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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,September 30, 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)
 
 
Canada 98-1206431
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)

130 King Street West, Suite 300
Toronto, Ontario
  M5X 1E1
Toronto,Ontario
(Address of Principal Executive Offices)  (Zip Code)
(905) (905) 845-6511
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) 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 every Interactive Data File required to be submitted 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 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,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
       
Large accelerated filer   Accelerated filer 
    
Non-accelerated filer   Smaller reporting company 
       
Emerging growth company


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 22,October 24, 2019, there were 207,380,043165,514,822 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
   
 
Item 1.
Item 2.
Item 3.
Item 4.
   
 
Item 1.6.
Item 5.
Item 6.
 




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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 ofAs of
March 31,
2019
 December 31,
2018
September 30,
2019
 December 31,
2018
ASSETS      
Current assets:      
Cash and cash equivalents$902
 $913
$1,699
 $913
Accounts and notes receivable, net of allowance of $14 and $14, respectively441
 452
Accounts and notes receivable, net of allowance of $16 and $14, respectively472
 452
Inventories, net74
 75
83
 75
Prepaids and other current assets63
 60
86
 60
Total current assets1,480
 1,500
2,340
 1,500
Property and equipment, net of accumulated depreciation and amortization of $645 and $704, respectively2,011
 1,996
Operating lease assets1,148
 
Property and equipment, net of accumulated depreciation and amortization of $709 and $704, respectively1,981
 1,996
Operating lease assets, net1,147
 
Intangible assets, net10,427
 10,463
10,439
 10,463
Goodwill5,555
 5,486
5,579
 5,486
Net investment in property leased to franchisees50
 54
47
 54
Other assets, net622
 642
716
 642
Total assets$21,293
 $20,141
$22,249
 $20,141
LIABILITIES AND EQUITY      
Current liabilities:      
Accounts and drafts payable$451
 $513
$510
 $513
Other accrued liabilities689
 637
797
 637
Gift card liability112
 167
94
 167
Current portion of long term debt and finance leases94
 91
Current portion of long term debt and finance leases (Note 10)776
 91
Total current liabilities1,346
 1,408
2,177
 1,408
Term debt, net of current portion11,747
 11,823
11,568
 11,823
Finance leases, net of current portion287
 226
279
 226
Operating lease liabilities, net of current portion1,046
 
1,055
 
Other liabilities, net1,531
 1,547
1,598
 1,547
Deferred income taxes, net1,563
 1,519
1,509
 1,519
Total liabilities17,520
 16,523
18,186
 16,523
Partners’ capital:      
Class A common units; 202,006,067 issued and outstanding at March 31, 2019 and December 31, 20184,423
 4,323
Partnership exchangeable units; 207,382,401 issued and outstanding at March 31, 2019; 207,523,591 issued and outstanding at December 31, 2018737
 730
Class A common units; 202,006,067 issued and outstanding at September 30, 2019 and December 31, 20187,753
 4,323
Partnership exchangeable units; 165,529,822 issued and outstanding at September 30, 2019; 207,523,591 issued and outstanding at December 31, 2018(2,358) 730
Accumulated other comprehensive income (loss)(1,389) (1,437)(1,334) (1,437)
Total Partners’ capital3,771
 3,616
4,061
 3,616
Noncontrolling interests2
 2
2
 2
Total equity3,773
 3,618
4,063
 3,618
Total liabilities and equity$21,293
 $20,141
$22,249
 $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
September 30,
 Nine Months Ended
September 30,
2019 20182019 2018 2019 2018
Revenues:          
Sales$522
 $548
$624
 $609
 $1,735
 $1,743
Franchise and property revenues744
 706
834
 766
 2,389
 2,229
Total revenues1,266
 1,254
1,458
 1,375
 4,124
 3,972
Operating costs and expenses:          
Cost of sales406
 429
475
 470
 1,334
 1,348
Franchise and property expenses133
 104
133
 107
 401
 314
Selling, general and administrative expenses312
 301
320
 298
 948
 917
(Income) loss from equity method investments(2) (14)(11) (4) (11) (17)
Other operating expenses (income), net(17) 13
(30) 26
 (44) 9
Total operating costs and expenses832
 833
887
 897
 2,628
 2,571
Income from operations434
 421
571
 478
 1,496
 1,401
Interest expense, net132
 140
137
 135
 406
 405
Loss on early extinguishment of debt4
 
 4
 
Income before income taxes302
 281
430
 343
 1,086
 996
Income tax expense56
 2
79
 93
 232
 153
Net income246
 279
351
 250
 854
 843
Net income attributable to noncontrolling interests
 

 
 
 1
Net income attributable to common unitholders$246
 $279
$351
 $250
 $854
 $842
Earnings per unit - basic and diluted          
Class A common units$0.67
 $0.73
$1.00
 $0.66
 $2.37
 $2.22
Partnership exchangeable units$0.53
 $0.60
$0.76
 $0.53
 $1.85
 $1.81
Weighted average units outstanding - basic and diluted          
Class A common units202
 202
202
 202
 202
 202
Partnership exchangeable units208
 218
197
 218
 204
 218
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 September 30, Nine Months Ended September 30,
2019 20182019 2018 2019 2018
Net income$246
 $279
$351
 $250
 $854
 $843
          
Foreign currency translation adjustment159
 (217)(173) 147
 185
 (325)
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
Net change in fair value of net investment hedges, net of tax of $(37), $0, $2 and $(38)143
 (83) 27
 33
Net change in fair value of cash flow hedges, net of tax of $9, $7, $43 and $(3)(25) 24
 (116) 52
Amounts reclassified to earnings of cash flow hedges, net of tax of $(2), $1, $(3) and $(1)5
 8
 7
 14
Other comprehensive income (loss)48
 (183)(50) 96
 103
 (226)
Comprehensive income (loss)294
 96
301
 346
 957
 617
Comprehensive income (loss) attributable to noncontrolling interests
 

 
 
 1
Comprehensive income (loss) attributable to common unitholders$294
 $96
$301
 $346
 $957
 $616
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
 Units Amount Units Amount 
Balances at December 31, 2018202,006,067
 $4,323
 207,523,591
 $730
 $(1,437) $2
 $3,618
Cumulative effect adjustment
 12
 
 9
 
 
 21
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
 9
 (141,190) (9) 
 
 
Capital contribution from RBI Inc.
 71
 
 
 
 
 71
Net income
 135
 
 111
 
 
 246
Other comprehensive income (loss)
 
 
 
 48
 
 48
Balances at March 31, 2019202,006,067
 $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
 TotalClass A Common
Units
 Partnership
Exchangeable Units
 Accumulated 
Other
Comprehensive
Income (Loss)
 Noncontrolling
Interest
 Total
Units Amount Units Amount Units Amount Units Amount 
Balances at December 31, 2017202,006,067
 $4,168
 217,708,924
 $1,276
 $(884) $1
 $4,561
Balances at December 31, 2018202,006,067
 $4,323
 207,523,591
 $730
 $(1,437) $2
 $3,618
Cumulative effect adjustment
 (132) 
 (118) 
 
 (250)
 12
 
 9
 
 
 21
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)
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
 9
 (141,190) (9) 
 
 
Capital contribution from RBI Inc.
 71
 
 
 
 
 71
Net income
 135
 
 111
 
 
 246
Other comprehensive income (loss)
 
 
 
 48
 
 48
Balances at March 31, 2019202,006,067
 $4,423
 207,382,401
 $737
 $(1,389) $2
 $3,773
Distributions declared on Class A common units ($0.63 per unit)
 (128) 
 
 
 
 (128)
Distributions declared on partnership exchangeable units ($0.50 per unit)
 
 
 (103) 
 
 (103)
Exchange of Partnership exchangeable units for RBI common shares
 2
 (29,432) (2) 
 
 

 3
 (45,325) (3) 
 
 
Capital contribution from RBI Inc.
 44
 
 
 
 
 44

 55
 
 
 
 
 55
Restaurant VIE contributions (distributions)
 
 
 
 
 1
 1

 
 
 
 
 1
 1
Net income
 148
 
 131
 
 
 279

 142
 
 115
 
 
 257
Other comprehensive income (loss)
 
 
 
 (183) 
 (183)
 
 
 
 105
 
 105
Balances at March 31, 2018202,006,067
 $4,118
 217,679,492
 $1,189
 $(1,067) $2
 $4,242
Balances at June 30, 2019202,006,067
 $4,495
 207,337,076
 $746
 $(1,284) $3
 $3,960
Distributions declared on Class A common units ($0.70 per unit)
 (141) 
 
 
 
 (141)
Distributions declared on partnership exchangeable units ($0.50 per unit)
 
 
 (92) 
 
 (92)
Exchange of Partnership exchangeable units for RBI common shares
 3,162
 (41,807,254) (3,162) 
 
 
Capital contribution from RBI Inc.
 36
 
 
 
 
 36
Restaurant VIE contributions (distributions)
 
 
 
 
 (1) (1)
Net income
 201
 
 150
 
 
 351
Other comprehensive income (loss)
 
 
 
 (50) 
 (50)
Balances at September 30, 2019202,006,067
 $7,753
 165,529,822
 $(2,358) $(1,334) $2
 $4,063
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
 Units Amount Units Amount 
Balances at December 31, 2017202,006,067
 $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, 2018202,006,067
 $4,118
 217,679,492
 $1,189
 $(1,067) $2
 $4,242
Distributions declared on Class A common units ($0.56 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
 (42,923) (2) 
 
 
Capital contribution from RBI Inc.
 18
 
 
 
 
 18
Net income
 167
 
 146
 
 1
 314
Other comprehensive income (loss)
 
 
 
 (139) 
 (139)
Balances at June 30, 2018202,006,067
 $4,193
 217,636,569
 $1,235
 $(1,206) $3
 $4,225
Distributions declared on Class A common units ($0.56 per unit)
 (114) 
 
 
 
 (114)
Distributions declared on partnership exchangeable units ($0.45 per unit)
 
 
 (98) 
 
 (98)
Exchange of Partnership exchangeable units for RBI common shares
 6
 (92,978) (6) 
 
 
Capital contribution from RBI Inc.
 37
 
 
 
 
 37
Net income
 134
 
 116
 
 
 250
Other comprehensive income (loss)
 
 
 
 96
 
 96
Balances at September 30, 2018202,006,067
 $4,256
 217,543,591
 $1,247
 $(1,110) $3
 $4,396
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,Nine Months Ended September 30,
2019 20182019 2018
Cash flows from operating activities:      
Net income$246
 $279
$854
 $843
Adjustments to reconcile net income to net cash provided by (used for) operating activities:      
Depreciation and amortization47
 47
139
 138
Non-cash loss on early extinguishment of debt4
 
Amortization of deferred financing costs and debt issuance discount7
 7
22
 22
(Income) loss from equity method investments(2) (14)(11) (17)
Loss (gain) on remeasurement of foreign denominated transactions(15) 16
(Gain) loss on remeasurement of foreign denominated transactions(38) (19)
Net (gains) losses on derivatives(20) 2
(43) (24)
Share-based compensation expense22
 13
56
 39
Deferred income taxes38
 (19)(16) 6
Other3
 4
1
 11
Changes in current assets and liabilities, excluding acquisitions and dispositions:      
Accounts and notes receivable14
 15
(7) (1)
Inventories and prepaids and other current assets(13) (7)(34) (16)
Accounts and drafts payable(69) (73)(15) (24)
Other accrued liabilities and gift card liability(126) (374)(85) (284)
Tenant inducements paid to franchisees
 (2)(13) (25)
Other long-term assets and liabilities22
 (36)64
 (6)
Net cash provided by (used for) operating activities154
 (142)878
 643
Cash flows from investing activities:      
Payments for property and equipment(5) (7)(32) (53)
Net proceeds from disposal of assets, restaurant closures, and refranchisings4
 2
22
 2
Settlement/sale of derivatives, net11
 3
17
 11
Other investing activities, net1
 4

 12
Net cash provided by (used for) investing activities11
 2
7
 (28)
Cash flows from financing activities:      
Proceeds from issuance of long-term debt750
 
Repayments of long-term debt and finance leases(23) (22)(290) (66)
Payment of financing costs(13) 
Distributions on Class A common and Partnership exchangeable units(207) (97)(669) (517)
Distributions to RBI for payments in connection with redemption of preferred shares
 (34)
 (60)
Capital contribution from RBI Inc.42
 25
99
 53
Proceeds from derivatives17
 
Other financing activities, net6
 

 1
Net cash (used for) provided by financing activities(182) (128)(106) (589)
Effect of exchange rates on cash and cash equivalents6
 (8)7
 (10)
Increase (decrease) in cash and cash equivalents(11) (276)786
 16
Cash and cash equivalents at beginning of period913
 1,097
913
 1,097
Cash and cash equivalents at end of period$902
 $821
$1,699
 $1,113
Supplemental cash flow disclosures:      
Interest paid$140
 $129
$433
 $411
Income taxes paid$45
 $304
$171
 $374
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,September 30, 2019, we franchised or owned 4,8664,887 Tim Hortons restaurants, 17,82318,232 Burger King restaurants, and 3,1203,192 Popeyes restaurants, for a total of 25,80926,311 restaurants, and operate in more than 100 countries and U.S. territories. Approximately 100% of current system-wide restaurants are franchised.
We are a subsidiary of Restaurant Brands International Inc. (“RBI”). RBI is our sole general partner, and as such, RBI has the exclusive right, power and authority to manage, control, administer and operate the business and affairs and to make decisions regarding the undertaking and business of Partnership in accordance with the partnership agreement of Partnership (“partnership agreement”) and applicable laws.
All references to “$” or “dollars” are to the currency of the United States unless otherwise indicated. All references to “Canadian dollars” or “C$” are to the currency of Canada unless otherwise indicated.
Note 2. Basis of Presentation and Consolidation
We have prepared the accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements. Therefore, the Financial Statements should be read in conjunction with the audited consolidated financial statements contained in our Annual Report on Form 10-K filed with the SEC and Canadian securities regulatory authorities on February 22, 2019.
The Financial Statements include our accounts and the accounts of entities in which we have a controlling financial interest, the usual condition of which is ownership of a majority voting interest. All material intercompany balances and transactions have been eliminated in consolidation. Investments in other affiliates that are owned 50% or less where we have significant influence are accounted for by the equity method.
We also consider for consolidation entities in which we have certain interests, where the controlling financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a variable interest entity (“VIE”), is required to be consolidated by its primary beneficiary. The primary beneficiary is the entity that possesses the power to direct the activities of the VIE that most significantly impact its economic performance and has the obligation to absorb losses or the right to receive benefits from the VIE that are significant to it. Our maximum exposure to loss resulting from involvement with VIEs is attributable to accounts and notes receivable balances, outstanding loan guarantees and future lease payments, where applicable.
As our franchise and master franchise arrangements provide the franchise and master franchise entities the power to direct the activities that most significantly impact their economic performance, we do not consider ourselves the primary beneficiary of any such entity that might be a VIE.
Tim Hortons has historically entered into certain arrangements in which an operator acquires the right to operate a restaurant, but Tim Hortons owns the restaurant’s assets. We perform an analysis to determine if the legal entity in which operations are conducted is a VIE and consolidate a VIE entity if we also determine Tim Hortons is the entity’s primary beneficiary (“Restaurant VIEs”). As of March 31,September 30, 2019 and December 31, 2018, we determined that we are the primary beneficiary of 1830 and 17 Restaurant VIEs, respectively, and accordingly, have consolidated the results of operations, assets and liabilities, and cash flows of these Restaurant VIEs in our Financial Statements. Material intercompany accounts and transactions have been eliminated in consolidation.


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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.
The preparation of consolidated financial statements in conformity with U.S. GAAP and related rules and regulations of the SEC requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates.
Certain prior year amounts in the accompanying Financial Statements and notes to the Financial Statements have been reclassified in order to be comparable with the current year classifications. These consist of the reclassification of $2$25 million from changes in Other long-term assets and liabilities in the Condensed Consolidated Statement of Cash Flows for the threenine months ended March 31,September 30, 2018 to Tenant inducements paid to franchisees. These reclassifications had no effect on previously reported net income.
Note 3. New Accounting Pronouncements
Lease Accounting – In February 2016, the Financial Accounting Standard Board (the “FASB”) issued new guidance on leases. We adopted this new guidance on January 1, 2019. See Note 4, Leases, for further information about our transition to this new lease accounting standard.
Goodwill Impairment – In January 2017, the FASB issued guidance to simplify how an entity measures goodwill impairment by removing the second step of the two-step quantitative goodwill impairment test. An entity will no longer be required to perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured at the amount by which the carrying value exceeds the fair value of a reporting unit; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendment requires prospective adoption and is effective commencing in 2020 with early adoption permitted. The adoption of this new guidance will not have a material impact on our Financial Statements.
Reclassification of Certain Tax Effects – In February 2018, the FASB issued guidance which allows a reclassification from accumulated other comprehensive income (loss) to retained earnings for the tax effects of certain items within accumulated other comprehensive income (loss). The amendment is effective commencing in 2019 with early adoption permitted. The adoption of this new guidance did not have a material impact on our Financial Statements.
Share-based payment arrangements with nonemployees – In June 2018, the FASB issued guidance which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The amendment is effective commencing in 2019 with early adoption permitted. The adoption of this new guidance did not have a material impact on our Financial Statements.




