partnership exchangeable units may be limited by restrictions under our debt agreements.

Outstanding Security Data

As of April ~~19, 2018,~~22, 2019, we had outstanding 202,006,067 Class A common units issued to RBI and ~~217,654,367~~207,380,043 Partnership exchangeable units.

One special voting share of RBI is held by a trustee, entitling the trustee to that number of votes on matters on which holders of RBI common shares are entitled to vote equal to the number of Partnership exchangeable units outstanding. The trustee is required to cast such votes in accordance with voting instructions provided by holders of Partnership exchangeable units. At any shareholder meeting of RBI, holders of RBI common shares vote together as a single class with the special voting share except as otherwise provided by law. For information on our share-based compensation and our outstanding equity awards, see Note 15 to the audited consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, filed with the SEC and Canadian securities regulatory authorities on February ~~23, 2018.~~22, 2019.

Since December 12, 2015, the holders of Partnership exchangeable units have had the right to require Partnership to exchange all or any portion of such holder’s Partnership exchangeable units for RBI common shares at a ratio of one share for each Partnership exchangeable unit, subject to RBI’s right as the general partner of Partnership to determine to settle any such exchange for a cash payment in lieu of RBI common shares.

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Comparative Cash Flows

Operating Activities

Cash ~~used for~~provided by operating activities was ~~$141.9~~$154 million during the three months ended March 31, ~~2018,~~2019, compared to cash ~~provided by~~used for operating activities of ~~$314.3~~$142.0 million during the same period in the prior year. The ~~change~~increase in cash provided by operating activities was driven by ~~an increase~~a decrease in income tax payments, primarily due to the 2018 payment of accrued income taxes related to the December 2017 redemption of preferred shares, a decrease in cash used for working capital, an increase in ~~interest payments,~~BK segment income and an increase in ~~cash used by changes in working capital, and a decrease in TH~~PLK segment income. These factors were partially offset by ~~the inclusion of PLK~~an increase in interest payments and a decrease in TH segment ~~income and increases in BK segment income in 2018.~~income.

Investing Activities

Cash provided by investing activities was ~~$1.9~~$11 million for the three months ended March 31, ~~2018,~~2019, compared to ~~cash used for investing activities of $1,624.7~~$2 million during the same period in the prior year. The change in investing activities was driven by an increase in proceeds from the settlement of derivatives and a decrease in capital expenditures.

We expect capital expenditures to increase in 2019 compared to 2018 primarily ~~by net cash used for~~as a result of a C$100 million investment to expand the ~~acquisition~~supply chain and distribution centers in Canada, the majority of ~~Popeyes during 2017.~~which will occur in 2019.

Financing Activities

Cash used for financing activities was ~~$127.6~~$182 million for the three months ended March 31, ~~2018,~~2019, compared to ~~cash provided by financing activities of $809.3~~$128 million during the same period in the prior year. The change in financing activities was driven primarily by ~~proceeds~~an increase in distributions on common units and Partnership exchangeable units, partially offset by an increase in capital contributions from ~~our incremental term loan in 2017~~RBI and the non-recurrence of the 2018 ~~payment of accrued withholding taxes made~~distribution to RBI for payments in connection with the December 2017 redemption of preferred shares. ~~These factors were partially offset by proceeds from stock option exercises in 2018, the repayment~~

Table of ~~a portion of our term loan in 2017, the repayment of debt assumed in connection with the acquisition of Popeyes in 2017, payment of financing costs in 2017, and preferred dividend payments in 2017.~~Contents

New Accounting Pronouncements

See Note 3 – New Accounting Pronouncements in the notes to the accompanying unaudited condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There were no material changes during the three months ended March 31, ~~2018~~2019 to the disclosures made in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 filed with the SEC and Canadian securities regulatory authorities on February ~~23, 2018.~~22, 2019.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation was conducted under the supervision and with the participation of management of RBI, as the general partner of Partnership, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of RBI, of the effectiveness of Partnership’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and Exchange Act Rules 15d-15(e)) as of March 31, ~~2018.~~2019. Based on that evaluation, the CEO and CFO of RBI concluded that Partnership’s disclosure controls and procedures were effective as of such date.

