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 June 30, ~~2020~~2021


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

For the transition period from to

Commission file number: 001-36787

RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP

(Exact Name of Registrant as Specified in its Charter)


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

130 King Street West, Suite 300

M5X 1E1

Toronto,

Ontario

(Address of Principal Executive Offices)

(Zip Code)

(905) ~~845-6511~~339-6011

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

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

Title of each class

Trading Symbols

Name of each exchange on which registered

Class B exchangeable limited partnership units

QSP

Toronto Stock Exchange

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

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

Table of Contents

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of July ~~31, 2020,~~23, 2021, there were ~~162,426,062~~154,892,524 Class B exchangeable limited partnership units and 202,006,067 Class A common units outstanding.

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

TABLE OF CONTENTS



		Page

PART I – Financial Information
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3433
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4846
Item 4.	Controls and Procedures	4847

PART II – Other Information
Item 1.	Legal Proceedings	50
~~Item 1A.~~	~~Risk Factors~~	5048
Item 6.	Exhibits	5249
	Signatures	5350

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PART I — Financial Information

Item 1. Financial Statements

RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

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

(Unaudited)


		As of							As of
		June 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,540	$	1,533	Cash and cash equivalents	$	1,749	$	1,560
Accounts and notes receivable, net of allowance of $41 and $13, respectively		520		527
Accounts and notes receivable, net of allowance of $23 and $42, respectively						Accounts and notes receivable, net of allowance of $23 and $42, respectively	535		536
Inventories, net	Inventories, net	96		84		Inventories, net	99		96
Prepaids and other current assets	Prepaids and other current assets	71		52		Prepaids and other current assets	132		72
Total current assets	Total current assets	2,227		2,196		Total current assets	2,515		2,264
Property and equipment, net of accumulated depreciation and amortization of $793 and $746, respectively		1,958		2,007
Property and equipment, net of accumulated depreciation and amortization of $940 and $879, respectively						Property and equipment, net of accumulated depreciation and amortization of $940 and $879, respectively	2,033		2,031
Operating lease assets, net	Operating lease assets, net	1,117		1,176		Operating lease assets, net	1,143		1,152
Intangible assets, net	Intangible assets, net	10,288		10,563		Intangible assets, net	10,820		10,701
Goodwill	Goodwill	5,498		5,651		Goodwill	5,831		5,739
Net investment in property leased to franchisees	Net investment in property leased to franchisees	62		48		Net investment in property leased to franchisees	80		66
Other assets, net	Other assets, net	866		719		Other assets, net	819		824
Total assets	Total assets	$	22,016	$	22,360	Total assets	$	23,241	$	22,777
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts and drafts payable	Accounts and drafts payable	$	470	$	644	Accounts and drafts payable	$	575	$	464
Other accrued liabilities	Other accrued liabilities	596		790		Other accrued liabilities	812		835
Gift card liability	Gift card liability	112		168		Gift card liability	149		191
Current portion of long-term debt and finance leases	Current portion of long-term debt and finance leases	106		101		Current portion of long-term debt and finance leases	113		111
Total current liabilities	Total current liabilities	1,284		1,703		Total current liabilities	1,649		1,601
Long-term debt, net of current portion	Long-term debt, net of current portion	12,310		11,759		Long-term debt, net of current portion	12,375		12,397
Finance leases, net of current portion	Finance leases, net of current portion	299		288		Finance leases, net of current portion	326		315
Operating lease liabilities, net of current portion	Operating lease liabilities, net of current portion	1,046		1,089		Operating lease liabilities, net of current portion	1,078		1,082
Other liabilities, net	Other liabilities, net	1,810		1,698		Other liabilities, net	2,110		2,236
Deferred income taxes, net	Deferred income taxes, net	1,415		1,564		Deferred income taxes, net	1,444		1,425
Total liabilities	Total liabilities	18,164		18,101		Total liabilities	18,982		19,056
Partners’ capital:	Partners’ capital:					Partners’ capital:
Class A common units; 202,006,067 issued and outstanding at June 30, 2020 and December 31, 2019		7,947		7,786
Partnership exchangeable units; 162,834,299 issued and outstanding at June 30, 2020; 165,507,199 issued and outstanding at December 31, 2019		(2,526)		(2,353)
Class A common units; 202,006,067 issued and outstanding at June 30, 2021 and December 31, 2020						Class A common units; 202,006,067 issued and outstanding at June 30, 2021 and December 31, 2020	8,222		7,994
Partnership exchangeable units; 154,952,900 issued and outstanding at June 30, 2021; 155,113,338 issued and outstanding at December 31, 2020						Partnership exchangeable units; 154,952,900 issued and outstanding at June 30, 2021; 155,113,338 issued and outstanding at December 31, 2020	(2,955)		(3,002)
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(1,572)		(1,178)		Accumulated other comprehensive income (loss)	(1,012)		(1,275)
Total Partners’ capital	Total Partners’ capital	3,849		4,255		Total Partners’ capital	4,255		3,717
Noncontrolling interests	Noncontrolling interests	3		4		Noncontrolling interests	4		4
Total equity	Total equity	3,852		4,259		Total equity	4,259		3,721
Total liabilities and equity	Total liabilities and equity	$	22,016	$	22,360	Total liabilities and equity	$	23,241	$	22,777

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 June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenues:	Revenues:									Revenues:
Sales	Sales	$	406	$	589	$	909	$	1,111	Sales	$	590	$	406	$	1,097	$	909
Franchise and property revenues	Franchise and property revenues	642		811		1,364		1,555		Franchise and property revenues	614		450		1,162		975
Advertising revenues										Advertising revenues	234		192		439		389
Total revenues	Total revenues	1,048		1,400		2,273		2,666		Total revenues	1,438		1,048		2,698		2,273
Operating costs and expenses:	Operating costs and expenses:									Operating costs and expenses:
Cost of sales	Cost of sales	339		453		738		859		Cost of sales	467		339		868		738
Franchise and property expenses	Franchise and property expenses	134		135		260		268		Franchise and property expenses	121		132		237		255
Selling, general and administrative expenses		295		316		620		628
Advertising expenses										Advertising expenses	238		203		474		429
General and administrative expenses										General and administrative expenses	113		94		218		196
(Income) loss from equity method investments	(Income) loss from equity method investments	16		2		18		—		(Income) loss from equity method investments	3		16		5		18
Other operating expenses (income), net	Other operating expenses (income), net	21		3		5		(14)		Other operating expenses (income), net	8		21		(34)		5
Total operating costs and expenses	Total operating costs and expenses	805		909		1,641		1,741		Total operating costs and expenses	950		805		1,768		1,641
Income from operations	Income from operations	243		491		632		925		Income from operations	488		243		930		632
Interest expense, net	Interest expense, net	128		137		247		269		Interest expense, net	126		128		250		247

Income before income taxes	Income before income taxes	115		354		385		656		Income before income taxes	362		115		680		385
Income tax (benefit) expense	Income tax (benefit) expense	(49)		97		(3)		153		Income tax (benefit) expense	(29)		(49)		18		(3)
Net income	Net income	164		257		388		503		Net income	391		164		662		388
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	1		—		1		—		Net income attributable to noncontrolling interests	1		1		2		1
Net income attributable to common unitholders	Net income attributable to common unitholders	$	163	$	257	$	387	$	503	Net income attributable to common unitholders	$	390	$	163	$	660	$	387
Earnings per unit - basic and diluted	Earnings per unit - basic and diluted									Earnings per unit - basic and diluted
Class A common units	Class A common units	$	0.52	$	0.70	$	1.24	$	1.37	Class A common units	$	1.28	$	0.52	$	2.17	$	1.24
Partnership exchangeable units	Partnership exchangeable units	$	0.35	$	0.55	$	0.83	$	1.09	Partnership exchangeable units	$	0.84	$	0.35	$	1.43	$	0.83
Weighted average units outstanding - basic and diluted	Weighted average units outstanding - basic and diluted									Weighted average units outstanding - basic and diluted
Class A common units	Class A common units	202		202		202		202		Class A common units	202		202		202		202
Partnership exchangeable units	Partnership exchangeable units	164		207		165		207		Partnership exchangeable units	155		164		155		165

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 June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net income	Net income	$	164	$	257	$	388	$	503	Net income	$	391	$	164	$	662	$	388

Foreign currency translation adjustment	Foreign currency translation adjustment	342		199		(409)		358		Foreign currency translation adjustment	141		342		195		(409)
Net change in fair value of net investment hedges, net of tax of $54, $13, $(52) and $39		(174)		(40)		237		(116)
Net change in fair value of cash flow hedges, net of tax of $13, $22, $92 and $34		(37)		(57)		(251)		(91)
Amounts reclassified to earnings of cash flow hedges, net of tax of $(6), $(1), $(10) and $(1)		18		3		29		2

Net change in fair value of net investment hedges, net of tax of $21, $54, $41 and $(52)										Net change in fair value of net investment hedges, net of tax of $21, $54, $41 and $(52)	(71)		(174)		(42)		237
Net change in fair value of cash flow hedges, net of tax of $5, $13, $(28) and $92										Net change in fair value of cash flow hedges, net of tax of $5, $13, $(28) and $92	(40)		(37)		55		(251)
Amounts reclassified to earnings of cash flow hedges, net of tax of $(4), $(6), $(12) and $(10)										Amounts reclassified to earnings of cash flow hedges, net of tax of $(4), $(6), $(12) and $(10)	29		18		53		29
Gain (loss) recognized on other, net of tax of $0, $0, $0 and $0										Gain (loss) recognized on other, net of tax of $0, $0, $0 and $0	1		0		2		0
Other comprehensive income (loss)	Other comprehensive income (loss)	149		105		(394)		153		Other comprehensive income (loss)	60		149		263		(394)
Comprehensive income (loss)	Comprehensive income (loss)	313		362		(6)		656		Comprehensive income (loss)	451		313		925		(6)
Comprehensive income (loss) attributable to noncontrolling interests	Comprehensive income (loss) attributable to noncontrolling interests	1		—		1		—		Comprehensive income (loss) attributable to noncontrolling interests	1		1		2		1
Comprehensive income (loss) attributable to common unitholders	Comprehensive income (loss) attributable to common unitholders	$	312	$	362	$	(7)	$	656	Comprehensive income (loss) attributable to common unitholders	$	450	$	312	$	923	$	(7)

See accompanying notes to condensed consolidated financial statements.

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

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

(Unaudited)


		Class A Common Units				Partnership Exchangeable Units						Accumulated Other Comprehensive Income (Loss)					Noncontrolling Interest		Total	Class A Common Units			Partnership Exchangeable Units					Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interest	Total
		Units	Amount		Units	Amount														Units	Amount		Units		Amount		Total
Balances at December 31, 2019		202,006,067	$	7,786	165,507,199	$	(2,353)	$	(1,178)	$	4			$	4,259

Distributions declared on Class A common units ($0.77 per unit)		—	(156)		—	—		—		—		(156)
Distributions declared on partnership exchangeable units ($0.52 per unit)		—	—		—	(86)		—		—		(86)
Balances at December 31, 2020														Balances at December 31, 2020		202,006,067		$	7,994	155,113,338	$	(3,002)	$	(1,275)	$	4		$	3,721
Distributions declared on Class A common units ($0.81 per unit)														Distributions declared on Class A common units ($0.81 per unit)		—		(163)		—	—		—		—			(163)
Distributions declared on partnership exchangeable units ($0.53 per unit)														Distributions declared on partnership exchangeable units ($0.53 per unit)		—		—		—	(82)		—		—			(82)
Exchange of Partnership exchangeable units for RBI common shares	Exchange of Partnership exchangeable units for RBI common shares	—	11		(178,046)	(11)		—		—		—		Exchange of Partnership exchangeable units for RBI common shares		—		5		(72,671)	(5)		—		—			0
Capital contribution from RBI	Capital contribution from RBI	—	55		—	—		—		—		55		Capital contribution from RBI		—		51		—	—		—		—			51
Restaurant VIE contributions (distributions)	Restaurant VIE contributions (distributions)	—	—		—	—		—		(1)		(1)		Restaurant VIE contributions (distributions)		—		—		—	—		—		1			1
Net income	Net income	—	144		—	80		—		—		224		Net income		—		179		—	91		—		1			271
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—	—		(543)		—		(543)		Other comprehensive income (loss)		—		—		—	—		203		—			203
Balances at March 31, 2020		202,006,067	$	7,840	165,329,153	$	(2,370)	$	(1,721)	$	3	$	3,752
Distributions declared on Class A common units ($0.78 per unit)		—	(158)		—	—		—		—		(158)
Distributions declared on partnership exchangeable units ($0.52 per unit)		—	—		—	(85)		—		—		(85)
Balances at March 31, 2021														Balances at March 31, 2021		202,006,067		$	8,066	155,040,667	$	(2,998)	$	(1,072)	$	6		$	4,002
Distributions declared on Class A common units ($0.81 per unit)														Distributions declared on Class A common units ($0.81 per unit)		—		(164)		—	—		—		—			(164)
Distributions declared on partnership exchangeable units ($0.53 per unit)														Distributions declared on partnership exchangeable units ($0.53 per unit)		—		—		—	(82)		—		—			(82)
Exchange of Partnership exchangeable units for RBI common shares	Exchange of Partnership exchangeable units for RBI common shares	—	128		(2,494,854)	(128)		—		—		—		Exchange of Partnership exchangeable units for RBI common shares		—		6		(87,767)	(6)		—		—			0
Capital contribution from RBI	Capital contribution from RBI	—	31		—	—		—		—		31		Capital contribution from RBI		—		55		—	—		—		—			55
Restaurant VIE contributions (distributions)	Restaurant VIE contributions (distributions)	—	—		—	—		—		(1)		(1)		Restaurant VIE contributions (distributions)		—		—		—	—		—		(3)			(3)
Net income	Net income	—	106		—	57		—		1		164		Net income		—		259		—	131		—		1			391
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—	—		149		—		149		Other comprehensive income (loss)		—		—		—	—		60		—			60
Balances at June 30, 2020		202,006,067	$	7,947	162,834,299	$	(2,526)	$	(1,572)	$	3	$	3,852
Balances at June 30, 2021														Balances at June 30, 2021		202,006,067		$	8,222	154,952,900	$	(2,955)	$	(1,012)	$	4		$	4,259

See accompanying notes to condensed consolidated financial statements.

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

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

(Unaudited)


		Class A Common Units				Partnership Exchangeable Units						Accumulated Other Comprehensive Income (Loss)					Noncontrolling Interest		Total	Class A Common Units			Partnership Exchangeable Units					Accumulated Other Comprehensive Income (Loss)				Noncontrolling Interest	Total
		Units	Amount		Units	Amount														Units	Amount		Units		Amount		Total
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		—	71		—	—		—		—		71
Balances at December 31, 2019														Balances at December 31, 2019		202,006,067		$	7,786	165,507,199	$	(2,353)	$	(1,178)	$	4				$	4,259

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)
Distributions declared on Class A common units ($0.77 per unit)														Distributions declared on Class A common units ($0.77 per unit)		—		(156)		—	—		—		—			(156)
Distributions declared on partnership exchangeable units ($0.52 per unit)														Distributions declared on partnership exchangeable units ($0.52 per unit)		—		—		—	(86)		—		—			(86)
Exchange of Partnership exchangeable units for RBI common shares	Exchange of Partnership exchangeable units for RBI common shares	—	3		(45,325)	(3)		—		—		—		Exchange of Partnership exchangeable units for RBI common shares		—		11		(178,046)	(11)		—		—			0
Capital contribution from RBI	Capital contribution from RBI	—	55		—	—		—		—		55		Capital contribution from RBI		—		55		—	—		—		—			55
Restaurant VIE contributions (distributions)	Restaurant VIE contributions (distributions)	—	—		—	—		—		1		1		Restaurant VIE contributions (distributions)		—		—		—	—		—		(1)			(1)
Net income	Net income	—	142		—	115		—		—		257		Net income		—		144		—	80		—		—			224
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—	—		105		—		105		Other comprehensive income (loss)		—		—		—	—		(543)		—			(543)
Balances at June 30, 2019		202,006,067	$	4,495	207,337,076	$	746	$	(1,284)	$	3	$	3,960
Balances at March 31, 2020														Balances at March 31, 2020		202,006,067		$	7,840	165,329,153	$	(2,370)	$	(1,721)	$	3		$	3,752
Distributions declared on Class A common units ($0.78 per unit)														Distributions declared on Class A common units ($0.78 per unit)		—		(158)		—	—		—		—			(158)
Distributions declared on partnership exchangeable units ($0.52 per unit)														Distributions declared on partnership exchangeable units ($0.52 per unit)		—		—		—	(85)		—		—			(85)
Exchange of Partnership exchangeable units for RBI common shares														Exchange of Partnership exchangeable units for RBI common shares		—		128		(2,494,854)	(128)		—		—			0
Capital contribution from RBI														Capital contribution from RBI		—		31		—	—		—		—			31
Restaurant VIE contributions (distributions)														Restaurant VIE contributions (distributions)		—		—		—	—		—		(1)			(1)
Net income														Net income		—		106		—	57		—		1			164
Other comprehensive income (loss)														Other comprehensive income (loss)		—		—		—	—		149		—			149
Balances at June 30, 2020														Balances at June 30, 2020		202,006,067		$	7,947	162,834,299	$	(2,526)	$	(1,572)	$	3		$	3,852

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)


		Six Months Ended June 30,							Six Months Ended June 30,
		2020		2019			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	388	$	503	Net income	$	662	$	388
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	91		92		Depreciation and amortization	100		91

Amortization of deferred financing costs and debt issuance discount	Amortization of deferred financing costs and debt issuance discount	12		15		Amortization of deferred financing costs and debt issuance discount	13		12
(Income) loss from equity method investments	(Income) loss from equity method investments	18		—		(Income) loss from equity method investments	5		18
(Gain) loss on remeasurement of foreign denominated transactions	(Gain) loss on remeasurement of foreign denominated transactions	10		(3)		(Gain) loss on remeasurement of foreign denominated transactions	(35)		10
Net (gains) losses on derivatives	Net (gains) losses on derivatives	(1)		(34)		Net (gains) losses on derivatives	42		(1)
Share-based compensation expense	Share-based compensation expense	39		39		Share-based compensation expense	40		39
Deferred income taxes	Deferred income taxes	(131)		23		Deferred income taxes	24		(131)
Other	Other	20		(3)		Other	(12)		20
Changes in current assets and liabilities, excluding acquisitions and dispositions:	Changes in current assets and liabilities, excluding acquisitions and dispositions:					Changes in current assets and liabilities, excluding acquisitions and dispositions:
Accounts and notes receivable	Accounts and notes receivable	(36)		(16)		Accounts and notes receivable	17		(36)
Inventories and prepaids and other current assets	Inventories and prepaids and other current assets	(28)		(10)		Inventories and prepaids and other current assets	(5)		(28)
Accounts and drafts payable	Accounts and drafts payable	(158)		(40)		Accounts and drafts payable	103		(158)
Other accrued liabilities and gift card liability	Other accrued liabilities and gift card liability	(13)		(166)		Other accrued liabilities and gift card liability	(123)		(13)
Tenant inducements paid to franchisees	Tenant inducements paid to franchisees	(5)		(8)		Tenant inducements paid to franchisees	(1)		(5)
Other long-term assets and liabilities	Other long-term assets and liabilities	(10)		83		Other long-term assets and liabilities	(98)		(10)
Net cash provided by operating activities	Net cash provided by operating activities	196		475		Net cash provided by operating activities	732		196
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Payments for property and equipment	Payments for property and equipment	(39)		(14)		Payments for property and equipment	(46)		(39)
Net proceeds from disposal of assets, restaurant closures, and refranchisings	Net proceeds from disposal of assets, restaurant closures, and refranchisings	5		22		Net proceeds from disposal of assets, restaurant closures, and refranchisings	14		5

Settlement/sale of derivatives, net	Settlement/sale of derivatives, net	22		15		Settlement/sale of derivatives, net	1		22

Other investing activities, net						Other investing activities, net	(5)		0
Net cash (used for) provided by investing activities	Net cash (used for) provided by investing activities	(12)		23		Net cash (used for) provided by investing activities	(36)		(12)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from revolving line of credit and long-term debt	Proceeds from revolving line of credit and long-term debt	1,585		—		Proceeds from revolving line of credit and long-term debt	0		1,585
Repayments of revolving line of credit, long-term debt and finance leases	Repayments of revolving line of credit, long-term debt and finance leases	(1,045)		(48)		Repayments of revolving line of credit, long-term debt and finance leases	(54)		(1,045)
Payment of financing costs	Payment of financing costs	(10)		—		Payment of financing costs	0		(10)
Distributions on Class A common and Partnership exchangeable units	Distributions on Class A common and Partnership exchangeable units	(716)		(437)		Distributions on Class A common and Partnership exchangeable units	(484)		(716)

Capital contribution from RBI	Capital contribution from RBI	41		80		Capital contribution from RBI	56		41
(Payments) proceeds from derivatives	(Payments) proceeds from derivatives	(14)		11		(Payments) proceeds from derivatives	(32)		(14)
Other financing activities, net	Other financing activities, net	(2)		(1)		Other financing activities, net	(2)		(2)
Net cash used for financing activities		(161)		(395)
Net cash (used for) provided by financing activities						Net cash (used for) provided by financing activities	(516)		(161)
Effect of exchange rates on cash and cash equivalents	Effect of exchange rates on cash and cash equivalents	(16)		12		Effect of exchange rates on cash and cash equivalents	9		(16)
Increase (decrease) in cash and cash equivalents	Increase (decrease) in cash and cash equivalents	7		115		Increase (decrease) in cash and cash equivalents	189		7
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	1,533		913		Cash and cash equivalents at beginning of period	1,560		1,533
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	1,540	$	1,028	Cash and cash equivalents at end of period	$	1,749	$	1,540
Supplemental cash flow disclosures:	Supplemental cash flow disclosures:					Supplemental cash flow disclosures:
Interest paid	Interest paid	$	234	$	292	Interest paid	$	198	$	234
Income taxes paid	Income taxes paid	$	60	$	127	Income taxes paid	$	142	$	60

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~~is a ~~general partnership and was registered on October 27, 2014 as a~~Canadian limited ~~partnership in accordance with the laws of the Province of Ontario.~~partnership. We franchise and operate quick service restaurants serving premium coffee and other beverage and food products under the Tim Hortons® brand (“Tim Hortons” or “TH”), fast food hamburgers principally under the Burger King® brand (“Burger King” or “BK”), and chicken under the Popeyes® brand (“Popeyes” or “PLK”). We are one of the world’s largest quick service restaurant, or QSR, companies as measured by total number of restaurants. As of June 30, ~~2020,~~2021, we franchised or owned ~~4,934~~5,065 Tim Hortons restaurants, ~~18,756~~18,776 Burger King restaurants, and ~~3,369~~3,562 Popeyes restaurants, for a total of ~~27,059~~27,403 restaurants, and operate in more than 100 ~~countries and U.S. territories.~~countries. Approximately 100% of current system-wide restaurants are franchised.

