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 ~~September~~June 30, ~~2017~~2019



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

For the transition period from to

Commission file number: 001-36787

RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP

(Exact Name of Registrant as Specified in its Charter)



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



~~226 Wyecroft Road~~ ~~Oakville, Ontario~~ 130 King Street West, Suite 300		~~L6K 3X7~~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:

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

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

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

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




Large accelerated filer	☒	Accelerated filer	☐

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

Emerging growth company	☐

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

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

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

As of ~~October 20, 2017,~~July 26, 2019, there were ~~226,839,418~~207,285,803 Class B exchangeable limited partnership units and 202,006,067 Class A common units outstanding.

Table of Contents

RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

TABLE OF CONTENTS




		Page

	PART I – Financial Information
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3639
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5152
Item 4.	Controls and Procedures	5152

	PART II – Other Information
Item 1.	Legal Proceedings	5354
Item 5.	Other Information	54
Item 6.	Exhibits	5355
	Signatures	5556

Table of Contents

PART I — Financial Information

Item 1. Financial Statements

RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

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

(Unaudited)


	As of						As of
	September 30, 2017			December 31, 2016			June 30, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	3,547.2		$	1,420.4		$	1,028		$	913
Accounts and notes receivable, net of allowance of $18.2 and $14.3, respectively	421.9			403.5
Accounts and notes receivable, net of allowance of $16 and $14, respectively							476			452
Inventories, net	91.9			71.8			81			75
Advertising fund restricted assets	110.8			57.7
Prepaids and other current assets	108.1			103.6			69			60
Total current assets	4,279.9			2,057.0			1,654			1,500
Property and equipment, net of accumulated depreciation and amortization of $585.1 and $474.5, respectively	2,158.2			2,054.7
Property and equipment, net of accumulated depreciation and amortization of $680 and $704, respectively							2,007			1,996
Operating lease assets, net							1,154			—
Intangible assets, net	11,121.8			9,228.0			10,543			10,463
Goodwill	5,810.3			4,675.1			5,625			5,486
Net investment in property leased to franchisees	76.1			91.9			47			54
Derivative assets	—			717.9
Other assets, net	481.6			300.7			695			642
Total assets	$	23,927.9		$	19,125.3		$	21,725		$	20,141
LIABILITIES, PARTNERSHIP PREFERRED UNITS AND EQUITY
LIABILITIES AND EQUITY
Current liabilities:
Accounts and drafts payable	$	365.2		$	369.8		$	486		$	513
Other accrued liabilities	530.6			469.3			699			637
Gift card liability	130.3			194.4			106			167
Advertising fund liabilities	154.1			83.3
Current portion of long term debt and capital leases	77.5			93.9
Current portion of long term debt and finance leases							92			91
Total current liabilities	1,257.7			1,210.7			1,383			1,408
Term debt, net of current portion	11,303.6			8,410.2			11,737			11,823
Capital leases, net of current portion	238.7			218.4
Finance leases, net of current portion							284			226
Operating lease liabilities, net of current portion							1,056			—
Other liabilities, net	1,354.0			784.9			1,730			1,547
Deferred income taxes, net	2,200.3			1,715.1			1,575			1,519
Total liabilities	16,354.3			12,339.3			17,765			16,523
Partnership preferred units; no par value; 68,530,939 authorized, issued and outstanding at September 30, 2017 and December 31, 2016	3,297.0			3,297.0
Partners’ capital:
Class A common units; 202,006,067 issued and outstanding at September 30, 2017 and December 31, 2016	3,530.7			3,364.1
Partnership exchangeable units; 226,839,418 issued and outstanding at September 30, 2017; 226,995,404 issued and outstanding at December 31, 2016	1,560.9			1,476.2
Class A common units; 202,006,067 issued and outstanding at June 30, 2019 and December 31, 2018							4,495			4,323
Partnership exchangeable units; 207,337,076 issued and outstanding at June 30, 2019; 207,523,591 issued and outstanding at December 31, 2018							746			730
Accumulated other comprehensive income (loss)	(818.7		)	(1,355.4		)	(1,284		)	(1,437		)
Total Partners’ capital	4,272.9			3,484.9			3,957			3,616
Noncontrolling interests	3.7			4.1			3			2
Total equity	4,276.6			3,489.0			3,960			3,618
Total liabilities, Partnership preferred units and equity	$	23,927.9		$	19,125.3
Total liabilities and equity							$	21,725		$	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 September 30,						Nine Months Ended September 30,						Three Months Ended June 30,					Six Months Ended June 30,
	2017			2016			2017			2016			2019		2018			2019			2018
Revenues:
Sales	$	631.6		$	586.4		$	1,784.1		$	1,635.5		$	589	$	586		$	1,111		$	1,134
Franchise and property revenues	577.0			489.3			1,557.8			1,398.9			811		757			1,555			1,463
Total revenues	1,208.6			1,075.7			3,341.9			3,034.4			1,400		1,343			2,666			2,597
Operating costs and expenses:
Cost of sales	493.3			457.1			1,376.9			1,285.7			453		449			859			878
Franchise and property expenses	118.5			109.8			343.2			323.5			135		103			268			207
Selling, general and administrative expenses	100.1			82.2			318.7			228.5			316		318			628			619
(Income) loss from equity method investments	(4.1		)	(2.6		)	(8.9		)	(16.6		)	2		1			—			(13		)
Other operating expenses (income), net	21.5			8.7			82.1			38.2			3		(30		)	(14		)	(17		)
Total operating costs and expenses	729.3			655.2			2,112.0			1,859.3			909		841			1,741			1,674
Income from operations	479.3			420.5			1,229.9			1,175.1			491		502			925			923
Interest expense, net	136.0			117.3			375.4			349.6			137		130			269			270
Loss on early extinguishment of debt	58.2			—			78.6			—
Income before income taxes	285.1			303.2			775.9			825.5			354		372			656			653
Income tax expense	38.3			64.6			119.0			171.0			97		58			153			60
Net income	246.8			238.6			656.9			654.5			257		314			503			593
Net income attributable to noncontrolling interests	0.3			1.0			1.1			2.8			—		1			—			1
Partnership preferred unit distributions	67.5			67.5			202.5			202.5
Net income attributable to common unitholders	$	179.0		$	170.1		$	453.3		$	449.2		$	257	$	313		$	503		$	592
Earnings per unit - basic and diluted
Class A common units	$	0.45		$	0.43		$	1.14		$	1.12		$	0.70	$	0.83		$	1.37		$	1.56
Partnership exchangeable units	$	0.39		$	0.37		$	0.98		$	0.97		$	0.55	$	0.67		$	1.09		$	1.27
Weighted average units outstanding - basic and diluted
Class A common units	202.0			202.0			202.0			202.0			202		202			202			202
Partnership exchangeable units	226.8			227.1			226.9			228.0			207		218			207			218
Distributions per unit
Class A common units	$	0.23		$	0.19		$	0.67		$	0.52
Partnership exchangeable units	$	0.20		$	0.16		$	0.57		$	0.45

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
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Net income $ 246.8
$ 238.6
$ 656.9
$ 654.5

Foreign currency translation adjustment 423.0
(131.7 ) 884.2
538.8
Net change in fair value of net investment hedges, net of tax of $45.4, $(2.7), $7.3 and $25.9 (126.1 ) 17.4
(342.5 ) (173.7 )
Net change in fair value of cash flow hedges, net of tax of $1.4, $(0.7), $8.2 and $20.7 (3.9 ) 2.4
(23.0 ) (58.6 )
Amounts reclassified to earnings of cash flow hedges, net of tax of $(2.5), $(1.9), $(6.3) and $(3.7) 6.9
5.4
17.9
10.5
Pension and post-retirement benefit plans, net of tax of $0, $0, $0.1 and $0 —
—
(0.1 ) —
Amortization of prior service (credits) costs, net of tax of $0.2, $0.3, $0.8 and $0.9 (0.5 ) (0.4 ) (1.3 ) (1.3 )
Amortization of actuarial (gains) losses, net of tax of $0, $0, $0.7 and $(0.1) 0.3
0.1
1.5
0.2
Other comprehensive income (loss) 299.7
(106.8 ) 536.7
315.9
Comprehensive income (loss) 546.5
131.8
1,193.6
970.4
Comprehensive income (loss) attributable to noncontrolling interests 0.3
1.0
1.1
2.8
Comprehensive income attributable to preferred unitholders 67.5
67.5
202.5
202.5
Comprehensive income (loss) attributable to common unitholders $ 478.7
$ 63.3
$ 990.0
$ 765.1



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net income	$	257		$	314		$	503		$	593

Foreign currency translation adjustment	199			(255		)	358			(472		)
Net change in fair value of net investment hedges, net of tax of $13, $(29), $39 and $(38)	(40		)	113			(116		)	116
Net change in fair value of cash flow hedges, net of tax of $22, $(1), $34 and $(10)	(57		)	(1		)	(91		)	28
Amounts reclassified to earnings of cash flow hedges, net of tax of $(1), $0, $(1) and $(2)	3			4			2			6
Other comprehensive income (loss)	105			(139		)	153			(322		)
Comprehensive income (loss)	362			175			656			271
Comprehensive income (loss) attributable to noncontrolling interests	—			1			—			1
Comprehensive income (loss) attributable to common unitholders	$	362		$	174		$	656		$	270

See accompanying notes to condensed consolidated financial statements.

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidated Statements of ~~Shareholders’~~ Equity

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

(Unaudited)


	Class A Common Units				Partnership Exchangeable Units					Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest			Total			Class A Common Units				Partnership Exchangeable Units					Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest		Total
	Units	Amount			Units		Amount			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest			Total			Units	Amount			Units		Amount			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest		Total
Balances at December 31, 2016	202,006,067	$	3,364.1		226,995,404		$	1,476.2		$	(1,355.4	)	$	4.1		$	3,489.0
Distributions declared on Class A common units	—	(134.5		)	—		—			—			—			(134.5		)
Distributions declared on partnership exchangeable units	—	—			—		(129.3		)	—			—			(129.3		)
Preferred unit distributions	—	(103.2		)	—		(99.3		)	—			—			(202.5		)
Balances at December 31, 2018																			202,006,067	$	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, 2019																			202,006,067	$	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	—	8.3			(155,986	)	(8.3		)	—			—			—			—	3			(45,325	)	(3		)	—			—		—
Capital contribution from RBI Inc.	—	61.8			—		—			—			—			61.8			—	55			—		—			—			—		55
Restaurant VIE contributions (distributions)	—	—			—		—			—			(1.5		)	(1.5		)	—	—			—		—			—			1		1
Net income	—	334.2			—		321.6			—			1.1			656.9			—	142			—		115			—			—		257
Other comprehensive income (loss)	—	—			—		—			536.7			—			536.7			—	—			—		—			105			—		105
Balances at September 30, 2017	202,006,067	$	3,530.7		226,839,418		$	1,560.9		$	(818.7	)	$	3.7		$	4,276.6
Balances at June 30, 2019																			202,006,067	$	4,495		207,337,076		$	746		$	(1,284	)	$	3	$	3,960

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			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest		Total
Balances at December 31, 2017	202,006,067	$	4,168		217,708,924		$	1,276		$	(884	)	$	1	$	4,561
Cumulative effect adjustment	—	(132		)	—		(118		)	—			—		(250		)
Distributions declared on Class A common units ($0.55 per unit)	—	(112		)	—		—			—			—		(112		)
Distributions declared on partnership exchangeable units ($0.45 per unit)	—	—			—		(98		)	—			—		(98		)
Exchange of Partnership exchangeable units for RBI common shares	—	2			(29,432	)	(2		)	—			—		—
Capital contribution from RBI Inc.	—	44			—		—			—			—		44
Restaurant VIE contributions (distributions)	—	—			—		—			—			1		1
Net income	—	148			—		131			—			—		279
Other comprehensive income (loss)	—	—			—		—			(183		)	—		(183		)
Balances at March 31, 2018	202,006,067	$	4,118		217,679,492		$	1,189		$	(1,067	)	$	2	$	4,242
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, 2018	202,006,067	$	4,193		217,636,569		$	1,235		$	(1,206	)	$	3	$	4,225

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)


	Nine Months Ended September 30,						Six Months Ended June 30,
	2017			2016			2019			2018
Cash flows from operating activities:
Net income	$	656.9		$	654.5		$	503		$	593
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization	134.9			129.0			92			93
Premiums paid and non-cash loss on early extinguishment of debt	75.9			—
Amortization of deferred financing costs and debt issuance discount	25.2			29.1			15			14
(Income) loss from equity method investments	(8.9		)	(16.6		)	—			(13		)
Loss (gain) on remeasurement of foreign denominated transactions	64.7			16.1
Net losses on derivatives	23.1			15.3
(Gain) loss on remeasurement of foreign denominated transactions							(3		)	(16		)
Net (gains) losses on derivatives							(34		)	(15		)
Share-based compensation expense	38.0			25.9			39			27
Deferred income taxes	(3.1		)	34.6			23			(58		)
Other	12.8			8.0			(3		)	4
Changes in current assets and liabilities, excluding acquisitions and dispositions:
Accounts and notes receivable	0.3			20.0			(16		)	36
Inventories and prepaids and other current assets	(12.5		)	(3.0		)	(10		)	(16		)
Accounts and drafts payable	(30.4		)	11.8			(40		)	(11		)
Advertising fund restricted assets and fund liabilities	18.1			4.0
Other accrued liabilities and gift card liability	(161.4		)	(23.8		)	(166		)	(347		)
Tenant inducements paid to franchisees							(8		)	(13		)
Other long-term assets and liabilities	(40.0		)	0.9			83			(13		)
Net cash provided by operating activities	793.6			905.8
Net cash provided by (used for) operating activities							475			265
Cash flows from investing activities:
Payments for property and equipment	(16.9		)	(18.2		)	(14		)	(22		)
Proceeds from disposal of assets, restaurant closures, and refranchisings	19.6			18.1
Net payment for purchase of Popeyes, net of cash acquired	(1,635.9		)	—
Return of investment on direct financing leases	11.8			12.5
Net proceeds from disposal of assets, restaurant closures, and refranchisings							22			3
Settlement/sale of derivatives, net	771.8			4.9			15			11
Other investing activities, net	(2.3		)	2.0			—			9
Net cash provided by (used for) investing activities	(851.9		)	19.3			23			1
Cash flows from financing activities:
Proceeds from issuance of long-term debt	4,350.0			—
Repayments of long-term debt and capital leases	(1,690.0		)	(52.7		)
Payment of financing costs	(57.0		)	—
Distributions on common, preferred and Partnership exchangeable units	(451.9		)	(396.9		)
Repayments of long-term debt and finance leases							(48		)	(43		)
Distributions on Class A common and Partnership exchangeable units							(437		)	(307		)
Distributions to RBI for payments in connection with redemption of preferred shares							—			(60		)
Capital contribution from RBI Inc.	17.5			12.5			80			29
Distributions to RBI Inc.	—			(28.5		)
Other financing activities, net	(6.2		)	0.8			10			(2		)
Net cash provided by (used for) financing activities	2,162.4			(464.8		)
Net cash (used for) provided by financing activities							(395		)	(383		)
Effect of exchange rates on cash and cash equivalents	22.7			14.6			12			(15		)
Increase (decrease) in cash and cash equivalents	2,126.8			474.9			115			(132		)
Cash and cash equivalents at beginning of period	1,420.4			753.7			913			1,097
Cash and cash equivalents at end of period	$	3,547.2		$	1,228.6		$	1,028		$	965
Supplemental cashflow disclosures:
Supplemental cash flow disclosures:
Interest paid	$	340.2		$	285.9		$	292		$	274
Income taxes paid	$	189.3		$	93.3		$	127		$	374
Non-cash investing and financing activities:
Acquisition of property with capital lease obligations	$	23.0		$	22.5

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 ~~hamburger restaurants~~hamburgers principally under the Burger King® brand (“Burger King” or “BK”), and chicken ~~quick service restaurants~~ under the Popeyes® brand (“Popeyes” or “PLK”). We are one of the world’s largest quick service restaurant, or QSR, companies as measured by total number of restaurants. As of ~~September~~June 30, ~~2017,~~2019, we franchised or owned ~~4,680~~4,872 Tim Hortons restaurants, ~~16,253~~18,008 Burger King restaurants, and ~~2,809~~3,156 Popeyes restaurants, for a total of ~~23,742~~26,036 restaurants, and operate in more than 100 countries and U.S. territories. Approximately 100% of current system-wide restaurants are franchised.

We are a subsidiary of Restaurant Brands International Inc. (“RBI”). RBI is our sole general partner, and as such, RBI has the exclusive right, power and authority to manage, control, administer and operate the business and affairs and to make decisions regarding the undertaking and business of Partnership in accordance with the partnership agreement of Partnership (“partnership agreement”) and applicable laws.

All references to “$” or “dollars” are to the currency of the United States unless otherwise indicated. All references to ~~Canadian dollars~~“Canadian dollars” or C$“C$” are to the currency of Canada unless otherwise indicated.

~~Note 2. Popeyes Acquisition~~

On March 27, 2017, we completed the acquisition of all of the outstanding shares of common stock of Popeyes Louisiana Kitchen, Inc. (the “Popeyes Acquisition”). Popeyes Louisiana Kitchen Inc. is one of the world’s largest chicken quick service restaurant companies and its global footprint complements RBI’s existing portfolio. Like RBI’s other brands, the ~~Popeyes~~ brand is managed independently, while benefitting from the global scale and resources of RBI. The Popeyes Acquisition was accounted for as a business combination using the acquisition method of accounting.

Total consideration in connection with the Popeyes Acquisition was $1,654.7 million, which includes $32.6 million for the settlement of equity awards. The consideration was funded through (1) cash on hand of approximately $354.7 million, and (2) $1,300.0 million from incremental borrowings under our Term Loan Facility – see Note 9, ~~Long-Term Debt~~.

Fees and expenses related to the Popeyes Acquisition and related financings totaled $34.4 million consisting primarily of professional fees and compensation related expenses, all of which are classified as selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. These fees and expenses were funded through cash on hand.

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During the three months ended September 30, 2017, we adjusted our preliminary estimate of the fair value of net assets acquired. The preliminary allocation of consideration to the net tangible and intangible assets acquired is presented in the table below (in millions):

March 27, 2017
Total current assets $ 64.4
Property and equipment 115.2
Intangible assets 1,405.2
Other assets 0.7
Total current liabilities (73.9 )
Total debt and capital lease obligations (159.0 )
Deferred income taxes (523.2 )
Other liabilities (20.5 )
Total identifiable net assets 808.9
Goodwill 845.8
Total consideration $ 1,654.7

The adjustments to the preliminary estimate of net assets acquired initially disclosed during the period ended March 31, 2017 resulted in a corresponding $232.5 million decrease in estimated goodwill due to the following changes to preliminary estimates of fair values and allocation of purchase price (in millions):

Increase (Decrease) in Goodwill
Change in:
Total current assets $ —
Property and equipment (18.7 )
Intangible assets (385.2 )
Total current liabilities (0.8 )
Deferred income taxes 164.9
Other liabilities 7.3
Total decrease in goodwill $ (232.5 )

The purchase price allocation reflects preliminary fair value estimates based on management’s analysis, including preliminary work performed by third-party valuation specialists. We will continue to obtain information to assist in determining the fair value of net assets acquired during the measurement period.

~~Intangible assets include $1,354.9 million related to the~~ ~~Popeyes~~ ~~brand, $40.9 million related to franchise agreements and $9.4 million related to favorable leases. The~~ ~~Popeyes~~ brand has been assigned an indefinite life and, therefore, will not be amortized, but rather tested annually for impairment. Franchise agreements have a weighted average amortization period of 17 years. Favorable leases have a weighted average amortization period of 14 years.

Goodwill attributable to the Popeyes Acquisition will not be amortizable or deductible for tax purposes. Goodwill is considered to represent the value associated with the workforce and synergies anticipated to be realized as a combined company. We have not yet allocated goodwill related to the Popeyes Acquisition to reporting units for goodwill impairment testing purposes. Goodwill will be allocated to reporting units when the purchase price allocation is finalized during the measurement period.

~~The Popeyes Acquisition is not material to our consolidated financial statements, and therefore, supplemental pro forma financial information related to the acquisition is not included herein.~~

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Note 3.2. 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 ~~17, 2017.~~22, 2019.

The Financial Statements include our accounts and the accounts of entities in which we have a controlling financial interest, the usual condition of which is ownership of a majority voting interest. All material intercompany balances and transactions have been eliminated in consolidation. Investments in other affiliates that are owned 50% or less where we have significant influence are accounted for by the equity method.

We also consider for consolidation entities in which we have certain interests, where the controlling financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a variable interest entity (“VIE”), is required to be consolidated by its primary beneficiary. The primary beneficiary is the entity that possesses the power to direct the activities of the VIE that most significantly impact its economic performance and has the obligation to absorb losses or the right to receive benefits from the VIE that are significant to it. Our maximum exposure to loss resulting from involvement with VIEs is attributable to accounts and notes receivable balances, outstanding loan guarantees and future lease payments, where applicable.

As our franchise and master franchise arrangements provide the franchise and master franchise entities the power to direct the activities that most significantly impact their economic performance, we do not consider ourselves the primary beneficiary of any such entity that might be a VIE.

Tim Hortons has historically entered into certain arrangements in which an operator acquires the right to operate a restaurant, but Tim Hortons owns the restaurant’s assets. We perform an analysis to determine if the legal entity in which operations are conducted is a VIE and consolidate a VIE entity if we also determine Tim Hortons is the entity’s primary beneficiary (“Restaurant VIEs”). As of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, we determined that we are the primary beneficiary of 3830 and 9617 Restaurant VIEs, ~~respectively. As Tim Hortons, Burger King,~~respectively, and ~~Popeyes franchise~~accordingly, have consolidated the results of operations, assets and ~~master franchise arrangements provide the franchise~~liabilities, and ~~master franchise entities the power to direct the activities that most significantly impact their economic performance, we do not consider ourselves the primary beneficiary~~cash flows of ~~any such entity that might be a VIE.~~these Restaurant VIEs in our Financial Statements. Material intercompany accounts and transactions have been eliminated in consolidation.

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In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included in the Financial Statements. The results for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the full year.

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 $13 million from changes in Other long-term assets and liabilities in the Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2018 to Tenant inducements paid to franchisees. These reclassifications had no effect on previously reported net income.

Note 4.3. New Accounting Pronouncements

~~Revenue Recognition~~Lease Accounting – In ~~May 2014,~~February 2016, the Financial Accounting ~~Standards~~Standard Board (the “FASB”) issued a new single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. In August 2015, the FASB deferred adoption of the new standard by one year. Several updates have been issued since to clarify the implementation guidance. The new guidance supersedes most current revenue recognition guidance, including industry-specific guidance, enhances revenue recognition disclosures, and is now effective commencing in 2018. The guidance allows for either a full retrospective or modified retrospective transition method. We currently expect to apply the modified retrospective transition method.

We have performed a preliminary analysis of the impact of the new revenue recognition guidance and developed a comprehensive plan for the implementation. The project plan includes analyzing the impact on our current revenue streams, comparing our historical accounting policies to the new guidance, and identifying potential differences from applying the requirements of the new guidance to our contracts. Under current accounting guidance, we recognize initial franchise fees when we have performed all material obligations and services, which generally occurs when the franchised restaurant opens. Under the new guidance, we anticipate deferring the initial franchise fees and recognizing revenue over the term of the related franchise agreement. We anticipate that the new guidance will also change our reporting of advertising fund contributions from franchisees and the related advertising expenditures, which are currently reported on a net basis in our consolidated balance sheet. Under the current guidance, as of the balance sheet date, advertising fund contributions received may not equal

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advertising expenditures for the period due to the timing of promotions. To the extent that contributions received exceeded advertising expenditures, the excess contributions are treated as a deferred liability. To the extent that advertising expenditures temporarily exceeded advertising fund contributions, the difference is recorded as a receivable from the fund. Under the new guidance, we anticipate advertising fund contributions from franchisees and advertising fund expenditures will be reported on a gross basis and the related advertising fund revenues and expenses may be reported in different periods.

We anticipate that estimated breakage income on gift cards will be recognized as gift cards are utilized instead of our current policy of deferring the breakage income until it is deemed remote that the unused gift card balance will be redeemed. We do not believe this guidance will materially impact our recognition of revenue from Company restaurant sales, our recognition of royalty revenues from franchisees, or our recognition of revenues from property rentals.