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Note 4. Leases
As of March 31,September 30, 2019, we leased or subleased 5,3395,294 restaurant properties to franchisees and 155183 non-restaurant properties to third parties under operating leases and direct financing leases where we are the lessor. Initial lease terms generally range from 10 to 20 years. Most leases to franchisees provide for fixed monthly payments and many provide for future rent escalations and renewal options. Certain leases also include provisions for variable rent, determined as a percentage of sales, generally when annual sales exceed specified levels. Lessees typically bear the cost of maintenance, insurance and property taxes.
We lease land, buildings, equipment, office space and warehouse space. Land and building leases generally have an initial term of 10 to 30 years, while land-only lease terms can extend longer, and most leases provide for fixed monthly payments. Many of these leases provide for future rent escalations and renewal options. Certain leases also include provisions for variable rent payments, determined as a percentage of sales, generally when annual sales exceed specified levels. Most leases also obligate us to pay, as lessee, the cost of maintenance, insurance and property taxes.
We transitioned to FASB Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”), from ASC Topic 840, Leases (the “Previous Standard”) on January 1, 2019 on a modified retrospective basis using the effective date transition method. Our Financial Statements reflect the application of ASC 842 guidance beginning in 2019, while our consolidated financial statements for prior periods were prepared under the guidance of the Previous Standard. The new guidance requires lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by finance and operating leases with lease terms of more than 12 months, amends various other aspects of accounting for leases by lessees and lessors, and requires enhanced disclosures. Our transition to ASC 842 resulted in the gross presentation of property tax and maintenance expenses and related lessee reimbursements as franchise and property expenses and franchise and property revenues, respectively. These expenses and reimbursements were presented on a net basis under the Previous Standard.
In connection with our transition to ASC 842, we elected the package of practical expedients under which we did not reassess the classification of our existing leases, reevaluate whether any expired or existing contracts are or contain leases or reassess initial direct costs under the new guidance. We also elected lessee and lessor practical expedients to not separate non-lease components comprised of maintenance from lease components for real estate leases that commenced prior to our transition to ASC 842, as well as for leases that commence or that are modified subsequent to our transition to ASC 842. We did not elect the practical expedient that permitted a reassessment of lease terms for existing leases.




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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 AdjustedAs Reported Total Adjusted
December 31, 2018 Adjustments January 1, 2019December 31, 2018 Adjustments January 1, 2019
ASSETS          
Current assets:          
Cash and cash equivalents$913
 $
 $913
$913
 $
 $913
Accounts and notes receivable, net452
 
 452
452
 
 452
Inventories, net75
 
 75
75
 
 75
Prepaids and other current assets60
 
 60
60
 
 60
Total current assets1,500
 
 1,500
1,500
 
 1,500
Property and equipment, net1,996
 26
(a)2,022
1,996
 26
(a)2,022
Operating lease assets
 1,143
(b)1,143
Operating lease assets, net
 1,143
(b)1,143
Intangible assets, net10,463
 (133)(c)10,330
10,463
 (133)(c)10,330
Goodwill5,486
 
 5,486
5,486
 
 5,486
Net investment in property leased to franchisees54
 
 54
54
 
 54
Other assets, net642
 
 642
642
 
 642
Total assets$20,141
 $1,036
 $21,177
$20,141
 $1,036
 $21,177
LIABILITIES AND EQUITY          
Current liabilities:          
Accounts and drafts payable$513
 $
 $513
$513
 $
 $513
Other accrued liabilities637
 114
(e)751
637
 114
(d)751
Gift card liability167
 
 167
167
 
 167
Current portion of long term debt and finance leases91
 
 91
91
 
 91
Total current liabilities1,408
 114
 1,522
1,408
 114
 1,522
Term debt, net of current portion11,823
 (65)(f)11,758
11,823
 (65)(e)11,758
Finance leases, net of current portion226
 62
(f)288
226
 62
(e)288
Operating lease liabilities, net of current portion
 1,028
(g)1,028

 1,028
(f)1,028
Other liabilities, net1,547
 (132)(d)1,415
1,547
 (132)(g)1,415
Deferred income taxes, net1,519
 8
(h)1,527
1,519
 8
(h)1,527
Total liabilities16,523
 1,015
 17,538
16,523
 1,015
 17,538
Partners' capital:          
Class A common units4,323
 12
(i)4,335
4,323
 12
(i)4,335
Partnership exchangeable units730
 9
(i)739
730
 9
(i)739
Accumulated other comprehensive income (loss)(1,437) 
 (1,437)(1,437) 
 (1,437)
Total Partners' capital3,616
 21
 3,637
3,616
 21
 3,637
Noncontrolling interests2
 
 2
2
 
 2
Total equity3,618
 21
 3,639
3,618
 21
 3,639
Total liabilities and equity$20,141
 $1,036
 $21,177
$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 current portion of operating lease liabilities.
(e)Represents the net change in liabilities recorded in connection with build-to-suit leases.
(f)Represents the recognition of operating lease liabilities, net of current portion.
(g)Represents the net carrying amount of unfavorable lease liabilities associated with leases in which we are the lessee and $64 million of straight-line rent accruals which have been reclassified to operating lease ROU assets.
(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 aan ROU asset and lease liability at lease commencement, which isare measured by discounting lease payments using our incremental borrowing rate as the discount rate. We determine the incremental borrowing rate applicable to each lease by reference to our outstanding secured borrowings and implied spreads over the risk-free discount rates that correspond to the term of each lease, term andas adjusted for the currency of the lease as the discount rate.lease. Subsequent amortization of the ROU asset and accretion of the lease liability for an operating lease is recognized as a single lease cost, on a straight-line basis, over the lease term. Amortization of the ROU asset and the change in the lease liability are included in changes in Other long-term assets and liabilities in the Condensed Consolidated Statement of Cash Flows. A finance lease ROU asset is depreciated on a straight-line basis over the lesser of the useful life of the leased asset or lease term. Interest on each finance lease liability is determined as the amount that results in a constant periodic discount rate on the remaining balance of the liability. ROU assets are assessed for impairment in accordance with our long-lived asset impairment policy. We reassess lease classification and remeasure ROU assets and lease liabilities when a lease is modified and that modification is not accounted for as a separate contract or upon certain other events that require reassessment in accordance with ASC 842. Maintenance and property tax expenses are accounted for on an accrual basis as variable lease cost.
We recognize variable lease cost for operating and finance leases in the period when changes in facts and circumstances on which the variable lease payments are based occur.


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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
 September 30, 2019
Land$903
Buildings and improvements1,131
Restaurant equipment21
 2,055
Accumulated depreciation and amortization(451)
Property and equipment leased, net$1,604
 As of
 March 31, 2019
Land$912
Buildings and improvements1,127
Restaurant equipment18
 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 ofAs of
March 31, 2019September 30, 2019
Future rents to be received:  
Future minimum lease receipts$57
$50
Contingent rents (a)25
21
Estimated unguaranteed residual value16
15
Unearned income(32)(28)
66
58
Current portion included within accounts receivables(16)(11)
Net investment in property leased to franchisees$50
$47


(a)Amounts represent estimated contingent rents recorded in connection with the acquisition method of accounting.
Property revenues are comprised primarily of lease income from operating leases and earned income on direct financing leases with franchisees as follows (in millions):
  Three months ended 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


13
  Three months ended September 30, 2019 Nine months ended September 30, 2019
Lease income - operating leases    
Minimum lease payments $112
 $335
Variable lease payments 100
 281
Amortization of favorable and unfavorable income lease contracts, net 1
 5
Subtotal - lease income from operating leases 213
 621
Earned income on direct financing leases 2
 7
Total property revenues $215
 $628



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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 Three months ended September 30, 2019 Nine months ended September 30, 2019
Operating lease cost $53
 $52
 $158
Operating lease variable lease cost 50
 51
 151
Finance lease cost:      
Amortization of right-of-use assets 7
 7
 20
Interest on lease liabilities 5
 5
 16
Sublease income (155) (164) (483)
Total lease cost (income) $(40) $(49) $(138)
Lease Term and Discount Rate as of September 30, 2019
Weighted-average remaining lease term (in years):  
Operating leases 11.311.0 years

Finance leases 11.211.1 years

Weighted-average discount rate:  
Operating leases 7.66.4%
Finance leases 6.67.5%
Other Information for the nine months ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:  
Operating cash flows from operating leases $145
Operating cash flows from finance leases $16
Financing cash flows from finance leases $20
Right-of-use assets obtained in exchange for new finance lease obligations $5
Right-of-use assets obtained in exchange for new operating lease obligations $106
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,September 30, 2019, future minimum lease receipts and commitments are as follows (in millions):
Lease Receipts Lease Commitments (a)Lease Receipts Lease Commitments (a)
Direct
Financing
Leases
 Operating
Leases
 Finance
Leases
 Operating
Leases
Direct
Financing
Leases
 Operating
Leases
 Finance
Leases
 Operating
Leases
Remainder of 2019$11
 $314
 $35
 $143
$3
 $106
 $12
 $49
202010
 396
 45
 183
10
 406
 46
 190
20217
 371
 43
 171
7
 383
 44
 178
20225
 346
 42
 158
5
 360
 42
 166
20235
 324
 39
 144
5
 337
 39
 151
Thereafter19
 1,821
 264
 909
20
 1,899
 270
 961
Total minimum receipts / payments$57
 $3,572
 468
 1,708
$50
 $3,491
 453
 1,695
Less amount representing interest (b)    (155) (543)    (147) (518)
Present value of minimum lease payments    313
 1,165
    306
 1,177
Current portion of lease obligations    (26) (119)    (27) (122)
Long-term portion of lease obligations    $287
 $1,046
    $279
 $1,055
(a)Minimum lease paymentscommitments have not been reduced by minimum sublease rentals of $2,332$2,298 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
202010
 388
 36
 172
20217
 360
 34
 158
20225
 331
 33
 145
20235
 306
 30
 130
Thereafter19
 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 paymentscommitments have not been reduced by minimum sublease rentals of $2,290 million due in the future under non-cancelable subleases.
Note 5. Revenue Recognition
Contract Liabilities
Contract liabilities consist of deferred revenue resulting from initial and renewal franchise fees paid by franchisees, as well as upfront fees paid by master franchisees, which are generally recognized on a straight-line basis over the term of the underlying agreement. We classify these contract liabilities as Other liabilities, net in our condensed consolidated balance sheets. The following table reflects the change in contract liabilities between December 31, 2018 and March 31,September 30, 2019 (in millions):
Contract Liabilities TH BK PLK Consolidated
Balance at December 31, 2018 $62
 $405
 $19
 $486
Revenue recognized that was included in the contract liability balance at the beginning of the year (7) (30) (1) (38)
Increase, excluding amounts recognized as revenue during the period 6
 55
 6
 67
Impact of foreign currency translation 1
 (9) 
 (8)
Balance at September 30, 2019 $62
 $421
 $24
 $507
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 (2) (9) 
 (11)
Increase, excluding amounts recognized as revenue during the period 2
 5
 1
 8
Impact of foreign currency translation 1
 (4) 
 (3)
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,September 30, 2019 (in millions):
Contract liabilities expected to be recognized in TH BK PLK Consolidated
Remainder of 2019 $2
 $9
 $
 $11
2020 8
 32
 2
 42
2021 7
 31
 2
 40
2022 7
 31
 2
 40
2023 6
 30
 1
 37
Thereafter 32
 288
 17
 337
Total $62
 $421
 $24
 $507

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


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Disaggregation of Total Revenues
Total revenues consist of the following (in millions):
 Three Months Ended September 30, Nine Months Ended
September 30,
 2019 2018 2019 2018
Sales$624
 $609
 $1,735
 $1,743
Royalties602
 557
 1,706
 1,611
Property revenues215
 192
 628
 560
Franchise fees and other revenue17
 17
 55
 58
Total revenues$1,458
 $1,375
 $4,124
 $3,972
  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 6. Earnings per Unit
Partnership uses the two-class method in the computation of earnings per unit. Pursuant to the terms of the partnership agreement, RBI, as the holder of the Class A common units, is entitled to receive distributions from Partnership in an amount equal to the aggregate dividends payable by RBI to holders of RBI common shares, and the holders of Class B exchangeable limited partnership units (the “Partnership exchangeable units”) are entitled to receive distributions from Partnership in an amount per unit equal to the dividends payable by RBI on each RBI common share. Partnership’s net income available to common unitholders is allocated between the Class A common units and Partnership exchangeable units on a fully-distributed basis and reflects residual net income after noncontrolling interests and Partnership preferred unit distributions. Basic and diluted earnings per Class A common unit is determined by dividing net income allocated to Class A common unit holders by the weighted average number of Class A common units outstanding for the period. Basic and diluted earnings per Partnership exchangeable unit is determined by dividing net income allocated to the Partnership exchangeable units by the weighted average number of Partnership exchangeable units outstanding during the period.
There are no dilutive securities for Partnership as RBI equity awards will not affect the number of Class A common units or Partnership exchangeable units outstanding. However, the issuance of shares by RBI in future periods will affect the allocation of net income attributable to common unitholders between Partnership’s Class A common units and Partnership exchangeable units.
The following table summarizes the basic and diluted earnings per unit calculations (in millions, except per unit amounts):


 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Allocation of net income among partner interests:       
Net income allocated to Class A common unitholders$201
 $134
 $478
 $449
Net income allocated to Partnership exchangeable unitholders150
 116
 376
 393
Net income attributable to common unitholders$351
 $250
 $854
 $842
        
Denominator - basic and diluted partnership units:       
Weighted average Class A common units202
 202
 202
 202
Weighted average Partnership exchangeable units197
 218
 204
 218
        
Earnings per unit - basic and diluted:       
Class A common units (a)$1.00
 $0.66
 $2.37
 $2.22
Partnership exchangeable units (a)$0.76
 $0.53
 $1.85
 $1.81
 Three Months Ended March 31,
 2019 2018
Allocation of net income among partner interests:   
Net income allocated to Class A common unitholders$135
 $148
Net income allocated to Partnership exchangeable unitholders111
 131
Net income attributable to common unitholders$246
 $279
    
Denominator - basic and diluted partnership units:   
Weighted average Class A common units202
 202
Weighted average Partnership exchangeable units208
 218
    
Earnings per unit - basic and diluted:   
Class A common units (a)$0.67
 $0.73
Partnership exchangeable units (a)$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 7. Intangible Assets, net and Goodwill
Intangible assets, net and goodwill consist of the following (in millions):


 As of
 September 30, 2019 December 31, 2018
 Gross Accumulated Amortization Net Gross Accumulated Amortization Net
Identifiable assets subject to amortization:           
   Franchise agreements$709
 $(214) $495
 $705
 $(194) $511
   Favorable leases (a)129
 (64) 65
 407
 (200) 207
      Subtotal838
 (278) 560
 1,112
 (394) 718
Indefinite lived intangible assets:           
   Tim Hortons brand
$6,425
 $
 $6,425
 $6,259
 $
 $6,259
   Burger King brand
2,099
 
 2,099
 2,131
 
 2,131
   Popeyes brand
1,355
 
 1,355
 1,355
 
 1,355
      Subtotal9,879
 
 9,879
 9,745
 
 9,745
Intangible assets, net    $10,439
     $10,463
            
Goodwill           
   Tim Hortons segment$4,140
     $4,038
    
   Burger King segment593
     602
    
   Popeyes segment846
     846
    
      Total$5,579
     $5,486
    
 As of
 March 31, 2019 December 31, 2018
 Gross Accumulated Amortization Net Gross Accumulated Amortization Net
Identifiable assets subject to amortization:           
   Franchise agreements$706
 $(200) $506
 $705
 $(194) $511
   Favorable leases (a)133
 (62) 71
 407
 (200) 207
      Subtotal839
 (262) 577
 1,112
 (394) 718
Indefinite lived intangible assets:           
   Tim Hortons brand
$6,378
 $
 $6,378
 $6,259
 $
 $6,259
   Burger King brand
2,117
 
 2,117
 2,131
 
 2,131
   Popeyes brand
1,355
 
 1,355
 1,355
 
 1,355
      Subtotal9,850
 
 9,850
 9,745
 
 9,745
Intangible assets, net    $10,427
     $10,463
            
Goodwill           
   Tim Hortons segment$4,111
     $4,038
    
   Burger King segment598
     602
    
   Popeyes segment846
     846
    
      Total$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 $11$12 million for the three months ended March 31,September 30, 2019 and $18$17 million for the same period in the prior year. Amortization expense on intangible assets totaled $33 million for the nine months ended September 30, 2019 and $53 million for the same period in the prior year. The change in the brands and goodwill balances during the threenine months ended March 31,September 30, 2019 was due to the impact of foreign currency translation.