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

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

~~COVID-19~~

The global crisis resulting from the spread of coronavirus (COVID-19) has had a substantial impact on our global restaurant operations for the three and six months ended June 30, 2020, which is expected to continue with the timing of recovery uncertain. During the three and six months ended June 30, 2020, many TH, BK and PLK restaurants were temporarily closed in certain countries and many of the restaurants that remained open had limited operations, such as Drive-thru, Takeout and Delivery (where applicable). This has continued into the third quarter of 2020.

Our operating results substantially depend upon our franchisees’ sales volumes, restaurant profitability, and financial stability. The financial impact of COVID-19 has had, and is expected to continue to have, an adverse effect on many of our franchisees’ liquidity and we are working closely with our franchisees to monitor and assist them with access to appropriate sources of liquidity in order to sustain their businesses throughout this crisis, such as the initiation of rent relief programs for eligible franchisees who lease property from us. See Note 4, ~~Leases~~, for further information about the rent relief programs. Additionally, during the second quarter of 2020, we provided cash flow support by extending loans to eligible BK franchisees in the U.S. and advancing certain cash payments to eligible TH franchisees in Canada.

During the three and six months ended June 30, 2020, we recorded bad debt expense of $24 million and $28 million, respectively, compared to $4 million and $5 million during the three and six months ended June 30, 2019. While all receivables remain contractually due and payable to us, the certainty of the amount and timing of payments has been impacted by the COVID-19 pandemic. Therefore, our bad debt expense during the three and six months ended June 30, 2020 reflects an adjustment to our historical collections experience to incorporate an estimate of the impact of current economic conditions resulting from the COVID-19 pandemic. Actual collections may be materially higher or lower than this estimate reflects since it is reasonably possible the duration and future impact of the COVID-19 pandemic on our business or our franchisees may differ from our assumptions. Ongoing material adverse effects of the COVID-19 pandemic on our franchisees for an extended period could negatively affect our operating results, including reductions in revenue and cash flow and could impact our impairment assessments of accounts receivable, intangible assets, long-lived assets or goodwill.

Note 2. Basis of Presentation and Consolidation

We have prepared the accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements. Therefore, the Financial Statements should be read in conjunction with the audited consolidated financial statements contained in our Annual Report on Form 10-K filed with the SEC and Canadian securities regulatory authorities on February ~~21, 2020.~~

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23, 2021.

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 June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we determined that we are the primary beneficiary of 3350 and 3538 Restaurant VIEs, respectively, and accordingly, have consolidated the results of operations, assets and liabilities, and cash flows of these Restaurant VIEs in our Financial Statements. Material intercompany accounts and transactions have been eliminated in consolidation.

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

The preparation of consolidated financial statements in conformity with U.S. GAAP and related rules and regulations of the SEC requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates.

The carrying amounts for cash and cash equivalents, accounts and notes receivable and accounts and drafts payable approximate fair value based on the short-term nature of these amounts.

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 quarter and year to date June 30, 2020 reclassification of advertising fund contributions from Franchise and property revenues to Advertising revenues and advertising fund expenses from Selling, general and administrative expenses to Advertising expenses, with General and administrative expenses now presented separately. Depreciation and amortization expenses related to the advertising funds for the three and six months ended June 30, 2020 have also been reclassified from Franchise and property expenses to Advertising expenses. These reclassifications ~~had~~did not arise as a result of any changes to accounting policies and relate entirely to presentation with no effect on previously reported net income.

Note 3. New Accounting Pronouncements

~~Credit Losses~~ – In June 2016, the Financial Accounting Standards Board ("FASB") issued guidance that requires companies to measure and recognize lifetime expected credit losses for certain financial instruments, including trade accounts receivable and net investments in direct financing and sales-type leases. Expected credit losses are estimated using relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This amendment was effective commencing in 2020, using a modified retrospective approach. The adoption of this new guidance did not have a material impact on our Financial Statements.

Simplifying the Accounting for Income Taxes – In December 2019, the FASB issued guidance which simplifies the accounting for income taxes by removing certain exceptions and by clarifying and amending existing guidance applicable to accounting for income taxes. The amendment is effective commencing in 2021 with early adoption permitted. ~~We are currently evaluating the impact that the~~The adoption of this new guidance ~~will~~in 2021 did not have a material impact on our Financial Statements.

Accounting Relief for the Transition Away from LIBOR and Certain other Reference Rates – In March 2020 and as clarified in January 2021, the FASB issued guidance which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. This amendment is effective as of March 12, 2020 through December 31, 2022. The expedients and exceptions provided by this new guidance do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has

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elected certain optional expedients for and that are retained through the end of the hedging relationships. We are currently evaluating the impact that the adoption of this new guidance will have on our Financial ~~Statements.~~Statements and have not adopted any of the transition relief available under the new guidance as of June 30, 2021.

Lessors—Certain Leases with Variable Lease Payments – In July 2021, the FASB issued guidance that requires lessors to classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if (a) the lease would have been classified as a sales-type lease or a direct financing lease in accordance with lease classification criteria and (b) the lessor would have otherwise recognized a day-one loss. This amendment is effective in 2022 with early adoption permitted. This guidance may be applied either retrospectively to leases that commenced or were modified on or after the adoption of lease guidance we adopted in 2019 or prospectively to leases that commence or are modified on or after the date that this new guidance is applied. We are currently evaluating the impact that the adoption of this new guidance will have on our Financial Statements.

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Note 4. Leases

During the six months ended June 30, 2020, we initiated a rent relief program for eligible TH franchisees in Canada who lease property from us (the “TH rent relief program”) and a rent relief program for eligible BK franchisees in the U.S. and Canada who lease property from us (the "BK rent relief program" and together with the TH rent relief program, the “rent relief programs”). Under the rent relief programs, we temporarily converted the rent structure from a combination of fixed plus variable rent to 100% variable rent. While in effect, these programs will result in a reduction in our property revenues.

In April 2020, the FASB staff issued interpretive guidance that indicated it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under Accounting Standards Codification Topic 842, Leases ("ASC 842"), as though enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract). Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance in ASC 842 to those contracts. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee.

We have elected to apply this interpretive guidance to the rent relief programs, and have assumed that enforceable rights and obligations for those concessions exist in the lease contract. As such, we began recognizing reductions in rents arising from the rent relief programs as reductions in variable lease payments, as the rent reductions did not result in a substantial increase in the rights of the lessor or the obligations of the lessee. This election will continue while our rent relief program is in effect.

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


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Lease income - operating leases	Lease income - operating leases									Lease income - operating leases
Minimum lease payments	Minimum lease payments	$	109	$	112	$	221	$	223	Minimum lease payments	$	117	$	109	$	230	$	221
Variable lease payments	Variable lease payments	46		97		109		181		Variable lease payments	84		46		150		109
Amortization of favorable and unfavorable income lease contracts, net	Amortization of favorable and unfavorable income lease contracts, net	1		2		3		4		Amortization of favorable and unfavorable income lease contracts, net	1		1		2		3
Subtotal - lease income from operating leases	Subtotal - lease income from operating leases	156		211		333		408		Subtotal - lease income from operating leases	202		156		382		333
Earned income on direct financing leases		2		3		3		5
Earned income on direct financing and sales-type leases										Earned income on direct financing and sales-type leases	1		2		3		3
Total property revenues	Total property revenues	$	158	$	214	$	336	$	413	Total property revenues	$	203	$	158	$	385	$	336

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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 may recognize unamortized upfront fees when a contract with a franchisee or master franchisee is modified and is accounted for as a termination of the existing contract. 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, ~~2019~~2020 and June 30, ~~2020~~2021 (in millions):


Contract Liabilities	Contract Liabilities	TH		BK		PLK		Consolidated		Contract Liabilities	TH		BK		PLK		Consolidated
Balance at December 31, 2019		$	64	$	449	$	28	$	541
Balance at December 31, 2020										Balance at December 31, 2020	$	62	$	427	$	39	$	528
Recognized during period and included in the contract liability balance at the beginning of the year	Recognized during period and included in the contract liability balance at the beginning of the year	(4)		(41)		(1)		(46)		Recognized during period and included in the contract liability balance at the beginning of the year	(5)		(21)		(1)		(27)
Increase, excluding amounts recognized as revenue during the period	Increase, excluding amounts recognized as revenue during the period	3		9		5		17		Increase, excluding amounts recognized as revenue during the period	5		15		9		29
Impact of foreign currency translation	Impact of foreign currency translation	(2)		—		—		(2)		Impact of foreign currency translation	1		(5)		0		(4)
Balance at June 30, 2020		$	61	$	417	$	32	$	510
Balance at June 30, 2021										Balance at June 30, 2021	$	63	$	416	$	47	$	526

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, ~~2020~~2021 (in millions):


Contract liabilities expected to be recognized in	Contract liabilities expected to be recognized in	TH		BK		PLK		Consolidated		Contract liabilities expected to be recognized in	TH		BK		PLK		Consolidated
Remainder of 2020		$	4	$	17	$	1	$	22
2021		8		33		2		43
Remainder of 2021										Remainder of 2021	$	5	$	18	$	2	$	25
2022	2022	7		32		2		41		2022	9		34		3		46
2023	2023	7		31		2		40		2023	9		33		3		45
2024	2024	7		30		2		39		2024	8		32		3		43
2025										2025	6		31		3		40
Thereafter	Thereafter	28		274		23		325		Thereafter	26		268		33		327
Total	Total	$	61	$	417	$	32	$	510	Total	$	63	$	416	$	47	$	526

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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,
2020 2019 2020 2019
Sales $ 406 $ 589 $ 909 $ 1,111
Royalties 469 576 995 1,104
Property revenues 158 214 336 413
Franchise fees and other revenue 15 21 33 38
Total revenues $ 1,048 $ 1,400 $ 2,273 $ 2,666


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Sales	$	590	$	406	$	1,097	$	909
Royalties	391		277		737		606
Property revenues	203		158		385		336
Franchise fees and other revenue	20		15		40		33
Advertising revenues	234		192		439		389
Total revenues	$	1,438	$	1,048	$	2,698	$	2,273

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Note 6. Earnings per Unit

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

There are no dilutive securities for Partnership as RBI equity awards will not affect the number of Class A common units or Partnership exchangeable units outstanding. However, the issuance of shares by RBI in future periods will affect the allocation of net income attributable to common unitholders between Partnership’s Class A common units and Partnership exchangeable units.

The following table summarizes the basic and diluted earnings per unit calculations (in millions, except per unit amounts):


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Allocation of net income among partner interests:	Allocation of net income among partner interests:									Allocation of net income among partner interests:
Net income allocated to Class A common unitholders	Net income allocated to Class A common unitholders	$	106	$	142	$	250	$	277	Net income allocated to Class A common unitholders	$	259	$	106	$	438	$	250
Net income allocated to Partnership exchangeable unitholders	Net income allocated to Partnership exchangeable unitholders	57		115		137		226		Net income allocated to Partnership exchangeable unitholders	131		57		222		137
Net income attributable to common unitholders	Net income attributable to common unitholders	$	163	$	257	$	387	$	503	Net income attributable to common unitholders	$	390	$	163	$	660	$	387

Denominator - basic and diluted partnership units:	Denominator - basic and diluted partnership units:									Denominator - basic and diluted partnership units:
Weighted average Class A common units	Weighted average Class A common units	202		202		202		202		Weighted average Class A common units	202		202		202		202
Weighted average Partnership exchangeable units	Weighted average Partnership exchangeable units	164		207		165		207		Weighted average Partnership exchangeable units	155		164		155		165

Earnings per unit - basic and diluted:	Earnings per unit - basic and diluted:									Earnings per unit - basic and diluted:
Class A common units (a)	Class A common units (a)	$	0.52	$	0.70	$	1.24	$	1.37	Class A common units (a)	$	1.28	$	0.52	$	2.17	$	1.24
Partnership exchangeable units (a)	Partnership exchangeable units (a)	$	0.35	$	0.55	$	0.83	$	1.09	Partnership exchangeable units (a)	$	0.84	$	0.35	$	1.43	$	0.83

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

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Note 7. Intangible Assets, net and Goodwill

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


		As of																							As of
		June 30, 2020										December 31, 2019											June 30, 2021				December 31, 2020
		Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net			Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Identifiable assets subject to amortization:	Identifiable assets subject to amortization:													Identifiable assets subject to amortization:
Franchise agreements	Franchise agreements	$	717	$	(240)	$	477	$	720	$	(225)	$	495	Franchise agreements	$	733	$	(278)	$	455	$	735	$	(264)	$	471
Favorable leases	Favorable leases	118		(64)		54		127		(65)		62		Favorable leases	110		(64)		46		117		(66)		51
Subtotal	Subtotal	835		(304)		531		847		(290)		557		Subtotal	843		(342)		501		852		(330)		522
Indefinite-lived intangible assets:	Indefinite-lived intangible assets:													Indefinite-lived intangible assets:
Tim Hortons brand	Tim Hortons brand	$	6,284	$	—	$	6,284	$	6,534	$	—	$	6,534	Tim Hortons brand	$	6,811	$	—	$	6,811	$	6,650	$	—	$	6,650
Burger King brand	Burger King brand	2,118		—		2,118		2,117		—		2,117		Burger King brand	2,153		—		2,153		2,174		—		2,174
Popeyes brand	Popeyes brand	1,355		—		1,355		1,355		—		1,355		Popeyes brand	1,355		—		1,355		1,355		—		1,355
Subtotal	Subtotal	9,757		—		9,757		10,006		—		10,006		Subtotal	10,319		—		10,319		10,179		—		10,179
Intangible assets, net	Intangible assets, net					$	10,288					$	10,563	Intangible assets, net					$	10,820					$	10,701

Goodwill	Goodwill													Goodwill
Tim Hortons segment	Tim Hortons segment	$	4,054					$	4,207					Tim Hortons segment	$	4,377					$	4,279
Burger King segment	Burger King segment	598						598						Burger King segment	608						614
Popeyes segment	Popeyes segment	846						846						Popeyes segment	846						846
Total	Total	$	5,498					$	5,651					Total	$	5,831					$	5,739

Amortization expense on intangible assets totaled $11 million ~~and $10 million~~ for the three months ended June 30, ~~2020~~2021 and ~~2019, respectively, and $22~~2020. Amortization expense on intangible assets totaled $21 million and ~~$21~~$22 million for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The change in the brands and goodwill balances during the six months ended June 30, ~~2020~~2021 was due to the impact of foreign currency translation.

Note 8. Equity Method Investments

The aggregate carrying amount of our equity method investments was ~~$216~~$204 million and ~~$266~~$205 million as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and is included as a component of Other assets, net in our accompanying condensed consolidated balance sheets. ~~TH and BK both have equity method investments. PLK does not have any equity method investments.~~

With respect to our TH business, the most significant equity method investment is our 50% joint venture interest with The Wendy’s Company (the “TIMWEN Partnership”), which jointly holds real estate underlying Canadian combination restaurants. Distributions received from this joint venture were $2$3 million and $5$2 million during the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Distributions received from this joint venture were $4$6 million and $7$4 million during the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Except for the following equity method investments, no quoted market prices are available for our other equity method investments. The aggregate market value of our ~~15.2%~~15.5% equity interest in Carrols Restaurant Group, Inc. (“Carrols”) based on the quoted market price on June 30, ~~2020~~2021 was approximately ~~$46~~$57 million. The aggregate market value of our ~~9.8%~~9.4% equity interest in BK Brasil Operação e Assessoria a Restaurantes S.A. based on the quoted market price on June 30, ~~2020~~2021 was approximately ~~$47~~$62 million. We have evaluated recent declines in the market value of these equity method investments as a result of COVID-19. We concluded these declines are not other than temporary and as such 0 impairments have been recognized at June 30, 2020.

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We have equity interests in entities that own or franchise Tim Hortons, or Burger King and Popeyes 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,							Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenues from affiliates:	Revenues from affiliates:									Revenues from affiliates:
Royalties	Royalties	$	54	$	87	$	127	$	165	Royalties	$	78	$	42	$	143	$	103
Advertising revenues										Advertising revenues	15		12		28		24
Property revenues	Property revenues	8		9		16		17		Property revenues	8		8		16		16
Franchise fees and other revenue	Franchise fees and other revenue	3		3		6		6		Franchise fees and other revenue	4		3		8		6
Total	Total	$	65	$	99	$	149	$	188	Total	$	105	$	65	$	195	$	149

We recognized $3$4 million and $5$3 million of rent expense associated with the TIMWEN Partnership during the three months ended June 30, ~~2020~~2021 and ~~2019, respectively.~~2020. We recognized $7$8 million and $9$7 million of rent expense associated with the TIMWEN Partnership during the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had ~~$64~~$49 million and ~~$47~~$52 million, respectively, of accounts receivable, net from our equity method investments which were recorded in Accounts and notes receivable, net in our condensed consolidated balance sheets.

(Income) loss from equity method investments reflects our share of investee net income or loss, non-cash dilution gains or losses from changes in our ownership interests in equity investees and basis difference amortization.

Note 9. Other Accrued Liabilities and Other Liabilities, net

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

As of
June 30,
2020 December 31,
2019
Current:
Dividend payable $ — $ 232
Interest payable 79 71
Accrued compensation and benefits 47 57
Taxes payable 184 126
Deferred income 35 35
Accrued advertising expenses 59 40
Restructuring and other provisions 9 8
Current portion of operating lease liabilities 123 126
Other 60 95
Other accrued liabilities $ 596 $ 790
Noncurrent:
Taxes payable $ 591 $ 579
Contract liabilities 510 541
Derivatives liabilities 492 341
Unfavorable leases 87 103
Accrued pension 61 65
Deferred income 29 25
Other 40 44
Other liabilities, net $ 1,810 $ 1,698


	As of
	June 30, 2021		December 31, 2020
Current:
Distribution payable	$	246	$	239
Interest payable	69		66
Accrued compensation and benefits	60		78
Taxes payable	114		122
Deferred income	43		42
Accrued advertising expenses	55		59
Restructuring and other provisions	14		12
Current portion of operating lease liabilities	139		137
Other	72		80
Other accrued liabilities	$	812	$	835
Noncurrent:
Taxes payable	$	553	$	626
Contract liabilities	526		528
Derivatives liabilities	820		865
Unfavorable leases	73		81
Accrued pension	68		70

Deferred income	34		28
Other	36		38
Other liabilities, net	$	2,110	$	2,236

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Note 10. Long-Term Debt

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


		As of							As of
		June 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Term Loan B (due November 19, 2026)	Term Loan B (due November 19, 2026)	$	5,323	$	5,350	Term Loan B (due November 19, 2026)	$	5,270	$	5,297
Term Loan A (due October 7, 2024)	Term Loan A (due October 7, 2024)	741		750		Term Loan A (due October 7, 2024)	722		731

2017 4.25% Senior Notes (due May 15, 2024)	2017 4.25% Senior Notes (due May 15, 2024)	1,500		1,500		2017 4.25% Senior Notes (due May 15, 2024)	775		775
2019 3.875% Senior Notes (due January 15, 2028)	2019 3.875% Senior Notes (due January 15, 2028)	750		750		2019 3.875% Senior Notes (due January 15, 2028)	750		750
2020 5.75% Senior Notes (due April 15, 2025)	2020 5.75% Senior Notes (due April 15, 2025)	500		—		2020 5.75% Senior Notes (due April 15, 2025)	500		500
2017 5.00% Senior Notes (due October 15, 2025)		2,800		2,800
2020 3.50% Senior Notes (due February 15, 2029)						2020 3.50% Senior Notes (due February 15, 2029)	750		750
2019 4.375% Senior Notes (due January 15, 2028)	2019 4.375% Senior Notes (due January 15, 2028)	750		750		2019 4.375% Senior Notes (due January 15, 2028)	750		750
2020 4.00% Senior Notes (due October 15, 2030)						2020 4.00% Senior Notes (due October 15, 2030)	2,900		2,900
TH Facility and other	TH Facility and other	169		81		TH Facility and other	181		178
Less: unamortized deferred financing costs and deferred issue discount	Less: unamortized deferred financing costs and deferred issue discount	(145)		(148)		Less: unamortized deferred financing costs and deferred issue discount	(142)		(155)
Total debt, net	Total debt, net	12,388		11,833		Total debt, net	12,456		12,476
Less: current maturities of debt	Less: current maturities of debt	(78)		(74)		Less: current maturities of debt	(81)		(79)
Total long-term debt	Total long-term debt	$	12,310	$	11,759	Total long-term debt	$	12,375	$	12,397

Revolving Credit ~~Facilities~~Facility

~~In March 2020,~~As of June 30, 2021, we ~~drew $995 million on~~had 0 amounts outstanding under our senior secured revolving credit facility (the ~~"Revolving~~“Revolving Credit ~~Facility"~~Facility”), ~~which we repaid in June 2020. As of June 30, 2020, we had 0 amounts outstanding under our Revolving Credit Facility,~~ had $2 million of letters of credit issued against the Revolving Credit Facility, and our borrowing availability under our Revolving Credit Facility was $998 million. Funds available under the Revolving Credit Facility may be used to repay other debt, finance debt or RBI share repurchases or repurchases of Class B exchangeable limited partnership units, fund acquisitions or capital expenditures and for other general corporate purposes. We have a $125 million letter of credit sublimit as part of the Revolving Credit Facility, which reduces our borrowing availability thereunder by the cumulative amount of outstanding letters of credit.

On April 2, 2020, two of our subsidiaries (the "Borrowers") entered into a fifth amendment (the "Fifth Amendment") to the credit agreement (the "Credit Agreement") governing our senior secured term loan facilities (the "Term Loan Facilities") and Revolving Credit Facility. The Fifth Amendment provides the Borrowers with the option to comply with a $1,000 million minimum liquidity covenant in lieu of the 6.50:1.00 net first lien senior secured leverage ratio financial maintenance covenant for the period after June 30, 2020 and prior to September 30, 2021. Additionally, for the periods ending September 30, 2021 and December 31, 2021, to determine compliance with the net first lien senior secured leverage ratio, we are permitted to annualize the Adjusted EBITDA (as defined in the Credit Agreement) for the three months ending September 30, 2021 and six months ending December 31, 2021, respectively, in lieu of calculating the ratio based on Adjusted EBITDA for the prior four quarters. There were no other material changes to the terms of the Credit Agreement.