~~Changes in Internal Controls~~

~~Beginning January 1, 2018, we integrated Popeyes into our overall internal control over financial reporting framework.~~

Internal Control Over Financial Reporting

The management of RBI, as general partner of Partnership, including the CEO and CFO, confirm ~~that, other than changes in internal controls disclosed above,~~ there were no changes in Partnership’s internal control over financial reporting during the three months ended March 31, ~~2018~~2019 that have materially affected, or are reasonably likely to materially affect, ~~RBI’s~~Partnership’s internal control over financial reporting. During the three months ended March 31, 2019, Partnership modified existing controls and processes to support the adoption of the new lease accounting standard that Partnership adopted as of January 1, 2019 which included the implementation of a new lease accounting system. There were no significant changes to partnership's internal control over financial reporting due to the adoption of the new standard.

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Special Note Regarding Forward-Looking Statements

Certain information contained in this report, including information regarding future financial performance and plans, targets, aspirations, expectations, and objectives of management, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of Canadian securities laws. We refer to all of these as forward-looking statements. Forward-looking statements are forward-looking in nature and, accordingly, are subject to risks and uncertainties. These forward-looking statements can generally be identified by the use of words such as “believe”, “anticipate”, “expect”, “intend”, “estimate”, “plan”, “continue”, “will”, “may”, “could”, “would”, “target”, “potential” and other similar expressions and include, without limitation, statements regarding our expectations or beliefs regarding (i) our future financial obligations, including annual debt service requirements, capital expenditures and distribution payments, our ability to meet such obligations and the source of funds used to satisfy such obligations; (ii) the amount and timing of additional general ~~and~~ administrative expenses associated with the ~~Popeyes Acquisition~~centralization and ~~the timing of completing the integration~~relocation of our ~~PLK operations;~~Canadian and U.S. restaurant support centers; (iii) the amount and timing of additional Corporate restructuring and tax advisory fees related to the Tax Act; (iv) ~~our estimates with respect to tax matters~~the increase in capital expenditures as a result of our investment to expand our supply chain and distribution centers in Canada and the ~~Tax Act,~~timing of such expenditures; (v) certain tax matters, including ~~our effective tax rate for 2018,~~ the ~~impacts~~impact of the Tax Act on future periods; (vi) the amount of net cash settlements we expect to pay on our derivative instruments; and ~~the anticipated timing of finalizing our estimates; and (v)~~(vii) certain accounting matters, including the impact of changes in accounting and ~~tax matters.~~our transition to ASC 842.

Our forward-looking statements, included in this report and elsewhere,represent management’s expectations as of the date that they are made. Our forward-looking statements are based on assumptions and analyses made by ~~the Company~~Partnership in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. However, these forward-looking statements are subject to a number of risks and uncertainties and actual results may differ materially from those expressed or implied in such statements. Important factors that could cause actual results, level of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements include, among other things, risks related to: (1) our substantial indebtedness, which could adversely affect our financial condition and prevent us from fulfilling our obligations; (2) global economic or other business conditions that may affect the desire or ability of our customers to purchase our products such as inflationary pressures, high unemployment levels, declines in median income growth, consumer confidence and consumer discretionary spending and changes in consumer perceptions of dietary health and food safety; (3) our ~~ability to successfully manage our franchisee relationships, including our~~ relationship with, ~~our Tim Hortons franchisees,~~ and ~~to effectively counter any adverse impact on guest perceptions due to negative publicity; (4)~~ the success of, our franchisees ~~including the financial and operational impact of the new “Winning Together Plan” on Tim Hortons franchisees;~~ and risks related to our fully franchised business model; ~~(5)~~(4) the effectiveness of our marketing and advertising programs and franchisee support of these programs; ~~(6)~~(5) significant and rapid fluctuations in interest rates and in the currency exchange markets and the effectiveness of our hedging activity; ~~(7)~~(6) our ability to successfully implement our domestic and international growth strategy for our brands and risks related to our international operations; ~~(8)~~(7) our reliance on master franchisees and subfranchisees to accelerate restaurant growth; ~~(9)~~(8) the ability of the counterparties to our credit facilities and derivatives to fulfill their commitments and/or obligations; and ~~(10)~~(9) changes in applicable tax laws or interpretations ~~thereof.~~ thereof; and risks related to the complexity of the Tax Act and our ability to accurately interpret and predict its impact on our financial condition and results.

We operate in a very competitive and rapidly changing environment and our inability to successfully manage any of the above risks may permit our competitors to increase their market share and may decrease our profitability New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

~~We operate in a very competitive and rapidly changing environment.~~profitability. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Finally, our future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 filed with the SEC and Canadian securities regulatory authorities on February ~~23, 2018,~~22, 2019, as well as other materials that we from time to time file with, or furnish to, the SEC or file with Canadian securities regulatory authorities. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this section and elsewhere in this report. Other than as required under securities laws, we do not assume a duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.