~~Lease Accounting~~ ~~– In February 2016, the FASB issued~~ new guidance on leases. The new guidance requires lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by finance and operating leases with lease terms of more than 12 months, as well as enhanced disclosures. The amendment requires the recognition and measurement of leases at the beginning of the earliest period presented using a modified retrospective approach and is effective commencing in 2019. We expect this new guidance to cause a material increase to our assets and liabilities on our consolidated balance sheet since we have a significant number of operating lease arrangements for which we are the lessee. We are currently evaluating the impact that adoption of this guidance will have on our consolidated statements of operations. We do not expect the adoption of this new guidance to have a material impact on our cash flows and liquidity.

~~Derivative Contract Novations on Existing Hedges~~ – In March 2016, the FASB issued an accounting standards update that clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument under existing accounting guidance does not, in and of itself, require de-designation of that hedging relationship provided that all other hedge accounting criteria continue to be met. We adopted this new guidance on a prospective basis on January 1, 2017. Adoption did not have an impact on our consolidated financial statements.

~~Equity Method Accounting~~ – In March 2016, the FASB issued an accounting standards update which eliminates the requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result of an increase in level of ownership interest or degree of influence. We adopted this new guidance on a prospective basis on January 1, 2017. Adoption did not have an impact on our consolidated financial statements.

~~Employee Share-Based Payment Accounting~~ – In March 2016, the FASB issued an accounting standards update to simplify several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures and statutory withholding requirements, as well as statement of cash flows presentation. The transition requirement is mostly modified retrospective, with the exception of recognition of excess tax benefits and tax deficiencies which requires prospective adoption. We adopted this new guidance on January 1, ~~2017. The adoption of~~2019. See Note 4, Leases, for further information about our transition to this new ~~guidance resulted in recognition of excess tax benefits as a reduction in the provision for income taxes rather than an addition to common shares, as required by previous~~lease accounting guidance. The adoption of this new guidance resulted in a 6.8% and 4.5% reduction in our effective tax rate for the three and nine months ended September 30, 2017, respectively. We will continue to estimate forfeitures instead of accounting for them as they occur as permitted by the new standard. ~~The adoption of the other provisions of this new guidance did not have an impact on our consolidated financial statements.~~

~~Classification of Certain Cash Receipts and Cash Payments~~ – In August 2016, the FASB issued an accounting standards update to reduce the existing diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments are effective for 2018. We do not expect the adoption of this new guidance to have a material impact on our consolidated financial statements.

~~Intra-Entity Transfers of Assets Other Than Inventory~~ – In October 2016, the FASB issued guidance amending the accounting for income taxes. The new guidance requires the recognition of the income tax consequences of an intercompany asset transfer, other than transfers of inventory, when the transfer occurs. For intercompany transfers of inventory, the income tax effects will continue to be deferred until the inventory has been sold to a third party. The amendment is effective for 2018. We are currently evaluating the impact that the adoption of this new guidance will have on our consolidated financial statements.

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

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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.

~~Hedge Accounting~~Reclassification of Certain Tax Effects – In ~~August 2017,~~February 2018, the FASB issued guidance which allows a reclassification from accumulated other comprehensive income (loss) to ~~(1) improve~~retained earnings for the ~~transparency and understandability~~tax effects of information conveyed to financial statement users about an entity's risk management activities by better aligning the entity's financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers.certain items within accumulated other comprehensive income (loss). The amendment is effective commencing in 2019 with early adoption permitted. ~~We are currently evaluating the impact that the~~The adoption of this new guidance ~~will~~did not have a material impact on our Financial Statements.

Share-based payment arrangements with nonemployees – In June 2018, the FASB issued guidance which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The amendment is effective commencing in 2019 with early adoption permitted. The adoption of this new guidance did not have a material impact on our Financial Statements.

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Note 4. Leases

As of June 30, 2019, we leased or subleased 5,331 restaurant properties to franchisees and 168 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.~~statements for prior periods were prepared under the guidance of the Previous Standard. The new guidance requires lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by finance and operating leases with lease terms of more than 12 months, amends various other aspects of accounting for leases by lessees and lessors, and requires enhanced disclosures. Our transition to ASC 842 resulted in the gross presentation of property tax and maintenance expenses and related lessee reimbursements as franchise and property expenses and franchise and property revenues, respectively. These expenses and reimbursements were presented on a net basis under the Previous Standard.

In connection with our transition to ASC 842, we elected the package of practical expedients under which we did not reassess the classification of our existing leases, reevaluate whether any expired or existing contracts are or contain leases or reassess initial direct costs under the new guidance. We also elected lessee and lessor practical expedients to not separate non-lease components comprised of maintenance from lease components for real estate leases that commenced prior to our transition to ASC 842, as well as for leases that commence or that are modified subsequent to our transition to ASC 842. We did not elect the practical expedient that permitted a reassessment of lease terms for existing leases.

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Financial Statement Impact of Transition to ASC 842

Transition Impact on January 1, 2019 Condensed Consolidated Balance Sheet

Our transition to ASC 842 represents a change in accounting principle. The $21 million cumulative effect of our transition to ASC 842 is reflected as an adjustment to January 1, 2019 Partners' capital.

Our transition to ASC 842 resulted in the following adjustments to our condensed consolidated balance sheet as of January 1, 2019 (in millions):



	As Reported			Total				Adjusted
	December 31, 2018			Adjustments				January 1, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	913		$	—			$	913
Accounts and notes receivable, net	452			—				452
Inventories, net	75			—				75
Prepaids and other current assets	60			—				60
Total current assets	1,500			—				1,500
Property and equipment, net	1,996			26			(a)	2,022
Operating lease assets, net	—			1,143			(b)	1,143
Intangible assets, net	10,463			(133		)	(c)	10,330
Goodwill	5,486			—				5,486
Net investment in property leased to franchisees	54			—				54
Other assets, net	642			—				642
Total assets	$	20,141		$	1,036			$	21,177
LIABILITIES AND EQUITY
Current liabilities:
Accounts and drafts payable	$	513		$	—			$	513
Other accrued liabilities	637			114			(d)	751
Gift card liability	167			—				167
Current portion of long term debt and finance leases	91			—				91
Total current liabilities	1,408			114				1,522
Term debt, net of current portion	11,823			(65		)	(e)	11,758
Finance leases, net of current portion	226			62			(e)	288
Operating lease liabilities, net of current portion	—			1,028			(f)	1,028
Other liabilities, net	1,547			(132		)	(g)	1,415
Deferred income taxes, net	1,519			8			(h)	1,527
Total liabilities	16,523			1,015				17,538
Partners' capital:
Class A common units	4,323			12			(i)	4,335
Partnership exchangeable units	730			9			(i)	739
Accumulated other comprehensive income (loss)	(1,437		)	—				(1,437		)
Total Partners' capital	3,616			21				3,637
Noncontrolling interests	2			—				2
Total equity	3,618			21				3,639
Total liabilities and equity	$	20,141		$	1,036			$	21,177


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


(b)	Represents the capitalization of operating lease right-of-use (“ROU”) assets equal to the amount of recognized operating lease liability, adjusted by the net carrying amounts of related favorable lease assets and unfavorable lease liabilities in which we are the lessee and straight-line rent accruals, which were reclassified to operating lease ROU assets.

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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.


(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 an ROU asset and lease liability at lease commencement, which is measured by discounting lease payments using our incremental borrowing rate applicable to the lease term and currency of the lease as the discount rate. Subsequent amortization of the ROU asset and accretion of the lease liability for an operating lease is recognized as a single lease cost, on a straight-line basis, over the lease term. Amortization of the ROU asset and the change in the lease liability is 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
	June 30, 2019
Land	$	920
Buildings and improvements	1,139
Restaurant equipment	21
	2,080
Accumulated depreciation and amortization	(441		)
Property and equipment leased, net	$	1,639

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



	As of
	June 30, 2019
Future rents to be received:
Future minimum lease receipts	$	53
Contingent rents (a)	23
Estimated unguaranteed residual value	15
Unearned income	(30		)
	61
Current portion included within accounts receivables	(14		)
Net investment in property leased to franchisees	$	47


(a)	Amounts represent estimated contingent rents recorded in connection with the acquisition method of accounting.

Property revenues are comprised primarily of lease income from operating leases and earned income on direct financing leases with franchisees as follows (in millions):



	Three months ended June 30, 2019		Six months ended June 30, 2019
Lease income - operating leases
Minimum lease payments	$	112	$	223
Variable lease payments	97		181
Amortization of favorable and unfavorable income lease contracts, net	2		4
Subtotal - lease income from operating leases	211		408
Earned income on direct financing leases	3		5
Total property revenues	$	214	$	413

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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 June 30, 2019			Six months ended June 30, 2019
Operating lease cost	$	53		$	106
Operating lease variable lease cost	50			100
Finance lease cost:
Amortization of right-of-use assets	6			13
Interest on lease liabilities	6			11
Sublease income	(164		)	(319		)
Total lease cost (income)	$	(49	)	$	(89	)

Lease Term and Discount Rate as of June 30, 2019



Weighted-average remaining lease term (in years):
Operating leases	11.1 years
Finance leases	11.2 years
Weighted-average discount rate:
Operating leases	6.5	%
Finance leases	7.6	%

Other Information for the six months ended June 30, 2019



Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	96
Operating cash flows from finance leases	$	11
Financing cash flows from finance leases	$	13
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	$	65

Maturity Analysis

As of June 30, 2019, future minimum lease receipts and commitments are as follows (in millions):



	Lease Receipts				Lease Commitments (a)
	Direct Financing Leases		Operating Leases		Finance Leases			Operating Leases
Remainder of 2019	$	7	$	213	$	24		$	97
2020	10		406		46			187
2021	7		382		44			175
2022	5		357		43			163
2023	5		335		39			149
Thereafter	19		1,876		268			941
Total minimum receipts / payments	$	53	$	3,569	464			1,712
Less amount representing interest (b)					(153		)	(535		)
Present value of minimum lease payments					311			1,177
Current portion of lease obligations					(27		)	(121		)
Long-term portion of lease obligations					$	284		$	1,056


(a)	Minimum lease commitments have not been reduced by minimum sublease rentals of $2,351 million due in the future under non-cancelable subleases.


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

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As of December 31, 2018, future minimum lease receipts and commitments are as follows (in millions):



	Lease Receipts				Lease Commitments (a)
	Direct Financing Leases		Operating Leases		Finance Leases			Operating Leases
2019	$	14	$	416	$	38		$	183
2020	10		388		36			172
2021	7		360		34			158
2022	5		331		33			145
2023	5		306		30			130
Thereafter	19		1,704		201			831
Total minimum receipts / payments	$	60	$	3,505	372			$	1,619
Less amount representing interest					(125		)
Present value of minimum finance lease payments					247
Current portion of finance lease obligation					(21		)
Long-term portion of finance lease obligation					$	226


(a)	Minimum lease commitments have not been reduced by minimum sublease rentals of $2,290 million due in the future under non-cancelable subleases.

Note 5. Revenue Recognition

Contract Liabilities

Contract liabilities consist of deferred revenue resulting from initial and renewal franchise fees paid by franchisees, as well as upfront fees paid by master franchisees, which are generally recognized on a straight-line basis over the term of the underlying agreement. We classify these contract liabilities as Other liabilities, net in our condensed consolidated balance sheets. The following table reflects the change in contract liabilities between December 31, 2018 and June 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	(4		)	(21		)	(1		)	(26		)
Increase, excluding amounts recognized as revenue during the period	4			42			4			50
Impact of foreign currency translation	1			(1		)	—			—
Balance at June 30, 2019	$	63		$	425		$	22		$	510

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 June 30, 2019 (in millions):



Contract liabilities expected to be recognized in	TH		BK		PLK		Consolidated
Remainder of 2019	$	4	$	16	$	1	$	21
2020	8		32		2		42
2021	7		31		1		39
2022	7		31		1		39
2023	6		30		1		37
Thereafter	31		285		16		332
Total	$	63	$	425	$	22	$	510

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Disaggregation of Total Revenues

Total revenues consist of the following (in millions):



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Sales	$	589	$	586	$	1,111	$	1,134
Royalties	576		544		1,104		1,054
Property revenues	214		190		413		368
Franchise fees and other revenue	21		23		38		41
Total revenues	$	1,400	$	1,343	$	2,666	$	2,597

Note 5.6. Earnings per Unit

Partnership uses the two-class method in the computation of earnings per unit. Pursuant to the terms of the partnership agreement, RBI, as the holder of the Class A common units, is entitled to receive distributions from Partnership in an amount equal to the aggregate dividends payable by RBI to holders of RBI common shares, and the holders of Class B exchangeable limited partnership units (the “Partnership exchangeable units”) are entitled to receive distributions from Partnership in an amount per unit equal to the dividends payable by RBI on each RBI common share. Partnership’s net income available to common unitholders is allocated between the Class A common units and Partnership exchangeable units on a fully-distributed basis and reflects residual net income after noncontrolling interests and Partnership preferred unit distributions. Basic and diluted earnings per Class A common unit is determined by dividing net income allocated to Class A common unit holders by the weighted average number of Class A common units outstanding for the period. Basic and diluted earnings per Partnership exchangeable unit is determined by dividing net income allocated to the Partnership exchangeable units by the weighted average number of Partnership exchangeable units outstanding during the period.

There are no dilutive securities for Partnership as ~~the exercise of stock options~~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 June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Allocation of net income among partner interests:
Net income allocated to Class A common unitholders	$	142	$	167	$	277	$	315
Net income allocated to Partnership exchangeable unitholders	115		146		226		277
Net income attributable to common unitholders	$	257	$	313	$	503	$	592

Denominator - basic and diluted partnership units:
Weighted average Class A common units	202		202		202		202
Weighted average Partnership exchangeable units	207		218		207		218

Earnings per unit - basic and diluted:
Class A common units (a)	$	0.70	$	0.83	$	1.37	$	1.56
Partnership exchangeable units (a)	$	0.55	$	0.67	$	1.09	$	1.27

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Allocation of net income among partner interests:
Net income allocated to Class A common unitholders $ 91.3
$ 86.3
$ 231.0
$ 227.2
Net income allocated to Partnership exchangeable unitholders 87.7
83.8
222.3
222.0
Net income attributable to common unitholders $ 179.0
$ 170.1
$ 453.3
$ 449.2

Denominator - basic and diluted partnership units:
Weighted average Class A common units 202.0
202.0
202.0
202.0
Weighted average Partnership exchangeable units 226.8
227.1
226.9
228.0
Total weighted average basic and diluted units outstanding 428.8
429.1
428.9
430.0

Earnings per unit - basic and diluted:
Class A common units $ 0.45
$ 0.43
$ 1.14
$ 1.12
Partnership exchangeable units $ 0.39
$ 0.37
$ 0.98
$ 0.97
(a) Earnings per unit may not recalculate exactly as it is calculated based on unrounded numbers.

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Note 6.7. Intangible Assets, net and Goodwill

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



	As of
	June 30, 2019							December 31, 2018
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Identifiable assets subject to amortization:
Franchise agreements	$	715	$	(209	)	$	506	$	705	$	(194	)	$	511
Favorable leases (a)	134		(65		)	69		407		(200		)	207
Subtotal	849		(274		)	575		1,112		(394		)	718
Indefinite lived intangible assets:
Tim Hortons brand	$	6,487	$	—		$	6,487	$	6,259	$	—		$	6,259
Burger King brand	2,126		—			2,126		2,131		—			2,131
Popeyes brand	1,355		—			1,355		1,355		—			1,355
Subtotal	9,968		—			9,968		9,745		—			9,745
Intangible assets, net						$	10,543						$	10,463

Goodwill
Tim Hortons segment	$	4,178						$	4,038
Burger King segment	601							602
Popeyes segment	846							846
Total	$	5,625						$	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.

As of
September 30, 2017 December 31, 2016
Gross Accumulated Amortization Net Gross Accumulated Amortization Net
Identifiable assets subject to amortization:
   Franchise agreements $ 724.3
$ (160.3 ) $ 564.0
$ 655.1
$ (132.4 ) $ 522.7
   Favorable leases 460.1
(184.9 ) 275.2
436.0
(149.7 ) 286.3
      Subtotal 1,184.4
(345.2 ) 839.2
1,091.1
(282.1 ) 809.0
Indefinite lived intangible assets:
   Tim Hortons brand
$ 6,776.9
$ —
$ 6,776.9
$ 6,341.6
$ —
$ 6,341.6
   Burger King brand
2,150.8
—
2,150.8
2,077.4
—
2,077.4
   Popeyes brand
1,354.9
—
1,354.9
—
—
—
      Subtotal 10,282.6
—
10,282.6
8,419.0
—
8,419.0
Intangible assets, net $ 11,121.8
$ 9,228.0

Goodwill
   Tim Hortons segment $ 4,356.9
$ 4,087.8

   Burger King segment 607.6
587.3

   Popeyes segment 845.8
—

      Total $ 5,810.3
$ 4,675.1

Amortization expense on intangible assets totaled ~~$18.7~~$10 million for the three months ended ~~September~~June 30, ~~2017~~2019 and ~~$18.1~~$18 million for the same period in the prior year. Amortization expense on intangible assets totaled ~~$54.2~~$21 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~$54.2~~$36 million for the same period in the prior year. The change in the brands and goodwill balances during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 was due ~~principally~~ to ~~the addition of goodwill and the~~ ~~Popeyes~~ ~~brand from the Popeyes Acquisition, and to a lesser extent,~~ the impact of foreign currency translation.

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Note 7.8. Equity Method Investments

The aggregate carrying amount of our equity method investments was ~~$156.8~~$272 million and ~~$151.1~~$259 million as of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively, and is included as a component of ~~other~~Other assets, net in our accompanying condensed consolidated balance sheets. ~~Our Tim Hortons (“TH”) business~~TH and ~~Burger King (“BK”) business~~BK both have equity method investments. ~~Our Popeyes Louisiana Kitchen (“PLK”) business~~PLK does not have any equity method investments. ~~Select information about our most significant equity method investments, based on the carrying value as of September 30, 2017, was as follows:~~



~~Entity~~	~~Country~~	~~Equity Interest~~
~~TIMWEN Partnership~~	~~Canada~~	~~50.0%~~
~~Carrols Restaurant Group, Inc.~~	~~United States~~	~~20.7%~~
~~Pangaea Foods (China) Holdings, Ltd.~~	~~China~~	~~27.5%~~

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 ~~$2.7~~$5 million and ~~$2.7~~$3 million during the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, respectively. Distributions received from this joint venture were ~~$8.1~~$7 million and ~~$8.3~~$6 million during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, respectively.

The aggregate market value of our 20.3% equity interest in Carrols Restaurant Group, Inc. (“Carrols”)~~, the most significant equity method investment for our BK business,~~ based on the quoted market price on ~~September~~June 30, ~~2017,~~2019 was approximately ~~$102.6~~$85 million. The aggregate market value of our 9.9% equity interest in BK Brasil Operação e Assessoria a Restaurantes S.A. based on the quoted market price on June 30, 2019 was approximately $130 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 June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Revenues from affiliates:
Royalties	$	87	$	74	$	165	$	142
Property revenues	9		9		17		18
Franchise fees and other revenue	3		2		6		4
Total	$	99	$	85	$	188	$	164

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Revenues from affiliates:
Franchise royalties $ 39.2
$ 34.9
$ 121.1
$ 94.2
Property revenues 7.2
6.9
20.1
21.1
Franchise fees and other revenue 3.7
6.8
14.7
14.7
Total $ 50.1
$ 48.6
$ 155.9
$ 130.0

We recognized ~~$5.3 million and $5.1~~$5 million of rent expense associated with the TIMWEN Partnership during the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016, respectively.~~2018. We recognized ~~$14.7~~$9 million and ~~$14.7~~$10 million of rent expense associated with the TIMWEN Partnership during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, respectively.

At ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, we had ~~$27.8~~$43 million and ~~$25.7~~$41 million, respectively, of accounts receivable, net from our equity method investments which were recorded in ~~accounts~~Accounts and notes receivable, net in our condensed consolidated balance sheets.

(Income) loss from equity method investments reflects our share of investee net income or loss, non-cash dilution gains or losses from changes in our ownership interests in equity method investees and basis difference amortization. WeDuring the six months ended June 30, 2019 we did not record a non-cash dilution gain. During the six months ended June 30, 2018, we recorded an increase to the carrying value of our equity method investment balance and a non-cash dilution gain of ~~$11.6~~$20 million ~~during~~on the ~~nine months ended September 30, 2016. The dilution gain resulted from the issuance of capital stock~~initial public offering by one of our equity method investees, which reduced our ownership interest in this equity method investment. The dilution gain we recorded in connection with the issuance of capital stock reflects adjustments to the difference between the amount of underlying equity in the net assets of the equity method investee before and after their issuance of capital stock.investees.

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Note 8.9. Other Accrued Liabilities and Other Liabilities, net

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



	As of
	June 30, 2019		December 31, 2018
Current:
Dividend payable	$	232	$	207
Interest payable	88		87
Accrued compensation and benefits	48		69
Taxes payable	73		113
Deferred income	36		27
Accrued advertising expenses	20		30
Restructuring and other provisions	7		11
Current portion of operating lease liabilities (a)	121		—
Other	74		93
Other accrued liabilities	$	699	$	637
Noncurrent:
Taxes payable	$	570	$	493
Contract liabilities, net	510		486
Unfavorable leases (b)	113		192
Derivatives liabilities	397		179
Accrued pension	63		64
Accrued lease straight-lining liability (b)	—		69
Deferred income	31		22
Other	46		42
Other liabilities, net	$	1,730	$	1,547

As of
September 30, 2017 December 31, 2016
Current:
Dividend payable $ 160.3
$ 146.1
Interest payable 63.9
63.3
Accrued compensation and benefits 65.5
60.5
Taxes payable 83.2
43.3
Deferred income 49.7
54.7
Closed property reserve 11.1
11.0
Restructuring and other provisions 10.6
9.1
Other 86.3
81.3
Other accrued liabilities $ 530.6
$ 469.3

Noncurrent:
Unfavorable leases $ 264.7
$ 275.8
Taxes payable 390.0
252.2
Accrued pension 77.5
82.9
Derivatives liabilities 479.2
55.1
Lease liability 26.0
27.2
Deferred income 40.5
27.1
Other 76.1
64.6
Other liabilities, net $ 1,354.0
$ 784.9


(a)	Represents the current portion of operating lease liabilities recognized in connection with our transition to ASC 842. See Note 4, Leases.


(b)	The decreases in unfavorable leases and accrued lease straight-lining liability reflect the reclassification of unfavorable leases and lease straight-lining liability where we are the lessee in the underlying operating lease to the right-of-use assets recorded for the underlying lease in connection with our transition to ASC 842. See Note 4, Leases.

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Note 9.10. Long-Term Debt

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



	As of
	June 30, 2019			December 31, 2018
Term Loan Facility (due February 17, 2024)	$	6,305		$	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)	80			150
Less: unamortized deferred financing costs and deferred issue discount	(133		)	(145		)
Total debt, net	11,802			11,893
Less: current maturities of debt	(65		)	(70		)
Total long-term debt	$	11,737		$	11,823

As of
September 30, 2017 December 31, 2016
Term Loan Facility (due February 17, 2024) $ 6,404.8
$ 5,046.1
2017 4.25% Senior Notes (due May 15, 2024) 1,500.0
—
2015 4.625% Senior Notes (due January 15, 2022) 1,250.0
1,250.0
2017 5.00% Senior Notes (due October 15, 2025) 1,300.0
—
2014 6.00% Senior Notes (due April 1, 2022) 1,000.0
2,250.0
Tim Hortons Notes (a) 5.2
40.6
Other 86.1
85.4
Less: unamortized deferred financing costs and deferred issue discount (185.8 ) (187.1 )
Total debt, net 11,360.3
8,485.0
Less: current maturities of debt (56.7 ) (74.8 )
Total long-term debt $ 11,303.6
$ 8,410.2


(a)	~~$35.6 million~~The decrease in Other reflects the de-recognition of ~~Tim Hortons Notes~~obligations associated with build-to-suit leases recorded under the Previous Standard. Liabilities associated with build-to-suit leases were ~~repaid on June 1, 2017, the original maturity date.~~remeasured and recorded as finance lease liabilities in conjunction with our transition to ASC 842.