TH Facility

~~One~~NaN of our subsidiaries entered into a non-revolving delayed drawdown term credit facility in a total aggregate principal amount of C$225 million with a maturity date of October 4, 2025 (the “TH Facility”). The interest rate applicable to the TH Facility is the Canadian Bankers’ Acceptance rate plus an applicable margin equal to 1.40% or the Prime Rate plus an applicable margin equal to 0.40%, at our option. Obligations under the TH Facility are guaranteed by ~~four~~4 of our subsidiaries, and amounts borrowed under the TH Facility are secured by certain parcels of real estate. ~~During the six months ended June 30, 2020, we drew down the remaining availability of C$125 million under the TH Facility and, as~~As of June 30, ~~2020,~~2021, we had outstanding C$~~225~~219 million under the TH Facility with a weighted average interest rate of ~~1.93%~~1.84%.

~~2020~~First Lien Senior Notes

On ~~April 7, 2020, the Borrowers entered into an indenture~~July 6, 2021, 2 of our subsidiaries (the ~~"2020 5.75% Senior Notes Indenture"~~“Borrowers”) ~~in connection with the issuance of $500~~issued $800 million of ~~5.75%~~3.875% first lien senior secured notes due ~~April~~January 15, ~~2025~~2028 (the ~~"2020 5.75% Senior Notes"~~“Notes”). NaN principal payments are due until maturity and interest is paid semi-annually. The Notes were issued as additional notes under the indenture, dated as of September 24, 2019, (the “2019 3.875% Senior Notes Indenture”) pursuant to which the Borrowers previously issued $750 million in aggregate principal amount of 3.875% first lien senior secured notes due January 15, 2028 during 2019 (the “2019 3.875% Senior Notes” and together with the Notes, the “3.875% First Lien Senior Notes” ). The Notes are treated as a single series with the 2019 3.875% Senior Notes and have the same terms for all purposes under the 2019 3.875% Senior Notes Indenture, including waivers, amendments, redemptions and offers to purchase. The Notes were priced at 100.250% of their face value. The net proceeds from the offering of the ~~2020 5.75% Senior~~ Notes were used ~~for general corporate purposes. In connection with~~to redeem the ~~issuance~~remaining $775 million principal amount outstanding of the ~~2020 5.75%~~2017 4.25% Senior Notes ~~we capitalized approximately $9 million in debt issuance costs.~~

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on July 15, 2021, plus any accrued and unpaid interest thereon, and pay related redemption premiums, fees and expenses.

Obligations under the ~~2020 5.75%~~3.875% First Lien Senior Notes are guaranteed on a senior secured basis, jointly and severally, by the Borrowers and substantially all of the ~~Borrowers'~~Borrower's Canadian and U.S. subsidiaries, including The TDL Group Corp., Burger King ~~Worldwide, Inc.,~~Corporation, Popeyes Louisiana Kitchen, Inc. and substantially all of their respective Canadian and U.S. subsidiaries (the ~~"Note Guarantors"~~“Note Guarantors”). The ~~2020 5.75%~~3.875% First Lien Senior Notes are first lien senior secured obligations and rank equal in right of payment with all of the existing and future first lien senior debt of the Borrowers and Note Guarantors, including borrowings and guarantees under our senior secured term loan facilities and Revolving Credit Facility (together the “Credit Facilities”).

Table of ~~the Credit Facilities.~~Contents

~~Our 2020 5.75%~~The 3.875% First Lien Senior ~~Notes~~notes may be redeemed in whole or in part, on or after ~~April~~September 15, 2022, at the redemption prices set forth in the ~~2020 5.75%~~2019 3.875% Senior Notes Indenture, plus accrued and unpaid interest, if any, at the date of redemption. The ~~2020 5.75%~~2019 3.875% Senior Notes Indenture also contains optional redemption provisions related to tender offers, change of control and equity offerings, among others.

Restrictions and Covenants

As of June 30, ~~2020,~~2021, we were in compliance with all applicable financial debt covenants under our senior secured term loan facilities and Revolving Credit Facility (together the ~~Credit Facilities,~~"Credit Facilities"), the TH Facility, and the indentures governing our Senior Notes.

Fair Value Measurement

The following table presents the fair value of our variable rate term debt and senior notes, estimated using inputs based on bid and offer prices that are Level 2 inputs, and principal carrying amount (in millions):


		As of							As of
		June 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Fair value of our variable term debt and senior notes	Fair value of our variable term debt and senior notes	$	12,152	$	12,075	Fair value of our variable term debt and senior notes	$	12,303	$	12,477
Principal carrying amount of our variable term debt and senior notes	Principal carrying amount of our variable term debt and senior notes	12,364		11,900		Principal carrying amount of our variable term debt and senior notes	12,417		12,453

Interest Expense, net

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


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Debt (a)	Debt (a)	$	119	$	128	$	232	$	252	Debt (a)	$	115	$	119	$	228	$	232
Finance lease obligations	Finance lease obligations	5		6		10		11		Finance lease obligations	5		5		10		10
Amortization of deferred financing costs and debt issuance discount	Amortization of deferred financing costs and debt issuance discount	6		8		12		15		Amortization of deferred financing costs and debt issuance discount	6		6		13		12
Interest income	Interest income	(2)		(5)		(7)		(9)		Interest income	0		(2)		(1)		(7)
Interest expense, net	Interest expense, net	$	128	$	137	$	247	$	269	Interest expense, net	$	126	$	128	$	250	$	247

(a)Amount includes ~~$20~~$11 million and ~~$19~~$20 million benefit during the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$41~~$23 million and ~~$37~~$41 million benefit during the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, related to the quarterly net settlements of our cross-currency rate swaps and amortization of the Excluded Component as defined in Note 13, Derivatives.

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Note 11. Income Taxes

Our effective tax rate was (8.1)% and 2.6% for the three and six months ended June 30, 2021, respectively. The effective tax rate was primarily the result of net reserve releases of $89 million and $87 million during the three and six months ended June 30, 2021, respectively, related to expiring statutes of limitation for certain prior tax years which reduced our effective tax rate by approximately 24.7% and 12.8% for the three and six months ended June 30, 2021, respectively. The effective tax rate during these periods also reflects the mix of income from multiple tax jurisdictions and the impact of internal financing arrangements.

Our effective tax rate was (42.3)% and (0.9)% for the three and six months ended June 30, 2020, respectively. The effective tax rate during these periods reflects a $64 million increase in deferred tax assets which decreased the effective tax rate by (55.2)% and (16.5)% during the three and six months ended June 30, 2020, respectively. Based on the analysis of final guidance related to the Tax Cuts and Jobs Act (the “Tax Act”) received during these periods, a deferred tax asset was recorded. The effective tax rate during these periods also reflects the mix of income from multiple tax jurisdictions and the impact of internal financing arrangements.

Our effective tax rate was 27.4% and 23.4% for the three and six months ended June 30, 2019, respectively. 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 these periods also reflects the mix

Table 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.Contents

Note 12. Equity

During the six months ended June 30, ~~2020,~~2021, Partnership exchanged ~~2,672,900~~160,438 Partnership exchangeable units pursuant to exchange notices received. In accordance with the terms of the partnership agreement, Partnership satisfied the exchange notices by exchanging these Partnership exchangeable units for the same number of newly issued RBI common shares. The issuances of shares were accounted for as capital contributions by RBI to Partnership. The exchanges of Partnership exchangeable units were recorded as increases to the Class A common units balance within partners’ capital in our consolidated balance sheet in an amount equal to the market value of the newly issued RBI common shares and a reduction to the Partnership exchangeable units balance within partners’ capital of our consolidated balance sheet in an amount equal to the cash paid by Partnership, if any, and the market value of the newly issued RBI common shares. Pursuant to the terms of the partnership agreement, upon the exchange of Partnership exchangeable units, each such Partnership exchangeable unit ~~was~~is automatically deemed 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)			Derivatives		Pensions		Foreign Currency Translation		Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2019		$	306	$	(29)	$	(1,455)	$	(1,178)
Balance at December 31, 2020										Balance at December 31, 2020	$	(107)	$	(45)	$	(1,123)	$	(1,275)
Foreign currency translation adjustment	Foreign currency translation adjustment	—		—		(409)		(409)		Foreign currency translation adjustment	—		—		195		195
Net change in fair value of derivatives, net of tax	Net change in fair value of derivatives, net of tax	(14)		—		—		(14)		Net change in fair value of derivatives, net of tax	13		—		—		13
Amounts reclassified to earnings of cash flow hedges, net of tax	Amounts reclassified to earnings of cash flow hedges, net of tax	29		—		—		29		Amounts reclassified to earnings of cash flow hedges, net of tax	53		—		—		53

Balance at June 30, 2020		$	321	$	(29)	$	(1,864)	$	(1,572)
Gain (loss) recognized on other, net of tax										Gain (loss) recognized on other, net of tax	—		2		—		2
Balance at June 30, 2021										Balance at June 30, 2021	$	(41)	$	(43)	$	(928)	$	(1,012)

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Note 13. Derivative Instruments

Disclosures about Derivative Instruments and Hedging Activities

We enter into derivative instruments for risk management purposes, including derivatives designated as cash flow hedges, derivatives designated as net investment hedges and those utilized as economic hedges. We use derivatives to manage our exposure to fluctuations in interest rates and currency exchange rates.

Interest Rate Swaps

At June 30, ~~2020,~~2021, we had outstanding receive-variable, pay-fixed interest rate swaps with a total notional value of $3,500 million to hedge the variability in the interest payments on a portion of our senior secured term loan facilities (the ~~"Term~~“Term Loan ~~Facilities"~~Facilities”) beginning October 31, 2019 through the termination date of November 19, 2026. Additionally, at June 30, ~~2020,~~2021, we also had outstanding receive-variable, pay-fixed interest rate swaps with a total notional value of $500 million to hedge the variability in the interest payments on a portion of our Term Loan Facilities effective September 30, 2019 through the termination date of September 30, 2026. At inception, all of these interest rate swaps were designated as cash flow hedges for hedge accounting. The unrealized changes in market value are recorded in AOCI and reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.

During 2019, we extended the term of our previous $3,500 million receive-variable, pay-fixed interest rate swaps to align the maturity date of the new interest rate swaps with the new maturity date of our Term Loan B. The extension of the term resulted in a de-designation and re-designation of the interest rate swaps and the swaps continue to be accounted for as a cash flow hedge for hedge accounting. In connection with the de-designation, we recognized a net unrealized loss of $213 million in AOCI and this amount gets reclassified into Interest expense, net as the original forecasted transaction affects earnings. The amount of pre-tax losses in AOCI as of June 30, ~~2020~~2021 that we expect to be reclassified into interest expense within the next 12 months is ~~$51~~$50 million.

During 2015, we settled certain interest rate swaps and recognized a net unrealized loss of $85 million in AOCI at the date of settlement. This amount gets reclassified into Interest expense, net as the original hedged forecasted transaction affects earnings. The amount of pre-tax losses in AOCI as of June 30, ~~2020~~2021 that we expect to be reclassified into interest expense within the next 12 months is ~~$12~~$5 million.

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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 June 30, ~~2020,~~2021, we had outstanding cross-currency rate swap contracts between the Canadian dollar and U.S. dollar and the Euro and U.S. dollar that have been designated as net investment hedges of a portion of our equity in foreign operations in those currencies. The component of the gains and losses on our net investment in these designated foreign operations driven by changes in foreign exchange rates are economically partly offset by movements in the fair value of our cross-currency swap contracts. The fair value of the swaps is calculated each period with changes in fair value reported in AOCI, net of tax. Such amounts will remain in AOCI until the complete or substantially complete liquidation of our investment in the underlying foreign operations.

At June 30, ~~2020,~~2021, we had outstanding fixed-to-fixed cross-currency rate swaps to partially hedge the net investment in our Canadian subsidiaries. At inception, these cross-currency rate swaps were designated as a hedge and are accounted for as net investment hedges. These swaps are contracts to exchange quarterly fixed-rate interest payments we make on the Canadian dollar notional amount of C$6,754 million for quarterly fixed-rate interest payments we receive on the U.S. dollar notional amount of $5,000 million through the maturity date of June 30, 2023.

At June 30, ~~2020,~~2021, we had outstanding cross-currency rate swaps in which we pay quarterly fixed-rate interest payments on the Euro notional value of €1,108 million and receive quarterly fixed-rate interest payments on the U.S. dollar notional value of $1,200 million. At inception, these cross-currency rate swaps were designated as a hedge and are accounted for as a net investment hedge. During 2018, we extended the term of the swaps from March 31, 2021 to the maturity date of February 17, 2024. The extension of the term resulted in a re-designation of the hedge and the swaps continue to be accounted for as a net investment hedge. Additionally, at June 30, ~~2020,~~2021, we also had outstanding cross-currency rate swaps in which we receive quarterly fixed-rate interest payments on the U.S. dollar notional value of $400 million, entered during 2018, and $500 million, entered during 2019, through the maturity date of February 17, 2024. At inception, these cross-currency rate swaps were designated as a hedge and are accounted for as a net investment hedge.

The ~~fixed to fixed~~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 de-designated and subsequently re-designated the outstanding fixed to fixed cross-currency rate swaps to prospectively use the spot method of hedge effectiveness

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assessment. Additionally, as a result of adopting new hedge accounting guidance during 2018, we elected to exclude the interest component (the “Excluded Component”) from the accounting hedge without affecting net investment hedge accounting and elected to amortize the Excluded Component over the life of the derivative instrument. The amortization of the Excluded Component is recognized in Interest expense, net in the condensed consolidated statement of operations. The change in fair value that is not related to the Excluded Component is recorded in AOCI and will be reclassified to earnings when the foreign subsidiaries are sold or substantially liquidated.

Foreign Currency Exchange Contracts

We use foreign exchange derivative instruments to manage the impact of foreign exchange fluctuations on U.S. dollar purchases and payments, such as coffee purchases made by our Canadian Tim Hortons operations. At June 30, ~~2020,~~2021, 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 ~~$84~~$143 million with maturities to ~~July 2021.~~August 2022. We have designated these instruments as cash flow hedges, and as such, the unrealized changes in market value of effective hedges are recorded in AOCI and are reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.

Credit Risk

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

Credit-Risk Related Contingent Features

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

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Quantitative Disclosures about Derivative Instruments and Fair Value Measurements

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


		Gain or (Loss) Recognized in Other Comprehensive Income (Loss)															Gain or (Loss) Recognized in Other Comprehensive Income (Loss)
		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Derivatives designated as cash flow hedges⁽¹⁾	Derivatives designated as cash flow hedges⁽¹⁾									Derivatives designated as cash flow hedges(1)
Interest rate swaps	Interest rate swaps	$	(48)	$	(77)	$	(348)	$	(121)	Interest rate swaps	$	(44)	$	(48)	$	85	$	(348)
Forward-currency contracts	Forward-currency contracts	$	(2)	$	(2)	$	5	$	(4)	Forward-currency contracts	$	(1)	$	(2)	$	(2)	$	5
Derivatives designated as net investment hedges	Derivatives designated as net investment hedges									Derivatives designated as net investment hedges
Cross-currency rate swaps	Cross-currency rate swaps	$	(228)	$	(53)	$	289	$	(155)	Cross-currency rate swaps	$	(92)	$	(228)	$	(83)	$	289

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


	Location of Gain or (Loss) Reclassified from AOCI into Earnings	Gain or (Loss) Reclassified from AOCI into Earnings
		Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020
Derivatives designated as cash flow hedges
Interest rate swaps	Interest expense, net	$	(31)	$	(26)	$	(61)	$	(41)
Forward-currency contracts	Cost of sales	$	(2)	$	2	$	(4)	$	2

	Location of Gain or (Loss) Recognized in Earnings	Gain or (Loss) Recognized in Earnings (Amount Excluded from Effectiveness Testing)
		Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020
Derivatives designated as net investment hedges
Cross-currency rate swaps	Interest expense, net	$	11	$	20	$	23	$	41

2019

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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,
2020 2019 2020 2019
Derivatives designated as cash flow hedges
Interest rate swaps Interest expense, net $ (26) $ (6) $ (41) $ (7)
Forward-currency contracts Cost of sales $ 2 $ 2 $ 2 $ 4
Location of Gain or (Loss) Recognized in Earnings Gain or (Loss) Recognized in Earnings
(Amount Excluded from Effectiveness Testing)
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Derivatives designated as net investment hedges
Cross-currency rate swaps Interest expense, net $ 20 $ 19 $ 41 $ 37


	Fair Value as of
	June 30, 2021		December 31, 2020		Balance Sheet Location
Assets:
Derivatives designated as cash flow hedges

Foreign currency	$	1	$	0	Prepaids and other current assets
Derivatives designated as net investment hedges
Foreign currency	8		0		Other assets, net
Total assets at fair value	$	9	$	0

Liabilities:
Derivatives designated as cash flow hedges
Interest rate	$	300	$	430	Other liabilities, net
Foreign currency	4		5		Other accrued liabilities
Derivatives designated as net investment hedges
Foreign currency	520		434		Other liabilities, net
Total liabilities at fair value	$	824	$	869

Fair Value as of
June 30,
2020 December 31, 2019 Balance Sheet Location
Assets:
Derivatives designated as cash flow hedges
Interest rate $ — $ 7 Other assets, net
Foreign currency 2 — Prepaids and other current assets
Derivatives designated as net investment hedges
Foreign currency 155 22 Other assets, net
Total assets at fair value $ 157 $ 29
Liabilities:
Derivatives designated as cash flow hedges
Interest rate $ 490 $ 175 Other liabilities, net
Foreign currency — 2 Other accrued liabilities
Derivatives designated as net investment hedges
Foreign currency 2 166 Other liabilities, net
Total liabilities at fair value $ 492 $ 343

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Note 14. 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,							Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings	Net losses (gains) on disposal of assets, restaurant closures, and refranchisings	$	—	$	(10)	$	(2)	$	(7)	Net losses (gains) on disposal of assets, restaurant closures, and refranchisings	$	1	$	0	$	(1)	$	(2)
Litigation settlements (gains) and reserves, net	Litigation settlements (gains) and reserves, net	1		—		1		—		Litigation settlements (gains) and reserves, net	1		1		3		1
Net losses (gains) on foreign exchange	Net losses (gains) on foreign exchange	18		12		10		(3)		Net losses (gains) on foreign exchange	8		18		(35)		10
Other, net	Other, net	2		1		(4)		(4)		Other, net	(2)		2		(1)		(4)
Other operating expenses (income), net	Other operating expenses (income), net	$	21	$	3	$	5	$	(14)	Other operating expenses (income), net	$	8	$	21	$	(34)	$	5

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

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

Note 15. Commitments and Contingencies

Litigation

From time to time, we are involved in legal proceedings arising in the ordinary course of business relating to matters including, but not limited to, disputes with franchisees, suppliers, employees and customers, as well as disputes over our intellectual property.

On October 5, 2018, a class action complaint was filed against Burger King Worldwide, Inc. (“BKW”) and Burger King Corporation (“BKC”) in the U.S. District Court for the Southern District of Florida by Jarvis Arrington, individually and on behalf of all others similarly situated. On October 18, 2018, a second class action complaint was filed against RBI, 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 RBI, BKW and BKC in the U.S.

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District Court for the Southern District of Florida by Sandra Muster, individually and on behalf of all others similarly situated. These complaints have been consolidated and 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. On March 24, 2020, the Court granted BKC’s motion to dismiss for failure to state a claim and on April 20, 2020 the plaintiffs filed a motion for leave to amend their complaint. On April 27, 2020, BKC filed a motion opposing the motion for leave to amend. The court denied the plaintiffs motion for leave to amend their complaint in August 2020 and the plaintiffs are appealing this ruling. Oral arguments are scheduled for September 2021. While we currently believe these claims are without merit, we are unable to predict the ultimate outcome of ~~these cases~~this case or estimate the range of possible loss, if any.

In July 2019, a class action complaint was filed against The TDL Group Corp. (“TDL”) in the Supreme Court of British Columbia by Samir Latifi, individually and on behalf of all others similarly situated. The complaint alleges that TDL violated the Canadian Competition Act by incorporating an employee no-solicitation and no-hiring clause in the standard form franchise agreement all Tim Hortons franchisees are required to sign. The plaintiff seeks damages and restitution, on behalf of himself and other members of the class. In February 2021, TDL filed and served an application to strike which was heard in May 2021. While we currently believe this claim is without merit, we are unable to predict the ultimate outcome of this case or estimate the range of possible loss, if any.

On June 30, 2020, a class action complaint was filed against Restaurant Brands International Inc., Restaurant Brands International Limited Partnership and The TDL Group Corp. in the Quebec Superior Court by Steve Holcman, individually and on behalf of all Quebec residents who downloaded the Tim Hortons mobile application. On July 2, 2020, a Notice of Action related to a second class action complaint was filed against Restaurant Brands International Inc., in the Ontario Superior Court by Ashley Sitko and Ashley Cadeau, individually and on behalf of all Canadian residents who downloaded the Tim Hortons mobile application. ~~Both~~On August 31, 2020, a notice of claim was filed against Restaurant Brands International Inc. in the Supreme Court of British Columbia by Wai Lam Jacky Law on behalf of all persons in Canada who downloaded the Tim Hortons mobile application or the Burger King mobile application. On September 30, 2020, a notice of action was filed against Restaurant Brands International Inc., Restaurant Brands International Limited Partnership, The TDL Group Corp., Burger King Worldwide, Inc. and Popeyes Louisiana Kitchen, Inc. in the Ontario Superior Court of Justice by William Jung on behalf of a to be determined class. All of the complaints allege that the defendants violated the ~~plaintiffs’~~plaintiff’s privacy rights, the Personal Information Protection and Electronic Documents Act, consumer protection and competition laws or app-based undertakings to users, in each case in

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connection with the collection of geolocation data through the Tim Hortons mobile ~~application.~~application, and in certain cases, the Burger King and Popeyes mobile applications. Each plaintiff seeks injunctive relief and monetary damages for himself or herself and other members of the class. These cases are in preliminary stages and we intend to vigorously defend against these lawsuits, but we are unable to predict the ultimate outcome of ~~either~~any of these cases or estimate the range of possible loss, if any.