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Part II – Other Information

Item 1. Legal Proceedings

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. Under the terms of the settlement, TDL will contribute C$10 million to the Tim Hortons Advertising Fund in Canada over two years, such amount to be spent on marketing activities. In addition, TDL will pay C$2 million for legal and administrative expenses. The court approved the settlement on April 29, 2019.

Item 5. Other Information

Item 5.02 Departure of Directors or Certain Officers; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

(e)

On January ~~16, 2018,~~22, 2019, the Compensation Committee of the ~~board~~Board of ~~directors~~Directors of RBI (the “Compensation Committee”) approved an increase in the ~~threshold,~~base salary of Matthew Dunnigan, Chief Financial Officer of RBI, from $400,000 to $480,000 and an increase in his target bonus percentage from 130% to 150%. The Compensation Committee also approved an increase in the base salary of Jill Granat, General Counsel and ~~maximum performance levels for~~Corporate Secretary of RBI, from $500,000 to $550,000.

On January 22, 2019, the Compensation Committee approved the RBI 2019 Annual Bonus Program on substantially the same terms as the RBI 2018 Annual Bonus Program, ~~and,~~ as described in prior years, approved Organic Adjusted EBITDA growth as the measure for Business Achievement. In prior years, RBI was required to achieve at least 80% of the Organic Adjusted EBITDA growth target for RBI for payments to be made under the Annual Bonus Plan. For 2018, however, RBI must achieve at least 50% of the Organic Adjusted EBITDA growth target for RBI in order for payments to be made under the 2018 Annual Bonus Program. For each participant, the “threshold” level represents a 50% payout, the “target” level represents a 100% payout and the “maximum” level represents a 150% payout (rather than a 120% payout as in prior years), and a global multiplier will be applied to calculate the bonus for all participants. The change in threshold and maximum performance levels was made to more closely tie the achievement of budgeted Organic Adjusted EBITDA growth to the bonus payout percentages. Except as set forth above, the terms of the 2018 Bonus Program approved by the Compensation Committee were substantially the same as the 2017 Annual Bonus Program. On January 16, 2018, the Compensation Committee also approved the program documentRBI's quarterly report on Form 10-Q for the ~~Annual Bonus Plan, a copy of which is attached as Exhibit 10.48 to this report.~~three months ended March 31, 2018.

Pursuant to RBI’s Bonus Swap Program, RBI provides eligible employees, including its named executive officers, or NEOs, the ability to invest ~~a portion~~25% or 50% of their net cash bonus into RBI common shares (“Investment Shares”) and leverage the investment through the issuance of matching restricted share units (“RSUs”). The terms of the ~~2017~~RBI 2018 Bonus Swap Program are substantially the same as the terms of the RBI 2015 Bonus Swap Program, which are described in ~~our~~RBI's quarterly report on Form 10-Q for the three months ended March 31, 2016. All of RBI’s NEOs elected to participate in the ~~2017~~RBI 2018 Bonus Swap Program ~~and to purchase Investment Shares. On January 16, 2018,~~at the Compensation Committee approved the grants of matching RSUs to the participants in the 2017 Bonus Swap Program. On February 23, 2018, our NEOs received the following number of matching RSUs: Daniel Schwartz, 29,594; Joshua Kobza, 17,111; Jose Cil, 15,894; Alexandre Santoro, 9,640; and Jill Granat, 9,748.50% level. The matching RSUs will cliff vest on December 31, ~~2022.~~2023. All of the matching RSUs will be forfeited if an NEO’s ~~employment~~service (including service on the Board of Directors of RBI) is terminated for any reason (other than death or disability) prior to December 31, ~~2019.~~2020. If an NEO sells more than 50% of the Investment Shares before the vesting date, he or she will forfeit 100% of the matching RSUs. An NEO who sells 50% or less of the Investment Shares before the vesting date will forfeit 50% of the matching RSUs and a proportional amount of the remaining matching RSUs.

On January ~~16, 2018,~~22, 2019, the Compensation Committee approved a grant of 50,000 RBI stock options to Alexandre Santoro, our former President, Popeyes, who moved into a new role with Partnership supporting its international supply chain business and assisting with new country entries. The stock options cliff vest on February 22, 2024 and the ~~2018 Bonus Swap Program on substantially the same terms as the 2017 Bonus Swap Program.~~exercise price is $64.75.