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~~Refinancing of Credit Facilities~~

On February 17, 2017, two of our subsidiaries (the “Borrowers”) entered into a second amendment (the “Second Amendment”) to the credit agreement governing our senior secured term loan facility (the “Term Loan Facility”) and our senior secured revolving credit facility of up to $500.0 million of revolving extensions of credit outstanding at any time (including revolving loans, swingline loans and letters of credit) (the “Revolving Credit Facility” and together with the Term Loan Facility, the “Credit Facilities”). Under the Second Amendment, (i) the outstanding aggregate principal amount under our Term Loan Facility was decreased to $4,900.0 million as a result of a repayment of $146.1 million from cash on hand, (ii) the interest rate applicable to our Term Loan Facility was reduced to, at our option, either (a) a base rate plus an applicable margin equal to 1.25%, or (b) a Eurocurrency rate plus an applicable margin equal to 2.25%, (iii) the maturity of our Term Loan Facility was extended from December 12, 2021 to February 17, 2024, and (iv) the Borrowers and their subsidiaries were provided with additional flexibility under certain negative covenants, including incurrence of indebtedness, making of investments, dispositions and restricted payments, and prepayment of subordinated indebtedness. Except as described herein, the Second Amendment did not materially change the terms of the Credit Facilities.

In connection with the Second Amendment, we capitalized approximately $11.3 million in debt issuance costs and recorded a loss on early extinguishment of debt of $20.4 million during the nine months ended September 30, 2017. The loss on early extinguishment of debt primarily reflects the write-off of unamortized debt issuance costs and discounts.

~~Incremental Term Loans~~

In connection with the Popeyes Acquisition, we obtained an incremental term loan in the aggregate principal amount of $1,300.0 million (the “Incremental Term Loan No. 1”) under our Term Loan Facility. Also, simultaneously and in connection with the issuance of the 2017 4.25% Senior Notes (described below), we obtained an additional incremental term loan in the aggregate principal amount of $250.0 million (the "Incremental Term Loan No. 2" and together with the Incremental Term Loan No. 1, the "Incremental Term Loans") under our Term Loan Facility. The Incremental Term Loans bear interest at the same rate as the Term Loan Facility and also mature on February 17, 2024. In connection with the Incremental Term Loan No. 1, Popeyes was included as loan guarantor and its assets as collateral, under the Credit Facilities. Except as described herein, there were no other material changes to the terms of the Credit Facilities. Debt issuance costs capitalized in connection with the Incremental Term Loans were approximately $23.0 million.

Revolving Credit Facility

As of ~~September~~June 30, ~~2017,~~2019, we had no amounts outstanding under our ~~Revolving~~senior secured revolving credit facility (the "Revolving Credit ~~Facility.~~Facility"). Funds available under the Revolving Credit Facility may be used to repay other debt, finance debt or RBI share repurchases, to fund acquisitions or capital expenditures and for other general corporate purposes. We have a ~~$125.0~~$125 million letter of credit sublimit as part of the Revolving Credit Facility, which reduces our borrowing availability thereunder by the cumulative amount of outstanding letters of credit. As of ~~September~~June 30, ~~2017,~~2019, we had ~~$1.6~~$2 million of letters of credit issued against the Revolving Credit Facility, and our borrowing availability was ~~$498.4~~$498 million.

~~2017 4.25% Senior Notes~~TH Facility

~~On May 17, 2017, the Borrowers~~One of our subsidiaries entered into ~~an indenture~~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 ~~"2017 4.25% Senior Notes Indenture") in connection with the issuance of $1,500.0 million of 4.25% first lien senior notes due May 15, 2024 (the "2017 4.25% Senior Notes"~~“TH Facility”). ~~No principal payments are due until maturity and~~The interest rate applicable to the TH Facility is ~~paid semi-annually. We expect~~the Canadian Bankers’ Acceptance rate plus an applicable margin equal to ~~use~~1.40% or the ~~net proceeds from the offering of the 2017 4.25% Senior Notes, together with other sources of liquidity,~~Prime Rate plus an applicable margin equal to redeem all or a portion of the outstanding Class A 9.0% cumulative compounding perpetual voting preferred shares and for other general corporate purposes. In connection with the issuance of the 2017 4.25% Senior Notes, we capitalized approximately $12.6 million in debt issuance costs.

0.40%, at our option. Obligations under the ~~2017 4.25% Senior Notes~~TH Facility are guaranteed ~~on a senior secured basis, jointly~~by three of our subsidiaries, 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 2017 4.25% Senior Notes are first lien senior secured obligations and rank equal in right of payment with all of the existing and future senior debt of the Borrowers and Note Guarantors, including borrowings and guarantees of the Credit Facilities.

Our 2017 4.25% Senior Notes may be redeemed in whole or in part, on or after May 15, 2020 at the redemption prices set forth in the 2017 4.25% Senior Notes Indenture, plus accrued and unpaid interest, if any, at the date of redemption. The 2017 4.25% Senior Notes Indenture also contains optional redemption provisions related to tender offers, change of control and equity offerings, among others.

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~~2017 5.00% Senior Notes~~

On August 28, 2017, the Borrowers entered into an indenture (the "2017 5.00% Senior Notes Indenture") in connection with the issuance of $1,300.0 million of 5.00% second lien senior notes due October 15, 2025 (the "2017 5.00% Senior Notes"). No principal payments are due until maturity and interest is paid semi-annually. The net proceeds from the offering of the 2017 5.00% Senior Notes were used to redeem $1,250.0 million of the 2014 6.00% Senior Notes and pay related redemption premiums. In connection with the issuance of the 2017 5.00% Senior Notes, we capitalized approximately $10.1 million in debt issuance costs. In connection with the redemption of the 2014 6.00% Senior Notes, we recorded a loss on early extinguishment of debt of $58.2 million that primarily reflects the payment of premiums to redeem the notes and the write-off of unamortized debt issuance costs.

~~Obligations~~amounts borrowed under the ~~2017 5.00% Senior Notes~~TH Facility are ~~guaranteed on~~secured by certain parcels of real estate. As of June 30, 2019, we had outstanding C$100 million under the TH Facility with a ~~second priority senior secured basis, jointly and severally, by the Note Guarantors. The 2017 5.00% Senior Notes are second lien senior secured obligations and rank equal in right~~weighted average interest rate of ~~payment with all of the existing and future senior debt of the Borrowers and Note Guarantors, including borrowings and guarantees of the Credit Facilities.~~

Our 2017 5.00% Senior Notes may be redeemed in whole or in part, on or after October 15, 2020 at the redemption prices set forth in the 2017 5.00% Senior Notes Indenture, plus accrued and unpaid interest, if any, at the date of redemption. The 2017 5.00% Senior Notes Indenture also contains optional redemption provisions related to tender offers, change of control and equity offerings, among others.3.36%.

Fair Value Measurement

The following table presents the fair value of our variable rate term debt and senior notes, is estimated using inputs based on bid and offer prices that are Level 2 inputs, and ~~was $11.6 billion and $8.8 billion at September 30, 2017 and December 31, 2016, respectively, compared to a~~ principal carrying amount (in billions):



	As of
	June 30, 2019		December 31, 2018
Fair value of our variable term debt and senior notes	$	12	$	11
Principal carrying amount of our variable term debt and senior notes	12		12

Table of ~~$11.5 billion and $8.6 billion, respectively on the same dates.~~Contents

Interest Expense, net

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


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2019			2018			2019			2018
Debt(a)	$	131.2		$	103.6		$	350.1		$	308.3		$	128		$	120		$	252		$	250
Capital lease obligations	5.4			5.2			15.4			15.0
Finance lease obligations													6			6			11			12
Amortization of deferred financing costs and debt issuance discount	8.5			9.8			25.2			29.1			8			7			15			14
Interest income	(9.1		)	(1.3		)	(15.3		)	(2.8		)	(5		)	(3		)	(9		)	(6		)
Interest expense, net	$	136.0		$	117.3		$	375.4		$	349.6		$	137		$	130		$	269		$	270

~~Other~~

~~On March 27, 2017, we repaid $155.5 million of debt assumed in connection with the Popeyes Acquisition.~~


(a)	Amount includes $19 million and $20 million benefit during the three months ended June 30, 2019 and 2018, respectively, and $37 million and $24 million benefit during the six months ended June 30, 2019 and 2018, respectively, from our adoption of a new hedge accounting standard in 2018.

Note ~~10.~~11. Income Taxes

Our effective tax rate was ~~13.4%~~27.4% and ~~15.3%~~23.4% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019. The effective tax rate during these periods 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 10.4% and 5.6% during the three and six months ended June 30, 2019, respectively. The effective tax rate during ~~this period~~these periods also reflects the mix of income from multiple tax jurisdictions, the impact of internal financing arrangements and stock option exercises. Benefits from stock option exercises reduced the effective tax rate by 4.0% and 4.1% for the three and six months ended June 30, 2019, respectively.

Our effective tax rate was 15.7% and 9.2% for the three and six months ended June 30, 2018. The effective tax rate during these periods was primarily a result of the mix of income from multiple tax jurisdictions, the ~~impact~~benefit from reserve releases due to audit settlements and the realignment of ~~our~~various internal financing ~~structure, excess tax~~arrangements. In addition, benefits from ~~share-based compensation as a result of~~stock option exercises reduced the ~~required adoption of a new share-based compensation accounting standard, net audit-related reserve releases and non-deductible transaction costs.~~

~~Our~~ effective tax rate ~~was 21.3%~~by 0.6% and ~~20.7%~~10.1% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2018, respectively. ~~The effective tax rate during this period was primarily a result of the mix of income from multiple tax jurisdictions and the impact of our financing structure.~~

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Note ~~11.~~12. Equity

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, Partnership exchanged ~~155,986~~186,515 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

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shares. The issuances of shares was accounted for as a capital contribution by RBI to Partnership. The exchanges of Partnership exchangeable units were recorded as increases to the Class A common units balance within ~~partner’s~~partners’ capital in our consolidated balance sheet in an amount equal to the market value of the newly issued RBI common shares and a reduction to the Partnership exchangeable units balance within ~~partner’s~~partners’ capital of our consolidated balance sheet in an amount equal to the cash paid by Partnership, if any, and the market value of the newly issued RBI common shares. Pursuant to the terms of the partnership agreement, upon the exchange of Partnership exchangeable units, each such Partnership exchangeable unit was cancelled concurrently with the exchange.

Accumulated Other Comprehensive Income (Loss)

The following table displays the changes in the components of accumulated other comprehensive income (loss) (“AOCI”) (in millions):



	Derivatives			Pensions			Foreign Currency Translation			Accumulated Other Comprehensive Income (Loss)
Balances at December 31, 2018	$	454		$	(27	)	$	(1,864	)	$	(1,437	)
Foreign currency translation adjustment	—			—			358			358
Net change in fair value of derivatives, net of tax	(207		)	—			—			(207		)
Amounts reclassified to earnings of cash flow hedges, net of tax	2			—			—			2
Balances at June 30, 2019	$	249		$	(27	)	$	(1,506	)	$	(1,284	)

Derivatives Pensions Foreign Currency Translation Accumulated Other Comprehensive Income (Loss)
Balances at December 31, 2016 $ 533.1
$ (32.8 ) $ (1,855.7 ) $ (1,355.4 )
Foreign currency translation adjustment —
—
884.2
884.2
Net change in fair value of derivatives, net of tax (365.5 ) —
—
(365.5 )
Amounts reclassified to earnings of cash flow hedges, net of tax 17.9
—
—
17.9
Pension and post-retirement benefit plans, net of tax —
(0.1 ) —
(0.1 )
Amortization of prior service (credits) costs, net of tax —
(1.3 ) —
(1.3 )
Amortization of actuarial (gains) losses, net of tax —
1.5
—
1.5
Balances at September 30, 2017 $ 185.5
$ (32.7 ) $ (971.5 ) $ (818.7 )

~~The following table displays the reclassifications out of AOCI (in millions):~~

Amounts Reclassified from AOCI
Affected Line Item in the Statement of Operations Three Months Ended
September 30, Nine Months Ended
September 30,
Details about AOCI Components 2017 2016 2017 2016
Gains (losses) on cash flow hedges:
Interest rate derivative contracts Interest expense, net $ (8.2 ) $ (5.9 ) $ (23.1 ) $ (15.3 )
Forward-currency contracts Cost of sales (1.2 ) (1.4 ) (1.1 ) 1.1
Total before tax (9.4 ) (7.3 ) (24.2 ) (14.2 )
Income tax (expense) benefit 2.5
1.9
6.3
3.7
Net of tax $ (6.9 ) $ (5.4 ) $ (17.9 ) $ (10.5 )
Defined benefit pension:
Amortization of prior service credits (costs) SG&A (a) $ 0.7
$ 0.7
$ 2.1
$ 2.2
Amortization of actuarial gains (losses) SG&A (a) (0.3 ) (0.1 ) (0.8 ) (0.3 )
Total before tax 0.4
0.6
1.3
1.9
Income tax (expense) benefit (0.2 ) (0.3 ) (1.5 ) (0.8 )
Net of tax $ 0.2
$ 0.3
$ (0.2 ) $ 1.1

Total reclassifications Net of tax $ (6.7 ) $ (5.1 ) $ (18.1 ) $ (9.4 )


~~(a)~~	~~Refers to selling, general and administrative expenses in the condensed consolidated statements of operations.~~

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~~Note 12. Partnership Preferred Units~~

We have 68,530,939 Partnership preferred units issued to RBI. Under the terms of the partnership agreement, Partnership is required to make distributions on the Partnership preferred units (all of which are owned by RBI) that correspond to preferred dividends declared and payable by RBI on the 68,530,939 Class A 9.0% cumulative compounding perpetual voting preferred shares of RBI (“Preferred Shares”) sold by RBI to a subsidiary of Berkshire Hathaway, Inc.

The Preferred Shares may be redeemed at RBI’s option on and after December 12, 2017. After December 12, 2024, holders of not less than a majority of the outstanding Preferred Shares may cause RBI to redeem their Preferred Shares. In either case, the redemption price is $48.109657 per Preferred Share plus accrued and unpaid dividends, plus or minus any unpaid make-whole dividend and any additional dividends (the “redemption price”). The redemption price may be reduced if the make-whole dividend formula described above indicates the after-tax net dividends paid to the holder of the Preferred Shares from the original issue date through the redemption date will exceed the after-tax net dividends that would have been paid if we were a U.S. corporation. Holders of the Preferred Shares also hold a contingently exercisable option to cause RBI to redeem their Preferred Shares at the redemption price in the event of a change of control. In the event the Preferred Shares are redeemed for cash, Partnership is required to make a distribution on the Partnership preferred units in an amount sufficient for RBI to fund the redemption amount.

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, we entered into a series of receive-variable, pay-fixed interest rate swaps with a 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 "Term Loan Facility") beginning March 29, 2018 through the expiration of the final swap on February 17, 2024, resetting each March. At inception, these interest rate swaps were designated as cash flow hedges for hedge accounting. The unrealized changes in market value are recorded in AOCI and reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.

During 2015, we entered into a series of receive-variable, pay-fixed interest rate swaps with a notional value of ~~$2,500.0~~$2,500 million to hedge the variability in the interest payments on a portion of our Term Loan Facility beginning May 28, ~~2015, through the expiration~~2015. All of ~~the final swap~~these interest rate swaps were settled on ~~March 31, 2021, resetting each March 31.~~April 26, 2018 for an insignificant cash receipt. At inception, these interest rate swaps were designated as cash flow hedges for hedge ~~accounting, and as such, the effective portion of~~accounting. The unrealized changes in market value iswere recorded in AOCI and reclassified into earnings during the period in which the hedged forecasted transaction affects earnings. ~~Gains and losses from hedge ineffectiveness are recognized in current earnings.~~

During 2015, we settled certain interest rate swaps and recognized a net unrealized loss of ~~$84.6~~$85 million in AOCI at the date of settlement. This amount ~~will be~~gets reclassified into ~~interest~~Interest expense, net as the original hedged forecasted transaction affects earnings. The amount of pre-tax losses in AOCI as of ~~September~~June 30, ~~2017~~2019 that we expect to be reclassified into interest expense within the next 12 months is ~~$12.4~~$12 million.

Cross-Currency Rate Swaps

To protect the value of our investments in our foreign operations against adverse changes in foreign currency exchange rates, we hedge a portion of our net investment in one or more of our foreign subsidiaries by using cross-currency rate swaps. At ~~September~~June 30, ~~2017,~~2019, we had outstanding cross-currency rate swap contracts between the Canadian dollar and U.S. dollar and the Euro and U.S. dollar that have been designated as net investment hedges of a portion of our equity in foreign operations in those currencies. The component of the gains and losses on our net investment in these designated foreign operations driven by changes in foreign exchange rates are economically offset by movements in the fair value of our ~~cross currency~~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.

~~We terminated and settled our previous cross-currency rate swaps in~~At June ~~2017, with an aggregate notional value of $5,000.0 million, between the Canadian dollar and U.S. dollar. In connection with this termination,~~30, 2019, we received $763.5 million which is reflected as a source of cash provided by investing activities in the condensed consolidated statement of cash flows. The unrealized gains totaled $533.4 million, net of tax, as of the termination date and will remain in AOCI until the complete or substantially complete liquidation of our investment in the underlying foreign operations. Additionally, we entered into newhad outstanding fixed-to-fixed cross-currency rate swaps to partially hedge the net investment in our Canadian subsidiaries. At inception, these

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cross-currency rate swaps were designated as a hedge and are accounted for as net investment hedges. These swaps are contracts to exchange quarterly fixed-rate interest payments we make on the Canadian dollar notional amount of C$~~6,753.5~~6,754 million for quarterly fixed-rate interest payments we receive on the U.S. dollar notional amount of ~~$5,000.0~~$5,000 million through the maturity date of June 30, 2023. ~~In making such changes, we effectively realigned our Canadian dollar hedges to reflect our current cash flow mix and capital structure maturity profile.~~

At ~~September~~June 30, ~~2017,~~2019, we also had outstanding a cross-currency rate ~~swap~~swaps in which we pay quarterly fixed-rate interest payments on the Euro notional value of ~~€1,107.8~~€1,108 million and receive quarterly fixed-rate interest payments on the U.S. dollar notional value of ~~$1,200.0~~$1,200 million. At inception, these cross-currency rate swaps were designated as a hedge and are accounted for as a net investment hedge. During 2018, we extended the term of the swaps from March 31, 2021 to the maturity date of February 17, 2024. The extension of the term resulted in a re-designation of the hedge and the swaps continue to be accounted for as a net investment hedge. Additionally, during 2018 we entered into cross-currency rate swaps in which we receive quarterly fixed-rate interest payments on the U.S. dollar notional value of $400 million through the maturity date of ~~March 31, 2021.~~February 17, 2024. At inception, ~~this~~these cross-currency rate ~~swap was~~swaps were designated as a hedge and isare accounted for as a net investment hedge.

The fixed to fixed cross-currency rate swaps hedging Canadian dollar and Euro net investments utilized the forward method of effectiveness assessment prior to March 15, 2018. On March 15, 2018, we dedesignated and subsequently redesignated the outstanding fixed to fixed cross-currency rate swaps to prospectively use the spot method of hedge effectiveness assessment. 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

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change in fair value that is not related to the Excluded Component is recorded in AOCI and will be reclassified to earnings when the foreign subsidiaries are sold or substantially liquidated.

Foreign Currency Exchange Contracts

We use foreign exchange derivative instruments to manage the impact of foreign exchange fluctuations on U.S. dollar purchases and payments, such as coffee purchases made by our Canadian Tim Hortons operations. At ~~September~~June 30, ~~2017,~~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 ~~$170.0~~$130 million with maturities to ~~December 2018.~~August 2020. We have designated these instruments as cash flow hedges, and as such, the ~~effective portion of~~ 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. Gains and losses from hedge ineffectiveness are recognized in current~~ earnings.

Credit Risk

By entering into derivative contracts, we are exposed to counterparty credit risk. Counterparty credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is in an asset position, the counterparty has a liability to us, which creates credit risk for us. We attempt to minimize this risk by selecting counterparties with investment grade credit ratings and regularly monitoring our market position with each counterparty.

Credit-Risk Related Contingent Features

Our derivative instruments do not contain any credit-risk related contingent features.

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Quantitative Disclosures about Derivative Instruments and Fair Value Measurements

The following tables present the required quantitative disclosures for our derivative instruments, including their estimated fair values (all estimated using Level 2 inputs) and their location on our condensed consolidated balance sheets (in millions):


	Gain (Loss) Recognized in Other Comprehensive Income (Loss) (Effective Portion)											Gain or (Loss) Recognized in Other Comprehensive Income (Loss)
	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016		2017			2016			2019			2018			2019			2018
Derivatives designated as cash flow hedges(1)
Forward-starting interest rate swaps	$	(0.1	)	$	1.0	$	(20.5	)	$	(71.6	)
Interest rate swaps												$	(77	)	$	(5	)	$	(121	)	$	24
Forward-currency contracts	$	(5.2	)	$	2.1	$	(10.7	)	$	(7.7	)	$	(2	)	$	3		$	(4	)	$	13
Derivatives designated as net investment hedges
Cross-currency rate swaps	$	(171.5	)	$	20.1	$	(349.8	)	$	(199.6	)	$	(53	)	$	143		$	(155	)	$	154


(1)	We did not exclude any components from the cash flow hedge relationships presented in this table.

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Classification on Condensed Consolidated Statements of Operations Gain (Loss) Reclassified from AOCI into Earnings
Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Interest expense, net $ (8.2 ) $ (5.9 ) $ (23.1 ) $ (15.3 )
Cost of sales $ (1.2 ) $ (1.4 ) $ (1.1 ) $ 1.1



	Location of Gain or (Loss) Reclassified from AOCI into Earnings	Gain or (Loss) Reclassified from AOCI into Earnings
		Three Months Ended June 30,						Six Months Ended June 30,
		2019			2018			2019			2018
Derivatives designated as cash flow hedges
Interest rate swaps	Interest expense, net	$	(6	)	$	(5	)	$	(7	)	$	(11	)
Forward-currency contracts	Cost of sales	$	2		$	—		$	4		$	3

	Location of Gain or (Loss) Recognized in Earnings	Gain or (Loss) Recognized in Earnings (Amount Excluded from Effectiveness Testing)
	Location of Gain or (Loss) Recognized in Earnings	Three Months Ended June 30,						Six Months Ended June 30,
		2019			2018			2019			2018
Derivatives designated as net investment hedges
Cross-currency rate swaps	Interest expense, net	$	19		$	20		$	37		$	24

Fair Value as of
September 30, 2017 December 31, 2016 Balance Sheet Location
Assets:
Derivatives designated as cash flow hedges
Foreign currency $ 0.4
$ 2.8
Prepaids and other current assets
Derivatives designated as net investment hedges
Foreign currency —
717.9
Derivative assets
Total assets at fair value $ 0.4
$ 720.7

Liabilities:
Derivatives designated as cash flow hedges
Interest rate $ 61.8
$ 55.1
Other liabilities, net
Foreign currency 8.6
1.1
Other accrued liabilities
Derivatives designated as net investment hedges
Foreign currency 417.4
—
Other liabilities, net
Total liabilities at fair value $ 487.8
$ 56.2



	Fair Value as of
	June 30, 2019		December 31, 2018		Balance Sheet Location
Assets:
Derivatives designated as cash flow hedges
Foreign currency	$	—	$	7	Prepaids and other current assets
Derivatives designated as net investment hedges
Foreign currency	15		58		Other assets, net
Total assets at fair value	$	15	$	65

Liabilities:
Derivatives designated as cash flow hedges
Interest rate	$	193	$	72	Other liabilities, net
Foreign currency	1		—		Other accrued liabilities
Derivatives designated as net investment hedges
Foreign currency	204		107		Other liabilities, net
Total liabilities at fair value	$	398	$	179

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Note 14. ~~Franchise and Property Revenues~~

~~Franchise and property revenues consist of the following (in millions):~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Franchise royalties $ 332.8
$ 261.1
$ 883.5
$ 738.7
Property revenues 204.1
194.6
568.4
563.9
Franchise fees and other revenue 40.1
33.6
105.9
96.3
Franchise and property revenues $ 577.0
$ 489.3
$ 1,557.8
$ 1,398.9

~~Note 15.~~ Other Operating Expenses (Income), net

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



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings	$	(10	)	$	3		$	(7	)	$	10
Litigation settlements (gains) and reserves, net	—			—			—			(6		)
Net losses (gains) on foreign exchange	12			(33		)	(3		)	(16		)
Other, net	1			—			(4		)	(5		)
Other operating expenses (income), net	$	3		$	(30	)	$	(14	)	$	(17	)

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings $ 3.4
$ 3.3
$ 14.9
$ 19.6
Litigation settlements and reserves, net 0.6
0.4
1.7
2.0
Net losses (gains) on foreign exchange 17.7
4.1
64.9
16.1
Other, net (0.2 ) 0.9
0.6
0.5
Other operating expenses (income), net $ 21.5
$ 8.7
$ 82.1
$ 38.2

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.