On October 26, 2020, City of Warwick Municipal Employees Pension Fund, a purported stockholder of Restaurant Brands International Inc., individually and putatively on behalf of all other stockholders similarly situated, filed a lawsuit in the Supreme Court of the State of New York County of New York naming RBI and certain of its officers, directors and shareholders as defendants alleging violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, in connection with certain offerings of securities by an affiliate in August and September 2019. The complaint alleges that the shelf registration statement used in connection with such offering contained certain false and/or misleading statements or omissions. The complaint seeks, among other relief, class certification of the lawsuit, unspecified compensatory damages, rescission, pre-judgement and post-judgement interest, costs and expenses. On December 18, 2020 the plaintiffs filed an amended complaint and on February 16, 2021 RBI filed a motion to dismiss the complaint. The plaintiffs filed a brief in opposition to the motion on April 19, 2021 and RBI filed a reply in May 2021. The motion to dismiss is scheduled to be heard in December 2021. We intend to vigorously defend. While we believe these claims are without merit, we are unable to predict the ultimate outcome of this case or estimate the range of possible loss, if any.

On February 5, 2021, Paul J. Graney, a purported shareholder of Restaurant Brands International, individually and putatively on behalf of all other stockholders similarly situated, filed a lawsuit in the U.S. District Court for the Southern District of Florida naming RBI and certain of our current or former officers as defendants. This lawsuit alleged violations of Sections 10 and 20(a) of the Securities Exchange Act of 1934, as amended, in connection with certain statements made beginning in April 2019. On April 26, 2021, the lead plaintiff filed a stipulation voluntarily dismissing the case, which the Court so ordered on April 27, 2021.

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Note 16. Segment Reporting

As stated in Note 1, Description of Business and Organization, we manage 3 brands. Under the Tim Hortons brand, we operate in the donut/coffee/tea category of the quick service segment of the restaurant industry. Under the Burger King brand, we operate in the fast food hamburger restaurant category of the quick service segment of the restaurant industry. Under the Popeyes brand, we operate in the chicken category of the quick service segment of the restaurant industry. Our business generates revenue from the following sources: (i) franchise and advertising revenues, consisting primarily of royalties and advertising fund contributions based on a percentage of sales reported by franchise restaurants and franchise fees paid by franchisees; (ii) property revenues from properties we lease or sublease to franchisees; and (iii) sales at restaurants owned by us ("(“Company ~~restaurants"~~restaurants”). In addition, our TH business generates revenue from sales to franchisees related to our supply chain operations, including manufacturing, procurement, warehousing and distribution, as well as sales to retailers. We manage each of our brands as an operating segment and each operating segment represents a reportable segment.

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


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenues by operating segment:	Revenues by operating segment:									Revenues by operating segment:
TH	TH	$	567	$	842	$	1,266	$	1,591	TH	$	831	$	567	$	1,541	$	1,266
BK	BK	347		447		735		858		BK	459		347		866		735
PLK	PLK	134		111		272		217		PLK	148		134		291		272
Total revenues	Total revenues	$	1,048	$	1,400	$	2,273	$	2,666	Total revenues	$	1,438	$	1,048	$	2,698	$	2,273


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenues by country (a):	Revenues by country (a):									Revenues by country (a):
Canada	Canada	$	514	$	764	$	1,146	$	1,440	Canada	$	754	$	514	$	1,392	$	1,146
United States	United States	443		479		893		923		United States	515		443		993		893
Other	Other	91		157		234		303		Other	169		91		313		234
Total revenues	Total revenues	$	1,048	$	1,400	$	2,273	$	2,666	Total revenues	$	1,438	$	1,048	$	2,698	$	2,273

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

Our measure of segment income is Adjusted EBITDA. Adjusted EBITDA represents earnings (net income or loss) before interest expense, net, loss on early extinguishment of debt, income tax ~~(benefit)~~ expense, and depreciation and amortization, adjusted to exclude (i) the non-cash impact of share-based compensation and non-cash incentive compensation expense, (ii) (income) loss from equity method investments, net of cash distributions received from equity method investments, (iii) other operating expenses (income), net and, (iv) income/expenses from non-recurring projects and non-operating activities. For the periods referenced, this included costs incurred ~~in connection~~from professional advisory and consulting services associated with ~~the centralization and relocation of our Canadian and U.S. restaurant support centers to new offices in Toronto, Ontario, and Miami, Florida, respectively and~~certain transformational corporate restructuring initiatives that rationalize our structure and optimize cash movements, including services related to significant tax reform legislation, regulations and related restructuring initiatives (“Corporate restructuring and tax advisory ~~fees, including those arising as a result of the adoption of the Tax Act and the implementing regulations thereunder.~~fees”).

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Adjusted EBITDA is used by management to measure operating performance of the business, excluding these non-cash and other specifically identified items that management believes are not relevant to management’s assessment of our operating business. A reconciliation of segment income to net income consists of the following (in millions):


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Segment income:	Segment income:									Segment income:
TH	TH	$	147	$	287	$	336	$	524	TH	$	253	$	147	$	460	$	336
BK	BK	160		252		360		474		BK	266		160		483		360
PLK	PLK	51		41		106		82		PLK	58		51		114		106
Adjusted EBITDA	Adjusted EBITDA	358		580		802		1,080		Adjusted EBITDA	577		358		1,057		802
Share-based compensation and non-cash incentive compensation expense	Share-based compensation and non-cash incentive compensation expense	23		19		44		44		Share-based compensation and non-cash incentive compensation expense	20		23		46		44

Corporate restructuring and tax advisory fees	Corporate restructuring and tax advisory fees	7		11		8		17		Corporate restructuring and tax advisory fees	3		7		4		8
Office centralization and relocation costs		—		2		—		6

Impact of equity method investments (a)	Impact of equity method investments (a)	18		9		22		10		Impact of equity method investments (a)	7		18		11		22
Other operating expenses (income), net	Other operating expenses (income), net	21		3		5		(14)		Other operating expenses (income), net	8		21		(34)		5
EBITDA	EBITDA	289		536		723		1,017		EBITDA	539		289		1,030		723
Depreciation and amortization	Depreciation and amortization	46		45		91		92		Depreciation and amortization	51		46		100		91
Income from operations	Income from operations	243		491		632		925		Income from operations	488		243		930		632
Interest expense, net	Interest expense, net	128		137		247		269		Interest expense, net	126		128		250		247

Income tax (benefit) expense	Income tax (benefit) expense	(49)		97		(3)		153		Income tax (benefit) expense	(29)		(49)		18		(3)
Net income	Net income	$	164	$	257	$	388	$	503	Net income	$	391	$	164	$	662	$	388

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

Note 17. Supplemental Financial Information

On February 17, 2017, 1011778 B.C. Unlimited Liability Company (the “Parent Issuer”) and New Red Finance Inc. (the “Co-Issuer” and together with the Parent Issuer, the “Issuers”) entered into an amended credit agreement, as amended from time to time, that provides for obligations under the Credit Facilities. On November 9, 2020, the Issuers entered into the 2020 3.50% Senior Notes Indenture with respect to the 2020 3.50% Senior Notes. On October 5, 2020, the Issuers entered into the 2020 4.00% Senior Notes Indenture with respect to the 2020 4.00% Senior Notes. On April 7, 2020, the Issuers entered into the 2020 ~~5.750%~~5.75% Senior Notes Indenture with respect to the 2020 ~~5.750%~~5.75% Senior Notes. On November 19, 2019, the Issuers entered into the 2019 4.375% Senior Notes Indenture with respect to the 2019 4.375% Senior Notes. On September 24, 2019, the Issuers entered into the 2019 3.875% Senior Notes Indenture with respect to the 2019 3.875% Senior Notes. On ~~August 28, 2017, the Issuers entered into the 2017 5.000% Senior Notes Indenture with respect to the 2017 5.000% Senior Notes. On~~ May 17, 2017, the Issuers entered into the 2017 4.25% Senior Notes Indenture with respect to the 2017 4.250% Senior Notes.

The agreement governing our Credit Facilities, the 2020 ~~5.750%~~3.50% Senior Notes Indenture, the 2020 4.00% Senior Notes Indenture, the 2020 5.75% Senior Notes Indenture, the 2019 4.375% Senior Notes Indenture, the 2019 3.875% ~~Senior Notes Indenture, the 2017 5.000%~~ Senior Notes Indenture, and the 2017 4.25% Senior Notes Indenture allow the financial reporting obligation of the Parent Issuer to be satisfied through the reporting of Partnership’s consolidated financial information, provided that the consolidated financial information of the Parent Issuer and its restricted subsidiaries is presented on a standalone basis.

The following represents the condensed consolidating financial information for the Parent Issuer and its restricted subsidiaries (“Consolidated Borrowers”) on a consolidated basis, together with eliminations, as of and for the periods indicated. The condensed consolidating financial information of Partnership is combined with the financial information of its wholly-owned subsidiaries that are also parent entities of the Parent Issuer and presented in a single column under the heading “RBILP”. The consolidating financial information may not necessarily be indicative of the financial position, results of operations or cash flows had the Issuers and Partnership operated as independent entities.

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidating Balance Sheets

(In millions of U.S. dollars)

As of June 30, ~~2020~~2021


		Consolidated Borrowers		RBILP		Eliminations		Consolidated			Consolidated Borrowers		RBILP		Eliminations		Consolidated
ASSETS	ASSETS									ASSETS
Current assets:	Current assets:									Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,540	$	—	$	—	$	1,540	Cash and cash equivalents	$	1,749	$	0	$	0	$	1,749
Accounts and notes receivable, net	Accounts and notes receivable, net	520		—		—		520		Accounts and notes receivable, net	535		0		0		535
Inventories, net	Inventories, net	96		—		—		96		Inventories, net	99		0		0		99
Prepaids and other current assets	Prepaids and other current assets	71		—		—		71		Prepaids and other current assets	132		0		0		132
Total current assets	Total current assets	2,227		—		—		2,227		Total current assets	2,515		0		0		2,515
Property and equipment, net	Property and equipment, net	1,958		—		—		1,958		Property and equipment, net	2,033		0		0		2,033
Operating lease assets, net	Operating lease assets, net	1,117		—		—		1,117		Operating lease assets, net	1,143		0		0		1,143
Intangible assets, net	Intangible assets, net	10,288		—		—		10,288		Intangible assets, net	10,820		0		0		10,820
Goodwill	Goodwill	5,498		—		—		5,498		Goodwill	5,831		0		0		5,831
Net investment in property leased to franchisees	Net investment in property leased to franchisees	62		—		—		62		Net investment in property leased to franchisees	80		0		0		80

Intercompany receivable										Intercompany receivable	0		246		(246)		0
Investment in subsidiaries	Investment in subsidiaries	—		3,852		(3,852)		—		Investment in subsidiaries	0		4,259		(4,259)		0
Other assets, net	Other assets, net	866		—		—		866		Other assets, net	819		0		0		819
Total assets	Total assets	$	22,016	$	3,852	$	(3,852)	$	22,016	Total assets	$	23,241	$	4,505	$	(4,505)	$	23,241
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY									LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:									Current liabilities:
Accounts and drafts payable	Accounts and drafts payable	$	470	$	—	$	—	$	470	Accounts and drafts payable	$	575	$	0	$	0	$	575
Other accrued liabilities	Other accrued liabilities	596		—		—		596		Other accrued liabilities	566		246		0		812
Gift card liability	Gift card liability	112		—		—		112		Gift card liability	149		0		0		149
Current portion of long-term debt and finance leases	Current portion of long-term debt and finance leases	106		—		—		106		Current portion of long-term debt and finance leases	113		0		0		113
Total current liabilities	Total current liabilities	1,284		—		—		1,284		Total current liabilities	1,403		246		0		1,649
Long-term debt, net of current portion	Long-term debt, net of current portion	12,310		—		—		12,310		Long-term debt, net of current portion	12,375		0		0		12,375
Finance leases, net of current portion	Finance leases, net of current portion	299		—		—		299		Finance leases, net of current portion	326		0		0		326
Operating lease liabilities, net of current portion	Operating lease liabilities, net of current portion	1,046		—		—		1,046		Operating lease liabilities, net of current portion	1,078		0		0		1,078
Other liabilities, net	Other liabilities, net	1,810		—		—		1,810		Other liabilities, net	2,110		0		0		2,110

Payables to affiliates										Payables to affiliates	246		0		(246)		0
Deferred income taxes, net	Deferred income taxes, net	1,415		—		—		1,415		Deferred income taxes, net	1,444		0		0		1,444
Total liabilities	Total liabilities	18,164		—		—		18,164		Total liabilities	18,982		246		(246)		18,982
Partners’ capital:	Partners’ capital:									Partners’ capital:
Class A common units	Class A common units	—		7,947		—		7,947		Class A common units	0		8,222		0		8,222
Partnership exchangeable units	Partnership exchangeable units	—		(2,526)		—		(2,526)		Partnership exchangeable units	0		(2,955)		0		(2,955)
Common shares	Common shares	3,334		—		(3,334)		—		Common shares	3,132		0		(3,132)		0
Retained Earnings	Retained Earnings	2,087		—		(2,087)		—		Retained Earnings	2,135		0		(2,135)		0
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(1,572)		(1,572)		1,572		(1,572)		Accumulated other comprehensive income (loss)	(1,012)		(1,012)		1,012		(1,012)
Total Partners' capital/shareholders' equity	Total Partners' capital/shareholders' equity	3,849		3,849		(3,849)		3,849		Total Partners' capital/shareholders' equity	4,255		4,255		(4,255)		4,255
Noncontrolling interests	Noncontrolling interests	3		3		(3)		3		Noncontrolling interests	4		4		(4)		4
Total equity	Total equity	3,852		3,852		(3,852)		3,852		Total equity	4,259		4,259		(4,259)		4,259
Total liabilities and equity	Total liabilities and equity	$	22,016	$	3,852	$	(3,852)	$	22,016	Total liabilities and equity	$	23,241	$	4,505	$	(4,505)	$	23,241

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RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidating Balance Sheets

(In millions of U.S. dollars)

As of December 31, ~~2019~~2020


		Consolidated Borrowers		RBILP		Eliminations		Consolidated			Consolidated Borrowers		RBILP		Eliminations		Consolidated
ASSETS	ASSETS									ASSETS
Current assets:	Current assets:									Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,533	$	—	$	—	$	1,533	Cash and cash equivalents	$	1,560	$	0	$	0	$	1,560
Accounts and notes receivable, net	Accounts and notes receivable, net	527		—		—		527		Accounts and notes receivable, net	536		0		0		536
Inventories, net	Inventories, net	84		—		—		84		Inventories, net	96		0		0		96
Prepaids and other current assets	Prepaids and other current assets	52		—		—		52		Prepaids and other current assets	72		0		0		72
Total current assets	Total current assets	2,196		—		—		2,196		Total current assets	2,264		0		0		2,264
Property and equipment, net	Property and equipment, net	2,007		—		—		2,007		Property and equipment, net	2,031		0		0		2,031
Operating lease assets. net	Operating lease assets. net	1,176		—		—		1,176		Operating lease assets. net	1,152		0		0		1,152
Intangible assets, net	Intangible assets, net	10,563		—		—		10,563		Intangible assets, net	10,701		0		0		10,701
Goodwill	Goodwill	5,651		—		—		5,651		Goodwill	5,739		0		0		5,739
Net investment in property leased to franchisees	Net investment in property leased to franchisees	48		—		—		48		Net investment in property leased to franchisees	66		0		0		66
Intercompany receivable	Intercompany receivable	—		232		(232)		—		Intercompany receivable	0		239		(239)		0
Investment in subsidiaries	Investment in subsidiaries	—		4,259		(4,259)		—		Investment in subsidiaries	0		3,721		(3,721)		0
Other assets, net	Other assets, net	719		—		—		719		Other assets, net	824		0		0		824
Total assets	Total assets	$	22,360	$	4,491	$	(4,491)	$	22,360	Total assets	$	22,777	$	3,960	$	(3,960)	$	22,777
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY									LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:									Current liabilities:
Accounts and drafts payable	Accounts and drafts payable	$	644	$	—	$	—	$	644	Accounts and drafts payable	$	464	$	0	$	0	$	464
Other accrued liabilities	Other accrued liabilities	558		232		—		790		Other accrued liabilities	596		239		0		835
Gift card liability	Gift card liability	168		—		—		168		Gift card liability	191		0		0		191
Current portion of long-term debt and finance leases	Current portion of long-term debt and finance leases	101		—		—		101		Current portion of long-term debt and finance leases	111		0		0		111
Total current liabilities	Total current liabilities	1,471		232		—		1,703		Total current liabilities	1,362		239		0		1,601
Long-term debt, net of current portion	Long-term debt, net of current portion	11,759		—		—		11,759		Long-term debt, net of current portion	12,397		0		0		12,397
Finance leases, net of current portion	Finance leases, net of current portion	288		—		—		288		Finance leases, net of current portion	315		0		0		315
Operating lease liabilities, net of current portion	Operating lease liabilities, net of current portion	1,089		—		—		1,089		Operating lease liabilities, net of current portion	1,082		0		0		1,082
Other liabilities, net	Other liabilities, net	1,698		—		—		1,698		Other liabilities, net	2,236		0		0		2,236
Payables to affiliates	Payables to affiliates	232		—		(232)		—		Payables to affiliates	239		0		(239)		0
Deferred income taxes, net	Deferred income taxes, net	1,564		—		—		1,564		Deferred income taxes, net	1,425		0		0		1,425
Total liabilities	Total liabilities	18,101		232		(232)		18,101		Total liabilities	19,056		239		(239)		19,056
Partners’ capital:	Partners’ capital:									Partners’ capital:
Class A common units	Class A common units	—		7,786		—		7,786		Class A common units	0		7,994		0		7,994
Partnership exchangeable units	Partnership exchangeable units	—		(2,353)		—		(2,353)		Partnership exchangeable units	0		(3,002)		0		(3,002)
Common shares	Common shares	3,248		—		(3,248)		—		Common shares	3,026		0		(3,026)		0
Retained Earnings	Retained Earnings	2,185		—		(2,185)		—		Retained Earnings	1,966		0		(1,966)		0
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(1,178)		(1,178)		1,178		(1,178)		Accumulated other comprehensive income (loss)	(1,275)		(1,275)		1,275		(1,275)
Total Partners' capital/shareholders' equity	Total Partners' capital/shareholders' equity	4,255		4,255		(4,255)		4,255		Total Partners' capital/shareholders' equity	3,717		3,717		(3,717)		3,717
Noncontrolling interests	Noncontrolling interests	4		4		(4)		4		Noncontrolling interests	4		4		(4)		4
Total equity	Total equity	4,259		4,259		(4,259)		4,259		Total equity	3,721		3,721		(3,721)		3,721
Total liabilities and equity	Total liabilities and equity	$	22,360	$	4,491	$	(4,491)	$	22,360	Total liabilities and equity	$	22,777	$	3,960	$	(3,960)	$	22,777

Table of Contents

RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidating Statements of Operations

(In millions of U.S. dollars)

Three Months Ended June 30, 2021


	Consolidated Borrowers		RBILP		Eliminations		Consolidated
Revenues:
Sales	$	590	$	0	$	0	$	590
Franchise and property revenues	614		0		0		614
Advertising revenues	234		0		0		234
Total revenues	1,438		0		0		1,438
Operating costs and expenses:
Cost of sales	467		0		0		467
Franchise and property expenses	121		0		0		121
Advertising expenses	238		0		0		238
General and administrative expenses	113		0		0		113
(Income) loss from equity method investments	3		0		0		3
Other operating expenses (income), net	8		0		0		8
Total operating costs and expenses	950		0		0		950
Income from operations	488		0		0		488
Interest expense, net	126		0		0		126

Income before income taxes	362		0		0		362
Income tax (benefit) expense	(29)		0		0		(29)
Net income	391		0		0		391
Equity in earnings of consolidated subsidiaries	0		391		(391)		0
Net income (loss)	391		391		(391)		391
Net income (loss) attributable to noncontrolling interests	1		1		(1)		1
Net income (loss) attributable to common unitholders	$	390	$	390	$	(390)	$	390
Comprehensive income (loss)	$	451	$	451	$	(451)	$	451

Table of Contents

RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidating Statements of Operations

(In millions of U.S. dollars)

~~Three~~

Six Months Ended June 30, ~~2020~~2021

Consolidated Borrowers RBILP Eliminations Consolidated
Revenues:
Sales $ 406 $ — $ — $ 406
Franchise and property revenues 642 — — 642
Total revenues 1,048 — — 1,048
Operating costs and expenses:
Cost of sales 339 — — 339
Franchise and property expenses 134 — — 134
Selling, general and administrative expenses 295 — — 295
(Income) loss from equity method investments 16 — — 16
Other operating expenses (income), net 21 — — 21
Total operating costs and expenses 805 — — 805
Income from operations 243 — — 243
Interest expense, net 128 — — 128
Income before income taxes 115 — — 115
Income tax (benefit) expense (49) — — (49)
Net income 164 — — 164
Equity in earnings of consolidated subsidiaries — 164 (164) —
Net income (loss) 164 164 (164) 164
Net income (loss) attributable to noncontrolling interests 1 1 (1) 1
Net income (loss) attributable to common unitholders $ 163 $ 163 $ (163) $ 163
Comprehensive income (loss) $ 313 $ 313 $ (313) $ 313


	Consolidated Borrowers		RBILP		Eliminations		Consolidated
Revenues:
Sales	$	1,097	$	0	$	0	$	1,097
Franchise and property revenues	1,162		0		0		1,162
Advertising revenues	439		0		0		439
Total revenues	2,698		0		0		2,698
Operating costs and expenses:
Cost of sales	868		0		0		868
Franchise and property expenses	237		0		0		237
Advertising expenses	474		0		0		474
General and administrative expenses	218		0		0		218
(Income) loss from equity method investments	5		0		0		5
Other operating expenses (income), net	(34)		0		0		(34)
Total operating costs and expenses	1,768		0		0		1,768
Income from operations	930		0		0		930
Interest expense, net	250		0		0		250

Income before income taxes	680		0		0		680
Income tax (benefit) expense	18		0		0		18
Net income	662		0		0		662
Equity in earnings of consolidated subsidiaries	0		662		(662)		0
Net income (loss)	662		662		(662)		662
Net income (loss) attributable to noncontrolling interests	2		2		(2)		2
Net income (loss) attributable to common unitholders	$	660	$	660	$	(660)	$	660
Comprehensive income (loss)	$	925	$	925	$	(925)	$	925

Table of Contents

RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidating Statements of Operations

(In millions of U.S. dollars)