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Note 8. Equity Method Investments
The aggregate carrying amount of our equity method investments was $256$274 million and $259 million as of March 31,September 30, 2019 and December 31, 2018, respectively, and is included as a component of Other assets, net in our accompanying condensed consolidated balance sheets. TH and BK both have equity method investments. PLK does not have any equity method investments.
With respect to our TH business, the most significant equity method investment is our 50% joint venture interest with The Wendy’s Company (the “TIMWEN Partnership”), which jointly holds real estate underlying Canadian combination restaurants. Distributions received from this joint venture were $2 million and $3 million during the three months ended March 31,September 30, 2019 and 2018. Distributions received from this joint venture were $10 million and $9 million during the nine months ended September 30, 2019 and 2018, respectively.
The aggregate market value of our 20.5%15.4% equity interest in Carrols Restaurant Group, Inc. (“Carrols”) based on the quoted market price on March 31,September 30, 2019 was approximately $94$78 million. The aggregate market value of our 10.1%9.9% equity interest in BK Brasil Operação e Assessoria a Restaurantes S.A. based on the quoted market price on March 31,September 30, 2019 was approximately $127$111 million. No quoted market prices are available for our other equity method investments.
We have equity interests in entities that own or franchise Tim Hortons or Burger King restaurants. Franchise and property revenues recognized from franchisees that are owned or franchised by entities in which we have an equity interest consist of the following (in millions):


 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Revenues from affiliates:       
Royalties$89
 $76
 $254
 $218
Property revenues8
 8
 25
 26
Franchise fees and other revenue1
 3
 7
 7
Total$98
 $87
 $286
 $251
 Three Months Ended March 31,
 2019 2018
Revenues from affiliates:   
Royalties$78
 $68
Property revenues8
 9
Franchise fees and other revenue3
 2
Total$89
 $79

We recognized $4 million and $5 million of rent expense associated with the TIMWEN Partnership during the three months ended March 31,September 30, 2019 and 2018. We recognized $14 million and $15 million of rent expense associated with the TIMWEN Partnership during the nine months ended September 30, 2019 and 2018, respectively.
At March 31,September 30, 2019 and December 31, 2018, we had $33$34 million and $41 million, respectively, of accounts receivable, net from our equity method investments which were recorded in Accounts and notes receivable, net in our condensed consolidated balance sheets.
(Income) loss from equity method investments reflects our share of investee net income or loss, non-cash dilution gains or losses from changes in our ownership interests in equity method investees and basis difference amortization. During the three and nine months ended March 31,September 30, 2019, we did not recordrecorded an increase to the carrying value of our equity method investment balance and a non-cash dilution gain.gain of $11 million related to the merger of one of our equity method investments. During the threenine months ended March 31,September 30, 2018, we recorded an increase to the carrying value of our equity method investment balance and a non-cash dilution gain of $20 million on the initial public offering by one of our equity method investees.


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Note 9. Other Accrued Liabilities and Other Liabilities, net
Other accrued liabilities (current) and other liabilities, net (noncurrent) consist of the following (in millions):


 As of
 September 30,
2019
 December 31,
2018
Current:   
Dividend payable$232
 $207
Interest payable91
 87
Accrued compensation and benefits52
 69
Taxes payable153
 113
Deferred income35
 27
Accrued advertising expenses27
 30
Restructuring and other provisions6
 11
Current portion of operating lease liabilities (a)122
 
Other79
 93
Other accrued liabilities$797
 $637
Noncurrent:   
Taxes payable$585
 $493
Contract liabilities507
 486
Unfavorable leases (b)107
 192
Derivatives liabilities267
 179
Accrued pension62
 64
Accrued lease straight-lining liability (b)
 69
Deferred income26
 22
Other44
 42
Other liabilities, net$1,598
 $1,547
 As of
 March 31,
2019
 December 31,
2018
Current:   
Dividend payable$231
 $207
Interest payable92
 87
Accrued compensation and benefits41
 69
Taxes payable66
 113
Deferred income37
 27
Accrued advertising expenses11
 30
Restructuring and other provisions9
 11
Current portion of operating lease liabilities (a)119
 
Other83
 93
Other accrued liabilities$689
 $637
Noncurrent:   
Taxes payable$512
 $493
Contract liabilities, net480
 486
Unfavorable leases (b)118
 192
Derivatives liabilities278
 179
Accrued pension64
 64
Accrued lease straight-lining liability (b)
 69
Deferred income32
 22
Other47
 42
Other liabilities, net$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 decreasedecreases in unfavorable leases and accrued lease straight-lining liability reflectsreflect 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 10. Long-Term Debt
Long-term debt consists of the following (in millions):

 As of
 September 30,
2019
 December 31,
2018
Term Loan B (due February 17, 2024)$6,070
 $6,338
2015 4.625% Senior Notes (due January 15, 2022)1,250
 1,250
2017 4.25% Senior Notes (due May 15, 2024)1,500
 1,500
2019 3.875% Senior Notes (due January 15, 2028)750
 
2017 5.00% Senior Notes (due October 15, 2025)2,800
 2,800
Other (a)79
 150
Less: unamortized deferred financing costs and deferred issue discount(132) (145)
Total debt, net12,317
 11,893
    Less: current maturities of debt (b)(749) (70)
Total long-term debt$11,568
 $11,823
 As of
 March 31,
2019
 December 31,
2018
Term Loan Facility (due February 17, 2024)$6,322
 $6,338
2017 4.25% Senior Notes (due May 15, 2024)1,500
 1,500
2015 4.625% Senior Notes (due January 15, 2022)1,250
 1,250
2017 5.00% Senior Notes (due October 15, 2025)2,800
 2,800
Other (a)81
 150
Less: unamortized deferred financing costs and deferred issue discount(138) (145)
Total debt, net11,815
 11,893
    Less: current maturities of debt(68) (70)
Total long-term debt$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.
(b)As of September 30, 2019, current maturities of debt includes $750 million of the total outstanding principal balance of the 2015 4.625% Senior Notes (defined below), net of related unamortized deferred financing costs, which is equal to the proceeds received from the issuance of the 2019 3.875% Senior Notes (defined below) that were used to redeem the 2015 4.625% Senior Notes on October 7, 2019.
Revolving Credit FacilityFacilities
AsOn September 6, 2019, two of March 31, 2019, we had no amounts outstanding underour subsidiaries (the "Borrowers") entered into a fourth incremental facility amendment (the "Fourth Incremental Amendment") to the credit agreement governing our senior secured term loan facilities (the "Term Loan Facilities") and our senior secured revolving credit facility (including revolving loans, swingline loans and letters of credit) (the "Revolving Credit Facility" and together with the Term Loan Facilities, the "Credit Facilities"). Under the Fourth Incremental Amendment, (i) we obtained a new term loan in the aggregate principal amount of $750 million (the "Term Loan A"), that was funded on October 7, 2019, with a maturity date of October 7, 2024 (subject to earlier maturity in specified circumstances), (ii) the interest rate applicable to the Term Loan A and Revolving Credit Facility is, at our option, either (a) a base rate, subject to a floor of 1.00%, plus an applicable margin varying from 0.00% to 0.50%, or (b) a Eurocurrency rate, subject to a floor of 0.00%, plus an applicable margin varying between 0.75% and 1.50%, in each case, determined by reference to a net first lien leverage based pricing grid, (iii) the aggregate principal amount of the commitments under our Revolving Credit Facility was increased to $1,000 million effective October 7, 2019, (iv) the maturity date of the Revolving Credit Facility was extended from October 13, 2022 to October 7, 2024 (subject to earlier maturity in specified circumstances), and (v) the commitment fee on the unused portion of the Revolving Credit Facility was decreased from 0.25% to 0.15%. The principal amount of the Term Loan A amortizes in quarterly installments equal to $5 million until October 7, 2022 and thereafter in quarterly installments equal to $9 million until maturity, with the balance payable at maturity. The Term Loan A will require compliance with the first lien leverage ratio. Except as described herein, the Fourth Incremental Amendment did not materially change the terms of the Credit Facilities.
Prior to obtaining the Term Loan A, our Credit Facilities included only 1 senior secured term loan facility (the "Term Loan B" and together with the Term Loan A, the "Term Loan Facilities"). During the quarter ended September 30, 2019, we prepaid $235 million principal amount of our Term Loan B and, in connection with this prepayment, we recorded a loss on early extinguishment of debt of $4 million that primarily reflects the write-off of related unamortized debt issuance costs and discounts.
As of September 30, 2019, we had 0 amounts outstanding under our Revolving Credit Facility. Funds available under the Revolving Credit Facility may be used to repay other debt, finance debt, ormake distributions to RBI share repurchases,for RBI to repurchase its common shares, repurchase Partnership exchangeable units, fund acquisitions or capital expenditures and for other general corporate purposes. We have a $125 million letter of credit sublimit as part of the Revolving Credit Facility, which reduces our borrowing availability thereunder by the cumulative amount of outstanding letters of credit. Under the Fourth Incremental Amendment, the interest rate applicable to amounts drawn under each letter of credit decreased from a range of 1.25% to 2.00% to a range of 0.75% to 1.50%, depending on our first lien leverage ratio. As of March 31,September 30, 2019, we had $2 million of

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letters of credit issued against the Revolving Credit Facility, and our borrowing availability was $498 million. As of October 7, 2019, our borrowing availability was $998 million under our Revolving Credit Facility.
2019 Senior Notes
On September 24, 2019, the Borrowers entered into an indenture (the "2019 3.875% Senior Notes Indenture") in connection with the issuance of $750 million of 3.875% first lien senior notes due January 15, 2028 (the "2019 3.875% Senior Notes"). NaN principal payments are due until maturity and interest is paid semi-annually. On October 7, 2019, the net proceeds from the offering of the 2019 3.875% Senior Notes and a portion of the net proceeds from the Term Loan A were used to redeem the entire outstanding principal balance of $1,250 million of 4.625% first lien secured notes due January 15, 2022 (the "2015 4.625% Senior Notes") and to pay related fees and expenses. In connection with the issuance of the 2019 3.875% Senior Notes, we capitalized approximately $10 million in debt issuance costs.
Obligations under the 2019 3.875% Senior Notes are guaranteed on a senior secured basis, jointly and severally, by the Borrowers and substantially all of the Borrowers' Canadian and U.S. subsidiaries, including The TDL Group Corp., Burger King Worldwide, Inc., Popeyes Louisiana Kitchen, Inc. and substantially all of their respective Canadian and U.S. subsidiaries (the "Note Guarantors"). The 2019 3.875% Senior Notes are first lien senior secured obligations and rank equal in right of payment with all of the existing and future first lien senior debt of the Borrowers and Note Guarantors, including borrowings and guarantees of the Credit Facilities.
Our 2019 3.875% Senior Notes may be redeemed in whole or in part, on or after September 15, 2022 at the redemption prices set forth in the 2019 3.875% Senior Notes Indenture, plus accrued and unpaid interest, if any, at the date of redemption. The 2019 3.875% Senior Notes Indenture also contains optional redemption provisions related to tender offers, change of control and equity offerings, among others.
TH Facility
During 2018, oneOne of our subsidiaries entered into a non-revolving delayed drawdown term credit facility in a total aggregate principal amount of C$225 million (increased from C$100 million during the three months ended June 30, 2019) with a maturity date of October 4, 2025 (the “TH Facility”). The interest rate applicable to the TH Facility is the Canadian Bankers’ Acceptance rate plus an applicable margin equal to 1.40% or the Prime Rate plus an applicable margin equal to 0.40%, at our option. Obligations under the TH Facility are guaranteed by three of our subsidiaries, and amounts borrowed under the TH Facility are and will be secured by certain parcels of real estate. As of March 31,September 30, 2019, we had drawn down the entireoutstanding C$100 million available under the TH Facility with a weighted average interest rate of 3.37%3.36%.
Fair Value Measurement
The following table presents the fair value of our variable rate term debt and senior notes, estimated using inputs based on bid and offer prices that are Level 2 inputs, and principal carrying amount (in billions)millions):
 As of
 September 30,
2019
 December 31,
2018
Fair value of our variable term debt and senior notes$12,557
 $11,237
Principal carrying amount of our variable term debt and senior notes12,370
 11,888
 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 notes12
 12

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Interest Expense, net
Interest expense, net consists of the following (in millions):
Three Months Ended March 31,Three Months Ended September 30, Nine Months Ended
September 30,
2019 20182019 2018 2019 2018
Debt (a)$124
 $130
$130
 $125
 $382
 $375
Finance lease obligations5
 6
5
 6
 16
 18
Amortization of deferred financing costs and debt issuance discount7
 7
7
 8
 22
 22
Interest income(4) (3)(5) (4) (14) (10)
Interest expense, net$132
 $140
$137
 $135
 $406
 $405
(a)
Amount includes $18$16 million and $4$15 million benefit during the three months ended March 31,September 30, 2019 and 2018, respectively, from our adoptionand $53 million and $39 million benefit during the nine months ended September 30, 2019 and 2018, respectively, related to the amortization of a new hedge accounting standardthe Excluded Component as defined in 2018.Note 13, Derivatives.

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Note 11. Income Taxes
Our effective tax rate was 18.7%18.3% and 21.4% for the three and nine months ended September 30, 2019. The effective tax rate during these periods reflects the mix of income from multiple tax jurisdictions, the impact of internal financing arrangements and stock option exercises. Additionally, the effective tax rate during the nine months ended September 30, 2019 reflects a $37 million increase in the provision for unrecognized tax benefits related to a prior restructuring transaction that is not applicable to ongoing operations which increased the effective tax rate by 3.4% during this period. Benefits from stock option exercises reduced the effective tax rate by 1.2% and 2.9% for the three and nine months ended September 30, 2019, respectively.
Our effective tax rate was 27.0% for the three months ended March 31, 2019. The effective taxSeptember 30, 2018. This rate for this period was primarily a result of the mix of income from multiple tax jurisdictions, and the year to date impact from the realignment of various internal financing arrangements and stock option exercises.
the increase in valuation allowance on deferred tax assets. Our effective tax rate was 0.6%15.4% for the threenine months ended March 31,September 30, 2018. The effective taxThis rate during this period was primarily a result of the mix of income from multiple tax jurisdictions, the benefit from reserve releases due to audit settlements during the first half of 2018, and the favorable impactrealignment of various internal financing arrangements. In addition, benefits from stock option exercises and reserve releases from audit settlements. Specifically, the benefit associated with stock option exercises reduced the effective tax rate by 22.7%.0.9% and 6.9% for the three and nine months ended September 30, 2018, respectively.
Note 12. Equity
During the threenine months ended March 31,September 30, 2019, Partnership exchanged 141,19041,993,769 Partnership exchangeable units pursuant to exchange notices received. In accordance with the terms of the partnership agreement, Partnership satisfied the exchange notices by exchanging these Partnership exchangeable units for the same number of newly issued RBI common shares. The issuances of shares waswere accounted for as a capital contributioncontributions by RBI to Partnership. The exchanges of Partnership exchangeable units were recorded as increases to the Class A common units balance within partner’spartners’ 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’spartners’ capital of our consolidated balance sheet in an amount equal to the cash paid by Partnership, if any, and the market value of the newly issued RBI common shares. Pursuant to the terms of the partnership agreement, upon the exchange of Partnership exchangeable units, each such Partnership exchangeable unit was cancelled concurrently with the exchange.
Accumulated Other Comprehensive Income (Loss)
The following table displays the changes in the components of accumulated other comprehensive income (loss) (“AOCI”) (in millions):

 Derivatives Pensions Foreign Currency Translation Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2018$454
 $(27) $(1,864) $(1,437)
Foreign currency translation adjustment
 
 185
 185
Net change in fair value of derivatives, net of tax(89) 
 
 (89)
Amounts reclassified to earnings of cash flow hedges, net of tax7
 
 
 7
Balances at September 30, 2019$372
 $(27) $(1,679) $(1,334)
 Derivatives Pensions Foreign Currency Translation Accumulated Other Comprehensive Income (Loss)
Balances at December 31, 2018$454
 $(27) $(1,864) $(1,437)
Foreign currency translation adjustment
 
 159
 159
Net change in fair value of derivatives, net of tax(110) 
 
 (110)
Amounts reclassified to earnings of cash flow hedges, net of tax(1) 
 
 (1)
Balances at March 31, 2019$343
 $(27) $(1,705) $(1,389)



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Note 13. Derivative Instruments
Disclosures about Derivative Instruments and Hedging Activities
We enter into derivative instruments for risk management purposes, including derivatives designated as cash flow hedges, derivatives designated as net investment hedges and those utilized as economic hedges. We use derivatives to manage our exposure to fluctuations in interest rates and currency exchange rates.
Interest Rate Swaps
During 2018,At September 30, 2019, we entered intohad outstanding a series of receive-variable, pay-fixed interest rate swaps with a total notional value of $3,500 million to hedge the variability in the interest payments on a portion of our senior secured term loan facility (the "TermTerm Loan Facility")Facilities beginning March 29, 2018 through the expiration of the final swap on February 17, 2024, with each swap resetting each March. Additionally, at September 30, 2019, we also had outstanding receive-variable, pay-fixed interest rate swaps with a total notional value of $500 million to hedge the variability in the interest payments on a portion of our Term Loan Facilities