Note ~~16.~~15. Commitments and Contingencies

Litigation

~~On June 19, 2017, a claim was~~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.

In March 2019, Partnership settled the two class action lawsuits filed in the Ontario Superior Court of ~~Justice.~~Justice against The ~~plaintiff,~~TDL Group Corp., a ~~franchisee~~subsidiary of ~~two Tim Hortons restaurants, seeks to certify a class of all persons who have carried~~Partnership (“TDL”), and certain other defendants, as described in Partnership’s Annual Report on ~~business as a Tim Hortons franchisee in Canada at any time after December 15, 2014.~~Form 10-K filed with the SEC on February 22, 2019. The ~~claim alleges various causes of action against~~court approved the ~~defendants in relation to~~settlement on April 29, 2019. Under the ~~purported misuse of amounts paid by members~~terms of the ~~proposed class~~settlement, TDL is contributing C$6 million to the Tim Hortons Advertising Fund in Canada ~~advertising fund (the “Ad Fund”~~over two years, such amount to be spent on marketing activities. In addition, TDL has paid C$6 million for legal, administrative and other third-party expenses. These amounts were accrued by TDL during 2018.

In 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 ~~to have the Ad Fund franchisee contributions held in trust for the benefit~~damages and restitution, on behalf of himself and other members of the ~~proposed class, an accounting~~class.

Table of ~~the Ad Fund, as well as damages for breach of contract, breach of trust, breach of the statutory duty of fair dealing, and breach of fiduciary duties.~~ Contents

While we currently believe ~~the~~these claims are without merit, ~~and we intend to vigorously defend against this lawsuit,~~ we are unable to predict the ultimate outcome of ~~this case~~these cases or estimate the range of possible loss, if any.

On October 6, 2017, a claim was filed in the Ontario Superior Court of Justice. The plaintiffs, two franchisees of Tim Hortons restaurants, seek to certify a class of all persons who have carried on business as a Tim Hortons franchisee at any time after March 8, 2017. The claim alleges various causes of action against the defendants in relation to the purported adverse treatment of member and potential member franchisees of the Great White North Franchisee Association. The plaintiffs seek damages for, among other things, breach of contract, breach of the statutory duty of fair dealing, and breach of the franchisees’ statutory right of association. While we believe the claims are without merit and we intend to vigorously defend against this lawsuit, we are unable to predict the ultimate outcome of this case or estimate the range of possible loss, if any.

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Note ~~17.~~16. Segment Reporting

As stated in Note 1, Description of Business and Organization, we manage three brands. Under the Tim Hortons brand, we operate in the donut/coffee/tea category of the quick service segment of the restaurant industry. Under the Burger King brand, we operate in the fast food hamburger restaurant category of the quick service segment of the restaurant industry. Under the Popeyes brand, we operate in the chicken category of the quick service segment of the restaurant industry. ~~We generate~~Our business generates revenue from ~~four~~the following sources: (i) ~~sales to franchisees related to our supply chain operations, including manufacturing, procurement, warehousing, and distribution, as well as sales to retailers; (ii)~~ franchise revenues, consisting primarily of royalties based on a percentage of sales reported by franchise restaurants and franchise fees paid by franchisees; ~~(iii)~~(ii) property revenues from properties we lease or sublease to franchisees; and ~~(iv)~~(iii) sales at restaurants owned by us ("Company ~~restaurants.~~

~~Each brand is managed by a brand president that reports directly~~restaurants"). In addition, our TH business generates revenue from sales to franchisees related to our ~~Chief Executive Officer, who is our Chief Operating Decision Maker. Therefore, we have three operating segments: (1) TH, which includes all~~supply chain operations, including manufacturing, procurement, warehousing and distribution, as well as sales to retailers. We manage each of our ~~Tim Hortons~~ ~~brand, (2) BK, which includes all operations of our~~ ~~Burger King~~ ~~brand,~~brands as an operating segment and ~~(3) PLK, which includes all operations of our~~ ~~Popeyes~~ ~~brand. Our three~~each operating ~~segments represent our~~segment represents a reportable ~~segments.~~segment.

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


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016		2019		2018		2019		2018
Revenues by operating segment:
TH	$	827.0	$	789.9	$	2,332.9	$	2,207.5	$	842	$	823	$	1,591	$	1,586
BK	313.6		285.8		874.3		826.9		447		418		858		808
PLK	68.0		—		134.7		—		111		102		217		203
Total revenues	$	1,208.6	$	1,075.7	$	3,341.9	$	3,034.4	$	1,400	$	1,343	$	2,666	$	2,597

Revenues by country (a):
Canada	$	748.7	$	708.8	$	2,093.6	$	1,973.0
United States	310.5		249.2		856.1		725.0
Other	149.4		117.7		392.2		336.4
Total revenues	$	1,208.6	$	1,075.7	$	3,341.9	$	3,034.4



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Revenues by country (a):
Canada	$	764	$	746	$	1,440	$	1,438
United States	479		450		923		871
Other	157		147		303		288
Total revenues	$	1,400	$	1,343	$	2,666	$	2,597


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

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Our measure of segment income is Adjusted EBITDA. Adjusted EBITDA represents earnings (net income or loss) before interest expense, net, (gain) loss on early extinguishment of debt, income tax expense, and depreciation and amortization, adjusted to exclude the non-cash impact of share-based compensation and non-cash incentive compensation expense and (income) loss from equity method investments, net of cash distributions received from equity method investments, as well as other operating expenses (income), net. Other specifically identified costs associated with non-recurring projects are also excluded from Adjusted EBITDA, including fees and expenses associated with the Popeyes Acquisition ("(“PLK Transaction ~~costs"~~costs”), Corporate restructuring and ~~integration~~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 ~~associated~~in connection with the ~~acquisition~~centralization and relocation of ~~Tim Hortons.~~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).:

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	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended June 30,					Six Months Ended June 30,
	2017			2016		2017			2016			2019		2018			2019			2018
Segment income:
TH	$	294.4		$	287.1	$	831.7		$	793.9		$	287	$	286		$	524		$	531
BK	233.9			201.8		637.8			581.9			252		236			474			450
PLK	36.8			—		70.0			—			41		40			82			79
Adjusted EBITDA	565.1			488.9		1,539.5			1,375.8			580		562			1,080			1,060
Share-based compensation and non-cash incentive compensation expense	12.5			11.8		42.9			31.0			19		16			44			31
PLK Transaction costs	6.9			—		49.8			—			—		5			—			10
Integration costs	—			4.4		—			10.4
Corporate restructuring and tax advisory fees												11		7			17			14
Office centralization and relocation costs												2		12			6			12
Impact of equity method investments (a)	(1.3		)	0.3		(0.1		)	(7.6		)	9		4			10			(6		)
Other operating expenses (income), net	21.5			8.7		82.1			38.2			3		(30		)	(14		)	(17		)
EBITDA	525.5			463.7		1,364.8			1,303.8			536		548			1,017			1,016
Depreciation and amortization	46.2			43.2		134.9			128.7			45		46			92			93
Income from operations	479.3			420.5		1,229.9			1,175.1			491		502			925			923
Interest expense, net	136.0			117.3		375.4			349.6			137		130			269			270
Loss on early extinguishment of debt	58.2			—		78.6			—
Income tax expense	38.3			64.6		119.0			171.0			97		58			153			60
Net income	$	246.8		$	238.6	$	656.9		$	654.5		$	257	$	314		$	503		$	593


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

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Note ~~18.~~17. Supplemental Financial Information

On February 17, 2017, 1011778 B.C. Unlimited Liability Company (the “Parent Issuer”) and New Red Finance Inc. (the “Co-Issuer” and together with the Parent Issuer, the “Issuers”) entered into an amended credit agreement that provides for obligations under the Credit Facilities. On August 28, 2017, the Issuers entered into the 2017 5.00% Senior Notes Indenture with respect to the 2017 5.00% Senior Notes. On May 17, 2017, the Issuers entered into the 2017 4.25% Senior Notes Indenture with respect to the 2017 4.25% Senior Notes. On May 22, 2015, the Issuers entered into the 2015 4.625% Senior Notes Indenture with respect to the 2015 4.625% Senior Notes. ~~On October 8, 2014, the Issuers entered into the 2014 6.00% Senior Notes Indenture with respect to the 2014 6.00% Senior Notes.~~

The agreement governing our Credit Facilities, the 2017 5.00% Senior Notes Indenture, the 2017 4.25% Senior Notes Indenture and the 2015 4.625% ~~Senior Notes Indenture and the 2014 6.00%~~ 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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Condensed Consolidating Balance Sheets

(In millions of U.S. dollars)

As of ~~September~~June 30, ~~2017~~2019


	Consolidated Borrowers			RBILP			Eliminations			Consolidated			Consolidated Borrowers			RBILP			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	3,547.2		$	—		$	—		$	3,547.2		$	1,028		$	—		$	—		$	1,028
Accounts and notes receivable, net	421.9			—			—			421.9			476			—			—			476
Inventories, net	91.9			—			—			91.9			81			—			—			81
Advertising fund restricted assets	110.8			—			—			110.8
Prepaids and other current assets	108.1			—			—			108.1			69			—			—			69
Total current assets	4,279.9			—			—			4,279.9			1,654			—			—			1,654

Property and equipment, net	2,158.2			—			—			2,158.2			2,007			—			—			2,007
Operating lease assets, net													1,154			—			—			1,154
Intangible assets, net	11,121.8			—			—			11,121.8			10,543			—			—			10,543
Goodwill	5,810.3			—			—			5,810.3			5,625			—			—			5,625
Net investment in property leased to franchisees	76.1			—			—			76.1			47			—			—			47
Intercompany receivable	—			160.3			(160.3		)	—			—			232			(232		)	—
Investment in subsidiaries	—			7,573.6			(7,573.6		)	—			—			3,960			(3,960		)	—
Other assets, net	481.6			—			—			481.6			695			—			—			695
Total assets	$	23,927.9		$	7,733.9		$	(7,733.9	)	$	23,927.9		$	21,725		$	4,192		$	(4,192	)	$	21,725

LIABILITIES, PREFERRED UNITS AND EQUITY
LIABILITIES AND EQUITY
Current liabilities:
Accounts and drafts payable	$	365.2		$	—		$	—		$	365.2		$	486		$	—		$	—		$	486
Other accrued liabilities	370.3			160.3			—			530.6			467			232			—			699
Gift card liability	130.3			—			—			130.3			106			—			—			106
Advertising fund liabilities	154.1			—			—			154.1
Current portion of long term debt and capital leases	77.5			—			—			77.5
Current portion of long term debt and finance leases													92			—			—			92
Total current liabilities	1,097.4			160.3			—			1,257.7			1,151			232			—			1,383

Term debt, net of current portion	11,303.6			—			—			11,303.6			11,737			—			—			11,737
Capital leases, net of current portion	238.7			—			—			238.7
Finance leases, net of current portion													284			—			—			284
Operating lease liabilities, net of current portion													1,056			—			—			1,056
Other liabilities, net	1,354.0			—			—			1,354.0			1,730			—			—			1,730
Payables to affiliates	160.3			—			(160.3		)	—			232			—			(232		)	—
Deferred income taxes, net	2,200.3			—			—			2,200.3			1,575			—			—			1,575
Total liabilities	16,354.3			160.3			(160.3		)	16,354.3			17,765			232			(232		)	17,765

Partnership preferred units	—			3,297.0			—			3,297.0

Partners’ capital:
Class A common units	—			3,530.7			—			3,530.7			—			4,495			—			4,495
Partnership exchangeable units	—			1,560.9			—			1,560.9			—			746			—			746
Common shares	6,887.6			—			(6,887.6		)	—			3,197			—			(3,197		)	—
Retained Earnings	1,501.0			—			(1,501.0		)	—			2,044			—			(2,044		)	—
Accumulated other comprehensive income (loss)	(818.7		)	(818.7		)	818.7			(818.7		)	(1,284		)	(1,284		)	1,284			(1,284		)
Total Partners' capital/shareholders' equity	7,569.9			4,272.9			(7,569.9		)	4,272.9			3,957			3,957			(3,957		)	3,957
Noncontrolling interests	3.7			3.7			(3.7		)	3.7			3			3			(3		)	3
Total equity	7,573.6			4,276.6			(7,573.6		)	4,276.6			3,960			3,960			(3,960		)	3,960
Total liabilities, Partnership preferred units and equity	$	23,927.9		$	7,733.9		$	(7,733.9	)	$	23,927.9
Total liabilities and equity													$	21,725		$	4,192		$	(4,192	)	$	21,725

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Condensed Consolidating Balance Sheets

(In millions of U.S. dollars)

As of December 31, ~~2016~~2018


	Consolidated Borrowers			RBILP			Eliminations			Consolidated			Consolidated Borrowers			RBILP			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	1,420.4		$	—		$	—		$	1,420.4		$	913		$	—		$	—		$	913
Accounts and notes receivable, net	403.5			—			—			403.5			452			—			—			452
Inventories, net	71.8			—			—			71.8			75			—			—			75
Advertising fund restricted assets	57.7			—			—			57.7
Prepaids and other current assets	103.6			—			—			103.6			60			—			—			60
Total current assets	2,057.0			—			—			2,057.0			1,500			—			—			1,500

Property and equipment, net	2,054.7			—			—			2,054.7			1,996			—			—			1,996
Intangible assets, net	9,228.0			—			—			9,228.0			10,463			—			—			10,463
Goodwill	4,675.1			—			—			4,675.1			5,486			—			—			5,486
Net investment in property leased to franchisees	91.9			—			—			91.9			54			—			—			54
Derivative assets	717.9			—			—			717.9
Intercompany receivable	—			146.1			(146.1		)	—			—			207			(207		)	—
Investment in subsidiaries	—			6,786.0			(6,786.0		)	—			—			3,618			(3,618		)	—
Other assets, net	300.7			—			—			300.7			642			—			—			642
Total assets	$	19,125.3		$	6,932.1		$	(6,932.1	)	$	19,125.3		$	20,141		$	3,825		$	(3,825	)	$	20,141

LIABILITIES, PREFERRED UNITS AND EQUITY
LIABILITIES AND EQUITY
Current liabilities:
Accounts and drafts payable	$	369.8		$	—		$	—		$	369.8		$	513		$	—		$	—		$	513
Other accrued liabilities	323.2			146.1			—			469.3			430			207			—			637
Gift card liability	194.4			—			—			194.4			167			—			—			167
Advertising fund liabilities	83.3			—			—			83.3
Current portion of long term debt and capital leases	93.9			—			—			93.9
Current portion of long term debt and finance leases													91			—			—			91
Total current liabilities	1,064.6			146.1			—			1,210.7			1,201			207			—			1,408

Term debt, net of current portion	8,410.2			—			—			8,410.2			11,823			—			—			11,823
Capital leases, net of current portion	218.4			—			—			218.4			226			—			—			226
Other liabilities, net	784.9			—			—			784.9			1,547			—			—			1,547
Payables to affiliates	146.1			—			(146.1		)	—			207			—			(207		)	—
Deferred income taxes, net	1,715.1			—			—			1,715.1			1,519			—			—			1,519
Total liabilities	12,339.3			146.1			(146.1		)	12,339.3			16,523			207			(207		)	16,523

Partnership preferred units	—			3,297.0			—			3,297.0

Partners’ capital:
Class A common units	—			3,364.1			—			3,364.1			—			4,323			—			4,323
Partnership exchangeable units	—			1,476.2			—			1,476.2			—			730			—			730
Common shares	6,825.8			—			(6,825.8		)	—			3,071			—			(3,071		)	—
Retained Earnings	1,311.5			—			(1,311.5		)	—			1,982			—			(1,982		)	—
Accumulated other comprehensive income (loss)	(1,355.4		)	(1,355.4		)	1,355.4			(1,355.4		)	(1,437		)	(1,437		)	1,437			(1,437		)
Total Partners' capital/shareholders' equity	6,781.9			3,484.9			(6,781.9		)	3,484.9			3,616			3,616			(3,616		)	3,616
Noncontrolling interests	4.1			4.1			(4.1		)	4.1			2			2			(2		)	2
Total equity	6,786.0			3,489.0			(6,786.0		)	3,489.0			3,618			3,618			(3,618		)	3,618
Total liabilities, Partnership preferred units and equity	$	19,125.3		$	6,932.1		$	(6,932.1	)	$	19,125.3
Total liabilities and equity													$	20,141		$	3,825		$	(3,825	)	$	20,141

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Condensed Consolidating Statements of Operations

(In millions of U.S. dollars)

Three Months Ended ~~September~~June 30, ~~2017~~2019


	Consolidated Borrowers			RBILP		Eliminations			Consolidated			Consolidated Borrowers		RBILP		Eliminations			Consolidated
Revenues:
Sales	$	631.6		$	—	$	—		$	631.6		$	589	$	—	$	—		$	589
Franchise and property revenues	577.0			—		—			577.0			811		—		—			811
Total revenues	1,208.6			—		—			1,208.6			1,400		—		—			1,400
Operating costs and expenses:
Cost of sales	493.3			—		—			493.3			453		—		—			453
Franchise and property expenses	118.5			—		—			118.5			135		—		—			135
Selling, general and administrative expenses	100.1			—		—			100.1			316		—		—			316
(Income) loss from equity method investments	(4.1		)	—		—			(4.1		)	2		—		—			2
Other operating expenses (income), net	21.5			—		—			21.5			3		—		—			3
Total operating costs and expenses	729.3			—		—			729.3			909		—		—			909
Income from operations	479.3			—		—			479.3			491		—		—			491
Interest expense, net	136.0			—		—			136.0			137		—		—			137
Loss on early extinguishment of debt	58.2			—		—			58.2
Income before income taxes	285.1			—		—			285.1			354		—		—			354
Income tax expense	38.3			—		—			38.3			97		—		—			97
Net income	246.8			—		—			246.8			257		—		—			257
Equity in earnings of consolidated subsidiaries	—			246.8		(246.8		)	—			—		257		(257		)	—
Net income (loss)	246.8			246.8		(246.8		)	246.8			257		257		(257		)	257
Net income (loss) attributable to noncontrolling interests	0.3			0.3		(0.3		)	0.3			—		—		—			—
Partnership preferred unit distributions	—			67.5		—			67.5
Net income (loss) attributable to common unitholders	$	246.5		$	179.0	$	(246.5	)	$	179.0		$	257	$	257	$	(257	)	$	257
Comprehensive income (loss)	$	546.5		$	546.5	$	(546.5	)	$	546.5		$	362	$	362	$	(362	)	$	362

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Condensed Consolidating Statements of Operations

(In millions of U.S. dollars)

~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2019


	Consolidated Borrowers			RBILP		Eliminations			Consolidated			Consolidated Borrowers			RBILP		Eliminations			Consolidated
Revenues:
Sales	$	1,784.1		$	—	$	—		$	1,784.1		$	1,111		$	—	$	—		$	1,111
Franchise and property revenues	1,557.8			—		—			1,557.8			1,555			—		—			1,555
Total revenues	3,341.9			—		—			3,341.9			2,666			—		—			2,666
Operating costs and expenses:
Cost of sales	1,376.9			—		—			1,376.9			859			—		—			859
Franchise and property expenses	343.2			—		—			343.2			268			—		—			268
Selling, general and administrative expenses	318.7			—		—			318.7			628			—		—			628
(Income) loss from equity method investments	(8.9		)	—		—			(8.9		)	—			—		—			—
Other operating expenses (income), net	82.1			—		—			82.1			(14		)	—		—			(14		)
Total operating costs and expenses	2,112.0			—		—			2,112.0			1,741			—		—			1,741
Income from operations	1,229.9			—		—			1,229.9			925			—		—			925
Interest expense, net	375.4			—		—			375.4			269			—		—			269
Loss on early extinguishment of debt	78.6			—		—			78.6
Income before income taxes	775.9			—		—			775.9			656			—		—			656
Income tax expense	119.0			—		—			119.0			153			—		—			153
Net income	656.9			—		—			656.9			503			—		—			503
Equity in earnings of consolidated subsidiaries	—			656.9		(656.9		)	—			—			503		(503		)	—
Net income (loss)	656.9			656.9		(656.9		)	656.9			503			503		(503		)	503
Net income (loss) attributable to noncontrolling interests	1.1			1.1		(1.1		)	1.1			—			—		—			—
Partnership preferred unit distributions	—			202.5		—			202.5
Net income (loss) attributable to common unitholders	$	655.8		$	453.3	$	(655.8	)	$	453.3		$	503		$	503	$	(503	)	$	503
Comprehensive income (loss)	$	1,193.6		$	1,193.6	$	(1,193.6	)	$	1,193.6		$	656		$	656	$	(656	)	$	656

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Condensed Consolidating Statements of Operations

(In millions of U.S. dollars)

Three Months Ended ~~September~~June 30, ~~2016~~2018


	Consolidated Borrowers			RBILP		Eliminations			Consolidated			Consolidated Borrowers			RBILP		Eliminations			Consolidated
Revenues:
Sales	$	586.4		$	—	$	—		$	586.4		$	586		$	—	$	—		$	586
Franchise and property revenues	489.3			—					489.3			757			—		—			757
Total revenues	1,075.7			—		—			1,075.7			1,343			—		—			1,343
Operating costs and expenses:
Cost of sales	457.1			—		—			457.1			449			—		—			449
Franchise and property expenses	109.8			—		—			109.8			103			—		—			103
Selling, general and administrative expenses	82.2			—		—			82.2			318			—		—			318
(Income) loss from equity method investments	(2.6		)	—		—			(2.6		)	1			—		—			1
Other operating expenses (income), net	8.7			—		—			8.7			(30		)	—		—			(30		)
Total operating costs and expenses	655.2			—		—			655.2			841			—		—			841
Income from operations	420.5			—		—			420.5			502			—		—			502
Interest expense, net	117.3			—		—			117.3			130			—		—			130
Income before income taxes	303.2			—		—			303.2			372			—		—			372
Income tax expense	64.6			—		—			64.6			58			—		—			58
Net income	238.6			—		—			238.6			314			—		—			314
Equity in earnings of consolidated subsidiaries	—			238.6		(238.6		)	—			—			314		(314		)	—
Net income (loss)	238.6			238.6		(238.6		)	238.6			314			314		(314		)	314
Net income (loss) attributable to noncontrolling interests	1.0			1.0		(1.0		)	1.0			1			1		(1		)	1
Partnership preferred unit distributions	—			67.5		—			67.5
Net income (loss) attributable to common unitholders	$	237.6		$	170.1	$	(237.6	)	$	170.1		$	313		$	313	$	(313	)	$	313
Comprehensive income (loss)	$	131.8		$	131.8	$	(131.8	)	$	131.8		$	175		$	175	$	(175	)	$	175

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Condensed Consolidating Statements of Operations

(In millions of U.S. dollars)

~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2018


	Consolidated Borrowers			RBILP		Eliminations			Consolidated			Consolidated Borrowers			RBILP		Eliminations			Consolidated
Revenues:
Sales	$	1,635.5		$	—	$	—		$	1,635.5		$	1,134		$	—	$	—		$	1,134
Franchise and property revenues	1,398.9			—		—			1,398.9			1,463			—		—			1,463
Total revenues	3,034.4			—		—			3,034.4			2,597			—		—			2,597
Operating costs and expenses:
Cost of sales	1,285.7			—		—			1,285.7			878			—		—			878
Franchise and property expenses	323.5			—		—			323.5			207			—		—			207
Selling, general and administrative expenses	228.5			—		—			228.5			619			—		—			619
(Income) loss from equity method investments	(16.6		)	—		—			(16.6		)	(13		)	—		—			(13		)
Other operating expenses (income), net	38.2			—		—			38.2			(17		)	—		—			(17		)
Total operating costs and expenses	1,859.3			—		—			1,859.3			1,674			—		—			1,674
Income from operations	1,175.1			—		—			1,175.1			923			—		—			923
Interest expense, net	349.6			—		—			349.6			270			—		—			270
Income before income taxes	825.5			—		—			825.5			653			—		—			653
Income tax expense	171.0			—		—			171.0			60			—		—			60
Net income	654.5			—		—			654.5			593			—		—			593
Equity in earnings of consolidated subsidiaries	—			654.5		(654.5		)	—			—			593		(593		)	—
Net income (loss)	654.5			654.5		(654.5		)	654.5			593			593		(593		)	593
Net income (loss) attributable to noncontrolling interests	2.8			2.8		(2.8		)	2.8			1			1		(1		)	1
Partnership preferred unit distributions	—			202.5		—			202.5
Net income (loss) attributable to common unitholders	$	651.7		$	449.2	$	(651.7	)	$	449.2		$	592		$	592	$	(592	)	$	592
Comprehensive income (loss)	$	970.4		$	970.4	$	(970.4	)	$	970.4		$	271		$	271	$	(271	)	$	271