~~Six~~

Three Months Ended June 30, 2020

Consolidated Borrowers RBILP Eliminations Consolidated
Revenues:
Sales $ 909 $ — $ — $ 909
Franchise and property revenues 1,364 — — 1,364
Total revenues 2,273 — — 2,273
Operating costs and expenses:
Cost of sales 738 — — 738
Franchise and property expenses 260 — — 260
Selling, general and administrative expenses 620 — — 620
(Income) loss from equity method investments 18 — — 18
Other operating expenses (income), net 5 — — 5
Total operating costs and expenses 1,641 — — 1,641
Income from operations 632 — — 632
Interest expense, net 247 — — 247
Income before income taxes 385 — — 385
Income tax (benefit) expense (3) — — (3)
Net income 388 — — 388
Equity in earnings of consolidated subsidiaries — 388 (388) —
Net income (loss) 388 388 (388) 388
Net income (loss) attributable to noncontrolling interests 1 1 (1) 1
Net income (loss) attributable to common unitholders $ 387 $ 387 $ (387) $ 387
Comprehensive income (loss) $ (6) $ (6) $ 6 $ (6)


	Consolidated Borrowers		RBILP		Eliminations		Consolidated
Revenues:
Sales	$	406	$	0	$	0	$	406
Franchise and property revenues	450		0		0		450
Advertising revenues	192		0		0		192
Total revenues	1,048		0		0		1,048
Operating costs and expenses:
Cost of sales	339		0		0		339
Franchise and property expenses	132		0		0		132
Advertising expenses	203		0		0		203
General and administrative expenses	94		0		0		94
(Income) loss from equity method investments	16		0		0		16
Other operating expenses (income), net	21		0		0		21
Total operating costs and expenses	805		0		0		805
Income from operations	243		0		0		243
Interest expense, net	128		0		0		128

Income before income taxes	115		0		0		115
Income tax (benefit) expense	(49)		0		0		(49)
Net income	164		0		0		164
Equity in earnings of consolidated subsidiaries	0		164		(164)		0
Net income (loss)	164		164		(164)		164
Net income (loss) attributable to noncontrolling interests	1		1		(1)		1
Net income (loss) attributable to common unitholders	$	163	$	163	$	(163)	$	163
Comprehensive income (loss)	$	313	$	313	$	(313)	$	313

Table of Contents

RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidating Statements of Operations

(In millions of U.S. dollars)

~~Three~~

Six Months Ended June 30, ~~2019~~2020


		Consolidated Borrowers		RBILP		Eliminations		Consolidated			Consolidated Borrowers		RBILP		Eliminations		Consolidated
Revenues:	Revenues:									Revenues:
Sales	Sales	$	589	$	—	$	—	$	589	Sales	$	909	$	0	$	0	$	909
Franchise and property revenues	Franchise and property revenues	811		—		—		811		Franchise and property revenues	975		0		0		975
Franchise contributions for advertising										Franchise contributions for advertising	389		0		0		389
Total revenues	Total revenues	1,400		—		—		1,400		Total revenues	2,273		0		0		2,273
Operating costs and expenses:	Operating costs and expenses:									Operating costs and expenses:
Cost of sales	Cost of sales	453		—		—		453		Cost of sales	738		0		0		738
Franchise and property expenses	Franchise and property expenses	135		—		—		135		Franchise and property expenses	255		0		0		255
Franchise advertising and related expenses										Franchise advertising and related expenses	429		0		0		429
Selling, general and administrative expenses	Selling, general and administrative expenses	316		—		—		316		Selling, general and administrative expenses	196		0		0		196
(Income) loss from equity method investments	(Income) loss from equity method investments	2		—		—		2		(Income) loss from equity method investments	18		0		0		18
Other operating expenses (income), net	Other operating expenses (income), net	3		—		—		3		Other operating expenses (income), net	5		0		0		5
Total operating costs and expenses	Total operating costs and expenses	909		—		—		909		Total operating costs and expenses	1,641		0		0		1,641
Income from operations	Income from operations	491		—		—		491		Income from operations	632		0		0		632
Interest expense, net	Interest expense, net	137		—		—		137		Interest expense, net	247		0		0		247

Income before income taxes	Income before income taxes	354		—		—		354		Income before income taxes	385		0		0		385
Income tax expense		97		—		—		97
Income tax (benefit) expense										Income tax (benefit) expense	(3)		0		0		(3)
Net income	Net income	257		—		—		257		Net income	388		0		0		388
Equity in earnings of consolidated subsidiaries	Equity in earnings of consolidated subsidiaries	—		257		(257)		—		Equity in earnings of consolidated subsidiaries	0		388		(388)		0
Net income (loss)	Net income (loss)	257		257		(257)		257		Net income (loss)	388		388		(388)		388
Net income (loss) attributable to noncontrolling interests	Net income (loss) attributable to noncontrolling interests	—		—		—		—		Net income (loss) attributable to noncontrolling interests	1		1		(1)		1
Net income (loss) attributable to common unitholders	Net income (loss) attributable to common unitholders	$	257	$	257	$	(257)	$	257	Net income (loss) attributable to common unitholders	$	387	$	387	$	(387)	$	387
Comprehensive income (loss)	Comprehensive income (loss)	$	362	$	362	$	(362)	$	362	Comprehensive income (loss)	$	(6)	$	(6)	$	6	$	(6)

Table of Contents

~~RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES~~

~~Condensed Consolidating Statements of Operations~~

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

~~Six Months Ended June 30, 2019~~

Consolidated Borrowers RBILP Eliminations Consolidated
Revenues:
Sales $ 1,111 $ — $ — $ 1,111
Franchise and property revenues 1,555 — — 1,555
Total revenues 2,666 — — 2,666
Operating costs and expenses:
Cost of sales 859 — — 859
Franchise and property expenses 268 — — 268
Selling, general and administrative expenses 628 — — 628
(Income) loss from equity method investments — — — —
Other operating expenses (income), net (14) — — (14)
Total operating costs and expenses 1,741 — — 1,741
Income from operations 925 — — 925
Interest expense, net 269 — — 269
Income before income taxes 656 — — 656
Income tax expense 153 — — 153
Net income 503 — — 503
Equity in earnings of consolidated subsidiaries — 503 (503) —
Net income (loss) 503 503 (503) 503
Net income (loss) attributable to noncontrolling interests — — — —
Net income (loss) attributable to common unitholders $ 503 $ 503 $ (503) $ 503
Comprehensive income (loss) $ 656 $ 656 $ (656) $ 656

~~Table of Contents~~

RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidating Statements of Cash Flows

(In millions of U.S. dollars)

Six months ended June 30, ~~2020~~2021


		Consolidated Borrowers		RBILP		Eliminations		Consolidated			Consolidated Borrowers		RBILP		Eliminations		Consolidated
Cash flows from operating activities:	Cash flows from operating activities:									Cash flows from operating activities:
Net income	Net income	$	388	$	388	$	(388)	$	388	Net income	$	662	$	662	$	(662)	$	662
Adjustments to reconcile net income to net cash provided by (used for) operating activities:	Adjustments to reconcile net income to net cash provided by (used for) operating activities:									Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Equity in loss (earnings) of consolidated subsidiaries	Equity in loss (earnings) of consolidated subsidiaries	—		(388)		388		—		Equity in loss (earnings) of consolidated subsidiaries	0		(662)		662		0
Depreciation and amortization	Depreciation and amortization	91		—		—		91		Depreciation and amortization	100		0		0		100

Amortization of deferred financing costs and debt issuance discount	Amortization of deferred financing costs and debt issuance discount	12		—		—		12		Amortization of deferred financing costs and debt issuance discount	13		0		0		13
(Income) loss from equity method investments	(Income) loss from equity method investments	18		—		—		18		(Income) loss from equity method investments	5		0		0		5
(Gain) loss on remeasurement of foreign denominated transactions	(Gain) loss on remeasurement of foreign denominated transactions	10		—		—		10		(Gain) loss on remeasurement of foreign denominated transactions	(35)		0		0		(35)
Net (gains) losses on derivatives	Net (gains) losses on derivatives	(1)		—		—		(1)		Net (gains) losses on derivatives	42		0		0		42
Share-based compensation expense	Share-based compensation expense	39		—		—		39		Share-based compensation expense	40		0		0		40
Deferred income taxes	Deferred income taxes	(131)		—		—		(131)		Deferred income taxes	24		0		0		24
Other	Other	20		—		—		20		Other	(12)		0		0		(12)
Changes in current assets and liabilities, excluding acquisitions and dispositions:	Changes in current assets and liabilities, excluding acquisitions and dispositions:									Changes in current assets and liabilities, excluding acquisitions and dispositions:
Accounts and notes receivable	Accounts and notes receivable	(36)		—		—		(36)		Accounts and notes receivable	17		0		0		17
Inventories and prepaids and other current assets	Inventories and prepaids and other current assets	(28)		—		—		(28)		Inventories and prepaids and other current assets	(5)		0		0		(5)
Accounts and drafts payable	Accounts and drafts payable	(158)		—		—		(158)		Accounts and drafts payable	103		0		0		103
Other accrued liabilities and gift card liability	Other accrued liabilities and gift card liability	(13)		—		—		(13)		Other accrued liabilities and gift card liability	(123)		0		0		(123)
Tenant inducements paid to franchisees	Tenant inducements paid to franchisees	(5)		—		—		(5)		Tenant inducements paid to franchisees	(1)		0		0		(1)
Other long-term assets and liabilities	Other long-term assets and liabilities	(10)		—		—		(10)		Other long-term assets and liabilities	(98)		0		0		(98)
Net cash provided by (used for) operating activities	Net cash provided by (used for) operating activities	196		—		—		196		Net cash provided by (used for) operating activities	732		0		0		732
Cash flows from investing activities:	Cash flows from investing activities:									Cash flows from investing activities:
Payments for property and equipment	Payments for property and equipment	(39)		—		—		(39)		Payments for property and equipment	(46)		0		0		(46)
Net proceeds from disposal of assets, restaurant closures, and refranchisings	Net proceeds from disposal of assets, restaurant closures, and refranchisings	5		—		—		5		Net proceeds from disposal of assets, restaurant closures, and refranchisings	14		0		0		14

Settlement/sale of derivatives, net	Settlement/sale of derivatives, net	22		—		—		22		Settlement/sale of derivatives, net	1		0		0		1

Other investing activities, net										Other investing activities, net	(5)		0		0		(5)
Net cash provided by (used for) investing activities	Net cash provided by (used for) investing activities	(12)		—		—		(12)		Net cash provided by (used for) investing activities	(36)		0		0		(36)
Cash flows from financing activities:	Cash flows from financing activities:									Cash flows from financing activities:
Proceeds from revolving line of credit and long-term debt		1,585		—		—		1,585
Repayments of revolving line of credit, long-term debt and finance leases		(1,045)		—		—		(1,045)
Payment of financing costs		(10)		—		—		(10)

Repayments of long-term debt and finance leases										Repayments of long-term debt and finance leases	(54)		0		0		(54)

Distributions on Class A common and Partnership exchangeable units	Distributions on Class A common and Partnership exchangeable units	—		(716)		—		(716)		Distributions on Class A common and Partnership exchangeable units	0		(484)		0		(484)

Capital contribution from RBI	Capital contribution from RBI	41		—		—		41		Capital contribution from RBI	56		0		0		56
Distributions from subsidiaries	Distributions from subsidiaries	(716)		716		—		—		Distributions from subsidiaries	(484)		484		0		0
(Payments) proceeds from derivatives	(Payments) proceeds from derivatives	(14)		—		—		(14)		(Payments) proceeds from derivatives	(32)		0		0		(32)
Other financing activities, net	Other financing activities, net	(2)		—		—		(2)		Other financing activities, net	(2)		0		0		(2)
Net cash provided by (used for) financing activities	Net cash provided by (used for) financing activities	(161)		—		—		(161)		Net cash provided by (used for) financing activities	(516)		0		0		(516)
Effect of exchange rates on cash and cash equivalents	Effect of exchange rates on cash and cash equivalents	(16)		—		—		(16)		Effect of exchange rates on cash and cash equivalents	9		0		0		9
Increase (decrease) in cash and cash equivalents	Increase (decrease) in cash and cash equivalents	7		—		—		7		Increase (decrease) in cash and cash equivalents	189		0		0		189
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	1,533		—		—		1,533		Cash and cash equivalents at beginning of period	1,560		0		0		1,560
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	1,540	$	—	$	—	$	1,540	Cash and cash equivalents at end of period	$	1,749	$	0	$	0	$	1,749

3130

Table of Contents

RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidating Statements of Cash Flows

(In millions of U.S. dollars)

Six Months Ended June 30, ~~2019~~2020


		Consolidated Borrowers		RBILP		Eliminations		Consolidated			Consolidated Borrowers		RBILP		Eliminations		Consolidated
Cash flows from operating activities:	Cash flows from operating activities:									Cash flows from operating activities:
Net income	Net income	$	503	$	503	$	(503)	$	503	Net income	$	388	$	388	$	(388)	$	388
Adjustments to reconcile net income to net cash provided by (used for) operating activities:	Adjustments to reconcile net income to net cash provided by (used for) operating activities:									Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Equity in loss (earnings) of consolidated subsidiaries	Equity in loss (earnings) of consolidated subsidiaries	—		(503)		503		—		Equity in loss (earnings) of consolidated subsidiaries	0		(388)		388		0
Depreciation and amortization	Depreciation and amortization	92		—		—		92		Depreciation and amortization	91		0		0		91

Amortization of deferred financing costs and debt issuance discount	Amortization of deferred financing costs and debt issuance discount	15		—		—		15		Amortization of deferred financing costs and debt issuance discount	12		0		0		12

(Income) loss from equity method investments										(Income) loss from equity method investments	18		0		0		18
(Gain) loss on remeasurement of foreign denominated transactions	(Gain) loss on remeasurement of foreign denominated transactions	(3)		—		—		(3)		(Gain) loss on remeasurement of foreign denominated transactions	10		0		0		10
Net (gains) losses on derivatives	Net (gains) losses on derivatives	(34)		—		—		(34)		Net (gains) losses on derivatives	(1)		0		0		(1)
Share-based compensation expense	Share-based compensation expense	39		—		—		39		Share-based compensation expense	39		0		0		39
Deferred income taxes	Deferred income taxes	23		—		—		23		Deferred income taxes	(131)		0		0		(131)
Other	Other	(3)		—		—		(3)		Other	20		0		0		20
Changes in current assets and liabilities, excluding acquisitions and dispositions:	Changes in current assets and liabilities, excluding acquisitions and dispositions:									Changes in current assets and liabilities, excluding acquisitions and dispositions:
Accounts and notes receivable	Accounts and notes receivable	(16)		—		—		(16)		Accounts and notes receivable	(36)		0		0		(36)
Inventories and prepaids and other current assets	Inventories and prepaids and other current assets	(10)		—		—		(10)		Inventories and prepaids and other current assets	(28)		0		0		(28)
Accounts and drafts payable	Accounts and drafts payable	(40)		—		—		(40)		Accounts and drafts payable	(158)		0		0		(158)
Other accrued liabilities and gift card liability	Other accrued liabilities and gift card liability	(166)		—		—		(166)		Other accrued liabilities and gift card liability	(13)		0		0		(13)
Tenant inducements paid to franchisees	Tenant inducements paid to franchisees	(8)		—		—		(8)		Tenant inducements paid to franchisees	(5)		0		0		(5)
Other long-term assets and liabilities	Other long-term assets and liabilities	83		—		—		83		Other long-term assets and liabilities	(10)		0		0		(10)
Net cash provided by (used for) operating activities	Net cash provided by (used for) operating activities	475		—		—		475		Net cash provided by (used for) operating activities	196		0		0		196
Cash flows from investing activities:	Cash flows from investing activities:									Cash flows from investing activities:
Payments for property and equipment	Payments for property and equipment	(14)		—		—		(14)		Payments for property and equipment	(39)		0		0		(39)
Net proceeds from disposal of assets, restaurant closures, and refranchisings	Net proceeds from disposal of assets, restaurant closures, and refranchisings	22		—		—		22		Net proceeds from disposal of assets, restaurant closures, and refranchisings	5		0		0		5

Settlement/sale of derivatives, net	Settlement/sale of derivatives, net	15		—		—		15		Settlement/sale of derivatives, net	22		0		0		22

Net cash provided by (used for) investing activities	Net cash provided by (used for) investing activities	23		—		—		23		Net cash provided by (used for) investing activities	(12)		0		0		(12)
Cash flows from financing activities:	Cash flows from financing activities:									Cash flows from financing activities:

Repayments of long-term debt and finance leases		(48)		—		—		(48)

Proceeds from revolving line of credit and long-term debt										Proceeds from revolving line of credit and long-term debt	1,585		0		0		1,585
Repayments of revolving line of credit, long-term debt and finance leases										Repayments of revolving line of credit, long-term debt and finance leases	(1,045)		0		0		(1,045)
Payment of financing costs										Payment of financing costs	(10)		0		0		(10)
Distributions on Class A common and Partnership exchangeable units	Distributions on Class A common and Partnership exchangeable units	—		(437)		—		(437)		Distributions on Class A common and Partnership exchangeable units	0		(716)		0		(716)

Capital contribution from RBI	Capital contribution from RBI	80		—		—		80		Capital contribution from RBI	41		0		0		41
Distributions from subsidiaries	Distributions from subsidiaries	(437)		437		—		—		Distributions from subsidiaries	(716)		716		0		0
(Payments) proceeds from derivatives	(Payments) proceeds from derivatives	11		—		—		11		(Payments) proceeds from derivatives	(14)		0		0		(14)
Other financing activities, net	Other financing activities, net	(1)		—		—		(1)		Other financing activities, net	(2)		0		0		(2)
Net cash (used for) provided by financing activities		(395)		—		—		(395)
Net cash provided by (used for) financing activities										Net cash provided by (used for) financing activities	(161)		0		0		(161)
Effect of exchange rates on cash and cash equivalents	Effect of exchange rates on cash and cash equivalents	12		—		—		12		Effect of exchange rates on cash and cash equivalents	(16)		0		0		(16)
Increase (decrease) in cash and cash equivalents	Increase (decrease) in cash and cash equivalents	115		—		—		115		Increase (decrease) in cash and cash equivalents	7		0		0		7
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	913		—		—		913		Cash and cash equivalents at beginning of period	1,533		0		0		1,533
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	1,028	$	—	$	—	$	1,028	Cash and cash equivalents at end of period	$	1,540	$	0	$	0	$	1,540

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Note 18. Subsequent Events

Cash Distributions/Dividends and RBI Share Repurchase Authorization

On July 7, 2021, RBI paid a cash dividend of $0.53 per RBI common share to common shareholders of record on June 23, 2021. 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 $0.53 per exchangeable unit to holders of record on June 23, 2021.

Subsequent to June 30, ~~2020,~~2021, the RBI board of directors declared a cash dividend of ~~$0.52~~$0.53 per RBI common share, which will be paid on October ~~2, 2020~~5, 2021 to RBI common shareholders of record on September ~~18, 2020.~~21, 2021. 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 ~~$0.52~~$0.53 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.

On July 28, 2021, the RBI board of directors approved a share repurchase authorization that allows RBI to purchase up to $1,000 million of RBI common shares until August 10, 2023.

Issuance of Senior Notes and Redemption of Senior Notes

As discussed in Note 10, Long-Term Debt, on July 6, 2021, the Borrowers issued the Notes. The net proceeds from the offering of the Notes were used to redeem the remaining $775 million principal amount outstanding of the 4.25% First Lien Senior Notes on July 15, 2021, plus any accrued and unpaid interest thereon, and pay related redemption premiums, fees and expenses.

During the three months ended September 30, 2021, we will record a loss on early extinguishment of debt that will include the redemption premiums paid as well as the write-off of unamortized debt issuance costs in connection with the redemption of the notes discussed above.

*****

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

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

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

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

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

Overview

We are one of the world’s largest quick service restaurant (“QSR”) companies with approximately ~~$32~~$33 billion in annual system-wide sales and over 27,000 restaurants in more than 100 countries ~~and U.S. territories~~ as of June 30, ~~2020.~~2021. Our Tim Hortons®, Burger King®, and Popeyes® brands have similar franchised business models with complementary daypart mixes and product platforms. Our three iconic brands are managed independently while benefiting from global scale and sharing of best practices.

Tim Hortons restaurants are quick service restaurants with a menu that includes premium blend coffee, tea, espresso-based hot and cold specialty drinks, fresh baked goods, including donuts, Timbits®, bagels, muffins, cookies and pastries, grilled paninis, classic sandwiches, wraps, soups, and more. Burger King restaurants are quick service restaurants that feature flame-grilled hamburgers, chicken, and other specialty sandwiches, french fries, soft drinks, and other affordably-priced food items. Popeyes restaurants are quick service restaurants featuring a unique “Louisiana” style menu that includes 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”). Our business generates revenue from the following sources: (i) franchise and advertising revenues, consisting primarily of royalties and advertising fund contributions based on a percentage of sales reported by franchise restaurants and franchise fees paid by franchisees; (ii) property revenues from properties we lease or sublease to franchisees; and (iii) sales at restaurants owned by us (“Company restaurants”). In addition, our TH business generates revenue from sales to franchisees related to our supply chain operations, including manufacturing, procurement, warehousing, and distribution, as well as sales to retailers.

COVID-19

The global crisis resulting from the spread of coronavirus ~~(COVID-19) has had a substantial impact on~~(“COVID-19”) impacted our global restaurant operations for the three and six months ended June 30, ~~2020, which is expected to continue with~~2021 and 2020. While the ~~timing~~impact of ~~recovery uncertain. System-wide~~COVID-19 on system-wide sales growth, system-wide sales, ~~and~~ comparable sales ~~were also negatively impacted~~and net restaurant growth was severe for the three and six months ended June 30, 2020, asin the 2021 periods these metrics were affected to a ~~result of~~lesser extent for the ~~impact of COVID-19.~~entire period, with variations among brands and regions. During 2020 and the ~~first and second quarters,~~six months ended June 30, 2021, substantially all TH, BK and PLK restaurants remained open in North America, some with limited operations, such as ~~Drive-thru, Takeout~~drive-thru, takeout and ~~Delivery~~delivery (where applicable) ~~and that currently remains~~, reduced if any dine-in capacity, and/or restrictions on hours of operation. During the case. While certain markets have opened for dine-in guests, the capacity may be limited, and local conditions may lead to closures or increased limitations. Some international markets temporarily closed most or allthree months ended June 30, 2021, on average 96% of our restaurants ~~and the~~were open worldwide, including approximately 97% of our restaurants ~~that remained open or have reopened may have limited operations. As~~in North America, approximately 96% of ~~the end~~our restaurants in Asia Pacific, approximately 94% of ~~July,~~our restaurants in ~~Asia-Pacific substantially all of the restaurants are open;~~ Europe, ~~Middle-East~~Middle East and Africa, ~~restaurants are now more than 90% open~~ and approximately ~~80%~~91% of our restaurants in Latin America. By contrast, during the ~~Latin~~three months ended June 30, 2020, on average 81% of our restaurants were open worldwide, including approximately 94% of our restaurants in North America, approximately 87% of our restaurants ~~are open, in many cases with limited operations.~~

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Our operating results substantially depend upon our franchisees’ sales volumes, restaurant profitability, and financial stability. The financial impact of COVID-19 has had, and is expected to continue to have, an adverse effect on manyin Asia Pacific, approximately 57% of our ~~franchisees’ liquidity~~restaurants in Europe, Middle East and ~~we are working closely with~~Africa, and approximately 56% of our ~~franchisees around~~restaurants in Latin America. Certain jurisdictions, such as Canada, Europe, and Brazil, that had eased restrictions during 2020, re-imposed lockdowns and curfews in the ~~world to monitor and assist them with access to appropriate sources of liquidity in order to sustain their businesses throughout this crisis. During~~six months ended June 30, 2021. In comparison, during the six months ended June 30, 2020, ~~we initiated rent relief programs for eligible TH franchisees in Canada~~a number of other markets required temporary complete closures while implementing lock-down orders. We expect local conditions to continue to dictate limitations on restaurant operations, capacity, and ~~eligible BK franchisees in~~hours of operation.