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effective September 30, 2019 through the termination date of September 30, 2026. At inception, all of these interest rate swaps were designated as cash flow hedges for hedge accounting. The unrealized changes in market value are recorded in AOCI and reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.
During 2015, we entered into a series of receive-variable, pay-fixed interest rate swaps with a notional value of $2,500 million to hedge the variability in the interest payments on a portion of our Term Loan Facility beginning May 28, 2015. All of these interest rate swaps were settled on April 26, 2018 for an insignificant cash receipt. At inception, these interest rate swaps were designated as cash flow hedges for hedge accounting. The unrealized changes in market value were recorded in AOCI and reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.
During 2015, we settled certain interest rate swaps and recognized a net unrealized loss of $85 million in AOCI at the date of settlement. This amount gets reclassified into Interest expense, net as the original hedged forecasted transaction affects earnings. The amount of pre-tax losses in AOCI as of March 31,September 30, 2019 that we expect to be reclassified into interest expense within the next 12 months is $12 million.
Cross-Currency Rate Swaps
To protect the value of our investments in our foreign operations against adverse changes in foreign currency exchange rates, we hedge a portion of our net investment in one or more of our foreign subsidiaries by using cross-currency rate swaps. At March 31,September 30, 2019, we had outstanding cross-currency rate swap contracts between the Canadian dollar and U.S. dollar and the Euro and U.S. dollar that have been designated as net investment hedges of a portion of our equity in foreign operations in those currencies. The component of the gains and losses on our net investment in these designated foreign operations driven by changes in foreign exchange rates are economically partly offset by movements in the fair value of our cross-currency swap contracts. The fair value of the swaps is calculated each period with changes in fair value reported in AOCI, net of tax. Such amounts will remain in AOCI until the complete or substantially complete liquidation of our investment in the underlying foreign operations.
At March 31,September 30, 2019, we had outstanding fixed-to-fixed cross-currency rate swaps to partially hedge the net investment in our Canadian subsidiaries. At inception, these cross-currency rate swaps were designated as a hedge and are accounted for as net investment hedges. These swaps are contracts to exchange quarterly fixed-rate interest payments we make on the Canadian dollar notional amount of C$6,754 million for quarterly fixed-rate interest payments we receive on the U.S. dollar notional amount of $5,000 million through the maturity date of June 30, 2023.
At March 31,September 30, 2019, we also had outstanding cross-currency rate swaps in which we pay quarterly fixed-rate interest payments on the Euro notional value of €1,108 million and receive quarterly fixed-rate interest payments on the U.S. dollar notional value of $1,200 million. At inception, these cross-currency rate swaps were designated as a hedge and are accounted for as a net investment hedge. During 2018, we extended the term of the swaps from March 31, 2021 to the maturity date of February 17, 2024. The extension of the term resulted in a re-designation of the hedge and the swaps continue to be accounted for as a net investment hedge. Additionally, during 2018at September 30, 2019, we entered intoalso had outstanding cross-currency rate swaps in which we receive quarterly fixed-rate interest payments on the U.S. dollar notional value of $400 million, entered during 2018, and $500 million, entered during 2019, through the maturity date of February 17, 2024. At inception, these cross-currency rate swaps were designated as a hedge and are accounted for as a net investment hedge.
The fixed to fixed cross-currency rate swaps hedging Canadian dollar and Euro net investments utilized the forward method of effectiveness assessment prior to March 15, 2018. On March 15, 2018, we dedesignated and subsequently redesignated the outstanding fixed to fixed cross-currency rate swaps to prospectively use the spot method of hedge effectiveness assessment. Additionally, as a result of adopting new hedge accounting guidance during 2018, we elected to exclude the interest component (the “Excluded Component”) from the accounting hedge without affecting net investment hedge accounting and elected to amortize the Excluded Component over the life of the derivative instrument. The amortization of the Excluded Component is recognized in Interest expense, net in the condensed consolidated statement of operations. The

22



change in fair value that is not related to the Excluded Component is recorded in AOCI and will be reclassified to earnings when the foreign subsidiaries are sold or substantially liquidated.
Foreign Currency Exchange Contracts
We use foreign exchange derivative instruments to manage the impact of foreign exchange fluctuations on U.S. dollar purchases and payments, such as coffee purchases made by our Canadian Tim Hortons operations. At March 31,September 30, 2019, we had outstanding forward currency contracts to manage this risk in which we sell Canadian dollars and buy U.S. dollars with a notional value of $130$132 million with maturities to MayNovember 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.

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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.

23



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 September 30, Nine Months Ended September 30,
2019 20182019 2018 2019 2018
Derivatives designated as cash flow hedges(1)
          
Interest rate swaps$(44) $29
$(35) $22
 $(156) $46
Forward-currency contracts$(2) $5
$1
 $(5) $(3) $8
Derivatives designated as net investment hedges          
Cross-currency rate swaps$(102) $11
$180
 $(83) $25
 $71
(1)We did not exclude any components from the cash flow hedge relationships presented in this table.
  Location of Gain or (Loss) Reclassified from AOCI into Earnings Gain or (Loss) Reclassified from AOCI into Earnings
   Three Months Ended September 30, Nine Months Ended September 30,
    2019 2018 2019 2018
Derivatives designated as cash flow hedges          
Interest rate swaps Interest expense, net $(7) $(5) $(14) $(16)
Forward-currency contracts Cost of sales $
 $(2) $4
 $1
           
  Location of Gain or (Loss) Recognized in Earnings 
Gain or (Loss) Recognized in Earnings
(Amount Excluded from Effectiveness Testing)
   Three Months Ended September 30, Nine Months Ended September 30,
    2019 2018 2019 2018
Derivatives designated as net investment hedges          
Cross-currency rate swaps Interest expense, net $16
 $15
 $53
 $39

  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)
   Three Months Ended March 31,
    2019 2018
Derivatives designated as net investment hedges      
Cross-currency rate swaps Interest expense, net $18
 $4

 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 currency17
 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 currency160
 107
 Other liabilities, net
Total liabilities at fair value$278
 $179
  


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 Fair Value as of    
 September 30, 2019 December 31, 2018 Balance Sheet Location
Assets:     
Derivatives designated as cash flow hedges     
Foreign currency$1
 $7
 Prepaids and other current assets
Derivatives designated as net investment hedges     
Foreign currency39
 58
 Other assets, net
Total assets at fair value$40
 $65
  
      
Liabilities:     
Derivatives designated as cash flow hedges     
Interest rate$223
 $72
 Other liabilities, net
Derivatives designated as net investment hedges     
Foreign currency44
 107
 Other liabilities, net
Total liabilities at fair value$267
 $179
  

Note 14. Other Operating Expenses (Income), net
Other operating expenses (income), net consist of the following (in millions):

 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings$6
 $7
 $(1) $17
Litigation settlements (gains) and reserves, net1
 5
 1
 (1)
Net losses (gains) on foreign exchange(35) (3) (38) (19)
Other, net(2) 17
 (6) 12
     Other operating expenses (income), net$(30) $26
 $(44) $9
 Three Months Ended March 31,
 2019 2018
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings$3
 $2
Litigation settlements (gains) and reserves, net
 (6)
Net losses (gains) on foreign exchange(15) 16
Other, net(5) 1
     Other operating expenses (income), net$(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.
Litigation settlements (gains) and reserves, net primarily reflects accruals and proceeds received in connection with litigation matters.
Net losses (gains) on foreign exchange is primarily related to revaluation of foreign denominated assets and liabilities.
Other, net during the three and nine months ended September 30, 2018 is comprised primarily of an expense in connection with the settlement of certain provisions associated with the 2017 redemption of RBI's preferred shares as a result of changes in Treasury regulations.



26



Note 15. Commitments and Contingencies
Litigation
From time to time, we are involved in legal proceedings arising in the ordinary course of business relating to matters including, but not limited to, disputes with franchisees, suppliers, employees and customers, as well as disputes over our intellectual property.
On October 5, 2018, a class action complaint was filed against Burger King Worldwide, Inc. (“BKW”) and Burger King Corporation (“BKC”) in the U.S. District Court for the Southern District of Florida by Jarvis Arrington, individually and on behalf of all others similarly situated. On October 18, 2018, a second class action complaint was filed against the Company, BKW and BKC in the U.S. District Court for the Southern District of Florida by Monique Michel, individually and on behalf of all others similarly situated. On October 31, 2018, a third class action complaint was filed against BKC and BKW in the U.S. District Court for the Southern District of Florida by Geneva Blanchard and Tiffany Miller, individually and on behalf of all others similarly situated. On November 2, 2018, a fourth class action complaint was filed against the Company, BKW and BKC in the U.S. District Court for the Southern District of Florida by Sandra Muster, individually and on behalf of all others similarly situated. These complaints allege that the defendants violated Section 1 of the Sherman Act by incorporating an employee no-solicitation and no-hiring clause in the standard form franchise agreement all Burger King franchisees are required to sign. Each plaintiff seeks injunctive relief and damages for himself or herself and other members of the class.
In July 2019, a class action complaint was filed against TDL in the Supreme Court of British Columbia by Samir Latifi, individually and on behalf of all others similarly situated. The complaint alleges that TDL violated the Canadian Competition Act by incorporating an employee no-solicitation and no-hiring clause in the standard form franchise agreement all Tim Hortons franchisees are required to sign. The plaintiff seeks damages and restitution, on behalf of himself and other members of the class.
While we currently believe these claims are without merit, we are unable to predict the ultimate outcome of these cases or estimate the range of possible loss, if any.
In March 2019, Partnership settled the two2 class action lawsuits filed in the Ontario Superior Court of Justice against The TDL Group Corp., a subsidiary of Partnership (“TDL”), and certain other defendants, as described in Partnership’s Annual Report on Form 10-K filed with the SEC on February 22, 2019. The court approved the settlement on April 29, 2019. Under the terms of the settlement, TDL will contributeis contributing C$106 million to the Tim Hortons Advertising Fund in Canada over two years, such amount to be spent on marketing activities. In addition, TDL will payhas paid C$26 million for legal, administrative and administrativeother third-party expenses. The court approved the settlement on April 29, 2019. These amounts were accrued by TDL during 2018.




2527





Note 16. Segment Reporting
As stated in Note 1, Description of Business and Organization, we manage three3 brands. Under the Tim Hortons brand, we operate in the donut/coffee/tea category of the quick service segment of the restaurant industry. Under the Burger King brand, we operate in the fast food hamburger restaurant category of the quick service segment of the restaurant industry. Under the Popeyes brand, we operate in the chicken category of the quick service segment of the restaurant industry. Our business generates revenue from the following sources: (i) franchise revenues, consisting primarily of royalties based on a percentage of sales reported by franchise restaurants and franchise fees paid by franchisees; (ii) property revenues from properties we lease or sublease to franchisees; and (iii) sales at restaurants owned by us ("Company restaurants"). In addition, our TH business generates revenue from sales to franchisees related to our supply chain operations, including manufacturing, procurement, warehousing and distribution, as well as sales to retailers. We manage each of our brands as an operating segment and each operating segment represents a reportable segment.
The following tables present revenues, by segment and by country (in millions):
Three Months Ended March 31,Three Months Ended September 30, Nine Months Ended
September 30,
2019 20182019 2018 2019 2018
Revenues by operating segment:          
TH$749
 $763
$881
 $854
 $2,472
 $2,440
BK411
 390
457
 416
 1,315
 1,224
PLK106
 101
120
 105
 337
 308
Total revenues$1,266
 $1,254
$1,458
 $1,375
 $4,124
 $3,972


Three Months Ended March 31,Three Months Ended September 30, Nine Months Ended
September 30,
2019 20182019 2018 2019 2018
Revenues by country (a):          
Canada$676
 $692
$805
 $776
 $2,245
 $2,214
United States444
 421
489
 448
 1,412
 1,319
Other146
 141
164
 151
 467
 439
Total revenues$1,266
 $1,254
$1,458
 $1,375
 $4,124
 $3,972


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

26

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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”), Corporate restructuring and tax advisory fees related to the interpretation and implementation of comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act enacted by the U.S. government on December 22, 2017 and non-operational Office centralization and relocation costs in connection with the centralization and relocation of our Canadian and U.S. restaurant support centers to new offices in Toronto, Ontario, and Miami, Florida, respectively. Adjusted EBITDA is used by management to measure operating performance of the business, excluding these non-cash and other specifically identified items that management believes are not relevant to management’s assessment of operating performance or the performance of an acquired business. A reconciliation of segment income to net income (loss) consists of the following (in millions):



28

Table of Contents


Three Months Ended March 31,Three Months Ended September 30, Nine Months Ended
September 30,
2019 20182019 2018 2019 2018
Segment income:          
TH$237
 $245
$301
 $299
 $825
 $830
BK222
 214
254
 231
 728
 681
PLK41
 39
47
 41
 129
 120
Adjusted EBITDA500
 498
602
 571
 1,682
 1,631
Share-based compensation and non-cash incentive compensation expense25
 15
18
 13
 62
 44
PLK Transaction costs
 5

 
 
 10
Corporate restructuring and tax advisory fees6
 7
5
 5
 22
 19
Office centralization and relocation costs4
 

 4
 6
 16
Impact of equity method investments (a)1
 (10)(9) 
 1
 (6)
Other operating expenses (income), net(17) 13
(30) 26
 (44) 9
EBITDA481
 468
618
 523
 1,635
 1,539
Depreciation and amortization47
 47
47
 45
 139
 138
Income from operations434
 421
571
 478
 1,496
 1,401
Interest expense, net132
 140
137
 135
 406
 405
Loss on early extinguishment of debt4
 
 4
 
Income tax expense56
 2
79
 93
 232
 153
Net income$246
 $279
$351
 $250
 $854
 $843
(a)Represents (i) (income) loss from equity method investments and (ii) cash distributions received from our equity method investments. Cash distributions received from our equity method investments are included in segment income.


27

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Note 17. Supplemental Financial Information
On February 17, 2017, 1011778 B.C. Unlimited Liability Company (the “Parent Issuer”) and New Red Finance Inc. (the “Co-Issuer” and together with the Parent Issuer, the “Issuers”) entered into an amended credit agreement, as amended from time to time, that provides for obligations under the Credit Facilities. On September 24, 2019, the Issuers entered into the 2019 3.875% Senior Notes Indenture with respect to the 2019 3.875% Senior Notes. On August 28, 2017, the Issuers entered into the 2017 5.00% Senior Notes Indenture with respect to the 2017 5.00% Senior Notes. On May 17, 2017, the Issuers entered into the 2017 4.25% Senior Notes Indenture with respect to the 2017 4.25% Senior Notes. On May 22, 2015, the Issuers entered into the 2015 4.625% Senior Notes Indenture with respect to the 2015 4.625% Senior Notes.
The agreement governing our Credit Facilities, the 2019 3.875% Senior Notes Indenture, the 2017 5.00% Senior Notes Indenture, the 2017 4.25% Senior Notes Indenture and the 2015 4.625% Senior Notes Indenture allow the financial reporting obligation of the Parent Issuer to be satisfied through the reporting of Partnership’s consolidated financial information, provided that the consolidated financial information of the Parent Issuer and its restricted subsidiaries is presented on a standalone basis.
The following represents the condensed consolidating financial information for the Parent Issuer and its restricted subsidiaries (“Consolidated Borrowers”) on a consolidated basis, together with eliminations, as of and for the periods indicated. The condensed consolidating financial information of Partnership is combined with the financial information of its wholly-owned subsidiaries that are also parent entities of the Parent Issuer and presented in a single column under the heading “RBILP”. The consolidating financial information may not necessarily be indicative of the financial position, results of operations or cash flows had the Issuers and Partnership operated as independent entities.