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Condensed Consolidating Statements of Cash Flows

(In millions of U.S. dollars)

~~Nine Months Ended September~~Six months ended June 30, ~~2017~~2019


	Consolidated Borrowers			RBILP			Eliminations			Consolidated			Consolidated Borrowers			RBILP			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	656.9		$	656.9		$	(656.9	)	$	656.9		$	503		$	503		$	(503	)	$	503
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Equity in loss (earnings) of consolidated subsidiaries	—			(656.9		)	656.9			—			—			(503		)	503			—
Depreciation and amortization	134.9			—			—			134.9			92			—			—			92
Premiums paid and non-cash loss on early extinguishment of debt	75.9			—			—			75.9
Amortization of deferred financing costs and debt issuance discount	25.2			—			—			25.2			15			—			—			15
(Income) loss from equity method investments	(8.9		)	—			—			(8.9		)	—			—			—			—
Loss (gain) on remeasurement of foreign denominated transactions	64.7			—			—			64.7
Net losses on derivatives	23.1			—			—			23.1
(Gain) loss on remeasurement of foreign denominated transactions													(3		)	—			—			(3		)
Net (gains) losses on derivatives													(34		)	—			—			(34		)
Share-based compensation expense	38.0			—			—			38.0			39			—			—			39
Deferred income taxes	(3.1		)	—			—			(3.1		)	23			—			—			23
Other	12.8			—			—			12.8			(3		)	—			—			(3		)
Changes in current assets and liabilities, excluding acquisitions and dispositions:
Accounts and notes receivable	0.3			—			—			0.3			(16		)	—			—			(16		)
Inventories and prepaids and other current assets	(12.5		)	—			—			(12.5		)	(10		)	—			—			(10		)
Accounts and drafts payable	(30.4		)	—			—			(30.4		)	(40		)	—			—			(40		)
Advertising fund restricted assets and fund liabilities	18.1			—			—			18.1
Other accrued liabilities and gift card liability	(161.4		)	—			—			(161.4		)	(166		)	—			—			(166		)
Tenant inducements paid to franchisees													(8		)	—			—			(8		)
Other long-term assets and liabilities	(40.0		)	—			—			(40.0		)	83			—			—			83
Net cash provided by operating activities	793.6			—			—			793.6
Net cash provided by (used for) operating activities													475			—			—			475
Cash flows from investing activities:
Payments for property and equipment	(16.9		)	—			—			(16.9		)	(14		)	—			—			(14		)
Proceeds from disposal of assets, restaurant closures, and refranchisings	19.6			—			—			19.6
Net payment for purchase of Popeyes, net of cash acquired	(1,635.9		)	—			—			(1,635.9		)
Return of investment on direct financing leases	11.8			—			—			11.8
Net proceeds from disposal of assets, restaurant closures, and refranchisings													22			—			—			22
Settlement/sale of derivatives, net	771.8			—			—			771.8			15			—			—			15
Other investing activities, net	(2.3		)	—			—			(2.3		)
Net cash provided by (used for) investing activities	(851.9		)	—			—			(851.9		)	23			—			—			23
Cash flows from financing activities:
Proceeds from issuance of long-term debt	4,350.0			—			—			4,350.0
Repayments of long-term debt and capital leases	(1,690.0		)	—			—			(1,690.0		)
Payment of financing costs	(57.0		)	—			—			(57.0		)
Distributions on common, preferred and Partnership exchangeable units	—			(451.9		)	—			(451.9		)
Repayments of long-term debt and finance leases													(48		)	—			—			(48		)
Distributions on Class A common and Partnership exchangeable units													—			(437		)	—			(437		)
Capital contribution from RBI Inc.	17.5			—			—			17.5			80			—			—			80
Distributions from subsidiaries	(451.9		)	451.9			—			—			(437		)	437			—			—
Other financing activities, net	(6.2		)	—			—			(6.2		)	10			—			—			10
Net cash provided by (used for) financing activities	2,162.4			—			—			2,162.4			(395		)	—			—			(395		)
Effect of exchange rates on cash and cash equivalents	22.7			—			—			22.7			12			—			—			12
Increase (decrease) in cash and cash equivalents	2,126.8			—			—			2,126.8			115			—			—			115
Cash and cash equivalents at beginning of period	1,420.4			—			—			1,420.4			913			—			—			913
Cash and cash equivalents at end of period	$	3,547.2		$	—		$	—		$	3,547.2		$	1,028		$	—		$	—		$	1,028

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidating Statements of Cash Flows

(In millions of U.S. dollars)

~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2018



	Consolidated Borrowers			RBILP			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	593		$	593		$	(593	)	$	593
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Equity in loss (earnings) of consolidated subsidiaries	—			(593		)	593			—
Depreciation and amortization	93			—			—			93
Amortization of deferred financing costs and debt issuance discount	14			—			—			14
(Income) loss from equity method investments	(13		)	—			—			(13		)
(Gain) loss on remeasurement of foreign denominated transactions	(16		)	—			—			(16		)
Net (gains) losses on derivatives	(15		)	—			—			(15		)
Share-based compensation expense	27			—			—			27
Deferred income taxes	(58		)	—			—			(58		)
Other	4			—			—			4
Changes in current assets and liabilities, excluding acquisitions and dispositions:
Accounts and notes receivable	36			—			—			36
Inventories and prepaids and other current assets	(16		)	—			—			(16		)
Accounts and drafts payable	(11		)	—			—			(11		)
Other accrued liabilities and gift card liability	(347		)	—			—			(347		)
Tenant inducements paid to franchisees	(13		)	—			—			(13		)
Other long-term assets and liabilities	(13		)	—			—			(13		)
Net cash provided by (used for) operating activities	265			—			—			265
Cash flows from investing activities:
Payments for property and equipment	(22		)	—			—			(22		)
Net proceeds from disposal of assets, restaurant closures, and refranchisings	3			—			—			3
Settlement/sale of derivatives, net	11			—			—			11
Other investing activities, net	9			—			—			9
Net cash provided by (used for) investing activities	1			—			—			1
Cash flows from financing activities:
Repayments of long-term debt and finance leases	(43		)	—			—			(43		)
Distributions on Class A common and Partnership exchangeable units	—			(307		)	—			(307		)
Distributions to RBI for payments in connections with redemption of preferred shares	—			(60		)	—			(60		)
Capital contribution from RBI Inc.	29			—			—			29
Distributions from subsidiaries	(367		)	367			—			—
Other financing activities, net	(2		)	—			—			(2		)
Net cash (used for) provided by financing activities	(383		)	—			—			(383		)
Effect of exchange rates on cash and cash equivalents	(15		)	—			—			(15		)
Increase (decrease) in cash and cash equivalents	(132		)	—			—			(132		)
Cash and cash equivalents at beginning of period	1,097			—			—			1,097
Cash and cash equivalents at end of period	$	965		$	—		$	—		$	965

Consolidated Borrowers RBILP Eliminations Consolidated
Cash flows from operating activities:
Net income $ 654.5
$ 654.5
$ (654.5 ) $ 654.5
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in loss (earnings) of consolidated subsidiaries —
(654.5 ) 654.5
—
Depreciation and amortization 129.0
—
—
129.0
Amortization of deferred financing costs and debt issuance discount 29.1
—
—
29.1
(Income) loss from equity method investments (16.6 ) —
—
(16.6 )
Loss (gain) on remeasurement of foreign denominated transactions 16.1
—
—
16.1
Net losses on derivatives 15.3
—
—
15.3
Share-based compensation expense 25.9
—
—
25.9
Deferred income taxes 34.6
—
—
34.6
Other 8.0
—
—
8.0
Changes in current assets and liabilities, excluding acquisitions and dispositions:
Accounts and notes receivable 20.0
—
—
20.0
Inventories and prepaids and other current assets (3.0 ) —
—
(3.0 )
Accounts and drafts payable 11.8
—
—
11.8
Advertising fund restricted assets and fund liabilities 4.0
—
—
4.0
Other accrued liabilities and gift card liability (23.8 ) —
—
(23.8 )
Other long-term assets and liabilities 0.9
—
—
0.9
Net cash provided by operating activities 905.8
—
—
905.8
Cash flows from investing activities:
Payments for property and equipment (18.2 ) —
—
(18.2 )
Proceeds from disposal of assets, restaurant closures, and refranchisings 18.1
—
—
18.1
Return of investment on direct financing leases 12.5
—
—
12.5
Settlement/sale of derivatives, net 4.9
—
—
4.9
Other investing activities, net 2.0
—
—
2.0
Net cash provided by (used for) investing activities 19.3
—
—
19.3
Cash flows from financing activities:
Repayments of long-term debt and capital leases (52.7 ) —
—
(52.7 )
Distributions on common, preferred and Partnership exchangeable units —
(396.9 ) —
(396.9 )
Capital contribution from RBI Inc. —
12.5
—
12.5
Distributions to RBI Inc. —
(28.5 ) —
(28.5 )
Distributions from subsidiaries (412.9 ) 412.9
—
—
Other financing activities, net
0.8
—
—
0.8
Net cash provided by (used for) financing activities (464.8 ) —
—
(464.8 )
Effect of exchange rates on cash and cash equivalents 14.6
—
—
14.6
Increase (decrease) in cash and cash equivalents 474.9
—
—
474.9
Cash and cash equivalents at beginning of period 753.7
—
—
753.7
Cash and cash equivalents at end of period $ 1,228.6
$ —
$ —
$ 1,228.6

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Note ~~19.~~18. Subsequent Events

~~Redemption of Preferred Shares~~

On October 25, 2017, the RBI board of directors approved the redemption of all of the Preferred Shares on December 12, 2017 (the "Redemption Date"). Partnership is required to make a distribution on the Partnership preferred units in an amount sufficient for RBI to fund the redemption amount of the Preferred Shares. The redemption price is $48.109657 per Preferred Share plus accrued and unpaid dividends up to the Redemption Date plus or minus any unpaid make-whole dividend and any additional dividends (the “redemption price”). The redemption price may be reduced if the make-whole dividend formula described above indicates the after-tax net dividends paid to the holder of the Preferred Shares from the original issue date through the redemption date will exceed the after-tax net dividends that would have been paid if we were a U.S. corporation. Upon redemption, the Preferred Shares will be deemed canceled, dividends will cease to accrue thereon and all rights of the holders will terminate, except the right to receive the cash payable upon such redemption.

~~Exchange of Partnership exchangeable units~~

In October 2017 Partnership received an exchange notice representing 9,050,594 Partnership exchangeable units. In accordance with the terms of the partnership agreement, Partnership will satisfy the exchange notice by repurchasing 5,000,000 Partnership exchangeable units with cash on hand and exchanging 4,050,594 Partnership exchangeable units for the same number of newly issued RBI common shares. The issuance of shares will be accounted for as a capital contribution by RBI to Partnership. The exchange of Partnership exchangeable units will be recorded as an increase to the Class A common units balance within partner's capital in our condensed consolidated balance sheet in an amount equal to the market value of the newly issued RBI common shares and a reduction to the Partnership exchangeable units balance within partner's capital of our condensed consolidated balance sheet in an amount equal to the cash paid by Partnership and the market value of the new issued RBI common shares. Pursuant to the terms of the partnership agreement, upon the exchange of Partnership exchangeable units, each such Partnership exchangeable unit is automatically deemed cancelled concurrently with such exchange. The exchange date will occur on November 8, 2017.

Cash Distributions/Dividends

On ~~October 2, 2017,~~July 3, 2019, RBI paid a cash dividend of $0.98 per Preferred Share, for a total dividend of $67.5 million, to the holder of the Preferred Shares. The dividend on the Preferred Shares included the amount due for the third calendar quarter of 2017. Partnership made a distribution to RBI as holder of the Partnership preferred units in an equal amount on the same date. On October 3, 2017, RBI paid a cash dividend of $0.20$0.50 per RBI common share to common shareholders of record on ~~September 15, 2017.~~June 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 ~~$0.20~~$0.50 per exchangeable unit to holders of record on ~~September 15, 2017.~~June 17, 2019.

~~On October 25, 2017, the~~The RBI board of directors has declared a cash dividend of $0.98 per Preferred Share, for a total dividend of $67.5 million payable on January 2, 2018 to the holder of record of the Preferred Shares on December 15, 2017. The dividend on the Preferred Shares includes the amount due for the fourth calendar quarter of 2017. However, as indicated above, if RBI redeems the Preferred Shares prior to December 15, 2017, the redemption price will include accrued and unpaid regular quarterly dividends to the Redemption Date and, in such event, no regular quarterly dividend will be paid on the Preferred Shares on January 2, 2018. If RBI redeems the Preferred Shares prior to December 15, 2017, Partnership will not make a regular quarterly distribution to RBI as holder of the Partnership preferred units on January 2, 2018 as the redemption price will include accrued and unpaid regular quarterly dividends up to the Redemption Date. On October 25, 2017, the RBI board of directors declared a cash dividend of $0.21$0.50 per RBI common share, which will be paid on ~~January~~October 3, ~~2018~~2019 to RBI common shareholders of record on ~~December 15, 2017.~~September 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 ~~$0.21~~$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.

~~Table of Contents~~

~~Issuance and Redemption of Senior Notes~~

On October 4, 2017, the Borrowers issued $1,500.0 million of 5.00% second lien senior secured notes due October 15, 2025 (the "October 2017 Senior Notes"), which were issued as additional notes under the 2017 5.00% Senior Notes Indenture pursuant to which the Borrowers previously issued the 2017 5.00% Senior Notes. The October 2017 Senior Notes are treated as a single series with the 2017 5.00% Senior Notes and have substantially the same terms as those of the 2017 5.00% Senior Notes for all purposes under the 2017 5.00% Senior Notes Indenture, including waivers, amendments, redemptions and offers to purchase. The net proceeds from the offering of the October 2017 Senior Notes were used to redeem the remaining $1,000.0 million principal amount outstanding of the 2014 6.00% Senior Notes on October 18, 2017, pay related redemption premiums, fees and expenses, and for general corporate purposes.

~~Extension of Maturity Date of Senior Secured Revolving Credit Facility~~

On October 13, 2017, the Borrowers extended the maturity date of the Revolving Credit Facility from December 12, 2019 to October 13, 2022. The extension was effected through the termination of the existing revolving credit commitments and the entry into Incremental Facility Amendment No. 3 (the "October 2017 Incremental Amendment ") to the Credit Agreement. The October 2017 Incremental Amendment maintains the same $500.0 million in aggregate principal amount of commitments under the Revolving Credit Facility. As amended, the Revolving Credit Facility matures on October 13, 2022, provided that if, on October 15, 2021, more than an aggregate of $150.0 million of the 2015 4.625% Senior Notes are outstanding, then the maturity date of the Revolving Credit Facility shall be October 15, 2021. All other material terms of the Revolving Credit Facility remained the same.

*****

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

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

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

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

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

Overview

We are a limited partnership originally formed to serve as the indirect holding company for Tim Hortons and its consolidated subsidiaries and Burger King Worldwide and its consolidated subsidiaries. We were formed on August 25, 2014 as a general partnership and registered on October 27, 2014 as a limited partnership in accordance with the laws of the Province of Ontario generally, and the ~~Ontario Limited Partnerships Act~~ ~~specifically. We are a subsidiary of RBI, our sole general partner. On March 27, 2017, we acquired Popeyes Louisiana Kitchen, Inc. and its consolidated subsidiaries (“Popeyes”).~~ We are one of the world’s largest quick service restaurant (“QSR”) companies with more than ~~$29~~$32 billion in system-wide sales and over ~~23,000~~26,000 restaurants in more than 100 countries and U.S. territories as of ~~September~~June 30, ~~2017.~~2019. Our Tim Hortons®, Burger ~~King~~®King®, and ~~Popeyes~~®Popeyes® brands have similar franchised business models with complementary daypart mixes and product platforms. Our three iconic brands are managed independently while benefiting from global scale and sharing of best practices.

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

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

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Operating Metrics ~~and Key Financial Measures~~

We evaluate our restaurants and assess our business based on the following operating ~~metrics and key financial measures:~~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.

System-wide sales represent sales at all franchise restaurants and Company restaurants. We do not record franchise sales as revenues; however, our franchise revenues include royalties based on a percentage of franchise sales. System-wide results are driven by our franchise restaurants, as approximately 100% of current system-wide restaurants are franchised.

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 ~~thirteen~~13 months or longer for TH and BK and ~~65 weeks~~17 months or longer for PLK.

Commencing in 2017, we are presenting net restaurant growth on a percentage basis, reflecting the net increase in restaurant count (openings, net of closures) over a trailing twelve month period, divided by the restaurant count at the beginning of the trailing twelve month period. This presentation has been applied retrospectively to the earliest period presented to provide period-to-period comparability. Previously, we presented net restaurant growth as the number of new restaurants opened, net of closures, during a stated period. We have disclosed restaurant count at period end which can be used to determine net restaurant growth as previously presented.

Adjusted EBITDA, a non-GAAP measure, which represents earnings (net income or loss) before interest expense, net, (gain) loss on early extinguishment of debt, income tax expense, depreciation and amortization, adjusted to exclude specifically identified items that management believes are not relevant to management’s assessment of operating performance. See ~~Non-GAAP Reconciliations~~.

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. ~~For items included in our results of operations, we calculate the FX Impact by translating current year results at prior year monthly average exchange rates. We analyze these operating metrics~~

Unless otherwise stated, system-wide sales growth, system-wide sales and comparable sales are presented on a ~~constant currency~~system-wide basis, which means they include franchise restaurants and Company restaurants. System-wide results are driven by our franchise restaurants, as ~~this helps identify underlying business trends, without distortion from~~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 ~~effects~~percentage change in restaurant count (openings, net of ~~currency movements.~~closures) over a trailing twelve-month period, divided by the restaurant count at the beginning of the trailing twelve month period.

~~Table of Contents~~

Recent Events and Factors Affecting Comparability

~~Popeyes Acquisition~~Transition to New Lease Accounting Standard

~~As described~~

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

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

Beginning on January 1, 2019, we record lease income and lease cost on a gross basis for lessee reimbursements of costs such as property taxes and maintenance when we are the lessor in the lease. Although there was no net impact to our consolidated statement of operations from this change, the presentation resulted in total increases to both franchise and property revenues and franchise and property expenses of $33 million ($22 million related to our TH segment, $10 million related to our BK segment and $1 million related to our PLK segment) during the three months ended June 30, 2019 and $67 million ($43 million related to our TH segment, $23 million related to our BK segment and $1 million related to our PLK segment) during the six months ended June 30, 2019, compared to the three and six months ended June 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 $2 million and $4 million net increases in non-cash amortization expense during the three and six months ended June 30, 2019, respectively, compared to the three and six months ended June 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.

Please refer to Note 24, Leases, to the accompanying unaudited condensed consolidated financial statements onfor further details of the effects of this change in accounting principle.

Table of Contents

PLK Transaction Costs

On March 27, 2017, we completed the acquisition of Popeyes ~~for total consideration of $1,654.7 million~~Louisiana Kitchen, Inc. (the ~~“Popeyes Acquisition”~~"Popeyes Acquisition"). The consideration was funded through (1) cash on hand of approximately$354.7 million, and (2) $1,300.0 million from incremental borrowings under our Term Loan Facility – see Note 9 to the accompanying unaudited condensed consolidated financial statements.

PLK revenues and segment income from March 28, 2017 through September 30, 2017 are included in our consolidated statement of operations for the nine months ended September 30, 2017. The changes in our results of operations for the three and nine months ended September 30, 2017 as compared to the three and nine months ended September 30, 2016 are partially driven by the inclusion of the results of operations of PLK. The PLK statement of operations data for the three and nine months ended September 30, 2017 is summarized as follows:

PLK Segment (in millions of U.S. dollars) Three months ended September 30, 2017 Nine months ended September 30, 2017
Revenues:
Sales $ 22.7
$ 45.7
Franchise and property revenues 45.3
89.0
Total revenues 68.0
134.7
Cost of sales 17.8
37.0
Franchise and property expenses 2.2
4.5
Segment SG&A 12.8
27.2
Segment depreciation and amortization ^(a)
1.6
4.0
Segment income 36.8
70.0


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

~~PLK Transaction Costs~~

In connection with the Popeyes Acquisition, we incurred certain non-recurring fees and expenses (“PLK Transaction costs”) totaling ~~$6.9~~$5 million and ~~$49.8~~$10 million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, consisting primarily of professional fees and compensation related expenses, all of which are classified as selling, general and administrative expenses in ~~the~~our condensed consolidated ~~statement~~statements of operations. We did not incur any PLK Transaction costs during the three and six months ended June 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 revised 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 $11 million and $7 million of costs during the three months ended June 30, 2019 and 2018, respectively, and $17 million and $14 million of costs during the six months ended June 30, 2019 and 2018, respectively, which are classified as selling, general and administrative expenses in our 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”). We expect to continue to incur additional ~~PLK Transaction costs through 2018 as we integrate~~Corporate restructuring and tax advisory fees related to the ~~operations of PLK.~~Tax Act in 2019.

~~Integration~~Office Centralization and Relocation Costs

In connection with the ~~implementation~~centralization and relocation of ~~initiatives~~our Canadian and U.S. restaurant support centers to ~~integrate the back-office processes of TH~~new offices in Toronto, Ontario, and ~~BK to enhance efficiencies,~~Miami, Florida, respectively, we incurred ~~$4.4~~certain non-operational expenses ("Office centralization and relocation costs") totaling $2 million and ~~$10.4~~$12 million ~~related to these initiatives~~ during the three ~~and nine~~ months ended ~~September~~June 30, ~~2016,~~2019 and 2018, respectively, and $6 million and $12 million during the six months ended June 30, 2019 and 2018, respectively, consisting primarily ~~consisting~~ of ~~professional fees.~~moving costs and relocation-driven compensation expenses, which are classified as selling, general and administrative expenses in our condensed consolidated statements of operations. We do not expect to incur additional Office centralization and relocation costs.