With the ~~U.S. and Canada who lease property from us. While in effect, these programs provide working capital~~pandemic affecting consumer behavior, the importance of digital sales, including delivery, has grown. We expect to continue to support ~~to franchisees and result in a reduction in our property revenues. See Note 4 to the accompanying unaudited Condensed Consolidated Financial Statements.~~

During the second quarter of 2020, we provided cash flow support by extending loans to eligible BK franchisees in the U.S. and advancing certain cash payments to eligible TH franchisees in Canada. We also temporarily deferred franchisee capital investment commitments for restaurant renovations and new restaurant development globally, based on the individual circumstances of relevant markets and restaurant owners. In addition, we have dedicated resources across all threeenhancements of our ~~brands to work one-on-one with restaurant owners~~digital and ~~provide guidance and support to franchisees.~~

~~During~~marketing capabilities. While we do not know the three and six months ended June 30, 2020, we recorded higher bad debt expense than the periods ended June 30, 2019. While all receivables remain contractually due and payable to us, the certainty of the amount and timing of payments has been impacted by the COVID-19 pandemic. Therefore, our bad debt expense during the three and six months ended June 30, 2020 reflects an adjustment to our historical collections experience to incorporate an estimate of the impact of current economic conditions resulting from the COVID-19 pandemic. Actual collections may be materially higher or lower than this estimate reflects since it is reasonably possible the duration andfull future impact ~~of the~~ COVID-19 ~~pandemic~~will have on our business, ~~or our franchisees may differ~~we expect to see a continued impact from ~~our assumptions.~~

~~While we cannot currently estimate the duration or future negative financial impact of the~~ COVID-19 ~~pandemic~~ on our ~~business or our franchisees, we expect the negative effects to continue into the third quarter of 2020.~~results in 2021.

Operating Metrics

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

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

•Comparable sales refers to the percentage change in restaurant sales in one period from the same prior year period for restaurants that have been open for 13 months or longer for TH and BK and 17 months or longer for PLK. Additionally, if a restaurant is closed for a significant portion of a month, the restaurant is excluded from the monthly comparable sales calculation.

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

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

•Net restaurant growth refers to the net increase in restaurant count (openings, net of permanent closures) over a trailing twelve month period, divided by the restaurant count at the beginning of the trailing twelve month period.

These metrics are important indicators of the overall direction of our business, including trends in sales and the effectiveness of each brand’s marketing, operations and growth initiatives.

~~Table of Contents~~

~~Recent Events and Factors Affecting Comparability~~

~~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 2019 and the current period, and is expected to continue to impact our consolidated results of operations in future periods.

We recorded $7 million and $11 million of costs during the three months ended June 30, 2020 and 2019, respectively, and $8 million and $17 million of costs during the six months ended June 30, 2020 and 2019, 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 interpretation, analysis and corporate restructuring initiatives related to recently issued, final and proposed regulations and guidance issued by the U.S. Treasury, the IRS and state tax authorities in their ongoing efforts to interpret and implement the Tax Act and related state and local tax implications (“Corporate restructuring and tax advisory fees”).

During the three months ended June 30, 2020, various guidance was issued by the U.S. Treasury relating to the Tax Act. After review of such guidance, we recorded a deferred tax asset of approximately $64 million related to certain tax attribute carryforwards, which we now expect to be able to deduct in future years under recently issued regulations implementing the Tax Act.

~~Office Centralization and Relocation Costs~~

In connection with the centralization and relocation of our Canadian and U.S. restaurant support centers to new offices in Toronto, Ontario, and Miami, Florida, respectively, we incurred certain non-operational expenses ("Office centralization and relocation costs") totaling $2 million and $6 million during the three and six months ended June 30, 2019 consisting primarily of moving costs and relocation-driven compensation expenses, which are classified as selling, general and administrative expenses in our condensed consolidated statements of operations. We did not incur any Office centralization and relocation costs during 2020 and do not expect to incur any additional Office centralization and relocation costs during 2020.

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Results of Operations for the Three and Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020

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


Consolidated	Consolidated	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	Consolidated	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
		2020		2019		Favorable / (Unfavorable)										2020		2019		Favorable / (Unfavorable)												2021		2020		Favorable / (Unfavorable)						2021		2020	Favorable / (Unfavorable)
Revenues:	Revenues:																					Revenues:
Sales	Sales	$	406	$	589	$	(183)	$	(17)	$	(166)	$	909	$	1,111	$	(202)	$	(22)	$	(180)	Sales	$	590	$	406		$	184	$	43	$	141	$	1,097	$	909	$	188	$	67	$	121
Franchise and property revenues	Franchise and property revenues	642		811		(169)		(18)		(151)		1,364		1,555		(191)		(27)		(164)		Franchise and property revenues	614		450			164		24		140		1,162		975		187		39		148
Advertising revenues																						Advertising revenues	234		192			42		5		37		439		389		50		8		42
Total revenues	Total revenues	1,048		1,400		(352)		(35)		(317)		2,273		2,666		(393)		(49)		(344)		Total revenues	1,438		1,048			390		72		318		2,698		2,273		425		114		311
Operating costs and expenses:	Operating costs and expenses:																					Operating costs and expenses:
Cost of sales	Cost of sales	339		453		114		13		101		738		859		121		17		104		Cost of sales	467		339			(128)		(35)		(93)		868		738		(130)		(54)		(76)
Franchise and property expenses	Franchise and property expenses	134		135		1		3		(2)		260		268		8		4		4		Franchise and property expenses	121		132			11		(10)		21		237		255		18		(15)		33
Selling, general and administrative expenses		295		316		21		3		18		620		628		8		5		3
Advertising expenses																						Advertising expenses	238		203			(35)		(6)		(29)		474		429		(45)		(10)		(35)
General and administrative expenses																						General and administrative expenses	113		94			(19)		(4)		(15)		218		196		(22)		(7)		(15)
(Income) loss from equity method investments	(Income) loss from equity method investments	16		2		(14)		—		(14)		18		—		(18)		(1)		(17)		(Income) loss from equity method investments	3		16			13		—		13		5		18		13		—		13
Other operating expenses (income), net	Other operating expenses (income), net	21		3		(18)		—		(18)		5		(14)		(19)		(1)		(18)		Other operating expenses (income), net	8		21			13		(1)		14		(34)		5		39		—		39
Total operating costs and expenses	Total operating costs and expenses	805		909		104		19		85		1,641		1,741		100		24		76		Total operating costs and expenses	950		805			(145)		(56)		(89)		1,768		1,641		(127)		(86)		(41)
Income from operations	Income from operations	243		491		(248)		(16)		(232)		632		925		(293)		(25)		(268)		Income from operations	488		243			245		16		229		930		632		298		28		270
Interest expense, net	Interest expense, net	128		137		9		—		9		247		269		22		—		22		Interest expense, net	126		128			2		(1)		3		250		247		(3)		(1)		(2)

Income before income taxes	Income before income taxes	115		354		(239)		(16)		(223)		385		656		(271)		(25)		(246)		Income before income taxes	362		115			247		15		232		680		385		295		27		268
Income tax (benefit) expense		(49)		97		146		1		145		(3)		153		156		1		155
Income tax expense (benefit)																						Income tax expense (benefit)	(29)		(49)			(20)		1		(21)		18		(3)		(21)		—		(21)
Net income	Net income	$	164	$	257	$	(93)	$	(15)	$	(78)	$	388	$	503	$	(115)	$	(24)	$	(91)	Net income	$	391	$	164		$	227	$	16	$	211	$	662	$	388	$	274	$	27	$	247

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

TH 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
2020 2019 Favorable / (Unfavorable) 2020 2019 Favorable / (Unfavorable)
Revenues:
Sales $ 374 $ 551 $ (177) $ (17) $ (160) $ 839 $ 1,034 $ (195) $ (22) $ (173)
Franchise and property revenues 193 291 (98) (9) (89) 427 557 (130) (11) (119)
Total revenues 567 842 (275) (26) (249) 1,266 1,591 (325) (33) (292)
Cost of sales 307 420 113 13 100 673 792 119 17 102
Franchise and property expenses 83 90 7 3 4 167 177 10 4 6
Segment SG&A 61 77 16 2 14 148 159 11 3 8
Segment depreciation and amortization (b) 28 26 (2) 1 (3) 54 52 (2) 1 (3)
Segment income (c) 147 287 (140) (9) (131) 336 524 (188) (11) (177)

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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
	2021		2020		Favorable / (Unfavorable)						2021		2020		Favorable / (Unfavorable)
Revenues:
Sales	$	556	$	374	$	182	$	43	$	139	$	1,029	$	839	$	190	$	67	$	123
Franchise and property revenues	219		154		65		17		48		409		342		67		27		40
Advertising revenues	56		39		17		4		13		103		85		18		6		12
Total revenues	831		567		264		64		200		1,541		1,266		275		100		175
Cost of sales	434		307		(127)		(35)		(92)		804		673		(131)		(54)		(77)
Franchise and property expenses	86		81		(5)		(9)		4		167		162		(5)		(13)		8
Advertising expenses	68		43		(25)		(5)		(20)		130		108		(22)		(9)		(13)
Segment G&A	26		20		(6)		(2)		(4)		50		45		(5)		(3)		(2)
Segment depreciation and amortization (b)	32		28		(4)		(3)		(1)		63		54		(9)		(4)		(5)
Segment income (c)	253		147		106		17		89		460		336		124		26		98

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

(c)TH segment income includes $2$3 million and $5$2 million of cash distributions received from equity method investments for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. TH segment income includes $4$6 million and $8$4 million of cash distributions received from equity method investments for the six months ended June 30, 2021 and 2020, ~~and 2019,~~ respectively.


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
	2021		2020		Favorable / (Unfavorable)						2021		2020		Favorable / (Unfavorable)
Revenues:
Sales	$	17	$	15	$	2	$	—	$	2	$	33	$	32	$	1	$	—	$	1
Franchise and property revenues	324		233		91		7		84		613		506		107		12		95
Advertising revenues	118		99		19		1		18		220		197		23		2		21
Total revenues	459		347		112		8		104		866		735		131		14		117
Cost of sales	17		16		(1)		—		(1)		33		33		—		—		—
Franchise and property expenses	33		48		15		(1)		16		66		87		21		(2)		23
Advertising expenses	110		105		(5)		(1)		(4)		227		213		(14)		(1)		(13)
Segment G&A	45		30		(15)		(1)		(14)		81		67		(14)		(2)		(12)
Segment depreciation and amortization (b)	12		12		—		—		—		24		24		—		—		—
Segment income	266		160		106		5		101		483		360		123		9		114

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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
	2021		2020		Favorable / (Unfavorable)						2021		2020		Favorable / (Unfavorable)
Revenues:
Sales	$	17	$	17	$	—	$	—	$	—	$	35	$	38	$	(3)	$	—	$	(3)
Franchise and property revenues	71		63		8		—		8		140		127		13		—		13
Advertising revenues	60		54		6		—		6		116		107		9		—		9
Total revenues	148		134		14		—		14		291		272		19		—		19
Cost of sales	16		16		—		—		—		31		32		1		—		1
Franchise and property expenses	2		3		1		—		1		4		6		2		—		2
Advertising expenses	60		55		(5)		—		(5)		117		108		(9)		—		(9)
Segment G&A	13		10		(3)		—		(3)		27		23		(4)		—		(4)
Segment depreciation and amortization (b)	1		2		1		—		1		3		4		1		—		1
Segment income	58		51		7		—		7		114		106		8		—		8


	Three Months Ended June 30,						Six Months Ended June 30,
Key Business Metrics	2021			2020			2021			2020
System-wide sales growth
TH	33.0		%	(33.4)		%	12.5		%	(22.1)		%
BK	37.9		%	(25.2)		%	18.2		%	(14.5)		%
PLK	10.5		%	24.0		%	8.8		%	28.1		%
Consolidated	31.9		%	(20.9)		%	15.5		%	(10.8)		%
System-wide sales
TH	$	1,637		$	1,108		$	3,016		$	2,490
BK	$	5,883		$	4,127		$	11,056		$	9,126
PLK	$	1,386		$	1,247		$	2,730		$	2,505
Consolidated	$	8,906		$	6,482		$	16,802		$	14,121
Comparable sales
TH	27.6		%	(29.3)		%	11.8		%	(19.9)		%
BK	18.2		%	(13.4)		%	8.9		%	(8.4)		%
PLK	(0.3)		%	24.8		%	0.6		%	25.5		%

							As of June 30,
							2021			2020
Net restaurant growth
TH							2.7		%	1.3		%
BK							0.1		%	4.2		%
PLK							5.7		%	6.7		%
Consolidated							1.3		%	3.9		%
Restaurant count
TH							5,065			4,934
BK							18,776			18,756
PLK							3,562			3,369
Consolidated							27,403			27,059

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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
2020 2019 Favorable / (Unfavorable) 2020 2019 Favorable / (Unfavorable)
Revenues:
Sales $ 15 $ 19 $ (4) $ — $ (4) $ 32 $ 38 $ (6) $ — $ (6)
Franchise and property revenues 332 428 (96) (9) (87) 703 820 (117) (16) (101)
Total revenues 347 447 (100) (9) (91) 735 858 (123) (16) (107)
Cost of sales 16 17 1 — 1 33 35 2 — 2
Franchise and property expenses 48 42 (6) — (6) 87 85 (2) — (2)
Segment SG&A 135 149 14 — 14 280 290 10 1 9
Segment depreciation and amortization (b) 12 12 — — — 24 25 1 — 1
Segment income (d) 160 252 (92) (9) (83) 360 474 (114) (15) (99)
Comparable Sales

~~(d)~~For TH and BK, ~~segment income includes $1 million~~system-wide sales were more severely impacted by COVID-19 during the three months ended June 30, 2020 than in the same period in 2021, resulting in a significant increase in system-wide sales growth and ~~$2 million of cash distributions received from equity method investments for~~comparable sales during the three and six months ended June 30, ~~2019, respectively. No significant amounts~~2021.

TH comparable sales were ~~received for~~27.6% during the three ~~and~~months ended June 30, 2021, including Canada comparable sales of 27.4%. TH comparable sales were 11.8% during the six months ended June 30, ~~2020.~~2021, including Canada comparable sales of 11.2%.

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
2020 2019 Favorable / (Unfavorable) 2020 2019 Favorable / (Unfavorable)
Revenues:
Sales $ 17 $ 19 $ (2) $ — $ (2) $ 38 $ 39 $ (1) $ — $ (1)
Franchise and property revenues 117 92 25 — 25 234 178 56 — 56
Total revenues 134 111 23 — 23 272 217 55 — 55
Cost of sales 16 16 — — — 32 32 — — —
Franchise and property expenses 3 3 — — — 6 6 — — —
Segment SG&A 65 54 (11) — (11) 131 103 (28) — (28)
Segment depreciation and amortization (b) 2 3 1 — 1 4 6 2 — 2
Segment income 51 41 10 — 10 106 82 24 — 24

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Three Months Ended
June 30, Six Months Ended
June 30,
Key Business Metrics 2020 2019 2020 2019
System-wide sales growth
    TH (33.4) % 1.6 % (22.1) % 1.1 %
    BK (25.2) % 9.8 % (14.5) % 9.0 %
    PLK 24.0 % 8.8 % 28.1 % 7.8 %
    Consolidated (20.9) % 7.9 % (10.8) % 7.2 %
System-wide sales
    TH $ 1,108 $ 1,716 $ 2,490 $ 3,263
    BK $ 4,127 $ 5,717 $ 9,126 $ 11,006
    PLK $ 1,247 $ 1,012 $ 2,505 $ 1,967
    Consolidated $ 6,482 $ 8,445 $ 14,121 $ 16,236
Comparable sales
    TH (29.3) % 0.5 % (19.9) % — %
    BK (13.4) % 3.6 % (8.4) % 2.9 %
    PLK 24.8 % 3.0 % 25.5 % 1.8 %
As of June 30,
2020 2019
Net restaurant growth
    TH 1.3 % 1.6 %
    BK 4.2 % 5.8 %
    PLK 6.7 % 6.1 %
    Consolidated 3.9 % 5.0 %
Restaurant count
    TH 4,934 4,872
    BK 18,756 18,008
    PLK 3,369 3,156
    Consolidated 27,059 26,036

~~Comparable Sales~~

THBK comparable sales were ~~(29.3)~~18.2% during the three months ended June 30, 2021, including U.S. comparable sales of 13.0%. BK comparable sales were 8.9% during the six months ended June 30, 2021, including U.S. comparable sales of 9.8%.

PLK comparable sales were (0.3)% during the three months ended June 30, ~~2020,~~2021, including ~~Canada~~U.S. comparable sales of ~~(29.9)~~(2.5)%. THPLK comparable sales were ~~(19.9)%~~0.6% during the six months ended June 30, ~~2020, including Canada comparable sales of (20.5)%.~~

~~BK comparable sales were (13.4)% during the three months ended June 30, 2020,~~2021, including U.S. comparable sales of ~~(9.9)~~(0.8)%~~. BK comparable sales were (8.4)% during the six months ended June 30, 2020, including U.S. comparable sales of (8.2)%.~~

PLK comparable sales were 24.8% during the three months ended June 30, 2020, including U.S. comparable sales of 28.5%. PLK comparable sales were 25.5% during the six months ended June 30, 2020, including U.S. comparable sales of 28.8%.

Sales and Cost of Sales

Sales include TH supply chain sales and sales from Company restaurants. TH supply chain sales represent sales of products, supplies and restaurant equipment, as well as sales to retailers. Sales from Company restaurants, including sales by our consolidated TH Restaurant VIEs, represent restaurant-level sales to our guests.

Cost of sales includes costs associated with the management of our TH supply chain, including cost of goods, direct labor and depreciation, as well as the cost of products sold to retailers. Cost of sales also includes food, paper and labor costs of Company ~~restaurants.~~

~~Table of Contents~~

restaurants, including our consolidated TH Restaurants VIEs.

During the three months ended June 30, ~~2020,~~2021, the ~~decrease~~increase in sales was driven ~~primarily~~ by ~~a decrease~~an increase of ~~$160~~$139 million in our TH segment, ~~a decrease~~an increase of $4$2 million in our BK segment and a ~~decrease of $2 million in our PLK segment, and an unfavorable~~favorable FX Impact of ~~$17~~$43 million. The ~~decrease~~increase in our TH segment was driven by ~~a decrease~~an increase in supply chain sales due to an increase in system-wide sales.

During the six months ended June 30, 2021, the increase in sales was driven by an increase of $123 million in our TH segment, an increase of $1 million in our BK segment and a favorable FX Impact of $67 million, partially offset by a decrease of $3 million in our PLK segment. The increase in our TH segment was driven by an increase in supply chain sales due to an increase in system-wide sales ~~net of~~and an increase in sales to retailers.

During the three months ended June 30, 2021, the increase in cost of sales was driven by an increase of $92 million in our TH segment, an increase of $1 million in our BK segment and an unfavorable FX Impact of $35 million. The increase in our TH segment was driven by an increase in supply chain sales, partially offset by a decrease in bad debt expense.

During the six months ended June 30, ~~2020,~~2021, the ~~decrease~~increase in cost of sales was driven ~~primarily~~ by ~~a decrease~~an increase of ~~$173~~$77 million in our TH segment ~~a decrease~~and an unfavorable FX Impact of $6$54 million, ~~in our BK segment,~~partially offset by a decrease of $1 million in our PLK ~~segment, and an unfavorable FX Impact of $22 million.~~segment. The ~~decrease~~increase in our TH segment was driven by ~~a $183 million decrease~~an increase in supply chain sales due to the decrease in system-wide sales, net of an increase in sales to retailers. The decrease in supply chain sales was partially offset by an increase of $10 million in Company restaurant revenue due to an increase in the number of Company restaurants.

~~While we cannot currently estimate the duration or future negative impact of the COVID-19 pandemic on our system-wide sales~~ and ~~sales revenue, we expect the negative effects to continue into the third quarter of 2020.~~

During the three months ended June 30, 2020, the decrease in cost of sales was driven primarily by a decrease of $100 million in our TH segment, a decrease of $1 million in our BK segment, and a $13 million favorable FX Impact. The decrease in our TH segment was driven primarily by a decrease of $103 million in supply chain cost of sales due to a decrease in system-wide sales, net of an increase in sales to retailers, ~~and an increase~~partially offset by a decrease in bad debt expense. ~~The decrease in supply chain cost of sales was partially offset by a $3 million increase in Company restaurant cost of sales due to an increase in the number of Company restaurants.~~

During the six months ended June 30, 2020, the decrease in cost of sales was driven primarily by a decrease of $102 million in our TH segment, a decrease of $2 million in our BK segment, and a $17 million favorable FX Impact. The decrease in our TH segment was driven primarily by a decrease of $112 million in supply chain cost of sales due to a decrease in system-wide sales, net of an increase in sales to retailers and an increase in bad debt expense. The decrease in supply chain cost of sales was partially offset by a $10 million increase in Company restaurant cost of sales due to an increase in the number of Company restaurants.

Franchise and Property

Franchise and property revenues consist primarily of royalties earned on franchise sales, ~~(including advertising fund revenues),~~ rents from real estate leased or subleased to franchisees, franchise fees, and other revenue. Franchise and property expenses consist primarily of depreciation of properties leased to franchisees, rental expense associated with properties subleased to franchisees, amortization of franchise agreements, and bad debt expense (recoveries).