On January ~~16, 2018,~~22, 2019, the Compensation Committee approved discretionary awards of ~~250,000~~275,000, 100,000, 225,000 and ~~220,000~~50,000 RBI performance based RSUs, or “PBRSUs”, to ~~Mr. Schwartz~~Messrs. Cil, Dunnigan and ~~Mr. Cil, respectively, for retention purposes based on the prior vesting of a significant portion of each executive’s equity awards.~~Kobza and Ms. Granat, respectively. The performance measure for purposes of determining the number of units earned by Messrs. ~~Schwartz~~Cil, Dunnigan and ~~Cil~~Kobza and Ms. Granat is RBI’s ~~compound~~ annual year-over-year growth of ~~organic~~Organic Adjusted EBITDA for 2019, 2020 and 2021. If, at the end of the three-year performance period, ~~beginning on January 1, 2015~~the threshold performance has not been achieved, the performance period will be extended for an additional year, and ~~ending on December 31, 2018.~~a 20% reduction to the payout will apply. The Compensation Committee established an ~~80% of target~~85.7% performance threshold, below which no shares are ~~earned. If 80% of the~~earned, and a 128.6% maximum performance target is achieved, Messrs. Schwartz and Cil will receive a maximum of 150,000 and 132,000 shares, respectively; if the performance target is achieved, Messrs. Schwartz and Cil will receive a maximum of 250,000 and 220,000 shares, respectively; and if 120% of the performance target is achieved, Messrs. Schwartz and Cil will receive a maximum of 300,000 and 264,000 shares, respectively.level. If achievement falls between the threshold level and the target level or between the target level and the maximum level, the number of shares earned by ~~Messrs. Schwartz and Cil~~each NEO would be calculated on a linear basis. Once earned, the PBRSUs will cliff vest on February 23, 2023. Messrs. Schwartz and Cil are required to maintain ownership of 750,000 and 617,762 common shares and Partnership exchangeable units (and any combination thereof), respectively, through the end of the vesting period. If an executive fails to comply with these holding requirements, he will forfeit all of the PBRSUs.22, 2024. In addition, if an executive’s ~~employment~~service to RBI (including service on the Board of Directors of RBI) is terminated for any reason (other than due to death or disability) prior to February ~~23, 2021,~~22, 2022, he or she will forfeit the entire award. ~~Each~~A copy of ~~Messrs. Schwartz and Cil entered into a~~the form of Performance Award Agreement ~~substantially~~between RBI and each of the NEOs is filed as Exhibit 10.62 in RBI's quarterly report on Form 10-Q for the ~~form as previously filed.~~three months ended March 31, 2019. This summary is qualified in its entirety to the full text of the Performance Award Agreement.

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Item 6. Exhibits

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Exhibit Number		Description

10.48* 10.50*		~~Restaurant Brands International Inc. Annual Bonus Program Plan Document~~ Employment and Post-Employment Covenants Agreement dated as of January 22, 2018 by and between The TDL Group Corp. and Matthew Dunnigan (incorporated herein by reference to Exhibit ~~10.48~~10.50 to the Form 10-Q of Restaurant Brands International Inc. filed on April ~~24, 2017)~~29, 2019).

~~10.49(a)~~ 10.51*		Employment and Post-Employment Covenants Agreement dated as of ~~February 9, 2015~~January 22, 2018 by and between ~~The TDL Group Corp.~~Restaurant Brands International Inc. and ~~Jill Granat~~Matthew Dunnigan (incorporated herein by reference to Exhibit ~~10.49(a)~~10.51 to the Form 10-Q of Restaurant Brands International Inc. filed on April ~~24, 2017)~~29, 2019).

~~10.49(b)~~ 10.52*		Employment and Post-Employment Covenants Agreement dated as of ~~February 9, 2015~~January 22, 2018 by and between Restaurant Brands International ~~Inc.~~U.S. Services LLC and ~~Jill Granat~~Matthew Dunnigan (incorporated herein by reference to Exhibit ~~10.49(b)~~10.52 to the Form 10-Q of Restaurant Brands International Inc. filed on April ~~24, 2017)~~29, 2019).

~~10.49(c)~~ 10.53*		Employment and Post-Employment Covenants Agreement dated as of ~~February 9, 2015~~January 23, 2019 by and between ~~Burger King Corporation~~The TDL Group Corp. and ~~Jill Granat~~Jose E. Cil (incorporated herein by reference to Exhibit ~~10.49(c)~~10.53 to the Form 10-Q of Restaurant Brands International Inc. filed on April ~~24, 2017)~~29, 2019).