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Results of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018

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


Consolidated	Three Months Ended September 30,						Variance			FX Impact			Variance Excluding FX Impact			Nine Months Ended September 30,						Variance			FX Impact			Variance Excluding FX Impact			Three Months Ended June 30,					Variance			FX Impact (a)			Variance Excluding FX Impact			Six Months Ended June 30,						Variance			FX Impact (a)			Variance Excluding FX Impact
	2017			2016			Favorable / (Unfavorable)									2017			2016			Favorable / (Unfavorable)									2019		2018			Favorable / (Unfavorable)									2019			2018			Favorable / (Unfavorable)
Revenues:
Sales	$	631.6		$	586.4		$	45.2		$	20.6		$	24.6		$	1,784.1		$	1,635.5		$	148.6		$	15.6		$	133.0		$	589	$	586		$	3		$	(17	)	$	20		$	1,111		$	1,134		$	(23	)	$	(39	)	$	16
Franchise and property revenues	577.0			489.3			87.7			9.8			77.9			1,557.8			1,398.9			158.9			3.7			155.2			811		757			54			(18		)	72			1,555			1,463			92			(41		)	133
Total revenues	1,208.6			1,075.7			132.9			30.4			102.5			3,341.9			3,034.4			307.5			19.3			288.2			1,400		1,343			57			(35		)	92			2,666			2,597			69			(80		)	149
Operating costs and expenses:
Cost of sales	493.3			457.1			(36.2		)	(16.0		)	(20.2		)	1,376.9			1,285.7			(91.2		)	(12.4		)	(78.8		)	453		449			(4		)	13			(17		)	859			878			19			30			(11		)
Franchise and property expenses	118.5			109.8			(8.7		)	(3.2		)	(5.5		)	343.2			323.5			(19.7		)	(1.9		)	(17.8		)	135		103			(32		)	3			(35		)	268			207			(61		)	6			(67		)
Selling, general and administrative expenses	100.1			82.2			(17.9		)	(2.1		)	(15.8		)	318.7			228.5			(90.2		)	(1.4		)	(88.8		)	316		318			2			4			(2		)	628			619			(9		)	9			(18		)
(Income) loss from equity method investments	(4.1		)	(2.6		)	1.5			—			1.5			(8.9		)	(16.6		)	(7.7		)	(0.1		)	(7.6		)	2		1			(1		)	—			(1		)	—			(13		)	(13		)	(3		)	(10		)
Other operating expenses (income), net	21.5			8.7			(12.8		)	(0.6		)	(12.2		)	82.1			38.2			(43.9		)	0.6			(44.5		)	3		(30		)	(33		)	(3		)	(30		)	(14		)	(17		)	(3		)	(2		)	(1		)
Total operating costs and expenses	729.3			655.2			(74.1		)	(21.9		)	(52.2		)	2,112.0			1,859.3			(252.7		)	(15.2		)	(237.5		)	909		841			(68		)	17			(85		)	1,741			1,674			(67		)	40			(107		)
Income from operations	479.3			420.5			58.8			8.5			50.3			1,229.9			1,175.1			54.8			4.1			50.7			491		502			(11		)	(18		)	7			925			923			2			(40		)	42
Interest expense, net	136.0			117.3			(18.7		)	0.1			(18.8		)	375.4			349.6			(25.8		)	(0.1		)	(25.7		)	137		130			(7		)	—			(7		)	269			270			1			—			1
Loss on early extinguishment of debt	58.2			—			(58.2		)	—			(58.2		)	78.6			—			(78.6		)	—			(78.6		)
Income before income taxes	285.1			303.2			(18.1		)	8.6			(26.7		)	775.9			825.5			(49.6		)	4.0			(53.6		)	354		372			(18		)	(18		)	—			656			653			3			(40		)	43
Income tax expense	38.3			64.6			26.3			1.5			24.8			119.0			171.0			52.0			0.2			51.8			97		58			(39		)	1			(40		)	153			60			(93		)	2			(95		)
Net income	$	246.8		$	238.6		$	8.2		$	10.1		$	(1.9	)	$	656.9		$	654.5		$	2.4		$	4.2		$	(1.8	)	$	257	$	314		$	(57	)	$	(17	)	$	(40	)	$	503		$	593		$	(90	)	$	(38	)	$	(52	)

TH Segment	Three Months Ended September 30,						Variance			FX Impact			Variance Excluding FX Impact			Nine Months Ended September 30,						Variance			FX Impact			Variance Excluding FX Impact
	2017			2016			Favorable / (Unfavorable)									2017			2016			Favorable / (Unfavorable)
Revenues:
Sales	$	585.5		$	563.0		$	22.5		$	20.4		$	2.1		$	1,666.8		$	1,565.8		$	101.0		$	14.7		$	86.3
Franchise and property revenues	241.5			226.9			14.6			8.5			6.1			666.1			641.7			24.4			6.6			17.8
Total revenues	827.0			789.9			37.1			28.9			8.2			2,332.9			2,207.5			125.4			21.3			104.1
Cost of sales	454.2			436.7			(17.5		)	(15.9		)	(1.6		)	1,273.8			1,226.4			(47.4		)	(11.7		)	(35.7		)
Franchise and property expenses	83.2			77.7			(5.5		)	(3.0		)	(2.5		)	240.7			224.8			(15.9		)	(2.5		)	(13.4		)
Segment SG&A	24.1			17.0			(7.1		)	(0.5		)	(6.6		)	71.4			48.3			(23.1		)	(0.4		)	(22.7		)
Segment depreciation and amortization^(a)	26.1			25.7			(0.4		)	(0.8		)	0.4			75.9			76.9			1.0			(0.7		)	1.7
Segment income ^(b)	294.4			287.1			7.3			10.5			(3.2		)	831.7			793.9			37.8			7.6			30.2

BK Segment	Three Months Ended September 30,						Variance			FX Impact			Variance Excluding FX Impact			Nine Months Ended September 30,						Variance			FX Impact			Variance Excluding FX Impact
	2017			2016			Favorable / (Unfavorable)									2017			2016			Favorable / (Unfavorable)
Revenues:
Sales	$	23.4		$	23.4		$	—		$	0.2		$	(0.2	)	$	71.6		$	69.7		$	1.9		$	0.9		$	1.0
Franchise and property revenues	290.2			262.4			27.8			1.3			26.5			802.7			757.2			45.5			(2.9		)	48.4
Total revenues	313.6			285.8			27.8			1.5			26.3			874.3			826.9			47.4			(2.0		)	49.4
Cost of sales	21.3			20.4			(0.9		)	(0.1		)	(0.8		)	66.1			59.3			(6.8		)	(0.7		)	(6.1		)
Franchise and property expenses	33.1			32.1			(1.0		)	(0.2		)	(0.8		)	98.0			98.7			0.7			0.6			0.1
Segment SG&A	38.0			43.5			5.5			(0.5		)	6.0			110.3			122.9			12.6			(0.1		)	12.7
Segment depreciation and amortization ^(a)	12.7			12.0			(0.7		)	(0.1		)	(0.6		)	37.9			35.9			(2.0		)	—			(2.0		)
Segment income	233.9			201.8			32.1			0.8			31.3			637.8			581.9			55.9			(2.2		)	58.1


(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.

~~Table of Contents~~



TH Segment	Three Months Ended June 30,				Variance			FX Impact (a)			Variance Excluding FX Impact			Six Months Ended June 30,				Variance			FX Impact (a)			Variance Excluding FX Impact
	2019		2018		Favorable / (Unfavorable)									2019		2018		Favorable / (Unfavorable)
Revenues:
Sales	$	551	$	548	$	3		$	(17	)	$	20		$	1,034	$	1,056	$	(22	)	$	(39	)	$	17
Franchise and property revenues	291		275		16			(8		)	24			557		530		27			(19		)	46
Total revenues	842		823		19			(25		)	44			1,591		1,586		5			(58		)	63
Cost of sales	420		417		(3		)	13			(16		)	792		813		21			30			(9		)
Franchise and property expenses	90		68		(22		)	2			(24		)	177		138		(39		)	5			(44		)
Segment SG&A	77		80		3			3			—			159		162		3			6			(3		)
Segment depreciation and amortization (b)	26		26		—			1			(1		)	52		52		—			2			(2		)
Segment income (c)	287		286		1			(9		)	10			524		531		(7		)	(20		)	13


(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 ~~$2.8~~$5 million and ~~$2.9~~$3 million of cash distributions received from equity method investments for the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, respectively. TH segment income includes ~~$8.8~~$8 million and ~~$9.0~~$6 million of cash distributions received from equity method investments for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, respectively.

Table of Contents

Three Months Ended
September 30, Nine Months Ended
September 30,
Key Business Metrics 2017 2016 2017 2016
Comparable sales
    TH 0.3 % 2.0 % (0.2 )% 3.3 %
    BK 3.6 % 1.7 % 2.6 % 2.2 %
    PLK (c) (1.8 )% 1.8 % (1.5 )% 1.4 %
System-wide sales growth
    TH 3.0 % 4.8 % 3.0 % 6.1 %
    BK 11.2 % 7.0 % 9.4 % 7.5 %
    PLK (c) 4.5 % 8.3 % 4.6 % 7.0 %
System-wide sales
    TH $ 1,812.3
$ 1,690.4
$ 4,971.8
$ 4,783.0
    BK $ 5,335.0
$ 4,776.7
$ 14,773.1
$ 13,557.6
    PLK (c) $ 897.3
$ 781.6
$ 2,623.5
$ 2,519.0

As of
September 30, 2017 September 30, 2016
Net restaurant growth
    TH 4.2 % 3.4 %
    BK 6.6 % 3.9 %
    PLK (d) 5.9 % 5.9 %
Restaurant count
    TH 4,680
4,492
    BK �� 16,253
15,243
    PLK (d) 2,809
2,653



BK Segment	Three Months Ended June 30,				Variance			FX Impact (a)			Variance Excluding FX Impact			Six Months Ended June 30,				Variance			FX Impact (a)			Variance Excluding FX Impact
	2019		2018		Favorable / (Unfavorable)									2019		2018		Favorable / (Unfavorable)
Revenues:
Sales	$	19	$	19	$	—		$	—		$	—		$	38	$	38	$	—		$	—		$	—
Franchise and property revenues	428		399		29			(9		)	38			820		770		50			(21		)	71
Total revenues	447		418		29			(9		)	38			858		808		50			(21		)	71
Cost of sales	17		17		—			—			—			35		33		(2		)	—			(2		)
Franchise and property expenses	42		32		(10		)	1			(11		)	85		64		(21		)	1			(22		)
Segment SG&A	149		146		(3		)	1			(4		)	290		286		(4		)	2			(6		)
Segment depreciation and amortization (b)	12		12		—			—			—			25		24		(1		)	—			(1		)
Segment income (d)	252		236		16			(8		)	24			474		450		24			(19		)	43

~~(c)~~

For the nine months ended September 30, 2017, PLK comparable sales, system-wide sales growth and system-wide sales are for the period from December 26, 2016 through September 30, 2017 and are calculated using the same period in the prior year (December 26, 2015 through September 30, 2016). For 2016, PLK figures are shown for information purposes only and are consistent with PLK's former fiscal calendar. Consequently, results for 2017 may not be comparable to those of 2016.

(d)

~~For 2017, net restaurant growth is~~BK segment income includes $1 million of cash distributions received from equity method investments for the ~~period~~three months ended June 30, 2019. No cash distributions were received from ~~October 3, 2016 through September 30, 2017 and from October 5, 2015 through October 2, 2016~~equity method investments for the ~~comparative period. Restaurant count is as~~three months ended June 30, 2018. BK segment income includes $2 million and $1 million of ~~September 30, 2017~~cash distributions received from equity method investments for the ~~current period,~~six months ended June 30, 2019 and ~~as of October 2, 2016 for the comparative period, inclusive of temporary closures.~~2018, respectively.



PLK Segment	Three Months Ended June 30,				Variance			FX Impact (a)			Variance Excluding FX Impact			Six Months Ended June 30,				Variance			FX Impact (a)			Variance Excluding FX Impact
	2019		2018		Favorable / (Unfavorable)									2019		2018		Favorable / (Unfavorable)
Revenues:
Sales	$	19	$	19	$	—		$	—		$	—		$	39	$	40	$	(1	)	$	—		$	(1	)
Franchise and property revenues	92		83		9			(1		)	10			178		163		15			(1		)	16
Total revenues	111		102		9			(1		)	10			217		203		14			(1		)	15
Cost of sales	16		15		(1		)	—			(1		)	32		32		—			—			—
Franchise and property expenses	3		3		—			—			—			6		5		(1		)	—			(1		)
Segment SG&A	54		47		(7		)	—			(7		)	103		93		(10		)	—			(10		)
Segment depreciation and amortization (b)	3		2		(1		)	—			(1		)	6		5		(1		)	—			(1		)
Segment income	41		40		1			(1		)	2			82		79		3			(1		)	4

Table of Contents



	Three Months Ended June 30,						Six Months Ended June 30,
Key Business Metrics	2019			2018			2019			2018
System-wide sales growth
TH	1.6		%	2.2		%	1.1		%	2.1		%
BK	9.8		%	8.4		%	9.0		%	9.8		%
PLK	8.8		%	10.7		%	7.8		%	10.8		%
Consolidated	7.9		%	7.3		%	7.2		%	8.2		%
System-wide sales
TH	$	1,716		$	1,742		$	3,263		$	3,350
BK	$	5,717		$	5,403		$	11,006		$	10,552
PLK	$	1,012		$	938		$	1,967		$	1,841
Consolidated	$	8,445		$	8,083		$	16,236		$	15,743
Comparable sales
TH	0.5		%	—		%	—		%	(0.1		)%
BK	3.6		%	1.8		%	2.9		%	2.8		%
PLK	3.0		%	2.9		%	1.8		%	3.1		%

							As of June 30,
							2019			2018
Net restaurant growth
TH							1.6		%	3.0		%
BK							5.8		%	6.4		%
PLK							6.1		%	7.5		%
Consolidated							5.0		%	5.8		%
Restaurant count
TH							4,872			4,794
BK							18,008			17,022
PLK							3,156			2,975
Consolidated							26,036			24,791

Comparable Sales

TH comparable sales ~~of 0.3% for~~were 0.5% during the three months ended ~~September~~June 30, ~~2017 was primarily driven by~~2019, including Canada comparable sales of ~~0.6%~~0.7%. TH comparable sales ~~of (0.2)%~~were flat during the ~~nine~~six months ended ~~September~~June 30, ~~2017 was primarily driven by flat~~2019, including Canada comparable ~~sales.~~sales of 0.2%.

BK comparable sales ofwere 3.6% ~~and 2.6%~~ during the three ~~and nine~~ months ended ~~September~~June 30, ~~2017, respectively, was primarily driven by~~2019, including U.S. comparable sales of ~~4.0% and 1.7%~~0.5%. BK comparable sales were 2.9% during ~~such periods.~~the six months ended June 30, 2019, including U.S. comparable sales of 0.5%.

PLK comparable sales ~~of (1.8)% and (1.5)%~~were 3.0% during the three ~~and nine~~ months ended ~~September~~June 30, ~~2017, respectively, was primarily driven by~~2019, including U.S. comparable sales of ~~(2.6)% and (2.1)%~~2.9%. PLK comparable sales were 1.8% during ~~such periods.~~the six months ended June 30, 2019, including U.S. comparable sales of 1.7%.

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Table of Contents

Sales and Cost of Sales

Sales include TH supply chain sales and sales from Company restaurants. ~~Supply~~TH supply chain sales represent sales of products, supplies and restaurant equipment, ~~other than equipment sales related to initial restaurant establishment or renovations, which are shipped directly from our warehouses or by third-party distributors to restaurants or retailers,~~ 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 ~~goods delivered by third-party distributors to the restaurants for which we manage the supply chain logistics, and for~~ products sold ~~through~~to retailers. Cost of sales also includes food, paper and labor costs of Company restaurants, which includes costs incurred by our consolidated TH Restaurant VIEs (see Note 3 to the accompanying unaudited condensed consolidated financial statements for additional information on Restaurant VIEs).restaurants.

During the three months ended ~~September~~June 30, ~~2017,~~2019, the increase in sales was driven by ~~the inclusion~~an increase of ~~$22.7~~$20 million ~~from~~in our ~~PLK~~TH segment, ~~a $2.1 million~~mostly offset by an unfavorable FX Impact of $17 million. The increase in our TH segment ~~and a favorable~~was driven by an increase in supply chain sales.

During the six months ended June 30, 2019, the decrease in sales was driven by an unfavorable FX Impact of ~~$20.6~~$39 million, partially offset by an increase of $17 million in our TH segment. The increase in our TH segment was driven by a $24 million increase in supply chain sales, partially offset by a decrease of ~~$0.2~~$7 million in our TH Company restaurant revenue, primarily from Company restaurant refranchisings and the conversion of Restaurant VIEs to franchise restaurants in prior periods.

During the three months ended June 30, 2019, the increase in cost of sales was driven primarily by an increase of $16 million in our TH segment, mostly offset by a $13 million favorable FX Impact. The increase in our TH segment was driven by an increase of $18 million in supply chain cost of sales due to the increase in supply chain sales discussed above.

During the six months ended June 30, 2019, the decrease in cost of sales was driven primarily by a $30 million favorable FX Impact, partially offset by an increase of $9 million in our TH segment and an increase of $2 million in our BK segment. The increase in our TH segment was driven by an $18.8 million increase in supply chain sales primarily reflecting growth in system wide sales, partially offset by a $16.7 million decrease in our TH Company restaurant revenue, primarily from the conversion of Restaurant VIEs to franchise restaurants.

~~During the nine months ended September 30, 2017, the increase in sales was driven by an $86.3 million increase in our TH segment, the inclusion of $45.7 million from our PLK segment, an~~ increase of ~~$1.0~~$16 million in our BK segment, and a $15.6 million favorable FX Impact. The increase in our TH segment was driven by a $127.2 million increase in supply chain sales primarily reflecting growth in system wide sales and the launch of our espresso-based beverage platform, partially offset by a $40.9 million decrease in our TH Company restaurant revenue, primarily from the conversion of Restaurant VIEs to franchise restaurants.

During the three months ended September 30, 2017, the increase in cost of sales was driven primarily by the inclusion of $17.8 million from our PLK segment, a $1.6 million increase in our TH segment, a $0.8 million increase in our BK segment, and a $16.0 million unfavorable FX Impact. The increase in our TH segment was primarily due to a $14.1 million increase in supply chain cost of sales ~~driven by~~due to the increase in supply chain sales ~~described above. This factor was~~discussed above, partially offset by a ~~$12.5~~decrease of $7 million ~~decrease~~ in Company restaurant cost of sales, primarily from Company restaurant refranchisings and the conversion of Restaurant VIEs to franchise ~~restaurants.~~

~~During the nine months ended September 30, 2017, the increase~~restaurants in cost of sales was driven primarily by the inclusion of $37.0 million from our PLK segment, a $35.7 million increase in our TH segment, a $6.1 million increase in our BK segment, and a $12.4 million unfavorable FX Impact. The increase in our TH segment was primarily due to a $71.0 million increase in supply chain cost of sales driven by the increase in supply chain sales described above, net of supply chain cost savings derived from effective cost management. This factor was partially offset by a $35.3 million decrease in Company restaurant cost of sales, primarily from the conversion of Restaurant VIEs to franchise restaurants.prior periods.

Franchise and Property

Franchise and property revenues consist primarily of royalties earned on franchise sales, rents from real estate leased or subleased to franchisees, franchise fees, ~~revenues derived from equipment packages at establishment of a restaurant and in connection with renewal or renovation,~~ and other revenue. Franchise and property expenses consist primarily of depreciation of properties leased to franchisees, rental expense associated with properties subleased to franchisees, ~~costs of equipment packages sold at establishment of a restaurant and in connection with renewal or renovation,~~ amortization of franchise agreements, and bad debt expense (recoveries).

During the three months ended ~~September~~June 30, ~~2017,~~2019, the increase in franchise and property revenues was driven by ~~the inclusion~~an increase of ~~$45.3~~$38 million ~~from our PLK segment, a $26.5 million increase~~ in our BK segment, ~~a $6.1~~an increase of $24 million ~~increase~~ in our TH segment, and ~~a $9.8~~an increase of $10 million ~~favorable~~in our PLK segment, partially offset by an $18 million unfavorable FX Impact. The ~~increase~~increases in our BK and THPLK segments ~~was~~were primarily ~~due to an increase~~driven by increases in royalties ~~driven by~~as a result of system-wide sales growth.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, the increase in franchise and property revenues was driven by ~~the inclusion~~an increase of ~~$89.0~~$71 million ~~from our PLK segment, a $48.4 million increase~~ in our BK segment, ~~a $17.8~~an increase of $46 million ~~increase~~ in our TH segment, and an increase of $16 million in our PLK segment, partially offset by a ~~$3.7~~$41 million ~~favorable~~unfavorable FX Impact. The ~~increase~~increases in our BK and THPLK segments ~~was~~were primarily ~~due to an increase~~driven by increases in royalties ~~driven by~~as a result of system-wide sales growth.

~~Table~~Additionally, the increase in franchise and property revenues in all of ~~Contents~~

our segments during the three and six months ended June 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 ~~September~~June 30, ~~2017,~~2019, the increase in franchise and property expenses was driven by ~~a $2.5~~an increase of $24 million ~~increase~~ in our TH segment ~~the inclusion~~and an increase of ~~$2.2~~$11 million ~~from our PLK segment, a $0.8 million increase~~ in our BK segment, ~~and~~partially offset by a ~~$3.2~~$3 million ~~unfavorable~~favorable FX Impact.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, the increase in franchise and property expenses was driven by ~~a $13.4~~an increase of $44 million ~~increase~~ in our TH segment, ~~the inclusion~~an increase of ~~$4.5~~$22 million ~~from~~in our BK segment, and an increase of $1 million in our PLK segment, ~~and a $1.9 million unfavorable FX Impact,~~ partially offset by a ~~$0.1~~$6 million ~~decrease~~favorable FX Impact. The increase in all of our ~~BK segment.~~segments during the three and six months ended June 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
September 30, Variance Nine Months Ended
September 30, Variance
$ % $ %
2017 2016 Favorable / (Unfavorable) 2017 2016 Favorable / (Unfavorable)
Segment SG&A:
TH $ 24.1
$ 17.0
$ (7.1 ) (41.8 )% $ 71.4
$ 48.3
$ (23.1 ) (47.8 )%
BK 38.0
43.5
5.5
12.6 % 110.3
122.9
12.6
10.3 %
PLK 12.8
—
(12.8 ) NM
27.2
—
(27.2 ) NM
Share-based compensation and non-cash incentive compensation expense 12.5
11.8
(0.7 ) (5.9 )% 42.9
31.0
(11.9 ) (38.4 )%
Depreciation and amortization 5.8
5.5
(0.3 ) (5.5 )% 17.1
15.9
(1.2 ) (7.5 )%
PLK Transaction costs 6.9
—
(6.9 ) NM
49.8
—
(49.8 ) NM
Integration costs —
4.4
4.4
NM
—
10.4
10.4
NM
Selling, general and administrative expenses $ 100.1
$ 82.2
$ (17.9 ) (21.8 )% $ 318.7
$ 228.5
$ (90.2 ) (39.5 )%

~~NM - not meaningful~~



	Three Months Ended June 30,				Variance					Six Months Ended June 30,				Variance
	Three Months Ended June 30,				$			%		Six Months Ended June 30,				$			%
	2019		2018		Favorable / (Unfavorable)					2019		2018		Favorable / (Unfavorable)
Segment SG&A:
TH	$	77	$	80	$	3		3.8	%	$	159	$	162	$	3		1.9	%
BK	149		146		(3		)	(2.1	)%	290		286		(4		)	(1.4	)%
PLK	54		47		(7		)	(14.9	)%	103		93		(10		)	(10.8	)%
Share-based compensation and non-cash incentive compensation expense	19		16		(3		)	(18.8	)%	44		31		(13		)	(41.9	)%
Depreciation and amortization	4		5		1			20.0	%	9		11		2			18.2	%
PLK Transaction costs	—		5		5			NM		—		10		10			NM
Corporate restructuring and tax advisory fees	11		7		(4		)	(57.1	)%	17		14		(3		)	(21.4	)%
Office centralization and relocation costs	2		12		10			83.3	%	6		12		6			50.0	%
Selling, general and administrative expenses	$	316	$	318	$	2		0.6	%	$	628	$	619	$	(9	)	(1.5	)%

Segment selling, general and administrative expenses (“Segment SG&A”) include segment selling expenses, which consist primarily of ~~Company restaurant~~ advertising fund ~~contributions,~~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 ~~integration~~tax advisory fees and Office centralization and relocation costs.

During the three and ~~nine~~six months ended ~~September~~June 30, 2017, TH Segment SG&A increased primarily due to an increase in salaries and benefits and an unfavorable FX Impact. During the same period, BK Segment SG&A decreased primarily due to a decrease in salaries and benefits, partially offset by an unfavorable FX Impact.

~~During the three months ended September 30, 2017,~~2019, the increase in share-based compensation and non-cash incentive compensation expense was ~~due~~ primarily ~~to additional equity awards granted.~~

~~During the nine months ended September 30, 2017, the increase in share-based compensation and non-cash incentive compensation expense was~~ due ~~primarily~~ to an increase in the number of equity awards granted during 2019 and an increase associated with equity award modifications ~~an increase related to~~in the ~~remeasurement of liability-classified and non-employee equity awards to fair value, and an increase due to additional equity awards granted.~~

~~During the three and nine~~six months ended ~~September~~June 30, ~~2017, the increase in depreciation and amortization expense was primarily due to depreciation related to information technology capital expenditures during 2016.~~2019.