During the three months ended June 30, ~~2020,~~2021, the ~~decrease~~increase in franchise and property revenues was driven by ~~a decrease~~an increase of ~~$89~~$84 million in our BK segment, an increase of $48 million in our TH segment, ~~a decrease of $87 million in our BK segment, and a $18 million unfavorable FX Impact, partially offset by~~ an increase of ~~$25~~$8 million in our PLK ~~segment.~~segment and a favorable FX Impact of $24 million. The ~~decreases~~increases were primarily driven by increases in royalties in all of our segments, and increases in rent in our TH and BK segments, ~~were primarily driven by decreases in royalties and rent from decreases~~as a result of increases in system-wide sales and decreases in rent relief provided to eligible ~~franchisees during the current period. The increase in our PLK segment was primarily driven by an increase in royalties as a result of an increase in system-wide sales.~~franchisees.

During the six months ended June 30, ~~2020,~~2021, the ~~decrease~~increase in franchise and property revenues was driven by ~~a decrease~~an increase of ~~$119~~$95 million in our BK segment, an increase of $40 million in our TH segment, ~~a decrease of $101 million in our BK segment, and a $27 million unfavorable FX Impact, partially offset by~~ an increase of ~~$56~~$13 million in our PLK ~~segment.~~segment and a favorable FX Impact of $39 million. The ~~decreases~~increases were primarily driven by increases in royalties in all of our segments, and increases in rent in our TH and BK segments, ~~were primarily driven by decreases in royalties and rent from decreases~~as a result of increases in system-wide sales and decreases in rent relief provided to eligible ~~franchisees during the current period. The increase in our PLK segment was primarily driven by an increase in royalties as a result~~franchisees.

Table of ~~an increase in system-wide sales.~~Contents

We cannot currently estimate the duration or future negative impact of the COVID-19 pandemic on our system-wide sales and, along with rent concessions provided to eligible franchisees as a result of COVID-19, the impact on our franchise and property revenues. We expect these negative effects to continue into the third quarter of 2020.

During the three months ended June 30, ~~2020,~~2021, the decrease in franchise and property expenses was driven by a decrease of $16 million in our BK segment, a decrease of $4 million in our TH segment, and a $3decrease of $1 million ~~favorable FX Impact,~~in our PLK segment, partially offset by an ~~increase~~unfavorable FX Impact of ~~$6 million~~$10 million. The decreases in our BK ~~segment. Overall, the decrease was driven by a decrease in property expenses partially offset by an increase in~~and TH segments were primarily related to bad debt ~~expense.~~

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recoveries in the current year compared to bad debt expense in the prior year.

During the six months ended June 30, ~~2020,~~2021, the decrease in franchise and property expenses was driven by a decrease of $6$23 million in our BK segment, a decrease of $8 million in our TH segment, and a ~~$4 million favorable FX Impact, partially offset by an increase~~decrease of $2 million in our ~~BK segment. Overall, the decrease was driven by a decrease in property expenses~~PLK segment, partially offset by an unfavorable FX Impact of $15 million. The decreases in our BK and TH segments were primarily related to bad debt recoveries in the current year compared to bad debt expense in the prior year.

Advertising

Advertising revenues consist primarily of advertising contributions earned on franchise sales and are based on a percentage of system-wide sales and intended to fund advertising expenses. Advertising expenses consist primarily of expenses relating to marketing, advertising and promotion, including market research, production, advertising costs, sales promotions, social media campaigns, technology initiatives, depreciation and amortization and other related support functions for the respective brands. We manage advertising expenses to equal advertising revenues in the long term, however in some periods there may be a mismatch in the timing of revenues and expense.

During the three months ended June 30, 2021, the increase in ~~bad debt expense.~~advertising revenues was driven by an increase of $18 million in our BK segment, an increase of $13 million in our TH segment, an increase of $6 million in our PLK segment and a favorable FX Impact of $5 million. The increases in all of our segments were primarily driven by increases in system-wide sales.

~~Selling,~~ During the six months ended June 30, 2021, the increase in advertising revenues was driven by an increase of $21 million in our BK segment, an increase of $12 million in our TH segment, an increase of $9 million in our PLK segment and a favorable FX Impact of $8 million. The increases in all of our segments were primarily driven by increases in system-wide sales.

During the three months ended June 30, 2021, the increase in advertising expenses was driven by an increase of $20 million in our TH segment, an increase of $5 million in our PLK segment, an increase of $4 million in our BK segment, and an unfavorable FX Impact of $6 million. The increase in all of our segments was primarily driven by an increase in advertising revenues, and for our TH segment, also driven by our support behind the marketing program in Canada.

During the six months ended June 30, 2021, the increase in advertising expenses was driven by an increase of $13 million in our TH segment, an increase of $13 million in our BK segment, an increase of $9 million in our PLK segment, and an unfavorable FX Impact of $10 million. The increase in all of our segments was primarily driven by an increase in advertising revenues, and for our TH segment, also driven by our support behind the marketing program in Canada.

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General and Administrative Expenses

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


		Three Months Ended June 30,						Variance								Six Months Ended June 30,								Variance						Three Months Ended June 30,					Variance							Six Months Ended June 30,	Variance
										$			%									$		%	Three Months Ended June 30,				%						Six Months Ended June 30,						%
		2020		2019		Favorable / (Unfavorable)								2020				2019				Favorable / (Unfavorable)						2021				Favorable / (Unfavorable)						2021				Favorable / (Unfavorable)
Segment SG&A:
Segment G&A:																				Segment G&A:
TH	TH	$	61	$	77	$	16	20.8	%		$	148		$	159	$	11	6.9	%	TH	$	26	$	20	$	(6)	(30.0)	%		$	50		$	45		$	(5)		(11.1)		%
BK	BK	135		149		14		9.4	%		280			290		10		3.4	%	BK	45		30		(15)		(50.0)	%		81			67		(14)			(20.9)		%
PLK	PLK	65		54		(11)		(20.4)	%		131			103		(28)		(27.2)	%	PLK	13		10		(3)		(30.0)	%		27			23		(4)			(17.4)		%
Share-based compensation and non-cash incentive compensation expense	Share-based compensation and non-cash incentive compensation expense	23		19		(4)		(21.1)	%		44			44		—		—	%	Share-based compensation and non-cash incentive compensation expense	20		23		3		13.0	%		46			44		(2)			(4.5)		%
Depreciation and amortization	Depreciation and amortization	4		4		—		—	%		9			9		—		—	%	Depreciation and amortization	6		4		(2)		(50.0)	%		10			9		(1)			(11.1)		%
Corporate restructuring and tax advisory fees																				Corporate restructuring and tax advisory fees	3		7		4		57.1	%		4			8		4			50.0		%

Corporate restructuring and tax advisory fees		7		11		4		36.4	%		8			17		9		52.9	%
Office centralization and relocation costs		—		2		2		100.0	%		—			6		6		100.0	%
Selling, general and administrative expenses		$	295	$	316	$	21	6.6	%		$	620		$	628	$	8	1.3	%
General and administrative expenses																				General and administrative expenses	$	113	$	94	$	(19)	(20.2)	%		$	218		$	196	$	(22)		(11.2)		%

Segment ~~selling,~~ general and administrative expenses (“Segment SGG&A”) ~~include segment selling expenses, which~~ consist ~~primarily of advertising fund expenses, and segment general and administrative expenses, which are comprised~~ primarily of salary and employee-related costs for non-restaurant employees, professional fees, information technology systems, and general overhead for our corporate offices. Segment SGG&A excludes share-based compensation and non-cash incentive compensation expense, depreciation and amortization, and Corporate restructuring and tax advisory ~~fees, and Office centralization and relocation costs.~~

~~During~~fees. The increase in Segment G&A for all segments during the three and six months ended June 30, ~~2020,~~2021 was primarily driven by higher salary and employee-related costs for non-restaurant employees, largely a result of hiring across a number of key areas, and ongoing investments in digital and technology. In addition, the ~~decrease~~year over year change in Segment SGG&A ~~in our~~at TH and BK segments is primarily due to a decrease in advertising fund expenses. During the three and six months ended June 30, 2020, the increase in Segment SG&A in our PLK segment is primarily due to an increase in advertising fund expenses resulting from an increase in advertising fund revenue.was impacted by unfavorable FX movements.

During the three months ended June 30, ~~2020,~~2021, the ~~increase~~decrease in share-based compensation and non-cash incentive compensation expense was primarily due to an increase in equity award ~~modifications~~forfeitures during the current period.

Corporate restructuring and ~~an increase in the number of equity awards granted during 2020. During the six months ended June 30, 2020, share-based compensation~~tax advisory fees arise primarily from professional advisory and ~~non-cash incentive compensation expense was consistent~~consulting services associated with ~~prior year.~~certain transformational corporate restructuring initiatives that rationalize our structure and optimize cash movement within our structure, including services related to significant tax reform legislation, regulations and related restructuring initiatives.

(Income) Loss from Equity Method Investments

The change in (income) loss from equity method investments during the three and six months ended June 30, ~~2020~~2021 was primarily driven by ~~an increase~~a decrease in equity method investment net losses that we recognized during the current year.

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Other Operating Expenses (Income), net

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


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings	Net losses (gains) on disposal of assets, restaurant closures, and refranchisings	$	—	$	(10)	$	(2)	$	(7)	Net losses (gains) on disposal of assets, restaurant closures, and refranchisings	$	1	$	—	$	(1)	$	(2)
Litigation settlements (gains) and reserves, net	Litigation settlements (gains) and reserves, net	1		—		1		—		Litigation settlements (gains) and reserves, net	1		1		3		1
Net losses (gains) on foreign exchange	Net losses (gains) on foreign exchange	18		12		10		(3)		Net losses (gains) on foreign exchange	8		18		(35)		10
Other, net	Other, net	2		1		(4)		(4)		Other, net	(2)		2		(1)		(4)
Other operating expenses (income), net	Other operating expenses (income), net	$	21	$	3	$	5	$	(14)	Other operating expenses (income), net	$	8	$	21	$	(34)	$	5

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 June 30,									Six Months Ended June 30,										Three Months Ended June 30,						Six Months Ended June 30,
		2020			2019			2020			2019				2021			2020			2021			2020
Interest expense, net	Interest expense, net	$	128		$	137		$	247		$	269		Interest expense, net	$	126		$	128		$	250		$	247
Weighted average interest rate on long-term debt	Weighted average interest rate on long-term debt	4.3		%	5.2		%	4.8		%	5.1		%	Weighted average interest rate on long-term debt	4.2		%	4.3		%	4.2		%	4.8		%

During the three and six months ended June 30, ~~2020,~~2021, the change in interest expense, net decreased primarily due to a decrease in the weighted average interest rate in the current year driven by the decrease in interest rates and the 2019 refinancing of our senior secured debt, partially offset by an increase in long-term debt.was not significant.

Income Tax (Benefit) Expense

Our effective tax rate was ~~(42.3)~~(8.1)% and ~~27.4%~~(42.3)% for the three months ended June 30, 2021 and 2020, ~~and 2019,~~ respectively. The effective tax rate for the three months ended June 30, 2021 included a net decrease in tax reserves of $89 million related primarily to expiring statutes of limitation for certain prior tax years which decreased the effective tax rate by 24.7%. The effective tax rate for the three months ended June 30, 2020 reflects a $64 million benefit due to an increase in deferred tax assets which decreased the effective tax rate by ~~(55.2)%~~55.2%. Based on the analysis of final guidance related to the Tax Cuts and Jobs Act (the “Tax Act”) received during the ~~current~~ quarter ended June 30, 2020, a deferred tax asset was recorded. The effective tax rate was reduced by 1.0% and 1.2% for the three months ended June 30, 2021 and 2020, respectively, as a result of excess tax benefits from equity-based compensation. Our effective tax rate was also ~~lower primarily due to~~impacted by changes to the relative mix of our income from multiple tax jurisdictions and the impact of internal financing arrangements. ~~The~~There may continue to be some quarter-to-quarter volatility of our effective tax rate ~~for~~as our mix of income from multiple tax jurisdictions and related income forecasts change due to the three months ended June 30, 2019 included a non-recurring $37 million increase in the provision for unrecognized tax benefits related to a prior restructuring transaction that was not applicable to ongoing operations which increased the effective tax rate by 10.4%.effects of COVID-19.

Our effective tax rate was 2.6% and (0.9)% ~~and 23.4%~~ for the six months ended June 30, 2021 and 2020, ~~and 2019,~~ respectively. The effective tax rate for the six months ended June 30, 2021 included a net decrease in tax reserves of $87 million related primarily to expiring statutes of limitation for certain prior tax years which decreased the effective tax rate by 12.8%. The effective tax rate for the six months ended June 30, 2020 reflects a $64 million benefit discussed above which decreased the effective tax rate by ~~(16.5)%~~16.5%. The effective tax rate was reduced by 1.5% and 0.4% for the six months ended June 30, 2021 and 2020, respectively, as a result of excess tax benefits from equity-based compensation. Our effective tax rate was also ~~lower primarily due to~~impacted by changes to the relative mix of our income from multiple tax jurisdictions and the impact of internal financing arrangements. The effective tax rate for the six months ended June 30, 2019 included a non-recurring $37 million increase in the provision discussed above which increased the effective tax rate by 5.6% during the period.

There may be some quarter-to-quarter volatility of our effective tax rate in future quarters as our mix of income from multiple tax jurisdictions and related income forecasts change due to the potential effects of COVID-19.

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Net Income

We reported net income of $391 million for the three months ended June 30, 2021, compared to net income of $164 million for the three months ended June 30, ~~2020, compared to net income of $257 million for the three months ended June 30, 2019.~~2020. The ~~decrease~~increase in net income is primarily due to a ~~$140~~$106 million ~~decrease~~increase in TH segment income, a ~~$92~~$106 million ~~decrease~~increase in BK segment income, ~~an $18~~a $13 million ~~unfavorable~~favorable change in the results from other operating expenses (income), net, a $9$11 million ~~unfavorable~~favorable change from the impact of equity method investments, a $4 million increase in share-based compensation and non-cash incentive compensation expense, and a $1 million increase in depreciation and amortization. These factors were partially offset by a $146 million favorable change in income taxes, a $10$7 million increase in PLK segment income, ~~a $9 million decrease in interest expense, net,~~ a $4 million decrease in Corporate restructuring and tax advisory fees, a $3 million decrease in share-based compensation and ~~the non-recurrence of~~non-cash incentive compensation and a $2 million decrease in ~~Office Centralization~~interest expense, net. These factors were partially offset by a $20 million decrease in income tax benefit and ~~relocation costs.~~a $5 million increase in depreciation and amortization. Amounts above include a total ~~unfavorable~~favorable FX Impact to net income of ~~$15~~$16 million.

We reported net income of $662 million for the six months ended June 30, 2021, compared to net income of $388 million for the six months ended June 30, ~~2020, compared to net income of $503 million for the six months ended June 30, 2019.~~2020. The ~~decrease~~increase in net income is primarily due to a ~~$188~~$124 million ~~decrease~~increase in TH segment income, a ~~$114~~$123 million ~~decrease~~increase in BK segment income, a ~~$19~~$39 million ~~unfavorable~~favorable change in the results from other operating expenses (income), net, ~~and~~ a ~~$12~~$11 million ~~unfavorable~~favorable change from the impact of equity method ~~investments. These factors were partially offset by a $156 million favorable change in income taxes, a $24~~investments, an $8 million increase in PLK segment income, and a ~~$22 million decrease in interest expense, net, a $9~~$4 million decrease in Corporate restructuring and tax advisory ~~fees,~~fees. These factors were partially offset by a $21 million unfavorable change in income tax from a benefit in the ~~non-recurrence of $6~~prior year to an expense in the current year, a $9 million ~~in Office Centralization and relocation costs, and a $1 million decrease~~increase in depreciation and ~~amortization.~~amortization, a $3 million increase in interest expense, net, and a $2 million increase in share-based compensation and non-cash incentive compensation expense. Amounts above include a total ~~unfavorable~~favorable FX Impact to net income of ~~$24~~$27 million.

~~While we cannot currently estimate the duration or future negative impact of the COVID-19 pandemic on our net income, we expect the negative effects to continue into the third quarter of 2020.~~

Non-GAAP Reconciliations

The table below contains information regarding EBITDA and Adjusted EBITDA, which are non-GAAP measures. These non-GAAP measures do not have a standardized meaning under U.S. GAAP and may differ from similar captioned measures of other companies in our industry. We believe that these non-GAAP measures are useful to investors in assessing our operating performance, as they provide them with the same tools that management uses to evaluate our performance and is responsive to questions we receive from both investors and analysts. By disclosing these non-GAAP measures, we intend to provide investors with a consistent comparison of our operating results and trends for the periods presented. EBITDA is defined as earnings (net income or loss) before interest expense, net, loss on early extinguishment of debt, income tax ~~(benefit)~~ expense, and depreciation and amortization and is used by management to measure operating performance of the business. Adjusted EBITDA is defined as EBITDA excluding (i) the non-cash impact of share-based compensation and non-cash incentive compensation expense, (ii) (income) loss from equity method investments, net of cash distributions received from equity method investments, (iii) other operating expenses (income), net and, (iv) income/expenses from non-recurring projects and non-operating activities. For the periods referenced, this included costs ~~incurred in connection~~from professional advisory and consulting services associated with ~~the centralization and relocation of our Canadian and U.S. restaurant support centers to new offices in Toronto, Ontario, and Miami, Florida, respectively and~~certain transformational corporate restructuring initiatives that rationalize our structure and optimize cash movements, including services related to significant tax reform legislation, regulations and related ~~tax advisory fees, including those arising as a result of the adoption of the Tax Act and the implementing regulations thereunder.~~restructuring initiatives. Management believes that these types of expenses are either not related to our underlying profitability drivers or not likely to re-occur in the foreseeable future and the varied timing, size and nature of these projects may cause volatility in our results unrelated to the performance of our core business that does not reflect trends of our core operations.

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Adjusted EBITDA is used by management to measure operating performance of the business, excluding these non-cash and other specifically identified items that management believes are not relevant to management’s assessment of our operating business. Adjusted EBITDA, as defined above, also represents our measure of segment income for each of our three operating segments.

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	Three Months Ended June 30,				Variance				Six Months Ended June 30,				Variance
					$		%						$		%
	2021		2020		Favorable / (Unfavorable)				2021		2020		Favorable / (Unfavorable)
Segment income:
TH	$	253	$	147	$	106	72.5	%	$	460	$	336	$	124	36.9	%
BK	266		160		106		66.4	%	483		360		123		34.2	%
PLK	58		51		7		13.2	%	114		106		8		7.9	%
Adjusted EBITDA	577		358		219		61.2	%	1,057		802		255		31.8	%
Share-based compensation and non-cash incentive compensation expense	20		23		3		13.0	%	46		44		(2)		(4.5)	%
Corporate restructuring and tax advisory fees	3		7		4		57.1	%	4		8		4		50.0	%
Impact of equity method investments (a)	7		18		11		61.1	%	11		22		11		50.0	%
Other operating expenses (income), net	8		21		13		61.9	%	(34)		5		39		NM
EBITDA	539		289		250		86.5	%	1,030		723		307		42.5	%
Depreciation and amortization	51		46		(5)		(10.9)	%	100		91		(9)		(9.9)	%
Income from operations	488		243		245		100.8	%	930		632		298		47.2	%
Interest expense, net	126		128		2		1.6	%	250		247		(3)		(1.2)	%

Income tax (benefit) expense	(29)		(49)		(20)		(40.8)	%	18		(3)		(21)		NM
Net income	$	391	$	164	$	227	138.4	%	$	662	$	388	$	274	70.6	%

Three Months Ended June 30, Variance Six Months Ended June 30, Variance
$ % $ %
2020 2019 Favorable / (Unfavorable) 2020 2019 Favorable / (Unfavorable)
Segment income:
TH $ 147 $ 287 $ (140) (48.9) % $ 336 $ 524 $ (188) (35.8) %
BK 160 252 (92) (36.7) % 360 474 (114) (24.1) %
PLK 51 41 10 23.9 % 106 82 24 28.9 %
Adjusted EBITDA 358 580 (222) (38.3) % 802 1,080 (278) (25.8) %
Share-based compensation and non-cash incentive compensation expense 23 19 (4) (21.1) % 44 44 — — %
Corporate restructuring and tax advisory fees 7 11 4 36.4 % 8 17 9 52.9 %
Office centralization and relocation costs — 2 2 100.0 % — 6 6 100.0 %
Impact of equity method investments (a) 18 9 (9) (100.0) % 22 10 (12) (120.0) %
Other operating expenses (income), net 21 3 (18) (600.0) % 5 (14) (19) (135.7) %
EBITDA 289 536 (247) (46.1) % 723 1,017 (294) (28.9) %
Depreciation and amortization 46 45 (1) (2.2) % 91 92 1 1.1 %
Income from operations 243 491 (248) (50.5) % 632 925 (293) (31.7) %
Interest expense, net 128 137 9 6.6 % 247 269 22 8.2 %
Income tax (benefit) expense (49) 97 146 150.5 % (3) 153 156 102.0 %
Net income $ 164 $ 257 $ (93) (36.2) % $ 388 $ 503 $ (115) (22.9) %
NM - not meaningful

The ~~decrease~~increase in Adjusted EBITDA for the three and six months ended June 30, ~~2020~~2021 reflects the ~~decreases~~increases in segment income in all of our THsegments and BKincludes a favorable FX Impact of $22 million and $35 million for the three and six months ended June 30, 2021, respectively.

The increase in EBITDA for the three and six months ended June 30, 2021 is primarily due to increases in segment income in all of our segments, ~~which~~favorable impact from other operating expenses (income), net, favorable decrease from the impact of equity method investments and a decrease in Corporate restructuring and tax advisory fees. The increase in EBITDA includes ~~decreases~~a favorable FX Impact of ~~$12~~$19 million and $32 million for the three and six months ended June 30, ~~2020, respectively, related to the timing of advertising fund revenue and expenses, partially offset by an increase in segment income in our PLK segment.~~

The decrease in EBITDA for the three and six months ended June 30, 2020 is primarily due to decreases in segment income in our TH and BK segments, unfavorable results from the impact of equity method investments and other operating expenses (income), net, and an increase in share-based compensation and non-cash incentive compensation expense in the current period, partially offset by an increase in segment income in our PLK segment, a decrease in Corporate restructuring and tax advisory fees, and the non-recurrence of Office centralization and relocation costs in the current period.

While we cannot currently estimate the duration or future negative impact of the COVID-19 pandemic on our segment income, Adjusted EBITDA and EBITDA, we expect the negative effects to continue into the third quarter of 2020.2021, respectively.