10.54*		Employment and Post-Employment Covenants Agreement dated as of January 23, 2019 by and between Restaurant Brands International Inc. and Jose E. Cil (incorporated herein by reference to Exhibit 10.54 to the Form 10-Q of Restaurant Brands International Inc. filed on April 29, 2019).

10.55*		Employment and Post-Employment Covenants Agreement dated as of January 23, 2019 by and between Burger King Corporation and Jose E. Cil (incorporated herein by reference to Exhibit 10.55 to the Form 10-Q of Restaurant Brands International Inc. filed on April 29, 2019).

10.56*		Amendment dated January 23, 2019 to Employment and Post-Covenants Agreement dated as of February 9, 2015 between Restaurant Brands International Inc. and Daniel Schwartz (incorporated herein by reference to Exhibit 10.56 to the Form 10-Q of Restaurant Brands International Inc. filed on April 29, 2019).

10.57*		Amendment dated January 23, 2019 to Employment and Post-Covenants Agreement dated as of February 9, 2015 between Burger King Corporation and Daniel Schwartz (incorporated herein by reference to Exhibit 10.57 to the Form 10-Q of Restaurant Brands International Inc. filed on April 29, 2019).

10.58*		Amendment dated January 23, 2019 to Employment and Post-Covenants Agreement dated as of February 9, 2015 between The TDL Group Corp. and Daniel Schwartz (incorporated herein by reference to Exhibit 10.58 to the Form 10-Q of Restaurant Brands International Inc. filed on April 29, 2019).

10.59*		Amendment dated January 23, 2019 to Employment and Post-Covenants Agreement dated as of February 9, 2015 between Restaurant Brands International Inc. and Joshua Kobza (incorporated herein by reference to Exhibit 10.59 to the Form 10-Q of Restaurant Brands International Inc. filed on April 29, 2019).

10.60*		Amendment dated January 23, 2019 to Employment and Post-Covenants Agreement dated as of February 9, 2015 between Burger King Corporation and Joshua Kobza (incorporated herein by reference to Exhibit 10.60 to the Form 10-Q of Restaurant Brands International Inc. filed on April 29, 2019).

10.61*		Amendment dated January 23, 2019 to Employment and Post-Covenants Agreement dated as of February 9, 2015 between The TDL Group Corp. and Joshua Kobza (incorporated herein by reference to Exhibit 10.61 to the Form 10-Q of Restaurant Brands International Inc. filed on April 29, 2019).

10.62*		Form of Performance Award Agreement under Amended and Restated 2014 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.62 to the Form 10-Q of Restaurant Brands International Inc. filed on April 29, 2019).

31.1		Certification of Chief Executive Officer of Restaurant Brands International Inc., as general partner of Restaurant Brands International Limited Partnership, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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31.2		Certification of Chief Financial Officer of Restaurant Brands International Inc., as general partner of Restaurant Brands International Limited Partnership, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer of Restaurant Brands International Inc., as general partner of Restaurant Brands International Limited Partnership, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer of Restaurant Brands International Inc., as general partner of Restaurant Brands International Limited Partnership, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

* Management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




	RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP
	By:	Restaurant Brands International Inc., its general partner

Date: April ~~24, 2018~~29, 2019	By:	/s/ Matthew Dunnigan
		Name:	Matthew Dunnigan ~~principal financial officer~~
		Title:	Chief Financial Officer of Restaurant Brands International Inc. (principal financial officer) (duly authorized officer)

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				Total			Amounts Under
	As Reported			Adjustments			Previous Standards
Revenues:
Sales	$	547.8		$	—		$	547.8
Franchise and property revenues	706.0			(182.0		)	524.0
Total revenues	1,253.8			(182.0		)	1,071.8
Operating costs and expenses:
Cost of sales	429.1			—			429.1
Franchise and property expenses	104.4			(0.2		)	104.2
Selling, general and administrative expenses	301.3			(190.5		)	110.8
(Income) loss from equity method investments	(14.3		)	—			(14.3		)
Other operating expenses (income), net	12.7			—			12.7
Total operating costs and expenses	833.2			(190.7		)	642.5
Income from operations	420.6			8.7			429.3
Interest expense, net	140.1			0.5			140.6
Income before income taxes	280.5			8.2			288.7
Income tax expense	1.7			2.1			3.8
Net income	278.8			6.1			284.9
Net income attributable to noncontrolling interests	0.2			—			0.2
Net income attributable to common unitholders	$	278.6		$	6.1		$	284.7

Earnings per unit - basic and diluted:
Class A common units	$	0.73					$	0.75
Partnership exchangeable units	$	0.60					$	0.61