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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,September 30, 2019
Consolidated Borrowers RBILP Eliminations ConsolidatedConsolidated Borrowers RBILP Eliminations Consolidated
ASSETS              
Current assets:              
Cash and cash equivalents$902
 $
 $
 $902
$1,699
 $
 $
 $1,699
Accounts and notes receivable, net441
 
 
 441
472
 
 
 472
Inventories, net74
 
 
 74
83
 
 
 83
Prepaids and other current assets63
 
 
 63
86
 
 
 86
Total current assets1,480
 
 
 1,480
2,340
 
 
 2,340
Property and equipment, net2,011
 
 
 2,011
1,981
 
 
 1,981
Operating lease assets1,148
 
 
 1,148
Operating lease assets, net1,147
 
 
 1,147
Intangible assets, net10,427
 
 
 10,427
10,439
 
 
 10,439
Goodwill5,555
 
 
 5,555
5,579
 
 
 5,579
Net investment in property leased to franchisees50
 
 
 50
47
 
 
 47
Intercompany receivable
 231
 (231) 

 232
 (232) 
Investment in subsidiaries
 3,773
 (3,773) 

 4,063
 (4,063) 
Other assets, net622
 
 
 622
716
 
 
 716
Total assets$21,293
 $4,004
 $(4,004) $21,293
$22,249
 $4,295
 $(4,295) $22,249
LIABILITIES AND EQUITY              
Current liabilities:              
Accounts and drafts payable$451
 $
 $
 $451
$510
 $
 $
 $510
Other accrued liabilities458
 231
 
 689
565
 232
 
 797
Gift card liability112
 
 
 112
94
 
 
 94
Current portion of long term debt and finance leases94
 
 
 94
776
 
 
 776
Total current liabilities1,115
 231
 
 1,346
1,945
 232
 
 2,177
Term debt, net of current portion11,747
 
 
 11,747
11,568
 
 
 11,568
Finance leases, net of current portion287
 
 
 287
279
 
 
 279
Operating lease liabilities, net of current portion1,046
 
 
 1,046
1,055
 
 
 1,055
Other liabilities, net1,531
 
 
 1,531
1,598
 
 
 1,598
Payables to affiliates231
 
 (231) 
232
 
 (232) 
Deferred income taxes, net1,563
 
 
 1,563
1,509
 
 
 1,509
Total liabilities17,520
 231
 (231) 17,520
18,186
 232
 (232) 18,186
Partners’ capital:              
Class A common units
 4,423
 
 4,423

 7,753
 
 7,753
Partnership exchangeable units
 737
 
 737

 (2,358) 
 (2,358)
Common shares3,142
 
 (3,142) 
3,233
 
 (3,233) 
Retained Earnings2,018
 
 (2,018) 
2,162
 
 (2,162) 
Accumulated other comprehensive income (loss)(1,389) (1,389) 1,389
 (1,389)(1,334) (1,334) 1,334
 (1,334)
Total Partners' capital/shareholders' equity3,771
 3,771
 (3,771) 3,771
4,061
 4,061
 (4,061) 4,061
Noncontrolling interests2
 2
 (2) 2
2
 2
 (2) 2
Total equity3,773
 3,773
 (3,773) 3,773
4,063
 4,063
 (4,063) 4,063
Total liabilities and equity$21,293
 $4,004
 $(4,004) $21,293
$22,249
 $4,295
 $(4,295) $22,249


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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, 2018
Consolidated Borrowers RBILP Eliminations ConsolidatedConsolidated Borrowers RBILP Eliminations Consolidated
ASSETS              
Current assets:              
Cash and cash equivalents$913
 $
 $
 $913
$913
 $
 $
 $913
Accounts and notes receivable, net452
 
 
 452
452
 
 
 452
Inventories, net75
 
 
 75
75
 
 
 75
Prepaids and other current assets60
 
 
 60
60
 
 
 60
Total current assets1,500
 
 
 1,500
1,500
 
 
 1,500
Property and equipment, net1,996
 
 
 1,996
1,996
 
 
 1,996
Intangible assets, net10,463
 
 
 10,463
10,463
 
 
 10,463
Goodwill5,486
 
 
 5,486
5,486
 
 
 5,486
Net investment in property leased to franchisees54
 
 
 54
54
 
 
 54
Intercompany receivable
 207
 (207) 

 207
 (207) 
Investment in subsidiaries
 3,618
 (3,618) 

 3,618
 (3,618) 
Other assets, net642
 
 
 642
642
 
 
 642
Total assets$20,141
 $3,825
 $(3,825) $20,141
$20,141
 $3,825
 $(3,825) $20,141
LIABILITIES AND EQUITY              
Current liabilities:              
Accounts and drafts payable$513
 $
 $
 $513
$513
 $
 $
 $513
Other accrued liabilities430
 207
 
 637
430
 207
 
 637
Gift card liability167
 
 
 167
167
 
 
 167
Current portion of long term debt and capital leases91
 
 
 91
Current portion of long term debt and finance leases91
 
 
 91
Total current liabilities1,201
 207
 
 1,408
1,201
 207
 
 1,408
Term debt, net of current portion11,823
 
 
 11,823
11,823
 
 
 11,823
Capital leases, net of current portion226
 
 
 226
226
 
 
 226
Other liabilities, net1,547
 
 
 1,547
1,547
 
 
 1,547
Payables to affiliates207
 
 (207) 
207
 
 (207) 
Deferred income taxes, net1,519
 
 
 1,519
1,519
 
 
 1,519
Total liabilities16,523
 207
 (207) 16,523
16,523
 207
 (207) 16,523
Partners’ capital:              
Class A common units
 4,323
 
 4,323

 4,323
 
 4,323
Partnership exchangeable units
 730
 
 730

 730
 
 730
Common shares3,071
 
 (3,071) 
3,071
 
 (3,071) 
Retained Earnings1,982
 
 (1,982) 
1,982
 
 (1,982) 
Accumulated other comprehensive income (loss)(1,437) (1,437) 1,437
 (1,437)(1,437) (1,437) 1,437
 (1,437)
Total Partners' capital/shareholders' equity3,616
 3,616
 (3,616) 3,616
3,616
 3,616
 (3,616) 3,616
Noncontrolling interests2
 2
 (2) 2
2
 2
 (2) 2
Total equity3,618
 3,618
 (3,618) 3,618
3,618
 3,618
 (3,618) 3,618
Total liabilities and equity$20,141
 $3,825
 $(3,825) $20,141
$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,September 30, 2019

Consolidated Borrowers RBILP Eliminations ConsolidatedConsolidated Borrowers RBILP Eliminations Consolidated
Revenues:
 
 
 
       
Sales$522
 $
 $
 $522
$624
 $
 $
 $624
Franchise and property revenues744
 
 
 744
834
 
 
 834
Total revenues1,266
 
 
 1,266
1,458
 
 
 1,458
Operating costs and expenses:
 
 
 
       
Cost of sales406
 
 
 406
475
 
 
 475
Franchise and property expenses133
 
 
 133
133
 
 
 133
Selling, general and administrative expenses312
 
 
 312
320
 
 
 320
(Income) loss from equity method investments(2) 
 
 (2)(11) 
 
 (11)
Other operating expenses (income), net(17) 
 
 (17)(30) 
 
 (30)
Total operating costs and expenses832
 
 
 832
887
 
 
 887
Income from operations434
 
 
 434
571
 
 
 571
Interest expense, net132
 
 
 132
137
 
 
 137
Loss on early extinguishment of debt4
 
 
 4
Income before income taxes302
 
 
 302
430
 
 
 430
Income tax expense56
 
 
 56
79
 
 
 79
Net income246
 
 
 246
351
 
 
 351
Equity in earnings of consolidated subsidiaries
 246
 (246) 

 351
 (351) 
Net income (loss)246
 246
 (246) 246
351
 351
 (351) 351
Net income (loss) attributable to noncontrolling interests
 
 
 

 
 
 
Net income (loss) attributable to common unitholders$246
 $246
 $(246) $246
$351
 $351
 $(351) $351
Comprehensive income (loss)$294
 $294
 $(294) $294
$301
 $301
 $(301) $301





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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES
Condensed Consolidating Statements of Operations
(In millions of U.S. dollars)
Nine Months Ended September 30, 2019

Consolidated Borrowers RBILP Eliminations Consolidated
Revenues:
 
 
 
Sales$1,735
 $
 $
 $1,735
Franchise and property revenues2,389
 
 
 2,389
Total revenues4,124
 
 
 4,124
Operating costs and expenses:
 
 
 
Cost of sales1,334
 
 
 1,334
Franchise and property expenses401
 
 
 401
Selling, general and administrative expenses948
 
 
 948
(Income) loss from equity method investments(11) 
 
 (11)
Other operating expenses (income), net(44) 
 
 (44)
Total operating costs and expenses2,628
 
 
 2,628
Income from operations1,496
 
 
 1,496
Interest expense, net406
 
 
 406
Loss on early extinguishment of debt4
 
 
 4
Income before income taxes1,086
 
 
 1,086
Income tax expense232
 
 
 232
Net income854
 
 
 854
Equity in earnings of consolidated subsidiaries
 854
 (854) 
Net income (loss)854
 854
 (854) 854
Net income (loss) attributable to noncontrolling interests
 
 
 
Net income (loss) attributable to common unitholders$854
 $854
 $(854) $854
Comprehensive income (loss)$957
 $957
 $(957) $957


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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,September 30, 2018

Consolidated Borrowers RBILP Eliminations ConsolidatedConsolidated Borrowers RBILP Eliminations Consolidated
Revenues:
 
 
 
       
Sales$548
 $
 $
 $548
$609
 $
 $
 $609
Franchise and property revenues706
 
 
 706
766
 
 
 766
Total revenues1,254
 
 
 1,254
1,375
 
 
 1,375
Operating costs and expenses:

 
 
 
       
Cost of sales429
 
 
 429
470
 
 
 470
Franchise and property expenses104
 
 
 104
107
 
 
 107
Selling, general and administrative expenses301
 
 
 301
298
 
 
 298
(Income) loss from equity method investments(14) 
 
 (14)(4) 
 
 (4)
Other operating expenses (income), net13
 
 
 13
26
 
 
 26
Total operating costs and expenses833
 
 
 833
897
 
 
 897
Income from operations421
 
 
 421
478
 
 
 478
Interest expense, net140
 
 
 140
135
 
 
 135
Income before income taxes281
 
 
 281
343
 
 
 343
Income tax expense2
 
 
 2
93
 
 
 93
Net income279
 
 
 279
250
 
 
 250
Equity in earnings of consolidated subsidiaries
 279
 (279) 

 250
 (250) 
Net income (loss)279
 279
 (279) 279
250
 250
 (250) 250
Net income (loss) attributable to noncontrolling interests
 
 
 

 
 
 
Net income (loss) attributable to common unitholders$279
 $279
 $(279) $279
$250
 $250
 $(250) $250
Comprehensive income (loss)$96
 $96
 $(96) $96
$346
 $346
 $(346) $346




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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES
Condensed Consolidating Statements of Operations
(In millions of U.S. dollars)
Nine Months Ended September 30, 2018

Consolidated Borrowers RBILP Eliminations Consolidated
Revenues:
 
 
 
Sales$1,743
 $
 $
 $1,743
Franchise and property revenues2,229
 
 
 2,229
Total revenues3,972
 
 
 3,972
Operating costs and expenses:

 
 
 
Cost of sales1,348
 
 
 1,348
Franchise and property expenses314
 
 
 314
Selling, general and administrative expenses917
 
 
 917
(Income) loss from equity method investments(17) 
 
 (17)
Other operating expenses (income), net9
 
 
 9
Total operating costs and expenses2,571
 
 
 2,571
Income from operations1,401
 
 
 1,401
Interest expense, net405
 
 
 405
Income before income taxes996
 
 
 996
Income tax expense153
 
 
 153
Net income843
 
 
 843
Equity in earnings of consolidated subsidiaries
 843
 (843) 
Net income (loss)843
 843
 (843) 843
Net income (loss) attributable to noncontrolling interests1
 1
 (1) 1
Net income (loss) attributable to common unitholders$842
 $842
 $(842) $842
Comprehensive income (loss)$617
 $617
 $(617) $617


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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES
Condensed Consolidating Statements of Cash Flows
(In millions of U.S. dollars)
ThreeNine months ended March 31,September 30, 2019
Consolidated Borrowers RBILP Eliminations ConsolidatedConsolidated Borrowers RBILP Eliminations Consolidated
Cash flows from operating activities:              
Net income$246
 $246
 $(246) $246
$854
 $854
 $(854) $854
Adjustments to reconcile net income to net cash (used for) provided by operating activities:              
Equity in loss (earnings) of consolidated subsidiaries
 (246) 246
 

 (854) 854
 
Depreciation and amortization47
 
 
 47
139
 
 
 139
Non-cash loss on early extinguishment of debt4
 
 
 4
Amortization of deferred financing costs and debt issuance discount7
 
 
 7
22
 
 
 22
(Income) loss from equity method investments(2) 
 
 (2)(11) 
 
 (11)
Loss (gain) on remeasurement of foreign denominated transactions(15) 
 
 (15)
(Gain) loss on remeasurement of foreign denominated transactions(38) 
 
 (38)
Net (gains) losses on derivatives(20) 
 
 (20)(43) 
 
 (43)
Share-based compensation expense22
 
 
 22
56
 
 
 56
Deferred income taxes38
 
 
 38
(16) 
 
 (16)
Other3
 
 
 3
1
 
 
 1
Changes in current assets and liabilities, excluding acquisitions and dispositions:              
Accounts and notes receivable14
 
 
 14
(7) 
 
 (7)
Inventories and prepaids and other current assets(13) 
 
 (13)(34) 
 
 (34)
Accounts and drafts payable(69) 
 
 (69)(15) 
 
 (15)
Other accrued liabilities and gift card liability(126) 
 
 (126)(85) 
 
 (85)
Tenant inducements paid to franchisees(13) 
 
 (13)
Other long-term assets and liabilities22
 
 
 22
64
 
 
 64
Net cash provided by (used for) operating activities154
 
 
 154
878
 
 
 878
Cash flows from investing activities:              
Payments for property and equipment(5) 
 
 (5)(32) 
 
 (32)
Proceeds from disposal of assets, restaurant closures, and refranchisings4
 
 
 4
Net proceeds from disposal of assets, restaurant closures, and refranchisings22
 
 
 22
Settlement/sale of derivatives, net11
 
 
 11
17
 
 
 17
Other investing activities, net1
 
 
 1
Net cash provided by (used for) investing activities11
 
 
 11
7
 
 
 7
Cash flows from financing activities:              
Proceeds from issuance of long-term debt750
 
 
 750
Repayments of long-term debt and finance leases(23) 
 
 (23)(290) 
 
 (290)
Distributions on Class A common, preferred and Partnership exchangeable units
 (207) 
 (207)
Payment of financing costs(13) 
 
 (13)
Distributions on Class A common and Partnership exchangeable units
 (669) 
 (669)
Capital contribution from RBI Inc.42
 
 
 42
99
 
 
 99
Distributions from subsidiaries(207) 207
 
 
(669) 669
 
 
Other financing activities, net6
 
 
 6
Proceeds from derivatives17
 
 
 17
Net cash provided by (used for) financing activities(182) 
 
 (182)(106) 
 
 (106)
Effect of exchange rates on cash and cash equivalents6
 
 
 6
7
 
 
 7
Increase (decrease) in cash and cash equivalents(11) 
 
 (11)786
 
 
 786
Cash and cash equivalents at beginning of period913
 
 
 913
913
 
 
 913
Cash and cash equivalents at end of period$902
 $
 $
 $902
$1,699
 $
 $
 $1,699


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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES
Condensed Consolidating Statements of Cash Flows
(In millions of U.S. dollars)
ThreeNine Months Ended March 31,September 30, 2018
 Consolidated Borrowers RBILP Eliminations Consolidated
Cash flows from operating activities:       
Net income$843
 $843
 $(843) $843
Adjustments to reconcile net income to net cash (used for) provided by operating activities:       
Equity in loss (earnings) of consolidated subsidiaries
 (843) 843
 
Depreciation and amortization138
 
 
 138
Amortization of deferred financing costs and debt issuance discount22
 
 
 22
(Income) loss from equity method investments(17) 
 
 (17)
(Gain) loss on remeasurement of foreign denominated transactions(19) 
 
 (19)
Net (gains) losses on derivatives(24) 
 
 (24)
Share-based compensation expense39
 
 
 39
Deferred income taxes6
 
 
 6
Other11
 
 
 11
Changes in current assets and liabilities, excluding acquisitions and dispositions:       
Accounts and notes receivable(1) 
 
 (1)
Inventories and prepaids and other current assets(16) 
 
 (16)
Accounts and drafts payable(24) 
 
 (24)
Other accrued liabilities and gift card liability(284) 
 
 (284)
Tenant inducements paid to franchisees(25) 
 
 (25)
Other long-term assets and liabilities(6) 
 
 (6)
Net cash provided by (used for) operating activities643
 
 
 643
Cash flows from investing activities:       
Payments for property and equipment(53) 
 
 (53)
Net proceeds from disposal of assets, restaurant closures, and refranchisings2
 
 
 2
Settlement/sale of derivatives, net11
 
 
 11
Other investing activities, net12
 
 
 12
Net cash provided by (used for) investing activities(28) 
 
 (28)
Cash flows from financing activities:       
Repayments of long-term debt and finance leases(66) 
 
 (66)
Distributions on Class A common and Partnership exchangeable units
 (517) 
 (517)
Distributions to RBI for payments in connections with redemption of preferred shares
 (60) 
 (60)
Capital contribution from RBI Inc.53
 
 
 53
Distributions from subsidiaries(577) 577
 
 
Other financing activities, net1
 
 
 1
Net cash (used for) provided by financing activities(589) 
 
 (589)
Effect of exchange rates on cash and cash equivalents(10) 
 