(Income) Loss from Equity Method Investments

~~Table of Contents~~

The change in (income) loss from equity method investments during the ~~three~~six months ended ~~September~~June 30, ~~2017 was primarily driven by improved results of our TH and BK equity method investments.~~

~~The change in (income) loss from equity method investments during the nine months ended September 30, 2017~~2019 was primarily driven by the ~~prior year~~ recognition of ~~an $11.6~~a $20 million ~~increase to the carrying value of our investment balance and a~~ non-cash dilution gain ~~included in (income) loss from equity method investments~~during 2018 on the ~~issuance of capital stock~~initial public offering by one of our equity method investees ~~partially offset by improved results of our BK~~and a decrease in equity method ~~investments in~~investment net losses that we recognized during the current ~~period.~~year.

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Other Operating Expenses (Income), net

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


	Three Months Ended September 30,					Nine Months Ended September 30,				Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016		2017		2016		2019			2018			2019			2018
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings	$	3.4		$	3.3	$	14.9	$	19.6	$	(10	)	$	3		$	(7	)	$	10
Litigation settlements and reserves, net	0.6			0.4		1.7		2.0
Litigation settlements (gains) and reserves, net										—			—			—			(6		)
Net losses (gains) on foreign exchange	17.7			4.1		64.9		16.1		12			(33		)	(3		)	(16		)
Other, net	(0.2		)	0.9		0.6		0.5		1			—			(4		)	(5		)
Other operating expenses (income), net	$	21.5		$	8.7	$	82.1	$	38.2	$	3		$	(30	)	$	(14	)	$	(17	)

Litigation settlements (gains) ~~on disposals of assets, restaurant closures,~~ and ~~refranchisings for the three and nine months ended September 30, 2017 and the three and nine months ended September 30, 2016~~reserves, net primarily reflects ~~losses~~payments made and proceeds received in connection with ~~refranchisings in our TH business.~~litigation matters.

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

Interest Expense, net

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


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2019			2018			2019			2018
Interest expense, net	$	136.0		$	117.3		$	375.4		$	349.6		$	137		$	130		$	269		$	270
Weighted average interest rate on long-term debt	4.8		%	5.2		%	4.9		%	5.2		%	5.2		%	4.9		%	5.1		%	4.8		%

During the three ~~and nine~~ months ended ~~September~~June 30, ~~2017,~~2019, interest expense, net increased primarily due to ~~higher outstanding debt~~an increase in the weighted average interest rate in the current year.

During the six months ended June 30, 2019, interest expense, net decreased primarily due to a $37 million benefit during the six months ended June 30, 2019 compared to a $24 million benefit during the period from ~~incremental term loans and the issuance~~March 15, 2018 to June 30, 2018 from our adoption of ~~senior notes during 2017,~~a new hedge accounting standard in 2018, partially offset by an increase in ~~interest income and a lower~~the weighted average interest ~~rate.~~

~~Loss on Early Extinguishment of Debt~~

~~During~~rate in the three and nine months ended September 30, 2017, we recorded a $58.2 million and $78.6 million loss on early extinguishment of debt, respectively, which primarily reflects the payment of premiums to redeem a portion of our second lien notes during September 2017 and the write-off of unamortized debt issuance costs and discounts in connection with the refinancing of our Term Loan Facility and the redemption of a portion of our second lien notes.current year.

Income Tax Expense

Our effective tax rate was ~~13.4%~~27.4% and ~~15.3%~~15.7% for the three ~~and nine~~ months ended ~~September~~June 30, ~~2017, respectively,~~2019 and ~~21.3% and 20.7%~~2018, respectively. The effective tax rate for the ~~comparable periods~~three months ended June 30, 2019 reflects a $37 million increase in ~~2016, respectively.~~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 10.4%. The increase in our effective tax rate also reflects a benefit from reserve releases in 2018 due to audit settlements, partially offset by the benefits in 2019 of internal financing arrangements and a higher tax benefit from stock option exercises. The effective tax rate was reduced by ~~6.8%~~4.0% and ~~4.5%~~0.6% for the three ~~and nine~~ months ended ~~September~~June 30, ~~2017,~~2019 and 2018, respectively, as a result of ~~excess tax~~ benefits from ~~share-based~~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.

~~Table of Contents~~

~~compensation which are now recorded as a reduction to~~Our effective tax rate was 23.4% and 9.2% for the income tax provision as a result of the required adoption of a new share-based compensation accounting standard (see Note 4 to the accompanying unaudited condensed consolidated financial statements). Additionally, oursix months ended June 30, 2019 and 2018, respectively. The effective tax rate for the ~~three and nine~~six months ended ~~September~~June 30, ~~2017 benefited~~2019 reflects a $37 million increase in the provision discussed above which increased our effective tax rate by 5.6% for the period. The increase in our effective tax rate also reflects a lower tax benefit from stock option exercises and the ~~impact of our financing structure and net audit-related~~benefit from reserve releases in 2018 due to audit settlements, partially offset by ~~non-deductible PLK Transaction costs.~~the benefits of internal financing arrangements in 2019. The effective tax rate was reduced by 4.1% and 10.1% for the six months

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ended June 30, 2019 and 2018, respectively, as a result of benefits from stock option exercises.

Net Income

We reported net income of ~~$246.8~~$257 million for the three months ended ~~September~~June 30, ~~2017,~~2019, compared to net income of ~~$238.6~~$314 million for the three months ended ~~September~~June 30, ~~2016.~~2018. The ~~increase~~decrease in net income is primarily asdue to a ~~result of increases in segment income in TH and BK totaling $39.4~~$39 million ~~the inclusion of $36.8 million of PLK segment income, a $26.3 million decrease~~increase in income tax expense, ~~and~~a $33 million unfavorable change in the ~~non-recurrence of $4.4 million in Integration costs. These factors were partially offset by~~results from other operating expenses (income), net, a ~~$58.2 million loss on early extinguishment of debt, an $18.7~~$7 million increase in interest expense, net, a ~~$12.8~~$5 million unfavorable change from the impact of equity method investments, a $4 million increase in ~~other operating expenses (income), net,~~Corporate restructuring and ~~$6.9 million of PLK Transaction costs.~~

~~We reported net income of $656.9 million for the nine months ended September 30, 2017, compared to net income of~~ ~~$654.5 million for the nine months ended September 30, 2016. The increase in net income is primarily as~~tax advisory fees and a result of increases in segment income in TH and BK totaling $93.7 million, the inclusion of $70.0 million of PLK segment income, a $52.0 million decrease in income tax expense and the non-recurrence of $10.4 million in Integration costs. These factors were partially offset by a $78.6 million loss on early extinguishment of debt, $49.8 million of PLK Transaction costs, a $43.9 million increase in other operating expenses (income), net, a $25.8 million increase in interest expense, net, an $11.9$3 million increase in share-based compensation and non-cash incentive compensation ~~and~~expense. These factors were partially offset by an $18 million increase in segment income in all of our segments, a ~~$7.5~~$10 million decrease in Office centralization and relocation costs and the non-recurrence of $5 million of PLK Transaction costs incurred in the prior period.

We reported net income of $503 million for the six months ended June 30, 2019, compared to net income of $593 million for the six months ended June 30, 2018. The decrease in net income is primarily due to a $93 million increase in income tax expense, a $16 million unfavorable change from the impact of equity method ~~investments.~~investments, a $13 million increase in share-based compensation and non-cash incentive compensation expense, a $7 million decrease in TH segment income, a $3 million increase in Corporate restructuring and tax advisory fees and a $3 million unfavorable change in the results from other operating expenses (income), net. These factors were partially offset by a $24 million increase in BK segment income, the non-recurrence of $10 million of PLK Transaction costs incurred in the prior period, a $6 million decrease in Office centralization and relocation costs, and a $3 million increase in PLK segment income.

Non-GAAP Reconciliations

The table below contains information regarding EBITDA and Adjusted EBITDA, which are non-GAAP measures. These non-GAAP measures do not have a standardized meaning under U.S. GAAP and may differ from similar captioned measures of other companies in our industry. We believe that these non-GAAP measures are useful to investors in assessing our operating performance, as ~~it provides~~they provide them with the same tools that management uses to evaluate our performance and is responsive to questions we receive from both investors and analysts. By disclosing these non-GAAP measures, we intend to provide investors with a consistent comparison of our operating results and trends for the periods presented. EBITDA is defined as earnings (net income or loss) before interest expense, net, ~~(gain)~~ 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 ~~integration~~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 ~~associated~~in connection with the ~~acquisition~~centralization and relocation of ~~Tim Hortons.~~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.

4448

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	Three Months Ended September 30,					Variance					Nine Months Ended September 30,							Variance						Three Months Ended June 30,						Variance						Six Months Ended June 30,							Variance
	Three Months Ended September 30,					$			%								$				%			Three Months Ended June 30,					$				%			Six Months Ended June 30,						$				%
	2017			2016		Favorable / (Unfavorable)					Nine Months Ended September 30,	2017			2016				Favorable / (Unfavorable)						2019		2018				Favorable / (Unfavorable)						2019			2018				Favorable / (Unfavorable)
Segment income:
TH	$	294.4		$	287.1	$	7.3		2.5	%	$	831.7		$	793.9			$	37.8			4.8	%	$	287	$	286			$	1			0.3	%	$	524		$	531			$	(7	)		(1.3	)%
BK	233.9			201.8		32.1			15.9	%	637.8			581.9				55.9				9.6	%	252		236				16				6.5	%	474			450				24				5.3	%
PLK	36.8			—		36.8			NM		70.0			—				70.0				NM		41		40				1				3.9	%	82			79				3				3.8	%
Adjusted EBITDA	565.1			488.9		76.2			15.6	%	1,539.5			1,375.8				163.7				11.9	%	580		562				18				3.2	%	1,080			1,060				20				1.9	%
Share-based compensation and non-cash incentive compensation expense	12.5			11.8		(0.7		)	(5.9	)%	42.9			31.0				(11.9		)		(38.4	)%	19		16				(3		)		(18.8	)%	44			31				(13		)		(41.9	)%
PLK Transaction costs	6.9			—		(6.9		)	NM		49.8			—				(49.8		)		NM		—		5				5				NM		—			10				10				NM
Integration costs	—			4.4		4.4			NM		—			10.4				10.4				NM
Corporate restructuring and tax advisory fees																								11		7				(4		)		(57.1	)%	17			14				(3		)		(21.4	)%
Office centralization and relocation costs																								2		12				10				83.3	%	6			12				6				50.0	%
Impact of equity method investments (a)	(1.3		)	0.3		1.6			NM		(0.1		)	(7.6		)		(7.5		)		98.7	%	9		4				(5		)		NM		10			(6		)		(16		)		NM
Other operating expenses (income), net	21.5			8.7		(12.8		)	NM		82.1			38.2				(43.9		)		(114.9	)%	3		(30		)		(33		)		110.0	%	(14		)	(17		)		(3		)		17.6	%
EBITDA	525.5			463.7		61.8			13.3	%	1,364.8			1,303.8				61.0				4.7	%	536		548				(12		)		(2.2	)%	1,017			1,016				1				0.1	%
Depreciation and amortization	46.2			43.2		(3.0		)	(6.9	)%	134.9			128.7				(6.2		)		(4.8	)%	45		46				1				2.2	%	92			93				1				1.1	%
Income from operations	479.3			420.5		58.8			14.0	%	1,229.9			1,175.1				54.8				4.7	%	491		502				(11		)		(2.2	)%	925			923				2				0.2	%
Interest expense, net	136.0			117.3		(18.7		)	(15.9	)%	375.4			349.6				(25.8		)		(7.4	)%	137		130				(7		)		(5.4	)%	269			270				1				0.4	%
Loss on early extinguishment of debt	58.2			—		(58.2		)	NM		78.6			—				(78.6		)		NM
Income tax expense	38.3			64.6		26.3			40.7	%	119.0			171.0				52.0				30.4	%	97		58				(39		)		(67.2	)%	153			60				(93		)		(155.0	)%
Net income	$	246.8		$	238.6	$	8.2		3.4	%	$	656.9		$	654.5			$	2.4			0.4	%	$	257	$	314			$	(57	)		(18.2	)%	$	503		$	593			$	(90	)		(15.2	)%

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 ~~and nine~~ months ended ~~September~~June 30, ~~2017~~2019 reflects the increases in segment income in all of our segments. The increase in Adjusted EBITDA for the six months ended June 30, 2019 reflects the increases in segment income in our THBK and BKPLK segments, ~~and the inclusion of~~partially offset by a decrease in our ~~PLK~~TH segment.

The ~~increase~~decrease in EBITDA for the three months ended ~~September~~June 30, ~~2017~~2019 is primarily due to ~~increases~~unfavorable results from other operating expenses (income), net in ~~segment income in our TH and BK segments,~~ the ~~inclusion of PLK segment income, the non-recurrence of integration costs, and an improvement~~current period, unfavorable results from the impact of equity method investments, ~~partially offset by~~ an increase in ~~other operating expenses (income), net, PLK Transaction costs recognized in the current period,~~Corporate restructuring and tax advisory fees, and an increase in share-based compensation and non-cash incentive ~~compensation.~~compensation expense, partially offset by increases in segment income in all our segments, a decrease in Office centralization and relocation costs, and the non-recurrence of PLK Transaction costs.

The increase in EBITDA for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 is primarily due to ~~increases~~an increase in segment income in our THBK and BKPLK segments, ~~the inclusion of PLK segment income, and~~ the non-recurrence of ~~integration~~PLK Transaction costs and a decrease in Office centralization and relocation cost, partially offset by ~~PLK Transaction costs recognized in~~unfavorable results from the ~~current period, an increase in other operating expenses (income), net,~~impact of equity method investments, an increase in share-based compensation and non-cash incentive compensation ~~and~~expense, a decrease in segment income in our TH segment, an increase in Corporate restructuring and tax advisory fees and unfavorable results from ~~the impact of equity method investments.~~other operating expenses (income), net.

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 ~~on Partnership preferred units (as defined below), 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 ~~make a distribution for RBI to redeem all or a portion of the Preferred Shares, to~~ voluntarily prepay and repurchase our or one of our affiliate’s outstanding debt, to fund our investing activities, ~~including the Popeyes Acquisition,~~ 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 ~~and the cash distribution requirements of the Partnership preferred units.~~requirements.

As of ~~September~~June 30, ~~2017,~~2019, we had cash and cash equivalents of ~~$3,547.2~~$1,028 million, a substantial portion of which resulted from proceeds from the May 2017 issuance of the 2017 4.25% Senior Notes (as defined below), borrowing of the Incremental Term Loan No. 2 (as defined below), and proceeds from the settlement and termination of our previous cross-currency rate swaps in June 2017. On October 25, 2017, the RBI board of directors approved the redemption of all of the Preferred Shares on December 12, 2017 (the "Redemption Date"). Partnership is required to make a distribution on the Partnership preferred units in an amount sufficient for RBI to fund the redemption of all of the Preferred Shares. In October 2017 Partnership received an exchange notice representing 9,050,594 Partnership exchangeable units. In accordance with the terms of the partnership

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agreement, Partnership will satisfy the exchange notice by repurchasing 5,000,000 Partnership exchangeable units for cash and exchanging 4,050,594 Partnership exchangeable units for the same number of newly issued RBI common shares. The exchange date will occur on November 8, 2017 and the repurchase of Partnership exchangeable units for cash will be based on the weighted average trading price of RBI common shares on the New York Stock Exchange in U.S. dollars for the 20 consecutive trading days ending on the last business day prior to the exchange date, per the terms of the partnership agreement. The distribution on the Partnership preferred units to fund the intended redemption of the Preferred Shares and the repurchase of Partnership exchangeable units are both anticipated to be financed with available cash on hand. See Note 19 to the accompanying unaudited condensed consolidated financial statements included in Part I, Item 1 "~~Financial Statements" of this report.~~

~~As of September 30, 2017, we had~~ working capital of ~~$3,022.2~~$271 million and borrowing availability of ~~$498.4~~$498 million under our Revolving Credit Facility. Based on our current level of operations and available cash,

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we believe our cash flow from operations, combined with availability under our Revolving Credit Facility, will provide sufficient liquidity to fund our current obligations, ~~distributions on Partnership preferred units, distributions to fund the redemption of Preferred Shares,~~ debt service requirements and capital spending over the next twelve months.

As of September 30, 2017, approximately 3% of our consolidated cash and cash equivalents balances were held in countries other than Canada and the U.S. Undistributed earnings of our foreign subsidiaries for periods prior to the acquisition of Tim Hortons in 2014 are considered indefinitely reinvested for U.S. income tax purposes. Subsequent to then, we record a deferred tax liability for earnings of foreign subsidiaries with U.S. parent companies when such amounts are not considered permanently reinvested and would be subject to tax in the U.S. upon repatriation of cash.

On August 2, 2016, the RBI board of directors approved a share repurchase authorization wherein RBI may purchase up to ~~$300.0~~$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.

Debt Instruments and Debt Service Requirements

As of ~~September~~June 30, ~~2017,~~2019, our long-term debt ~~is comprised~~consists primarily of borrowings under our Credit Facilities, amounts outstanding under our 2017 4.25% Senior Notes, 2015 4.625% Senior Notes, 2017 5.00% Senior Notes ~~2015 4.625% Senior Notes,~~ and ~~2014 6.00% Senior Notes~~TH Facility (each as defined below), and obligations under ~~capital~~finance leases. For further information about our long-term debt, see Note 910 to the accompanying unaudited condensed consolidated financial statements included in this report.

~~Refinancing of~~ Credit Facilities

~~On February 17, 2017, two~~As of ~~our subsidiaries (the “Borrowers”) entered into a second amendment (the “Second Amendment”) to the credit agreement governing~~June 30, 2019, there was $6,305 million outstanding principal amount under our senior secured term loan facility (the ~~“Term~~"Term Loan ~~Facility”~~Facility") and our senior secured revolving credit facility of up to $500.0 million of revolving extensions of credit outstanding at any time (including revolving loans, swingline loans and letters of credit) (the “Revolving Credit Facility” and together with the Term Loan Facility, the “Credit Facilities”). Under the Second Amendment, (i) the outstanding aggregate principal amount under our Term Loan Facility was decreased to $4,900.0 million as a result of a repayment of $146.1 million from cash on hand, (ii) the interest rate applicable to our Term Loan Facility was reduced to, at our option, either (a) a base rate plus an applicable margin equal to 1.25%, or (b) a Eurocurrency rate plus an applicable margin equal to 2.25%, (iii) the maturity of our Term Loan Facility was extended from December 12, 2021 to February 17, 2024, and (iv) the Borrowers and their subsidiaries were provided with additional flexibility under certain negative covenants, including incurrence of indebtedness, making of investments, dispositions and restricted payments, and prepayment of subordinated indebtedness. Except as described herein, the Second Amendment did not materially change the terms of the Credit Facilities.

~~Incremental Term Loans~~

In connection with the Popeyes Acquisition, we obtained an incremental term loan in the aggregate principal amount of $1,300.0 million (the “Incremental Term Loan No. 1”) under our Term Loan Facility. The Incremental Term Loan No. 1 bears interest at the same rate as the Term Loan Facility and also matures on February 17, 2024. In connection with the Incremental Term Loan No. 1, Popeyes was included as loan guarantor and its assets as collateral under the Credit Facilities. Except as described herein, there were no material changes to the terms of the Credit Facilities.

Simultaneously and in connection with the issuance of the 2017 4.25% Senior Notes (defined below), we obtained an incremental term loan in the aggregate principal amount of $250.0 million (the "Incremental Term Loan No. 2" and together

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with the Incremental Term Loan No. 1, the "Incremental Term Loans") under our Term Loan Facility. The Incremental Term Loan No. 2 bears interest at the same rate as the Term Loan Facility and also matures on February 17, 2024. There were no other material changes to the terms of the Credit Facilities.

~~Credit Facilities~~

~~As of September 30, 2017, there was $6,404.8 million outstanding principal amount under the Term Loan Facility with a weighted average~~ interest rate of ~~3.52%~~4.65%. Based on the amounts outstanding under the Term Loan Facility and LIBOR as of ~~September~~June 30, ~~2017,~~2019, subject to a floor of 1.00%, required debt service for the next twelve months is estimated to be approximately ~~$227.9~~$297 million in interest payments and ~~$64.5~~$65 million in principal payments. In addition, based on LIBOR as of ~~September~~June 30, ~~2017,~~2019, net cash settlements that we expect to pay on our ~~$2,500.0~~$3,500 million interest rate swap are estimated to be approximately ~~$24.2~~$9 million for the next twelve months.

As of ~~September~~June 30, ~~2017,~~2019, we had no amounts outstanding under our senior secured revolving credit facility (the "Revolving Credit Facility" and together with the ~~Revolving Credit~~Term Loan Facility, the "Credit Facilities"), had ~~$1.6~~$2 million of letters of credit issued against the ~~facility,~~Revolving Credit Facility, and our borrowing availability was ~~$498.4~~$498 million. Funds available under the Revolving Credit Facility may be used to repay other debt, finance debt or RBI share repurchases, fund acquisitions or capital expenditures, and for other general corporate purposes. We have a ~~$125.0~~$125 million letter of credit sublimit as part of the Revolving Credit Facility, which reduces our borrowing availability thereunder by the cumulative amount of outstanding letters of credit.

~~On October 13, 2017,~~The interest rate applicable to borrowings under our Credit Facilities is, at our option, either (i) a base rate plus an applicable margin equal to 1.25% for the ~~Borrowers extended the maturity date of~~Term Loan Facility and ranging from 0.25% to 1.00%, depending on our leverage ratio, for the Revolving Credit Facility, or (ii) a Eurocurrency rate plus an applicable margin of 2.25% for the Term Loan Facility and ranging from ~~December 12, 2019~~1.25% to October 13, 2022. The extension was effected through the termination of the existing revolving credit commitments and the entry into Incremental Facility Amendment No. 3 (the "October 2017 Incremental Amendment ") to the Credit Agreement. The October 2017 Incremental Amendment maintains the same $500.0 million in aggregate principal amount of commitments under2.00%, depending on our leverage ratio, for the Revolving Credit Facility. ~~As amended, the Revolving Credit Facility matures on October 13, 2022, provided that if, on October 15, 2021, more than an aggregate~~Borrowings are subject to a floor of $150.0 million of the 2015 4.625% Senior Notes are outstanding, then the maturity date of the Revolving Credit Facility shall be October 15, 2021. All other material terms of the Revolving Credit Facility remained the same.2.00% for base rate borrowings and 1.00% for Eurocurrency rate borrowings.

Senior Notes

~~On May 17, 2017, the~~The Borrowers ~~entered into~~are party to (i) an indenture (the “2017 4.25% Senior Notes Indenture”) in connection with the issuance of ~~$1,500.0~~$1,500 million of 4.25% first lien senior secured notes due May 15, 2024 (the “2017 4.25% Senior Notes”)~~. No principal payments are due until maturity and interest is paid semi-annually. We expect to use the net proceeds from the offering of the 2017 4.25%~~, (ii) an indenture (the “2015 4.625% Senior Notes ~~together~~Indenture”) in connection with ~~other sources~~the issuance of ~~liquidity, to redeem all~~$1,250 million of ~~the Preferred Shares on the Redemption Date~~4.625% first lien senior notes due January 15, 2022 (the “2015 4.625% Senior Notes”) and ~~for other general corporate purposes.~~

~~On August 28, 2017, the Borrowers entered into~~(iii) an indenture (the “2017 5.00% Senior Notes Indenture”) in connection with the issuance of ~~$1,300.0~~$2,800 million of 5.00% second lien senior secured notes due October 15, 2025 (the “2017 5.00% Senior Notes”). No principal payments are due on the 2017 4.25% Senior Notes, 2015 4.625% Senior Notes and 2017 5.00% Senior Notes until maturity and interest is paid semi-annually. The net proceeds from the offering of the 2017 5.00% Senior Notes were used to redeem $1,250.0 million principal amount of the 6.00% second lien senior secured notes due April 1, 2022 (the “2014 6.00% Senior Notes”), pay related redemption premiums, fees and expenses.

On October 4, 2017, the Borrowers issued $1,500.0 million of 5.00% second lien senior secured notes due October 15, 2025 (the "October 2017 Senior Notes"), which were issued as additional notes under the 2017 5.00% Senior Notes Indenture pursuant to which the Borrowers previously issued the 2017 5.00% Senior Notes. The October 2017 Senior Notes are treated as a single series with the 2017 5.00% Senior Notes and have substantially the same terms as those of the 2017 5.00% Senior Notes for all purposes under the 2017 5.00% Senior Notes Indenture, including waivers, amendments, redemptions and offers to purchase. No principal payments are due until maturity and interest is paid semi-annually. The net proceeds from the offering of the October 2017 Senior Notes were used to redeem the remaining $1,000.0 million principal amount outstanding of the 2014 6.00% Senior Notes on October 18, 2017, pay related redemption premiums, fees and expenses, and for general corporate purposes.