 (10)
Increase (decrease) in cash and cash equivalents16
 
 
 16
Cash and cash equivalents at beginning of period1,097
 
 
 1,097
Cash and cash equivalents at end of period$1,113
 $
 $
 $1,113

 Consolidated Borrowers RBILP Eliminations Consolidated
Cash flows from operating activities:       
Net income$279
 $279
 $(279) $279
Adjustments to reconcile net income to net cash (used for) provided by operating activities:       
Equity in loss (earnings) of consolidated subsidiaries
 (279) 279
 
Depreciation and amortization47
 
 
 47
Amortization of deferred financing costs and debt issuance discount7
 
 
 7
(Income) loss from equity method investments(14) 
 
 (14)
Loss (gain) on remeasurement of foreign denominated transactions16
 
 
 16
Net (gains) losses on derivatives2
 
 
 2
Share-based compensation expense13
 
 
 13
Deferred income taxes(19) 
 
 (19)
Other4
 
 
 4
Changes in current assets and liabilities, excluding acquisitions and dispositions:       
Accounts and notes receivable15
 
 
 15
Inventories and prepaids and other current assets(7) 
 
 (7)
Accounts and drafts payable(73) 
 
 (73)
Other accrued liabilities and gift card liability(374) 
 
 (374)
Tenant inducements paid to franchisees(2) 
 
 (2)
Other long-term assets and liabilities(36) 
 
 (36)
Net cash (used for) provided by operating activities(142) 
 
 (142)
Cash flows from investing activities:       
Payments for property and equipment(7) 
 
 (7)
Proceeds from disposal of assets, restaurant closures, and refranchisings2
 
 
 2
Settlement/sale of derivatives, net3
 
 
 3
Other investing activities, net4
 
 
 4
Net cash provided by (used for) investing activities2
 
 
 2
Cash flows from financing activities:       
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.25
 
 
 25
Distributions from subsidiaries(131) 131
 
 
Net cash provided by (used for) financing activities(128) 
 
 (128)
Effect of exchange rates on cash and cash equivalents(8) 
 
 (8)
Increase (decrease) in cash and cash equivalents(276) 
 
 (276)
Cash and cash equivalents at beginning of period1,097
 
 
 1,097
Cash and cash equivalents at end of period$821
 $
 $
 $821


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Note 18. Subsequent Events
Cash Distributions/Dividends
On AprilOctober 3, 2019, RBI paid a cash dividend of $0.50 per RBI common share to common shareholders of record on March 15,September 17, 2019. Partnership made a distribution to RBI as holder of Class A common units in the amount of the aggregate dividends declared and paid by RBI on RBI common shares and also made a distribution in respect of each Partnership exchangeable unit in the amount of $0.50 per exchangeable unit to holders of record on March 15,September 17, 2019.
The RBI board of directors has declared a cash dividend of $0.50 per RBI common share, which will be paid on JulyJanuary 3, 20192020 to RBI common shareholders of record on JuneDecember 17, 2019. Partnership will make a distribution to RBI as holder of Class A common units in the amount of the aggregate dividends declared and paid by RBI on RBI common shares. Partnership will also make a distribution in respect of each Partnership exchangeable unit in the amount of $0.50 per Partnership exchangeable unit, and the record date and payment date for such distribution will be the same as the record date and payment date for the cash dividend per RBI common share set forth above.
Term Loan A Proceeds and Redemption of Senior Notes
As disclosed in Note 10, Long-Term Debt, the net proceeds from the Term Loan A were obtained on October 7, 2019. The net proceeds from the offering of the 2019 3.875% Senior Notes and a portion of the net proceeds from the Term Loan A were used to redeem the entire outstanding principal balance of the 2015 4.625% Senior Notes on October 7, 2019 and to pay related fees and expenses. Additionally, the aggregate principal amount of the commitments under our Revolving Credit Facility was increased to $1,000 million effective October 7, 2019.
*****


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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” or “our” are to Restaurant Brands International Limited Partnership and its subsidiaries, collectively.
Overview
We are one of the world’s largest quick service restaurant (“QSR”) companies with more than $30$33 billion in system-wide sales and over 25,00026,000 restaurants in more than 100 countries and U.S. territories as of March 31,September 30, 2019. Our Tim Hortons®, Burger King®, and 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 spicyfried 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 HortonsTH 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 (referred to as system-wide sales) in one period from the same period in the prior year.
Comparable sales refers to the percentage change in restaurant sales in one period from the same prior year period for restaurants that have been open for 13 months or longer for TH 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 monthtwelve-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 Lease Accounting Standard


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


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


Beginning on January 1, 2019, we record lease income and lease cost on a gross basis for lessee reimbursements of costs such as property taxes and maintenance when we are the lessor in the lease. Although there iswas no net impact to our consolidated statement of operations from this change, the presentation resulted in a total increase of $34 million, of which $21 million is relatedincreases to our TH segment and $13 million is related to our BK segment, inboth franchise and property revenues and franchise and property expenses of $32 million ($22 million related to our TH segment and $10 million related to our BK segment ) during the three months ended March 31,September 30, 2019 and $99 million ($65 million related to our TH segment, $33 million related to our BK segment and $1 million related to our PLK segment) during the nine months ended September 30, 2019, compared to the three and nine months ended March 31,September 30, 2018, respectively, 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 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 $1 million and $5 million net increases in non-cash amortization expense during the three and nine months ended September 30, 2019, respectively, compared to the three and nine months ended September 30, 2018, respectively. Favorable lease assets and unfavorable lease liabilities associated with leases where we are the lessor were not impacted by our transition to ASC 842.

As described in Note 4, Leases, to the accompanying unaudited condensed consolidated financial statements, the transition provisions of ASC 842 required the reclassification of favorable lease assets and unfavorable lease liabilities where we are the lessee in the underlying lease to the right-of-use (“ROU”) asset recorded for the underlying lease. As a result of this reclassification, the amortization period for certain favorable lease assets and unfavorable lease liabilities was reduced, resulting in a $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 underlying leases reach the end of their term, and reclassified balances are fully amortized. Favorable lease assets and unfavorable lease liabilities associated with leases where we are the lessor are not impacted by our transition to ASC 842.

Please refer to Note 4, 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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PLK Transaction Costs
On March 27, 2017, we completed the acquisition of Popeyes Louisiana Kitchen, Inc. (the "Popeyes Acquisition"). In connection with the Popeyes Acquisition, we incurred certain non-recurring fees and expenses (“PLK Transaction costs”) totaling $5$10 million during the threenine months ended March 31,September 30, 2018 consisting primarily of professional fees and compensation related expenses, all of which are classified as selling, general and administrative expenses in theour condensed consolidated statements of operations. We did not incur any PLK Transaction costs during the three and nine months ended March 31,September 30, 2019.
Tax Reform
In December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) that significantly revisesrevised 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.
We recorded $6$5 million of costs during each of the three months ended September 30, 2019 and 2018 and $22 million and $7$19 million of costs during the nine months ended September 30, 2019 and 2018, respectively, which are classified as selling, general and administrative expenses in theour condensed consolidated statements of operations, arising primarily from professional advisory and consulting services associated with corporate restructuring initiatives related to the interpretation and implementation of the Tax Act (“Corporate restructuring and tax advisory fees”) during the three months ended March 31, 2019 and 2018, respectively.. We expect to continue to incur additionaland separately disclose Corporate restructuring and tax advisory fees related to the Tax Act in 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,September 30, 2018 and $6 million and $16 million during the nine months ended September 30, 2019 and 2018, respectively, consisting primarily of moving costs and relocation-driven compensation expenses, which are classified as selling, general and administrative expenses in theour condensed consolidated statements of operations. We did not incur any Office centralization and relocation costs during the three months ended September 30, 2019 and do not expect to continue to incurseparately disclose additional Office centralization and relocation costs in 2019.costs.


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Results of Operations for the Three and Nine Months Ended March 31,September 30, 2019 and 2018
Tabular amounts in millions of U.S. dollars unless noted otherwise. Segment income may not calculate exactly due to rounding.
ConsolidatedThree Months Ended March 31, Variance FX Impact (a) Variance Excluding FX ImpactThree Months Ended September 30, Variance FX Impact (a) Variance Excluding FX Impact Nine Months Ended September 30, Variance FX Impact (a) Variance Excluding FX Impact
2019 2018  Favorable / (Unfavorable)2019 2018  Favorable / (Unfavorable) 2019 2018  Favorable / (Unfavorable)
Revenues:                            
Sales$522
 $548
 $(26) $(22) $(4)$624
 $609
 $15
 $(5) $20
 $1,735
 $1,743
 $(8) $(44) $36
Franchise and property revenues744
 706
 38
 (23) 61
834
 766
 68
 (8) 76
 2,389
 2,229
 160
 (49) 209
Total revenues1,266
 1,254
 12
 (45) 57
1,458
 1,375
 83
 (13) 96
 4,124
 3,972
 152
 (93) 245
Operating costs and expenses:                            
Cost of sales406
 429
 23
 17
 6
475
 470
 (5) 4
 (9) 1,334
 1,348
 14
 34
 (20)
Franchise and property expenses133
 104
 (29) 3
 (32)133
 107
 (26) 1
 (27) 401
 314
 (87) 7
 (94)
Selling, general and administrative expenses312
 301
 (11) 5
 (16)320
 298
 (22) 2
 (24) 948
 917
 (31) 11
 (42)
(Income) loss from equity method investments(2) (14) (12) (3) (9)(11) (4) 7
 
 7
 (11) (17) (6) (3) (3)
Other operating expenses (income), net(17) 13
 30
 1
 29
(30) 26
 56
 
 56
 (44) 9
 53
 (2) 55
Total operating costs and expenses832
 833
 1
 23
 (22)887
 897
 10
 7
 3
 2,628
 2,571
 (57) 47
 (104)
Income from operations434
 421
 13
 (22) 35
571
 478
 93
 (6) 99
 1,496
 1,401
 95
 (46) 141
Interest expense, net132
 140
 8
 
 8
137
 135
 (2) 
 (2) 406
 405
 (1) 
 (1)
Loss on early extinguishment of debt4
 
 (4) 
 (4) 4
 
 (4) 
 (4)
Income before income taxes302
 281
 21
 (22) 43
430
 343
 87
 (6) 93
 1,086
 996
 90
 (46) 136
Income tax expense56
 2
 (54) 1
 (55)79
 93
 14
 9
 5
 232
 153
 (79) 11
 (90)
Net income$246
 $279
 $(33) $(21) $(12)$351
 $250
 $101
 $3
 $98
 $854
 $843
 $11
 $(35) $46
(a)We calculate the FX Impact by translating prior year results at current year monthly average exchange rates. We analyze these results on a constant currency basis as this helps identify underlying business trends, without distortion from the effects of currency movements.
TH SegmentThree Months Ended March 31, Variance FX Impact (a) Variance Excluding FX ImpactThree Months Ended September 30, Variance FX Impact (a) Variance Excluding FX Impact Nine Months Ended September 30, Variance FX Impact (a) Variance Excluding FX Impact
2019 2018  Favorable / (Unfavorable)2019 2018  Favorable / (Unfavorable) 2019 2018  Favorable / (Unfavorable)
Revenues:                            
Sales$483
 $508
 $(25) $(22) $(3)$584
 $571
 $13
 $(5) $18
 $1,618
 $1,627
 $(9) $(44) $35
Franchise and property revenues266
 255
 11
 (11) 22
297
 283
 14
 (3) 17
 854
 813
 41
 (22) 63
Total revenues749
 763
 (14) (33) 19
881
 854
 27
 (8) 35
 2,472
 2,440
 32
 (66) 98
Cost of sales372
 396
 24
 17
 7
441
 437
 (4) 4
 (8) 1,233
 1,250
 17
 34
 (17)
Franchise and property expenses87
 70
 (17) 3
 (20)91
 72
 (19) 1
 (20) 268
 210
 (58) 6
 (64)
Segment SG&A82
 82
 
 3
 (3)77
 76
 (1) 
 (1) 236
 238
 2
 6
 (4)
Segment depreciation and amortization (b)26
 26
 
 1
 (1)28
 26
 (2) 
 (2) 80
 78
 (2) 2
 (4)
Segment income (c)237
 245
 (8) (11) 3
301
 299
 2
 (2) 4
 825
 830
 (5) (22) 17
(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 million of cash distributions received from equity method investments for the three months ended March 31, 2019 and 2018.


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BK SegmentThree Months Ended March 31, Variance FX Impact (a) Variance Excluding FX Impact
 2019 2018  Favorable / (Unfavorable)
Revenues:         
Sales$19
 $19
 $
 $
 $
Franchise and property revenues392
 371
 21
 (12) 33
Total revenues411
 390
 21
 (12) 33
Cost of sales18
 16
 (2) 
 (2)
Franchise and property expenses43
 32
 (11) 
 (11)
Segment SG&A141
 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$4 million of cash distributions received from equity method investments for the three months ended March 31,September 30, 2019 and 2018.2018, respectively. TH segment income includes $11 million and $10 million of cash distributions received from equity method investments for the nine months ended September 30, 2019 and 2018, respectively.



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PLK SegmentThree Months Ended March 31, Variance FX Impact (a) Variance Excluding FX Impact
BK SegmentThree Months Ended September 30, Variance FX Impact (a) Variance Excluding FX Impact Nine Months Ended September 30, Variance FX Impact (a) Variance Excluding FX Impact
2019 2018  Favorable / (Unfavorable)2019 2018  Favorable / (Unfavorable) 2019 2018  Favorable / (Unfavorable)
Revenues:                            
Sales$20
 $21
 $(1) $
 $(1)$19
 $18
 $1
 $
 $1
 $57
 $56
 $1
 $
 $1
Franchise and property revenues86
 80
 6
 
 6
438
 398
 40
 (5) 45
 1,258
 1,168
 90
 (26) 116
Total revenues106
 101
 5
 
 5
457
 416
 41
 (5) 46
 1,315
 1,224
 91
 (26) 117
Cost of sales16
 17
 1
 
 1
18
 17
 (1) 
 (1) 53
 50
 (3) 
 (3)
Franchise and property expenses3
 2
 (1) 
 (1)39
 33
 (6) 
 (6) 124
 97
 (27) 1
 (28)
Segment SG&A49
 46
 (3) 
 (3)159
 147
 (12) 
 (12) 449
 433
 (16) 2
 (18)
Segment depreciation and amortization (b)3
 3
 
 
 
12
 12
 
 
 
 37
 36
 (1) 
 (1)
Segment income(d)41
 39
 2
 
 2
254
 231
 23
 (4) 27
 728
 681
 47
 (23) 70
(d)No cash distributions were received from equity method investments for the three months ended September 30, 2019 and 2018. BK segment income includes $2 million and $1 million of cash distributions received from equity method investments for the nine months ended September 30, 2019 and 2018, respectively.




40
PLK SegmentThree Months Ended September 30, Variance FX Impact (a) Variance Excluding FX Impact Nine Months Ended September 30, Variance FX Impact (a) Variance Excluding FX Impact
 2019 2018  Favorable / (Unfavorable) 2019 2018  Favorable / (Unfavorable)
Revenues:                   
Sales$21
 $20
 $1
 $
 $1
 $60
 $60
 $
 $
 $
Franchise and property revenues99
 85
 14
 
 14
 277
 248
 29
 (1) 30
Total revenues120
 105
 15
 
 15
 337
 308
 29
 (1) 30
Cost of sales16
 16
 
 
 
 48
 48
 
 
 
Franchise and property expenses3
 2
 (1) 
 (1) 9
 7
 (2) 
 (2)
Segment SG&A56
 48
 (8) 
 (8) 159
 141
 (18) 
 (18)
Segment depreciation and amortization (b)2
 3
 1
 
 1
 8
 8
 
 
 
Segment income47
 41
 6
 
 6
 129
 120
 9
 (1) 10



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Three Months Ended March 31,Three Months Ended September 30, Nine Months Ended
September 30,
Key Business Metrics2019 20182019 2018 2019 2018
System-wide sales growth          
TH0.5 % 2.1 %(0.1)% 2.8% 0.6 % 2.4%
BK8.2 % 11.3 %10.7 % 7.8% 9.6 % 9.1%
PLK6.8 % 10.9 %15.6 % 7.9% 10.5 % 9.8%
Consolidated6.4 % 9.2 %8.9 % 6.7% 7.8 % 7.7%
System-wide sales          
TH$1,547
 $1,608
$1,774
 $1,793
 $5,037
 $5,143
BK$5,289
 $5,149
$6,010
 $5,544
 $17,016
 $16,096
PLK$955
 $903
$1,103
 $956
 $3,070
 $2,797
Consolidated$7,791
 $7,660
$8,887
 $8,293
 $25,123
 $24,036
Comparable sales          
TH(0.6)% (0.3)%(1.4)% 0.6% (0.5)% 0.1%
BK2.2 % 3.8 %4.8 % 1.0% 3.6 % 2.1%
PLK0.6 % 3.2 %9.7 % 0.5% 4.5 % 2.1%
          
As of March 31,    As of September 30,
2019 2018    2019 2018
Net restaurant growth          
TH1.9 % 2.8 %    1.7 % 2.7%
BK5.7 % 6.9 %    5.8 % 6.1%
PLK6.6 % 6.7 %    5.6 % 7.6%
Consolidated5.1 % 6.1 %    5.0 % 5.6%
Restaurant count          
TH4,866
 4,774
    4,887
 4,805
BK17,823
 16,859
    18,232
 17,239
PLK3,120
 2,926
    3,192
 3,022
Consolidated25,809
 24,559
    26,311
 25,066
Comparable Sales
TH comparable sales were (0.6)(1.4)% during the three months ended March 31,September 30, 2019, including Canada comparable sales of (0.4)(1.2)%. TH comparable sales were (0.5)% during the nine months ended September 30, 2019, including Canada comparable sales of (0.3)%.
BK comparable sales were 2.2%4.8% during the three months ended March 31,September 30, 2019, including U.S. comparable sales of 0.4%5.0%. BK comparable sales were 3.6% during the nine months ended September 30, 2019, including U.S. comparable sales of 2.0%.
PLK comparable sales were 9.7% during the three months ended September 30, 2019, including U.S. comparable sales of 10.2%. PLK comparable sales were 0.6%4.5% during the threenine months ended March 31,September 30, 2019, including U.SU.S. comparable sales of 0.4%4.6%.




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Sales and Cost of Sales
Sales include TH supply chain sales and sales from Company restaurants. TH supply chain sales represent sales of products, supplies and restaurant equipment, as well as sales to retailers. 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.
During the three months ended March 31,September 30, 2019, the increase in sales was driven primarily by an increase of $18 million in our TH segment, partially offset by an unfavorable FX Impact of $5 million. The increase in our TH segment was driven by a $12 million increase in supply chain sales and a $6 million increase in Company restaurant revenue.
During the nine months ended September 30, 2019, the decrease in sales was driven by a decreasean unfavorable FX Impact of $3$44 million, partially offset by an increase of $35 million in our TH segment a decreasedriven primarily by an increase in supply chain sales.
During the three months ended September 30, 2019, the increase in cost of $1sales was driven primarily by an increase of $8 million in our PLKTH segment, and an unfavorablepartially offset by a $4 million favorable FX Impact of $22 million.Impact. The decreaseincrease in our TH segment was driven primarily by aan increase of $6 million decrease in our TH Company restaurant revenue, primarily from Company restaurant refranchisingscost of sales and the conversion of Restaurant VIEs to franchise restaurants in prior periods, partially offset by a $3 millionan increase in supply chain cost of sales. The decrease in our PLK segment was due primarily to Company restaurant refranchisings in prior periods.
During the threenine months ended March 31,September 30, 2019, the decrease in cost of sales was driven primarily by a decrease of $7 million in our TH segment, a decrease of $1 million in our PLK segment and a $17$34 million favorable FX Impact, partially offset by a $2an increase of $17 million in our TH segment and an increase of $3 million in our BK segment. The decreaseincrease in our TH segment was driven primarily due to a decrease of $5 millionby an increase in Company restaurantsupply chain cost of sales primarily from Company restaurant refranchisings anddue to the conversion of Restaurant VIEs to franchise restaurantsincrease in prior periods.supply chain sales.
Franchise and Property
Franchise and property revenues consist primarily of royalties earned on franchise sales, rents from real estate leased or subleased to franchisees, franchise fees, and other revenue. Franchise and property expenses consist primarily of depreciation of properties leased to franchisees, rental expense associated with properties subleased to franchisees, amortization of franchise agreements, and bad debt expense (recoveries).
During the three months ended March 31,September 30, 2019, the increase in franchise and property revenues was driven by an increase of $33$45 million in our BK segment, an increase of $22$17 million in our TH segment, and an increase of $6$14 million in our PLK segment, partially offset by a $23an $8 million unfavorable FX Impact. The increases in our BK and PLK segments were primarily driven by increases in royalties driven byas a result of system-wide sales growth. Additionally,
During the nine months ended September 30, 2019, the increase in franchise and property revenues was driven by an increase of $116 million in our BK segment, an increase of $63 million in our TH segment, and an increase of $30 million in our PLK segment, partially offset by a $49 million unfavorable FX Impact. The increases in our BK and THPLK segments were primarily driven by increases in royalties as a result of system-wide sales growth.
Additionally, the increase in franchise and property revenues in all of our segments during the three and nine months ended September 30, 2019 reflected the gross recognition of property income from lessee reimbursements of costs such as property taxes and maintenance when we are the lessor in the lease as a result of the application of ASC 842 beginning January 1, 2019.
During the three months ended March 31,September 30, 2019, the increase in franchise and property expenses was driven by an increase of $20 million in our TH segment and an increase of $11$6 million in our BK segment. During the nine months ended September 30, 2019, the increase in franchise and property expenses was driven by an increase of $64 million in our TH segment, an increase of $28 million in our BK segment, and an increase of $1$2 million in our PLK segment, partially offset by a $3$7 million favorable FX Impact. The increase in all of our THsegments during the three and BK segments reflectednine months ended September 30, 2019 was driven by the gross recognition of property expense for costs such as property taxes and maintenance paid by us and reimbursed by lessees when we are the lessor in the lease as a result of the application of ASC 842 beginning January 1, 2019.




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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, VarianceThree Months Ended September 30, Variance Nine Months Ended September 30, Variance
 $ % $ % $ %
2019 2018 Favorable / (Unfavorable)2019 2018 Favorable / (Unfavorable) 2019 2018 Favorable / (Unfavorable)
Segment SG&A:                      
TH$82
 $82
 $
  %$77
 $76
 $(1) (1.3)% $236
 $238
 $2
 0.8 %
BK141
 140
 (1) (0.7)%159
 147
 (12) (8.2)% 449
 433
 (16) (3.7)%
PLK49
 46
 (3) (6.5)%56
 48
 (8) (16.7)% 159
 141
 (18) (12.8)%
Share-based compensation and non-cash incentive compensation expense25
 15
 (10) (66.7)%18
 13
 (5) (38.5)% 62
 44
 (18) (40.9)%
Depreciation and amortization5
 6
 1
 16.7 %5
 5
 
  % 14
 16
 2
 12.5 %
PLK Transaction costs
 5
 5
 100.0 %
 
 
  % 
 10
 10
 NM
Corporate restructuring and tax advisory fees6
 7
 1
 14.3 %5
 5
 
  % 22
 19
 (3) (15.8)%
Office centralization and relocation costs4
 
 (4) NM

 4
 4
 NM
 6
 16
 10
 62.5 %
Selling, general and administrative expenses$312
 $301
 $(11) (3.7)%$320
 $298
 $(22) (7.4)% $948
 $917
 $(31) (3.4)%
NM - not meaningful
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. Segment SG&A excludes share-based compensation and non-cash incentive compensation expense, depreciation and amortization, PLK Transaction costs, Corporate restructuring and tax advisory fees, and Office centralization and relocation costs.
During the three and nine months ended March 31,September 30, 2019, the increase in Segment SG&A in our BK and PLK segments is primarily due to an increase in advertising fund expenses.
During the three and nine months ended September 30, 2019, the increase in share-based compensation and non-cash incentive compensation expense was primarily due primarily to an increase in the number of equity awards granted during 2019 and an increase associated with equity award modifications in the current year.nine months ended September 30, 2019.
(Income) Loss from Equity Method Investments
(Income) loss from equity method investments reflects our share of investee net income or loss, non-cash dilution gains or losses from changes in our ownership interests in equity method investees, and basis difference amortization.
The change in (income) loss from equity method investments during the three months ended March 31,September 30, 2019 was primarily driven by the recognition of an $11 million non-cash dilution gain during 2019 from the issuance of additional shares in connection with a merger by one of our equity method investees, partially offset by an increase in equity method investment net losses that we recognized during the current year.
The change in (income) loss from equity method investments during the nine months ended September 30, 2019 was primarily driven by the recognition of an $11 million non-cash dilution gain during 2019 (described above), a $20 million non-cash dilution gain during 2018 on the initial public offering by one of our equity method investees and an increasea decrease 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 September 30, Nine Months Ended September 30,
2019 20182019 2018 2019 2018
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings$3
 $2
$6
 $7
 $(1) $17
Litigation settlements (gains) and reserves, net
 (6)1
 5
 1
 (1)
Net losses (gains) on foreign exchange(15) 16
(35) (3) (38) (19)
Other, net(5) 1
(2) 17
 (6) 12
Other operating expenses (income), net$(17) $13
$(30) $26
 $(44) $9
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings represent sales of properties and other costs related to restaurant closures and refranchisings. Gains and losses recognized in the current period may reflect certain costs related to closures and refranchisings that occurred in previous periods.
Litigation settlements (gains) and reserves, net primarily reflects payments made and proceeds received in connection with litigation matters.
Net losses (gains) on foreign exchange is primarily related to revaluation of foreign denominated assets and liabilities.

Other, net during the three and nine months ended September 30, 2018 is comprised primarily of an expense in connection with the settlement of certain provisions associated with the 2017 redemption of RBI's preferred shares as a result of changes in Treasury regulations.
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 September 30, Nine Months Ended September 30,
2019 20182019 2018 2019 2018
Interest expense, net$132
 $140
$137
 $135
 $406
 $405
Weighted average interest rate on long-term debt5.0% 4.7%5.1% 5.1% 5.1% 4.9%
During the threenine months ended March 31,September 30, 2019, interest expense, net decreasedincreased primarily due to an $18 million benefit during the three months ended March 31, 2019 compared to a $4 million benefit during the period from March 15, 2018 to March 31, 2018 from our adoption of a new hedge accounting standard in 2018, partially offset by an increase in the weighted average interest rate in the current year.year partially offset by a $53 million benefit during the nine months ended September 30, 2019 compared to a $39 million benefit during the period from March 15, 2018 to September 30, 2018 related to the amortization of amounts other than currency movements of our net investment hedges, which is excluded from the accounting hedge. Refer to Note 13, Derivative Instruments, to the accompanying unaudited condensed consolidated financial statements for further details of the effects of this excluded component.
Loss on early extinguishment of debt
During the quarter ended September 30, 2019, we prepaid $235 million principal amount of our existing senior secured term loan and, in connection with this prepayment, we recorded a loss on early extinguishment of debt of $4 million that primarily reflects the write-off of unamortized debt issuance costs and discounts.
Income Tax Expense
Our effective tax rate was 18.7%18.3% and 0.6%27.0% for the three months ended March 31,September 30, 2019 and 2018, respectively. The increasedecrease in our effective tax rate was primarily due toreflects the non-recurrence of the cumulative impact in the 2018 quarter of certain aspects of U.S. corporate tax reform as well as the benefit in 2019 of internal financing arrangements and a lowerhigher tax benefit from stock option exercises and the benefit from reserve releases in 2018 due to audit settlements, partially offset by the benefits of internal financing arrangements.exercises. The effective tax rate was reduced by 4.1%1.2% and 22.7%0.9% for the three months ended March 31,September 30, 2019 and 2018, respectively, as a result of benefits from stock option exercises. We expect quarter-to-quarter volatility in the impact of stock option exercises on our effective tax rate based on fluctuations in stock option exercises.
Our effective tax rate was 21.4% and 15.4% for the nine months ended September 30, 2019 and 2018, respectively. The effective tax rate for the nine months ended September 30, 2019 reflects a $37 million increase in the provision for

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unrecognized tax benefits related to a prior restructuring transaction that is not applicable to ongoing operations which increased our effective tax rate by 3.4% for the period. The increase in our effective tax rate also reflects a lower tax benefit from stock option exercises and the benefit from reserve releases in 2018 due to audit settlements, partially offset by the benefits of internal financing arrangements in 2019. The effective tax rate was reduced by 2.9% and 6.9% for the nine months ended September 30, 2019 and 2018, respectively, as a result of benefits from stock option exercises.
Net Income
We reported net income of $246$351 million for the three months ended March 31,September 30, 2019, compared to net income of $279$250 million for the three months ended March 31,September 30, 2018. The decreaseincrease in net income is primarily due to a $54$56 million favorable change in the results from other operating expenses (income), net, a $31 million increase in segment income in all of our segments, a $14 million decrease in income tax expense, an $11a $9 million unfavorablefavorable change from the impact of equity method investments, a $10 million increase in share-based compensation and non-cash incentive compensation expense, an $8 million decrease in TH segment income, andthe non-recurrence of $4 million of Office centralization and relocation costs. These factors were partially offset by a $30$5 million increase in share-based compensation and non-cash incentive compensation expense, a $4 million loss on early extinguishment of debt in the current year, a $2 million increase in depreciation and amortization, and a $2 million increase in interest expense, net.
We reported net income of $854 million for the nine months ended September 30, 2019, compared to net income of $843 million for the nine months ended September 30, 2018. The increase in net income is primarily due to a $53 million favorable change in the results from other operating expenses (income), net, an $8a $47 million increase in BK segment income, an $8 million decrease in interest expense, the non-recurrence of $5$10 million of PLK Transaction costs incurred in the prior period, a $2$10 million decrease in Office centralization and relocation costs, and a $9 million increase in PLK segment income. These factors were partially offset by a $79 million increase in income tax expense, an $18 million increase in share-based compensation and non-cash incentive compensation expense, a $7 million unfavorable change from the impact of equity method investments, a $5 million decrease in TH segment income, a $4 million loss on early extinguishment of debt in the current year, and a $1$3 million decreaseincrease 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 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, Corporate restructuring and tax advisory fees related to the interpretation and implementation of the Tax 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.

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Three Months Ended March 31, VarianceThree Months Ended September 30, Variance Nine Months Ended September 30, Variance
 $ % $ % $ %
2019 2018 Favorable / (Unfavorable)2019 2018 Favorable / (Unfavorable) 2019 2018 Favorable / (Unfavorable)
Segment income:                      
TH$237
 $245
 $(8) (3.3)%$301
 $299
 $2
 0.7 % $825
 $830
 $(5) (0.6)%
BK222
 214
 8
 3.9 %254
 231
 23
 10.0 % 728
 681
 47
 6.9 %
PLK41
 39
 2
 5.4 %47
 41
 6
 12.3 % 129
 120
 9
 7.3 %
Adjusted EBITDA500
 498
 2
 0.5 %602
 571
 31
 5.3 % 1,682
 1,631
 51
 3.1 %
Share-based compensation and non-cash incentive compensation expense25
 15
 (10) (66.7)%18
 13
 (5) (38.5)% 62
 44
 (18) (40.9)%
PLK Transaction costs
 5
 5
 NM

 
 
 NM
 
 10
 10
 NM
Corporate restructuring and tax advisory fees6
 7
 1
 14.3 %5
 5
 
  % 22
 19
 (3) (15.8)%
Office centralization and relocation costs4
 
 (4) NM

 4
 4
 NM
 6
 16
 10
 62.5 %
Impact of equity method investments (a)1
 (10) (11) NM
(9) 
 9
 NM
 1
 (6) (7) NM
Other operating expenses (income), net(17) 13
 30
 NM
(30) 26
 56
 NM
 (44) 9
 53
 NM
EBITDA481
 468
 13
 2.8 %618
 523
 95
 18.2 % 1,635
 1,539
 96
 6.2 %
Depreciation and amortization47
 47
 
  %47
 45
 (2) (4.4)% 139
 138
 (1) (0.7)%
Income from operations434
 421
 13
 3.1 %571
 478
 93
 19.5 % 1,496
 1,401
 95
 6.8 %
Interest expense, net132
 140
 8
 5.7 %137
 135
 (2) (1.5)% 406
 405
 (1) (0.2)%
Loss on early extinguishment of debt4
 
 (4) NM
 4
 
 (4) NM
Income tax expense56
 2
 (54) NM
79
 93
 14
 15.1 % 232
 153
 (79) (51.6)%
Net income$246
 $279
 $(33) (11.8)%$351
 $250
 $101
 40.4 % $854
 $843
 $11
 1.3 %
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,September 30, 2019 reflects the increases in segment income in all of our segments. The increase in Adjusted EBITDA for the nine months ended September 30, 2019 reflects the increases in segment income in our BK and PLK segments, partially offset by a decrease in our TH segment.
The increase in EBITDA for the three months ended March 31,September 30, 2019 is primarily due to favorable results from other operating expenses (income), net in the current period, increases in segment income in all our segments, favorable results from the impact of equity method investments, and the non-recurrence of Office centralization and relocation costs, partially offset by an increase in share-based compensation and non-cash incentive compensation expense.
The increase in EBITDA for the nine months ended September 30, 2019 is primarily due to favorable results from other operating expenses (income), net in the current period, an increase in segment income in our BK segment,and PLK segments, the non-recurrence of PLK Transaction costs and an increasea decrease in segment income in our PLK segment,Office centralization and relocation cost, partially offset by unfavorable results from the impact of equity method investments, an increase in share-based compensation and non-cash incentive compensation expense, unfavorable results from the impact of equity method investments, a decrease in segment income in our TH segment, and the inclusion of Office centralizationan increase in Corporate restructuring and relocation costs.tax advisory fees.