The Borrowers are also party to an indenture (the “2015 4.625% Senior Notes Indenture”) in connection with the issuance of $1,250.0 million of 4.625% first lien senior notes due January 15, 2022 (the “2015 4.625% Senior Notes”) and an indenture (the “2014 6.00% Senior Notes Indenture”) in connection with the issuance of the 2014 6.00% Senior Notes. As of September 30, 2017, there was $1,000.0 million of outstanding principal amount of the 2014 6.00% Senior Notes following the September 2017 redemption of $1,250.0 million principal amount of the 2014 6.00% Senior Notes. The remaining $1,000.0 million of the 2014 6.00% Senior Notes was redeemed in October 2017. No principal payments are due on the 2015 4.625% Senior Notes or were due on the 2014 6.00% Senior Notes until maturity and interest on the 2015 4.625% Senior Notes is paid semi-annually.

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Based on the amounts outstanding at ~~October 26, 2017,~~June 30, 2019, required debt service for the next twelve months on all of the Senior Notes outstanding is approximately ~~$261.6~~$262 million in interest payments.

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TH Facility

One of our subsidiaries entered into a non-revolving delayed drawdown term credit facility in a total aggregate principal amount of C$225 million (increased from C$100 million during the three months ended June 30, 2019) with a maturity date of October 4, 2025 (the “TH Facility”). The interest rate applicable to the TH Facility is the Canadian Bankers’ Acceptance rate plus an applicable margin equal to 1.40% or the Prime Rate plus an applicable margin equal to 0.40%, at our option. Obligations under the TH Facility are guaranteed by three of our subsidiaries, and amounts borrowed under the TH Facility are secured by certain parcels of real estate. As of June 30, 2019, we had outstanding C$100 million under the TH Facility with a weighted average interest rate of 3.36%.

Restrictions and Covenants

As of ~~September~~June 30, ~~2017,~~2019, we were in compliance with all debt covenants under the Credit Facilities, the TH Facility, 2017 4.25% ~~Senior Notes Indenture, 2015 4.625%~~ Senior Notes Indenture, 2017 5.00% Senior Notes Indenture and ~~2014 6.00%~~2015 4.625% Senior Notes Indenture, and there were no limitations on our ability to draw on the remaining availability under our Revolving Credit ~~Facility.~~

~~Preferred Partnership Units~~

As of September 30, 2017, we had outstanding 68,530,939 preferred units (“Partnership preferred units”), all of which were issued to RBI in 2014. The Partnership preferred units are entitled to receive preferred distributions from Partnership that correspond to preferred dividends paid by RBI on the 68,530,939 Class A 9.0% cumulative compounding perpetual voting preferred shares of RBI (“Preferred Shares”) that were sold by RBI to a subsidiary of Berkshire Hathaway Inc. (“Berkshire”).

~~Under the terms of the partnership agreement, if a dividend has been declared~~Facility and is payable in respect of the Preferred Shares, Partnership must make a distribution in respect of the Partnership preferred units in an amount equal to the aggregate amount of dividends payable in respect of the Preferred Shares. The holder of the Preferred Shares is entitled to receive, as and when declared by the board of directors of RBI, cumulative cash dividends at an annual rate of 9.0% on the amount of the purchase price of $43.775848 per Preferred Share, payable quarterly in arrears (“regular quarterly dividends”). Such dividends accrue daily on a cumulative basis, whether or not declared by RBI’s board of directors.

The Preferred Shares may be redeemed at RBI’s option on and after December 12, 2017. After December 12, 2024, holders of not less than a majority of the outstanding Preferred Shares may cause RBI to redeem their Preferred Shares. On October 25, 2017, the RBI board of directors approved the redemption of all of the Preferred Shares on December 12, 2017 (the "Redemption Date"). Partnership is required to make a distribution on the Partnership preferred units in an amount sufficient for RBI to fund the redemption amount of the Preferred Shares. The redemption price is $48.109657 per Preferred Share plus accrued and unpaid dividends up to the Redemption Date plus or minus any unpaid make-whole dividend and any additional dividends (the “redemption price”). The redemption price may be reduced if the make-whole dividend formula described above indicates the after-tax net dividends paid to the holder of the Preferred Shares from the original issue date through the redemption date will exceed the after-tax net dividends that would have been paid if we were a U.S. corporation. Upon redemption, the Preferred Shares will be deemed canceled, dividends will cease to accrue thereon and all rights of the holders will terminate, except the right to receive the cash payable upon such redemption.

Holders of Preferred Shares also hold a contingently exercisable option to cause RBI to redeem their Preferred Shares at the redemption price in the event of certain triggering events. In the event that a triggering event is announced, the holders of not less than a majority of the Preferred Shares may require RBI, to the fullest extent permitted by law, to redeem all of the outstanding Preferred Shares of such holders at a price equal to the redemption price for each redeemed share on the date of the consummation of the triggering event. For this purpose, a “triggering event” means the occurrence of one or more of the following: (i) the acquisition of RBI by another entity by means of any transaction or series of transactions (including, without limitation, any merger, amalgamation, arrangement, consolidation or reorganization) if RBI’s shareholders constituted immediately prior to such transaction or series of related transactions hold less than 50% of the voting power of the surviving or acquiring entity; (ii) the closing of the transfer, in one transaction or a series of related transactions, to a person or entity (or a group of persons or entities) of RBI’s securities if, after such closing, RBI’s shareholders constituted immediately prior to such transaction or series of related transactions hold less than 50% of the voting power of RBI or its successor; or (iii) a sale, license or other disposition (in one transaction or a series of related transactions) of all or substantially all of the assets of RBI. Since the redemption features are not solely within the control of RBI, the Preferred Shares are classified as temporary equity. Once a Preferred Share has been redeemed and all payments and dividends to the holder have been made in full, it must be cancelled and may not be reissued.

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TH Facility.

Cash Distributions/Dividends

On ~~October 2, 2017,~~July 3, 2019, RBI paid a cash dividend of $0.98 per Preferred Share, for a total dividend of $67.5 million, to the holder of the Preferred Shares. The dividend on the Preferred Shares included the amount due for the third calendar quarter of 2017. Partnership made a distribution to RBI as holder of the Partnership preferred units in an equal amount on the same date. On October 3, 2017, RBI paid a cash dividend of $0.20$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 ~~$0.20~~$0.50 per exchangeable unit.

No dividend may be declared or paid on RBI common shares or Partnership exchangeable units until a dividend is declared or paid on the Preferred Shares. In addition, if holders of at least a majority of the outstanding Preferred Shares have delivered a notice to exercise their right to have RBI redeem the Preferred Shares, no dividend may be declared or paid on RBI common shares or Partnership exchangeable units (except that dividends declared on RBI common shares and Partnership exchangeable units prior to the date of such delivery may be paid) unless on the date of such declaration or payment all Preferred Shares subject to such notice have been redeemed in full.

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 ~~October 20, 2017,~~July 26, 2019, we had outstanding 202,006,067 Class A common units issued to RBI ~~68,530,939 Partnership preferred units issued to RBI~~ and ~~226,839,418~~207,285,803 Partnership exchangeable units. In October 2017 Partnership received an exchange notice representing 9,050,594 Partnership exchangeable units. In accordance with the terms of the partnership agreement, Partnership will satisfy the exchange notice by repurchasing 5,000,000 Partnership exchangeable units with cash on hand and exchanging 4,050,594 Partnership exchangeable units for the same number of newly issued RBI common shares. The exchange date will occur on November 8, 2017. See Note 19 to the accompanying unaudited condensed consolidated financial statements included in Part I, Item 1 "~~Financial Statements" of this report.~~

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 ~~Preferred Shares and the~~ special voting share except as otherwise provided by law. For information on ~~our~~RBI's share-based compensation and ~~our~~its outstanding equity awards, see Note 1415 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, ~~2016,~~2018, filed with the SEC and Canadian securities regulatory authorities on February ~~17, 2017.~~22, 2019.

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

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Comparative Cash Flows

Operating Activities

Cash provided by operating activities was ~~$793.6~~$475 million during the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, compared to ~~$905.8~~$265 million during the same period in the prior year. The ~~decrease~~increase in cash provided by operating activities was driven by ~~increases~~a decrease in income tax payments, primarily due to the 2018 payment of accrued income taxes related to the December 2017 redemption of the RBI preferred shares, an increase in BK segment income and ~~interest payments,~~an increase in PLK ~~Transaction costs, and~~segment income. These factors were partially offset by an increase in cash used ~~by changes in~~for working capital, ~~partially offset by the inclusion of PLK segment income~~an increase in interest payments and ~~increases~~a decrease in TH ~~and BK~~ segment income.

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Investing Activities

Cash ~~used for investing activities was $851.9 million for the nine months ended September 30, 2017, compared to cash~~ provided by investing activities ~~of $19.3~~was $23 million for the six months ended June 30, 2019, compared to $1 million during the same period in the prior year. The change in investing activities was driven ~~primarily~~ by an increase in net ~~cash used for the Popeyes Acquisition partially offset by~~ proceeds ~~received~~ from ~~the settlement~~disposal of assets, restaurant closures and ~~termination of our previous cross-currency rate swaps.~~refranchisings and a decrease in capital expenditures.

Financing Activities

Cash ~~provided by financing activities was $2,162.4 million for the nine months ended September 30, 2017, compared to cash~~ used for financing activities ~~of $464.8~~was $395 million for the six months ended June 30, 2019, compared to $383 million during the same period in the prior year. The change in financing activities was driven primarily by ~~proceeds from the Incremental Term Loans under our Term Loan Facility, the issuance of the 2017 4.25% Senior Notes,~~an increase in distributions on common units and ~~the issuance of the first tranche of the 2017 5.00% Senior Notes,~~Partnership exchangeable units, partially offset by an increase in capital contributions from RBI and the ~~repayment of a portion~~non-recurrence of the ~~2014 6.00% Senior Notes, the repayment of a portion of the Term Loan Facility~~2018 distribution to RBI for payments in connection with the ~~February~~December 2017 ~~refinancing referred to above, the repayment of debt assumed in the Popeyes Acquisition, the repayment~~redemption of the ~~series 1 Tim Hortons Notes due June 1, 2017, premiums paid to redeem the 2014 6.00% Senior Notes, payment of financing costs, and higher distribution payments in the current period.~~

~~Contractual Obligations and Commitments~~

Except as described herein, as of October 26, 2017, 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, 2016 filed with the SEC and Canadian securities regulatory authorities on February 17, 2017. During 2017, we completed the refinancing of our Credit Facilities, incurred the Incremental Term Loans under our Term Loan Facility, issued the 2017 4.25% Senior Notes, issued the 2017 5.00% Senior Notes and redeemed all of the outstanding 2014 6.00% Senior Notes, each as defined and as described in Note 9, ~~Long-Term Debt~~, to the accompanying unaudited condensed consolidated financial statements. The following table provides an update as of October 26, 2017 of the contractual obligations under our Credit Facilities and senior notes presented in our Annual Report on Form 10-K for the year ended December 31, 2016.

Payment Due by Period
Less Than More Than
Contractual Obligations Total 1 Year 1-3 Years 3-5 Years 5 Years
(In millions)
Credit Facilities, including interest (a) $ 7,821.2
$ 292.4
$ 578.6
$ 568.9
$ 6,381.3
All Senior Notes, including interest (b) 7,346.3
261.6
523.1
1,732.2
4,829.4


~~(a)~~	~~We have estimated our interest payments through the maturity of our Credit Facilities based on LIBOR as of September 30, 2017.~~


~~(b)~~	~~Amounts included herein for the Senior Notes exclude amounts for the Tim Hortons Notes.~~

~~Critical Accounting Policies and Estimates~~

This discussion and analysis of financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as related disclosures of contingent assets and liabilities. We evaluate our estimates on an ongoing basis and we base our estimates on historical experience and various other assumptions we deem reasonable to the situation. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. As future events and their effects cannot be determined with precision, actual results could differ significantly from these

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estimates. Changes in our estimates could materially impact our results of operations and financial condition in any particular period. For a complete discussion of our critical and significant accounting policies and estimates, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC and Canadian securities regulatory authorities on February 17, 2017. In addition to those policies and estimates, due to recent transactions and events, we also consider the following to be part of our critical accounting policies and estimates due to the high degree of judgment or complexity in its application:

~~Business Combinations~~

~~The Popeyes Acquisition was accounted for using the acquisition method of accounting, or acquisition accounting, in accordance with ASC Topic 805,~~ ~~Business Combinations~~. The acquisition method of accounting involves the allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed. This allocation process involves the use of estimates and assumptions to derive fair values and to complete the allocation. Acquisition accounting allows for up to one year to obtain the information necessary to finalize the fair value of all assets acquired and liabilities assumed at March 27, 2017. As of September 30, 2017, we have recorded preliminary acquisition accounting allocations, which are subject to revision as we obtain additional information necessary to complete the fair value studies and acquisition accounting.

In the event that actual results vary from any of the estimates or assumptions used in the valuation or allocation process, we may be required to record an impairment charge or an increase in depreciation or amortization in future periods, or both.

See Note 2 to the accompanying unaudited condensed consolidated financial statements included in Part I, Item 1 “Financial Statements” of this report for additional information about accounting for the Popeyes Acquisition.RBI preferred shares.

New Accounting Pronouncements

See Note 43 – 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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 to the disclosures made in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2018 filed with the SEC and Canadian securities regulatory authorities on February ~~17, 2017.~~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 ~~September~~June 30, ~~2017.~~2019. Based on that evaluation, the CEO and CFO of RBI concluded that Partnership’s disclosure controls and procedures were effective as of such date.

~~Changes in Internal Controls~~

~~We are in the process of integrating Popeyes into our overall internal control over financial reporting processes.~~

Internal Control Over Financial Reporting

The management of RBI, as general partner of Partnership, including the CEO and CFO, confirm ~~that~~ there were no changes in Partnership’s internal control over financial reporting during the ~~nine~~three months ended ~~September~~June 30, ~~2017~~2019 that have materially affected, or are reasonably likely to materially affect, ~~RBI’s~~Partnership’s internal control over financial reporting. During the six months ended June 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'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~~Corporate restructuring and ~~administrative expenses associated with~~tax advisory fees related to the ~~Popeyes Acquisition;~~Tax Act; (iii) certain tax matters, including the ~~amount and timing~~impact of the ~~redemption of the Preferred Shares and the source of funds used to satisfy such obligations;~~Tax Act on future periods; (iv) the amount ~~and timing~~ of ~~the repurchase of exchangeable units, the exchange of exchangeable units into RBI common shares and the source of funds used~~net cash settlements we expect to ~~satisfy such obligations;~~pay on our derivative instruments; and (v) certain accounting matters, including the impact of changes in accounting and ~~tax matters.~~our transition to ASC 842.

~~These~~Our forward-looking statements, included in this report and elsewhere, represent management’s expectations as of the date ~~hereof. These~~that they are made. Our forward-looking statements are based on ~~certain~~ assumptions and analyses made by ~~the Company~~Partnership in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. However, these forward-looking statements are subject to a number of risks and uncertainties and actual results may differ materially from those expressed or implied in such statements. Important factors that could cause actual results, level of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements include, among other things, risks related to: (1) our substantial indebtedness, which could adversely affect our financial condition and prevent us from fulfilling our obligations; (2) global economic or other business conditions that may affect the desire or ability of our customers to purchase our products such as inflationary pressures, high unemployment levels, declines in median income growth, consumer confidence and consumer discretionary spending and changes in consumer perceptions of dietary health and food safety; (3) our 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.~~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.~~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, ~~2016~~2018 filed with the SEC and Canadian securities regulatory authorities on February ~~17, 2017,~~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

~~On October 6, 2017, a claim was~~

In March 2019, Partnership settled the two class action lawsuits filed in the Ontario Superior Court of Justice ~~in a case styled~~ ~~JB & M Walker Ltd. and 1128419 Alberta Ltd. v.~~against The TDL Group Corp., ~~Restaurant Brands International Inc.~~a subsidiary of Partnership (“TDL”), ~~Daniel Schwartz, Sami Siddiqui, Andrea John~~ and ~~Jon Domanko~~.certain other defendants, as described in Partnership’s Annual Report on Form 10-K filed with the SEC on February 22, 2019. The ~~plaintiffs, two franchisees~~court approved the settlement on April 29, 2019. Under the terms of the settlement, TDL is contributing C$6 million to the Tim Hortons ~~restaurants, seek~~Advertising Fund in Canada over two years, such amount to ~~certify~~be spent on marketing activities. In addition, TDL has paid C$6 million for legal, administrative and other third party expenses.

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 ~~persons who have carried on business as a~~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 ~~franchisee at any time after March 8, 2017.~~franchisees are required to sign. The ~~claim alleges various causes~~plaintiff seeks damages and restitution, on behalf of ~~action against the defendants in relation to the purported adverse treatment of member~~himself and ~~potential member franchisees~~other members of the ~~Great White North Franchisee Association. The plaintiffs seek damages for, among other things, breach~~class. While we currently believe these claims are without merit, we are unable to predict the ultimate outcome of ~~contract, breach of the statutory duty of fair dealing, and breach of the franchisees’ statutory right of association.~~this case.

Item 5. Other Information

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

(e)

On May 17, 2019, the Board of Directors of RBI approved the conversion of the unvested restricted stock units and performance based restricted stock units previously granted to Daniel S. Schwartz, the former Chief Executive Officer and Executive Chairman of RBI through June 30, 2019, to an equal number of RBI restricted shares. As a result of this change, RBI entered into amended and restated award agreements with Mr. Schwartz. The Amended and Restated Performance Award Agreement and the forms of Amended and Restated Base Matching Restricted Stock Unit Award Agreement and Amended and Restated Additional Matching Restricted Stock Unit Award Agreement are filed in RBI's quarterly report on Form 10-Q for the quarter ended June 30, 2019 as Exhibits 10.63, 10.64 and 10.65, respectively.

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Item 6. Exhibits




Exhibit Number		Description

~~10.10(d)~~ 10.63*		~~Amendment No. 2, dated February 17, 2017, to the Credit~~Amended and Restated Performance Award Agreement dated as of ~~October 27, 2014, among 1011778 B.C. Unlimited Liability Company, an unlimited liability company organized under the laws of British Columbia, New Red Finance,~~May 17, 2019 by and between Restaurant Brands International Inc., a Delaware corporation, 1013421 B.C. Unlimited Liability Company, an unlimited liability company organized under the laws of British Columbia, the other guarantors party thereto, JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and ~~swing line lender and each L/C issuer and lender from time to time party thereto~~Daniel Schwartz (incorporated herein by reference to Exhibit ~~10.10(d)~~10.63 to the Form 10-Q of Restaurant Brands International Inc. filed on ~~October 26, 2017)~~August 2, 2019).

~~10.10(e)~~ 10.64*		~~Incremental Facility Amendment, dated as~~Form of ~~March 27, 2017, to the Credit~~Amended and Restated Base Matching Restricted Stock Unit Award Agreement dated as of ~~October 27, 2014, among 1011778 B.C. Unlimited Liability Company, an unlimited liability company organized under the laws of British Columbia, New Red Finance,~~May 17, 2019 by and between Restaurant Brands International Inc., a Delaware corporation, 1013421 B.C. Unlimited Liability Company, an unlimited liability company organized under the laws of British Columbia, the other guarantors party thereto, JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and ~~swing line lender and each L/C issuer and lender from time to time party thereto~~Daniel Schwartz (incorporated herein by reference to Exhibit ~~10.10(e)~~10.64 to the Form 10-Q of Restaurant Brands International Inc. filed on ~~October 26, 2017)~~August 2, 2019).

~~10.46~~ 10.65*		~~Purchase~~Form of Amended and Restated Additional Matching Restricted Stock Unit Award Agreement dated as of ~~August 8, 2017 among J.P. Morgan Securities LLC, as representative of the Initial Purchasers (as defined therein), the Issuers (as defined therein)~~May 17, 2019 by and ~~the Guarantors (as defined therein)(incorporated~~between Restaurant Brands International Inc. and Daniel Schwartz (incorporated herein by reference to Exhibit ~~10.46~~10.65 to the Form 10-Q of Restaurant Brands International Inc. filed on ~~October 26, 2017)~~August 2, 2019).

~~10.47~~ 31.1		Purchase Agreement dated as of September 18, 2017 among J.P. Morgan Securities LLC, as representative of the Initial Purchasers (as defined therein), the Issuers (as defined therein) and the Guarantors (as defined therein)(incorporated herein by reference to Exhibit 10.47 to the Form 10-Q of Restaurant Brands International Inc. filed on October 26, 2017).

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

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

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

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

101.INS		XBRL Instance Document - 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

104		Cover 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: ~~October 26, 2017~~August 2, 2019	By:	/s/ ~~Joshua Kobza~~Matthew Dunnigan
		Name:	~~Joshua Kobza, principal financial officer~~Matthew Dunnigan
		Title:	Chief Financial Officer of Restaurant Brands International Inc. (principal financial officer) (duly authorized officer)

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	March 27, 2017
Total current assets	$	64.4
Property and equipment	115.2
Intangible assets	1,405.2
Other assets	0.7
Total current liabilities	(73.9		)
Total debt and capital lease obligations	(159.0		)
Deferred income taxes	(523.2		)
Other liabilities	(20.5		)
Total identifiable net assets	808.9
Goodwill	845.8
Total consideration	$	1,654.7



	Increase (Decrease) in Goodwill
Change in:
Total current assets	$	—
Property and equipment	(18.7		)
Intangible assets	(385.2		)
Total current liabilities	(0.8		)
Deferred income taxes	164.9
Other liabilities	7.3
Total decrease in goodwill	$	(232.5	)



		Amounts Reclassified from AOCI
	Affected Line Item in the Statement of Operations	Three Months Ended September 30,						Nine Months Ended September 30,
Details about AOCI Components	Affected Line Item in the Statement of Operations	2017			2016			2017			2016
Gains (losses) on cash flow hedges:
Interest rate derivative contracts	Interest expense, net	$	(8.2	)	$	(5.9	)	$	(23.1	)	$	(15.3	)
Forward-currency contracts	Cost of sales	(1.2		)	(1.4		)	(1.1		)	1.1
	Total before tax	(9.4		)	(7.3		)	(24.2		)	(14.2		)
	Income tax (expense) benefit	2.5			1.9			6.3			3.7
	Net of tax	$	(6.9	)	$	(5.4	)	$	(17.9	)	$	(10.5	)
Defined benefit pension:
Amortization of prior service credits (costs)	SG&A (a)	$	0.7		$	0.7		$	2.1		$	2.2
Amortization of actuarial gains (losses)	SG&A (a)	(0.3		)	(0.1		)	(0.8		)	(0.3		)
	Total before tax	0.4			0.6			1.3			1.9
	Income tax (expense) benefit	(0.2		)	(0.3		)	(1.5		)	(0.8		)
	Net of tax	$	0.2		$	0.3		$	(0.2	)	$	1.1

Total reclassifications	Net of tax	$	(6.7	)	$	(5.1	)	$	(18.1	)	$	(9.4	)



Classification on Condensed Consolidated Statements of Operations	Gain (Loss) Reclassified from AOCI into Earnings
	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Interest expense, net	$	(8.2	)	$	(5.9	)	$	(23.1	)	$	(15.3	)
Cost of sales	$	(1.2	)	$	(1.4	)	$	(1.1	)	$	1.1



PLK Segment (in millions of U.S. dollars)	Three months ended September 30, 2017		Nine months ended September 30, 2017
Revenues:
Sales	$	22.7	$	45.7
Franchise and property revenues	45.3		89.0
Total revenues	68.0		134.7
Cost of sales	17.8		37.0
Franchise and property expenses	2.2		4.5
Segment SG&A	12.8		27.2
Segment depreciation and amortization ^(a)	1.6		4.0
Segment income	36.8		70.0



	Payment Due by Period
			Less Than						More Than
Contractual Obligations	Total		1 Year		1-3 Years		3-5 Years		5 Years
	(In millions)
Credit Facilities, including interest (a)	$	7,821.2	$	292.4	$	578.6	$	568.9	$	6,381.3
All Senior Notes, including interest (b)	7,346.3		261.6		523.1		1,732.2		4,829.4