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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.

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As of March 31,September 30, 2019, we had cash and cash equivalents of $902$1,699 million, working capital of $134$163 million and borrowing availability of $498 million under our Revolving Credit Facility.Facility (defined below). During the three months ended September 30, 2019, we issued $750 million of 3.875% first lien senior notes and the net proceeds, reflected in our September 30, 2019 cash and cash equivalents balance, as well as proceeds received from the Term Loan A (defined below) on October 7, 2019, were used to redeem the entire outstanding principal balance of $1,250 million of our 2015 4.625% Senior Notes (defined below) on October 7, 2019. Additionally, in connection with an amendment to our credit agreement, the aggregate principal amount of the commitments under our Revolving Credit Facility (defined below) was increased to $1,000 million effective October 7, 2019. 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.


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Debt Instruments and Debt Service Requirements
As of March 31,September 30, 2019, our long-term debt consists primarily of borrowings under our Credit Facilities, amounts outstanding under our 2015 4.625% Senior Notes, 2017 4.25% Senior Notes, 2015 4.625%2019 3.875% Senior Notes, 2017 5.00% Senior Notes and TH Facility (each as defined below), and obligations under finance leases. For further information about our long-term debt, see Note 10 to the accompanying unaudited condensed consolidated financial statements included in this report.
Credit Facilities
AsOn September 6, 2019, two of March 31, 2019, there was $6,322 million outstandingour subsidiaries (the "Borrowers") entered into a fourth incremental facility amendment (the "Fourth Incremental Amendment") to the credit agreement governing our senior secured term loan facilities (the "Term Loan Facilities") and our senior secured revolving credit facility (including revolving loans, swingline loans and letters of credit) (the "Revolving Credit Facility" and together with the Term Loan Facilities, the "Credit Facilities"). Under the Fourth Incremental Amendment, (i) we obtained a new term loan in the aggregate principal amount of $750 million (the "Term Loan A"), that was funded on October 7, 2019, with a maturity date of October 7, 2024 (subject to earlier maturity in specified circumstances), (ii) the interest rate applicable to the Term Loan A and Revolving Credit Facility is, at our option, either (a) a base rate, subject to floor of 1.00%, plus an applicable margin varying from 0.00% to 0.50%, or (b) a Eurocurrency rate, subject to a floor of 0.00%, plus an applicable margin varying between 0.75% and 1.50%, in each case, determined by reference to a net first lien leverage based pricing grid, (iii) the aggregate principal amount of the commitments under our Revolving Credit Facility was increased to $1,000 million effective October 7, 2019, (iv) the maturity date of the Revolving Credit Facility was extended from October 13, 2022 to October 7, 2024 (subject to earlier maturity in specified circumstances), and (v) the commitment fee on the unused portion of the Revolving Credit Facility was decreased from 0.25% to 0.15%. The principal amount of the Term Loan A amortizes in quarterly installments equal to $5 million until October 7, 2022 and thereafter in quarterly installments equal to $9 million until maturity, with the balance payable at maturity. The Term Loan A will require compliance with the first lien leverage ratio. Except as described herein, the Fourth Incremental Amendment did not materially change the terms of the Credit Facilities.
Prior to obtaining the Term Loan A, our Credit Facilities included only one senior secured term loan facility (the "Term Loan Facility")B" and together with anthe Term Loan A, the "Term Loan Facilities"). During the quarter ended September 30, 2019, we prepaid $235 million principal amount of our Term Loan B. As a result of this prepayment, we are not required to make any principal payments on the Term Loan B until March 31, 2023. As such, as of October 7, 2019, there was $6,820 million outstanding principal amount under our Term Loan Facilities with a weighted average interest rate of 4.75%4.18%. Based on the amounts outstanding under the Term Loan FacilityFacilities as of October 7, 2019 and LIBOR as of March 31,September 30, 2019, subject to a floor of 0.00% for the Term Loan A and a floor of 1.00%, for the Term Loan B, required debt service for the next twelve months is estimated to be approximately $304$289 million in interest payments and $65$14 million in principal payments. In addition, based on

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LIBOR as of March 31,September 30, 2019, net cash settlements that we expect to pay on our $3,500$4,000 million interest rate swap are estimated to be approximately $9$26 million for the next twelve months.
The interest rate applicable to borrowings under our Term Loan B is, at our option, either (i) a base rate, subject to a floor of 2.00%, plus an applicable margin of 1.25% or (ii) a Eurocurrency rate, subject to a floor of 1.00%, plus an applicable margin of 2.25%.
As of March 31,September 30, 2019, we had no amounts outstanding under our senior secured revolving credit facility (the "RevolvingRevolving Credit Facility" and together with the Term Loan Facility, the "Credit Facilities"), had $2 million of letters of credit issued against the Revolving Credit Facility, and our borrowing availability was $498 million. As of October 7, 2019, we had borrowing availability of $998 million under our 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 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 Under the Fourth Incremental Amendment, the interest rate applicable to borrowingsamounts drawn under our Credit Facilities is, at our option, either (i)each letter of credit decreased from a base rate plus an applicable margin equalrange of 1.25% to 1.25% for the Term Loan Facility and ranging from 0.25%2.00% to 1.00%a range of 0.75% to 1.50%, depending on our first lien leverage ratio, forratio.
Senior Notes
On September 24, 2019, the Revolving Credit Facility, or (ii)Borrowers entered into an indenture (the "2019 3.875% Senior Notes Indenture") in connection with the issuance of $750 million of 3.875% first lien senior notes due January 15, 2028 (the "2019 3.875% Senior Notes"). No principal payments are due until maturity and interest is paid semi-annually. On October 7, 2019, the net proceeds from the offering of the 2019 3.875% Senior Notes and a Eurocurrency rate plus an applicable marginportion of 2.25% forthe net proceeds from the Term Loan FacilityA were used to redeem the entire outstanding principal balance of $1,250 million of 4.625% first lien secured notes due January 15, 2022 (the "2015 4.625% Senior Notes") and ranging from 1.25% to 2.00%pay related fees and expenses.
Obligations under the 2019 3.875% Senior Notes are guaranteed on a senior secured basis, jointly and severally, by the Borrowers and substantially all of the Borrowers' Canadian and U.S. subsidiaries, including The TDL Group Corp., depending on our leverage ratio, forBurger King Worldwide, Inc., Popeyes Louisiana Kitchen, Inc. and substantially all of their respective Canadian and U.S. subsidiaries (the "Note Guarantors"). The 2019 3.875% Senior Notes are first lien senior secured obligations and rank equal in right of payment with all of the Revolving Credit Facility. Borrowings are subject to a floorexisting and future senior debt of 2.00% for base ratethe Borrowers and Note Guarantors, including borrowings and 1.00% for Eurocurrency rate borrowings.guarantees of the Credit Facilities.
Our 2019 3.875% Senior Notes may be redeemed in whole or in part, on or after September 15, 2022 at the redemption prices set forth in the 2019 3.875% Senior Notes Indenture, plus accrued and unpaid interest, if any, at the date of redemption. The 2019 3.875% Senior Notes Indenture also contains optional redemption provisions related to tender offers, change of control and equity offerings, among others.
The Borrowers are also party to (i) an indenture (the “2017 4.25% Senior Notes Indenture”) in connection with the issuance of $1,500 million of 4.25% first lien senior secured notes due May 15, 2024 (the “2017 4.25% Senior Notes”), and (ii) an indenture (the “2015 4.625% Senior Notes Indenture”) in connection with the issuance of $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 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,October 7, 2019 after the redemption of the 2015 4.625% Senior Notes, required debt service for the next twelve months on all of the Senior Notes outstanding is approximately $262$233 million in interest payments.
TH Facility
During 2018, oneOne of our subsidiaries entered into a non-revolving delayed drawdown term credit facility in a total aggregate principal amount of C$225 million (increased from C$100 million during the three months ended June 30, 2019) with a maturity date of October 4, 2025 (the “TH Facility”). The interest rate applicable to the TH Facility is the Canadian Bankers’ Acceptance rate plus an applicable margin equal to 1.40% or the Prime Rate plus an applicable margin equal to 0.40%, at our option. Obligations under the TH Facility are guaranteed by three of our subsidiaries, and amounts borrowed under the TH Facility are and will be secured by certain parcels of real estate. As of March 31,September 30, 2019, we had drawn down the entireoutstanding C$100 million available under the TH Facility with a weighted average interest rate of 3.37%3.36%.
Restrictions and Covenants
As of March 31,September 30, 2019, we were in compliance with all debt covenants under the Credit Facilities, the TH Facility, 2015 4.625% Senior Notes Indenture, 2017 4.25% Senior Notes Indenture, 2017 5.00%2019 3.875% Senior Notes Indenture, and 2015 4.625%2017 5.00% Senior Notes Indenture, and there were no limitations on our ability to draw on the remaining availability under our Revolving Credit Facility and TH Facility.


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Cash Distributions/Dividends
On AprilOctober 3, 2019, RBI paid a cash dividend of $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 $0.50 per exchangeable unit.
The RBI board of directors has declared a cash dividend of $0.50 per RBI common share, which will be paid on JulyJanuary 3, 20192020 to RBI common shareholders of record on JuneDecember 17, 2019. Partnership will make a distribution to RBI as holder of Class A common units in the amount of the aggregate dividends declared and paid by RBI on RBI common shares. Partnership will also make a distribution in respect of each Partnership exchangeable unit in the amount of $0.50 per Partnership exchangeable unit, and the record date and payment date for such distribution will be the same as the record date and payment date for the cash dividend per RBI common share set forth above.
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 22,October 24, 2019, we had outstanding 202,006,067 Class A common units issued to RBI and 207,380,043165,514,822 Partnership exchangeable units. During the nine months ended September 30, 2019, Partnership exchanged 41,993,769 Partnership exchangeable units pursuant to exchange notices received.
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 ourRBI's share-based compensation and ourits 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, 2018, filed with the SEC and Canadian securities regulatory authorities on February 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.
Comparative Cash Flows
Operating Activities
Cash provided by operating activities was $154$878 million during the threenine months ended March 31,September 30, 2019, compared to cash used for operating activities of $142.0$643 million during the same period in the prior year. The increase in cash provided by operating activities was driven by a decrease in income tax payments, primarily due to the 2018 payment of accrued income taxes related to the December 2017 redemption of preferred shares, a decrease in cash used for working capital, an increase in BK segment income and an increase in PLK segment income. These factors were partially offset by an increase in interest payments and a decrease in TH segment income.
Investing Activities
Cash provided by investing activities was $11$7 million for the threenine months ended March 31,September 30, 2019, compared to $2$28 million of cash used for investing activities during the same period in the prior year. The change in investing activities was driven by an increase in net proceeds from the settlementdisposal of derivativesassets, restaurant closures and refranchisings and a decrease in capital expenditures.
We expect capital expenditures to increase in 2019 compared to 2018 primarily as a result of a C$100 million investment to expand the supply chain and distribution centers in Canada, the majority of which will occur in 2019.
Financing Activities
Cash used for financing activities was $182$106 million for the threenine months ended March 31,September 30, 2019, compared to $128$589 million during the same period in the prior year. The change in financing activities was driven primarily by proceeds from the issuance of the 2019 3.875% Senior Notes during 2019, an increase in distributions on common units and Partnership exchangeable units, partially offset by an increase in capital contributionsproceeds from RBIstock option exercises, proceeds from derivatives and the non-recurrence of the 2018 distribution to RBI for payments in connection with the December 2017 redemption of preferred shares.shares, partially offset by Term Loan B prepayments during 2019, an increase in RBI common share dividends and distributions on Partnership exchangeable units and payment of financing costs.


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Contractual Obligations and Commitments
Except as described herein, there were no material changes to our contractual obligations, which are detailed in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC and Canadian securities regulatory authorities on February 22, 2019, other than the following.
During the three months ended September 30, 2019, we issued the 2019 3.875% Senior Notes and prepaid $235 million principal amount of the Term Loan B. Additionally, on October 7, 2019, we obtained the proceeds from the Term Loan A and redeemed all of the outstanding 2015 4.625% Senior Notes. Each of these terms is defined and described above. The following table provides contractual obligations as of September 30, 2019 and an update as of October 7, 2019, which reflects all of the debt transactions disclosed above, of the contractual obligations under our Credit Facilities, senior notes and other long term debt presented in our Annual Report on Form 10-K for the year ended December 31, 2018.
   Payment Due by Period as of October 7, 2019
Contractual ObligationsTotal as of September 30, 2019 Total Less Than
1 Year
 1-3 Years 3-5 Years More Than
5 Years
   (In millions)
Credit Facilities, including interest (a)$7,235
 $8,104
 $305
 $617
 $6,558
 $624
Senior Notes, including interest (b)7,683
 6,432
 233
 466
 1,942
 3,791
Other long term debt92
 92
 3
 10
 19
 60
(a)We have estimated our interest payments through the maturity of our Credit Facilities based on LIBOR as of September 30, 2019.
(b)Amounts included herein for the Senior Notes exclude amounts for the Tim Hortons Notes.
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 threenine months ended March 31,September 30, 2019 to the disclosures made in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC and Canadian securities regulatory authorities on February 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,September 30, 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.
Internal Control Over Financial Reporting
The management of RBI, as general partner of Partnership, including the CEO and CFO, confirm there were no changes in Partnership’s internal control over financial reporting during the three months ended March 31,September 30, 2019 that have materially affected, or are reasonably likely to materially affect, Partnership’s internal control over financial reporting. During the threenine months ended March 31,September 30, 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'sPartnership'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 administrative expenses associated with the centralization and relocation of our 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) the increase in capital expenditures as a result of our investment to expand our supply chainAct and distribution centers in CanadaOffice centralization and the timing of such expenditures; (v)relocation costs; (iii) certain tax matters, including the impact of the Tax Act on future periods; (vi)(iv) the amount of net cash settlements we expect to pay on our derivative instruments; and (vii)(v) certain accounting matters, including the impact of changes in accounting and 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 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 relationship with, and the success of, our franchisees and risks related to our fully franchised business model; (4) the effectiveness of our marketing and advertising programs and franchisee support of these programs; (5) significant and rapid fluctuations in interest rates and in the currency exchange markets and the effectiveness of our hedging activity; (6) our ability to successfully implement our domestic and international growth strategy for our brands and risks related to our international operations; (7) our reliance on master franchisees and subfranchisees to accelerate restaurant growth; (8) the ability of the counterparties to our credit facilities and derivatives to fulfill their commitments and/or obligations; and (9) changes in applicable tax laws or interpretations 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.
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, 2018 filed with the SEC and Canadian securities regulatory authorities on February 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 22, 2019, the Compensation Committee of the Board of Directors of RBI (the “Compensation Committee”) approved an increase in the 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 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, as described in RBI's quarterly report on Form 10-Q for the 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 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 RBI 2018 Bonus Swap Program are substantially the same as the terms of the RBI 2015 Bonus Swap Program, which are described in 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 RBI 2018 Bonus Swap Program at the 50% level. The matching RSUs will cliff vest on December 31, 2023. All of the matching RSUs will be forfeited if an NEO’s service (including service on the Board of Directors of RBI) is terminated for any reason (other than death or disability) prior to December 31, 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 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 exercise price is $64.75.
On January 22, 2019, the Compensation Committee approved discretionary awards of 275,000, 100,000, 225,000 and 50,000 RBI performance based RSUs, or “PBRSUs”, to Messrs. Cil, Dunnigan and Kobza and Ms. Granat, respectively. The performance measure for purposes of determining the number of units earned by Messrs. Cil, Dunnigan and Kobza and Ms. Granat is RBI’s annual year-over-year growth of Organic Adjusted EBITDA for 2019, 2020 and 2021. If, at the end of the three-year performance period, the threshold performance has not been achieved, the performance period will be extended for an additional year, and a 20% reduction to the payout will apply. The Compensation Committee established an 85.7% performance threshold, below which no shares are earned, and a 128.6% maximum performance 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 each NEO would be calculated on a linear basis. Once earned, the PBRSUs will cliff vest on February 22, 2024. In addition, if an executive’s 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 22, 2022, he or she will forfeit the entire award. A copy of the form of Performance Award Agreement between RBI and each of the NEOs is filed as Exhibit 10.62 in RBI's quarterly report on Form 10-Q for the 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


   
Exhibit
Number
  Description
   
 
   
  

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101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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
104Cover Page Interactive File (formatted as Inline XBRL and contained in Exhibit 101)
  * 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 29,October 28, 2019   By: /s/ Matthew Dunnigan
      Name: Matthew Dunnigan
      Title: 
Chief Financial Officer of Restaurant Brands International Inc.
(principal financial officer)
(duly authorized officer)


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