Liquidity and Capital Resources

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

As of June 30, ~~2020,~~2021, we had cash and cash equivalents of ~~$1,540~~$1,749 million, working capital of ~~$943~~$866 million and borrowing availability of $998 million under our senior secured revolving credit facility (the ~~"Revolving~~“Revolving Credit ~~Facility"~~Facility”). During the first quarter of 2020, we drew down $995 million on our Revolving Credit Facility, which we repaid during the second quarter of 2020. During the first quarter of 2020, we also drew down the remaining availability of C$125 million under the TH Facility (defined below). Additionally, on April 7, 2020,On July 6, 2021, two of our subsidiaries (the ~~"Borrowers"~~“Borrowers”) ~~entered into an indenture (the "2020 5.75% Senior Notes Indenture") in connection with the issuance of $500~~issued $800 million of ~~5.75%~~3.875% first lien senior secured notes due ~~April~~January 15, ~~2025~~

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~~(the "2020 5.75% Senior Notes"~~2028 (the “Notes”). No principal payments are due until maturity and interest is paid semi-annually. The Notes were issued as additional notes under the indenture, dated as of September 24, 2019, (the “2019 3.875% Senior Notes Indenture”) pursuant to which the Borrowers previously issued $750 million in aggregate principal amount of 3.875% first lien senior secured notes due

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January 15, 2028 during 2019 (the “2019 3.875% First Lien Senior Notes” and together with the Notes, the “3.875% First Lien Senior Notes” ). The Notes are treated as a single series with the 2019 3.875% First Lien Senior Notes and have the same terms for all purposes under the 2019 3.875% Senior Notes Indenture, including waivers, amendments, redemptions and offers to purchase. The Notes were priced at 100.250% of their face value. The net proceeds from the offering of the ~~2020 5.75% Senior~~ Notes were used ~~for general corporate purposes.~~to redeem the remaining $775 million principal amount outstanding of the 2017 4.25% Senior Notes on July 15, 2021, plus any accrued and unpaid interest thereon, and pay related redemption premiums, fees and expenses. Based on our current level of operations and available cash, we believe our cash flow from operations, combined with our availability under our Revolving Credit Facility, will provide sufficient liquidity to fund our current obligations, debt service requirements and capital spending over the next twelve months.

~~Our operating results substantially depend upon~~In March 2021, we announced our ~~franchisees’ sales volumes, restaurant profitability,~~plan to spend C$80 million in 2021 to support increased advertising and ~~financial stability. The financial impact of COVID-19 has had,~~digital advancements at the TH business and ~~is expected to continue for an uncertain period to have, an adverse effect on~~supplement advertising fund amounts contributed by franchisees. We commenced our ~~franchisees’ liquidity and we are working closely with our franchisees around~~support during the world to monitor and assist them with access to appropriate sources of liquidity in order to sustain their businesses throughout this crisis. During the second quarter of 2020, we provided cash flow support by extending loans to eligible BK franchisees in the U.S. and advancing certain cash payments to eligible TH franchisees in Canada. During the sixthree months ended June 30, ~~2020, we initiated a rent relief program for eligible TH franchisees in Canada~~2021, most of which will be spent during the second half of 2021, and ~~extended payment terms for eligible TH franchisees in Canada and~~are on track to spend the ~~U.S. who lease property from us and also initiated rent relief programs and extended payment terms for eligible BK franchisees in~~entire amount by the U.S. and Canada who lease property from us. We also temporarily deferred franchisee capital investment commitments for restaurant renovations and new restaurant development globally, based on individual circumstancesend of relevant markets and restaurant owners. These actions are expected to adversely affect our cash flow and financial results at least through the third quarter of 2020. In addition to these actions, we may decide to take additional steps to assist in the financial stabilization of our franchisees, which could impact our liquidity and our financial results.2021.

On ~~August 2, 2016,~~July 28, 2021, the RBI board of directors approved a share repurchase authorization wherein RBI may purchase up to ~~$300~~$1,000 million of RBI common shares ~~through July 2021.~~until August 10, 2023. 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 were subject to a transition tax charge at reduced rates and future repatriations of foreign earnings generally will 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.~~unremitted earnings. We will continue to monitor our plans for foreign earnings but our expectation is to continue to provide taxes on unremitted earnings.

Debt Instruments and Debt Service Requirements

As of June 30, ~~2020,~~2021, our long-term debt consists primarily of borrowings under our Credit Facilities (defined below), amounts outstanding under our 2017 4.25% Senior Notes, 2019 3.875% Senior Notes, 2020 5.75% Senior Notes, ~~2017 5.00%~~2020 3.50% Senior Notes, 2019 4.375% Senior Notes, 2020 4.00% Senior Notes and TH Facility (each as defined below), and obligations under finance leases. For further information about our long-term debt, see Note 10 to the accompanying unaudited condensed consolidated financial statements included in this report.

Credit Facilities

As of June 30, ~~2020,~~2021, there was ~~$6,064~~$5,992 million outstanding principal amount under our senior secured term loan facilities (the ~~"Term~~“Term Loan ~~Facilities"~~Facilities” and together with the Revolving Credit Facility, the “Credit Facilities”) with a weighted average interest rate of ~~1.84%~~1.82%. Based on the amounts outstanding under the Term Loan Facilities and LIBOR as of June 30, ~~2020,~~2021, subject to a floor of 0.00%, required debt service for the next twelve months is estimated to be approximately ~~$112~~$109 million in interest payments and $72 million in principal payments. In addition, based on LIBOR as of June 30, ~~2020,~~2021, net cash settlements that we expect to pay on our $4,000 million interest rate swap are estimated to be approximately ~~$89~~$92 million for the next twelve months.

On April 2, 2020, the Borrowers entered into a fifth amendment (the ~~"Fifth Amendment"~~“Fifth Amendment”) to the credit agreement (the ~~"Credit Agreement"~~“Credit Agreement”) governing our Term Loan Facilities and Revolving Credit Facility. The Fifth Amendment provides the Borrowers with the option to comply with a $1,000 million minimum liquidity covenant in lieu of the 6.50:1.00 net first lien senior secured leverage ratio financial maintenance covenant for the period after June 30, 2020 and prior to September 30, 2021. Additionally, for the periods ending September 30, 2021 and December 31, 2021, to determine compliance with the net first lien senior secured leverage ratio, we are permitted to annualize the Adjusted EBITDA (as defined in the Credit Agreement) for the three months ending September 30, 2021 and six months ending December 31, 2021, respectively, in lieu of calculating the ratio based on Adjusted EBITDA for the prior four quarters. There were no other material changes to the terms of the Credit Agreement.

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The interest rate applicable to borrowings under our Term Loan A and Revolving Credit Facility is, at our option, either (i) a base rate, subject to a floor of 1.00%, plus an applicable margin varying from 0.00% to 0.50%, or (ii) a Eurocurrency rate, subject to a floor of 0.00%, plus an applicable margin varying between 0.75% to 1.50%, in each case, determined by reference to a net first lien leverage based pricing grid. The interest rate applicable to borrowings under our Term Loan B is, at our option, either (i) a base rate, subject to a floor of 1.00%, plus an applicable margin of 0.75% or (ii) a Eurocurrency rate, subject to a floor of 0.00%, plus an applicable margin of 1.75%.

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As of June 30, ~~2020,~~2021, we had no amounts outstanding under our Revolving Credit Facility, had $2 million of letters of credit issued against the Revolving Credit Facility, and our borrowing availability was $998 million. Funds available under the Revolving Credit Facility may be used to repay other debt, finance debt ~~make distributions to~~or RBI ~~for RBI to repurchase its common shares, repurchase Partnership exchangeable units,~~share repurchases or PEU repurchases, fund acquisitions or capital expenditures, and for other general corporate purposes. We have a $125 million letter of credit sublimit as part of the Revolving Credit Facility, which reduces our borrowing availability thereunder by the cumulative amount of outstanding letters of credit.

Senior Notes

The Borrowers are party to (i) an indenture (the ~~“2017 4.25%~~“4.25% Senior Notes Indenture”) in connection with the issuance of ~~$1,500~~$775 million of 4.25% first lien senior notes due May 15, 2024 (the “2017 4.25% Senior Notes”), (ii) an indenture (the ~~“2019 3.875%~~“3.875% Senior Notes Indenture”) in connection with the issuance of $750 million of 3.875% first lien senior notes due January 15, 2028 (the “2019 3.875% Senior Notes”), (iii) an indenture (the ~~“2017 5.00%~~“5.75% Senior Notes Indenture”) in connection with the issuance of ~~$2,800~~$500 million of ~~5.00% second~~5.75% first lien senior notes due ~~October~~April 15, 2025 (the ~~“2017 5.00%~~“2020 5.75% Senior Notes”), (iv) an indenture (the ~~“2019 4.375%~~“3.50% Senior Notes Indenture” ~~and together~~) in connection with the ~~above indentures the "Senior~~issuance of $750 million of 3.50% first lien senior notes due February 15, 2029 (the “2020 3.50% Senior Notes”), (v) an indenture (the “4.375% Senior Notes ~~Indentures"~~Indenture”) in connection with the issuance of $750 million of 4.375% second lien senior notes due January 15, 2028 (the “2019 4.375% Senior Notes”), and ~~(v) the 2020 5.75%~~(vi) an indenture (the “4.00% Senior Notes ~~Indenture described above.~~Indenture”) in connection with the issuance of $2,900 million of 4.00% second lien senior notes due October 15, 2030 (the “2020 4.00% Senior Notes”). No principal payments are due on the 2017 4.25% Senior Notes, 2019 3.875% Senior Notes, ~~2017 5.00%~~2020 5.75% Senior Notes, 2020 3.50% Senior Notes, 2019 4.375% Senior Notes and 2020 ~~5.75%~~4.00% Senior Notes until maturity and interest is paid semi-annually.

Based on the amounts outstanding at June 30, ~~2020,~~2021, required debt service for the next twelve months on all of the Senior Notes outstanding is approximately ~~$294~~$266 million in interest payments.

TH Facility

One of our subsidiaries entered into a non-revolving delayed drawdown term credit facility in a total aggregate principal amount of C$225 million with a maturity date of October 4, 2025 (the “TH Facility”). The interest rate applicable to the TH Facility is the Canadian Bankers’ Acceptance rate plus an applicable margin equal to 1.40% or the Prime Rate plus an applicable margin equal to 0.40%, at our option. Obligations under the TH Facility are guaranteed by four of our subsidiaries, and amounts borrowed under the TH Facility are secured by certain parcels of real estate. As of June 30, ~~2020,~~2021, we had outstanding C$~~225~~219 million under the TH Facility with a weighted average interest rate of ~~1.93%~~1.84%.

Based on the amounts outstanding under the TH Facility as of June 30, ~~2020,~~2021, required debt service for the next twelve months is estimated to be approximately $3 million in interest payments and $4$9 million in principal payments.

Restrictions and Covenants

As of June 30, ~~2020,~~2021, we were in compliance with all applicable financial debt covenants under the Credit Facilities, the TH Facility, and the Senior Notes Indentures.

Cash Distributions/Dividends

On July 7, 2021, RBI paid a cash dividend of $0.53 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 of $0.53 in respect of each Partnership exchangeable unit.

The RBI board of directors has declared a cash dividend of ~~$0.52~~$0.53 per RBI common share, which will be paid on October ~~2, 2020~~5, 2021 to RBI common shareholders of record on September ~~18, 2020.~~21, 2021. 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 ~~$0.52~~$0.53 per Partnership exchangeable unit, and the record date and payment date for such distribution will be the same as the record date and payment date for the cash dividend per RBI common share set forth above.

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

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Outstanding Security Data

As of July ~~31, 2020,~~23, 2021, we had outstanding 202,006,067 Class A common units issued to RBI and ~~162,426,062~~154,892,524 Partnership exchangeable units. During the six months ended June 30, ~~2020,~~2021, Partnership exchanged ~~2,672,900~~160,438 Partnership exchangeable units pursuant to exchange notices received.

One special voting share of RBI is held by a trustee, entitling the trustee to that number of votes on matters on which holders of RBI common shares are entitled to vote equal to the number of Partnership exchangeable units outstanding. The trustee is required to cast such votes in accordance with voting instructions provided by holders of Partnership exchangeable units. At any shareholder meeting of RBI, holders of RBI common shares vote together as a single class with the special voting share except as otherwise provided by law. For information on RBI's share-based compensation and its outstanding equity awards, see Note 1513 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, ~~2019,~~2020, filed with the SEC and Canadian securities regulatory authorities on February ~~21, 2020.~~23, 2021.

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

Comparative Cash Flows

Operating Activities

Cash provided by operating activities was ~~$196~~$732 million for the six months ended June 30, ~~2020,~~2021, compared to ~~$475~~$196 million during the same period in the prior year. The ~~decrease~~increase in cash provided by operating activities was driven by a decrease in ~~TH segment income, a decrease in BK segment income and an increase in~~ cash used for working ~~capital. These factors were partially offset by a decrease~~capital, an increase in segment income ~~tax payments,~~in all of our segments, and a decrease in interest payments, ~~and~~partially offset by an increase in ~~PLK segment income.~~income tax payments.

Investing Activities

Cash used for investing activities was ~~$12~~$36 million for the six months ended June 30, ~~2020,~~2021, compared to ~~$23~~$12 million ~~of cash provided from investing activities~~ during the same period in the prior year. The change in cash used for investing activities was driven by a decrease in proceeds from derivatives, an increase in capital expenditures, and cash used in other investing activities during the current period, ~~and a decrease~~partially offset by an increase in net proceeds from disposal of assets, restaurant closures, and refranchisings.

Financing Activities

Cash used for financing activities was ~~$161~~$516 million for the six months ended June 30, ~~2020,~~2021, compared to ~~$395~~$161 million during the same period in the prior year. The change in cash used for financing activities was driven primarily by proceeds from the issuance of the 2020 5.75% Senior Notes in the prior year and proceeds from the draw down on the remaining availability under the TH Facility in 2020. These factors were partially offset by ~~an increase in~~higher RBI common share dividends and distributions on Partnership exchangeable units ~~and a decrease~~ in ~~capital contribution from RBI.~~

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~~Contractual Obligations and Commitments~~

~~Except as described herein, there were no material changes~~the prior year due to ~~our contractual obligations, which are detailed in our Annual Report on Form 10-K for~~accelerating the ~~year ended December 31, 2019 filed with the SEC and Canadian securities regulatory authorities on February 21, 2020, other than the following.~~

~~During the first~~third quarter of 2020 ~~we drew down~~dividend and distribution payment to the ~~remaining availability~~second quarter of C$125 million under the TH Facility. Additionally, on April 7, 2020, we obtained the proceeds from the 2020 5.75% Senior Notes. Each of these terms is defined and described above. The following table provides contractual obligations under our Credit Facilities, senior notes and other long term debt as of June 30, 2020, which reflects all of the debt transactions disclosed above.

Payment Due by Period as of June 30, 2020
Contractual Obligations Total Less Than
1 Year 1-3 Years 3-5 Years More Than
5 Years
(In millions)
Credit Facilities, including interest (a) $ 6,750 $ 186 $ 383 $ 989 $ 5,192
Senior Notes, including interest (b) 7,891 294 589 2,511 4,497
Other long term debt 183 7 23 36 117

~~(a)We have estimated our interest payments through the maturity of our Credit Facilities based on LIBOR as of June 30,~~ 2020.

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

Critical Accounting Policies and Estimates

For information regarding our Critical Accounting Policies and Estimates, see the “Critical Accounting Policies and Estimates” section of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 21, 2020. Additionally, see the “COVID-19” section of Note 1 to the accompanying unaudited Condensed Consolidated Financial Statements for a discussion about the potential impact of the COVID-19 pandemic on asset impairment assessments.23, 2021.

New Accounting Pronouncements

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There were no material changes during the six months ended June 30, ~~2020~~2021 to the disclosures made in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC and Canadian securities regulatory authorities on February ~~21, 2020.~~23, 2021.

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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 June 30, ~~2020.~~2021. Based on that evaluation, the CEO and CFO of RBI concluded that Partnership’s disclosure controls and procedures were effective as of such date.

Internal Control Over Financial Reporting

The management of RBI, as general partner of Partnership, including the CEO and CFO, confirm there were no changes in Partnership’s internal control over financial reporting during the three months ended June 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, Partnership’s internal control over financial reporting.

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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) the effects and continued impact of the COVID-19 pandemic on our results of operations, business, liquidity, prospects and ~~prospects~~restaurant operations and those of our franchisees, including local conditions and government-imposed limitations and restrictions; (ii) our digital and marketing initiatives and the expected amount of and timing for planned expenditures relating to these initiatives; (iii) our future financial obligations, including annual debt service requirements, capital expenditures and dividend payments, our ability to meet such obligations and the source of funds used to satisfy such obligations; ~~(iii)~~(iv) expected timing of debt refinancing transactions; (v) our efforts to assist restaurant owners in maintaining ~~liquidity; (iv)~~liquidity and the ~~amount~~impact of these programs on our future cash flow and ~~timing of additional Corporate restructuring and tax advisory fees related to the Tax Act and Office centralization and relocation costs; (v)~~financial results; (vi) certain tax matters, including ~~the~~our estimates with respect to tax matters and their impact ~~of the Tax Act~~ on future periods; ~~(vi)~~(vii) the amount of net cash settlements we expect to pay on our derivative instruments; and ~~(vii)~~(viii) certain accounting matters.

Our forward-looking statements, included in this report and elsewhere, represent management’s expectations as of the date that they are made. Our forward-looking statements are based on assumptions and analyses made by Partnership in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. However, these forward-looking statements are subject to a number of risks and uncertainties and actual results may differ materially from those expressed or implied in such statements. Important factors that could cause actual results, level of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements include, among other things, risks related to: (1) our substantial indebtedness, which could adversely affect our financial condition and prevent us from fulfilling our obligations; (2) global economic or other business conditions that may affect the desire or ability of our customers to purchase our products, ~~and supply chain,~~ such as the effects of the COVID-19 pandemic, 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) our franchisees’ financial stability and their ability to access and maintain the liquidity necessary to operate their businesses; (5) our supply chain operations; (6) our ownership and leasing of real estate; (7) the effectiveness of our marketing, advertising and ~~advertising~~digital programs and franchisee support of these programs; (8) significant and rapid fluctuations in interest rates and in the currency exchange markets and the effectiveness of our hedging activity; (9) our ability to successfully implement our domestic and international growth strategy for each of our brands and risks related to our international operations; (10) our reliance on ~~master~~ franchisees, ~~and~~including subfranchisees, to accelerate restaurant growth; (11) the ability of the counterparties to our credit facilities and derivatives to fulfill their commitments and/or obligations; and (12) changes in applicable tax laws or interpretations thereof, and ~~risks related to the complexity of the Tax Act and~~ our ability to accurately interpret and predict ~~its~~the impact of such changes or interpretations on our financial condition and results.

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

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Finally, our future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC and Canadian securities regulatory authorities on February ~~21, 2020,~~23, 2021, 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 June 30, 2020, a class action complaint was filed against Restaurant Brands International Inc., Restaurant Brands International Limited Partnership~~See Part I, Notes to Condensed Consolidated Financial Statements, Note 15, Commitment and The TDL Group Corp. in the Quebec Superior Court by Steve Holcman, individually and on behalf of all Quebec residents who downloaded the Tim Hortons mobile application. On July 2, 2020, a Notice of Action related to a second class action complaint was filed against Restaurant Brands International Inc., in the Ontario Superior Court by Ashley Sitko and Ashley Cadeau, individually and on behalf of all Canadian residents who downloaded the Tim Hortons mobile application. Both of the complaints allege that the defendants violated the plaintiff’s privacy rights, the Personal Information Protection and Electronic Documents Act, consumer protection and competition laws or app-based undertakings to users, in each case in connection with the collection of geolocation data through the Tim Hortons mobile application. Each plaintiff seeks injunctive relief and monetary damages for himself or herself and other members of the class. We intend to vigorously defend against these lawsuits, but we are unable to predict the ultimate outcome of either case.

~~Item 1A. Risk Factors~~

~~The below updates the risk factor included in our Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 21, 2020.~~

Our results can be adversely affected by unforeseen events, such as adverse weather conditions, natural disasters, terrorist attacks or threats, pandemics, such as the COVID-19 pandemic, or other catastrophic events.

Unforeseen events, such as adverse weather conditions, natural disasters or catastrophic events, can adversely impact restaurant sales. Natural disasters such as earthquakes, hurricanes, and severe adverse weather conditions and health pandemics whether occurring in Canada, the United States or abroad, can keep customers in the affected area from dining out, cause damage to or closure of restaurants and result in lost opportunities for our restaurants.

In March 2020, the World Health Organization declared COVID-19 a global pandemic, and governmental authorities around the world have implemented measures to reduce the spread of COVID-19. These measures have adversely affected workforces, customers, consumer sentiment, economies and financial markets, and, along with decreased consumer spending, have led to an economic downturn in many of our markets. As a result of COVID-19, we and our franchisees have experienced significant store closures and instances of reduced store-level operations, including reduced operating hours and dining-room closures. During 2020, our restaurants in the U.S. and Canada closed dine-in operations, continuing to offer drive-thru, delivery and take-out where possible, sometimes with limited hours, several markets in Asia, Europe and Latin America closed all restaurants, and many other international markets also have limited operations. As of the end of July, restaurants in most markets have reopened, often with limited operations. While certain markets have opened for dine-in guests, the capacity may be limited, and local conditions may lead to closures or increased limitations. As a result of COVID-19, restaurant traffic and system-wide sales have been significantly negatively impacted.

Our operating results substantially depend upon our franchisees’ sales volumes, restaurant profitability, and financial stability. The impact of COVID-19 has, and is expected to continue to have, an adverse effect on our franchisees’ liquidity. As a result, we are providing cash flow support by extending loans to eligible BK franchisees in the U.S. and advancing certain cash payments to eligible TH franchisees in Canada. For approximately 3,700 eligible locations where we have property control at Tim Hortons in Canada and Burger King in the United States and Canada, we have temporarily converted our rent structure from a combination of fixed plus variable rent to 100% variable rent, which provides relief in the face of declining sales. In addition, we have deferred rent payments for up to 45 days for certain other franchisees. These actions are expected to continue to adversely affect our cash flow and financial results in the upcoming quarter. In addition to these actions, we may decide to take additional steps to assist in the financial stabilization of our franchisees, which could impact our liquidity and our financial results. In addition, we are delaying the capital expenditure obligations of our franchisees relating to new restaurants, remodels and significant equipment deployments, which could adversely affect our growth once the COVID-19 pandemic has passed. To the extent that our franchisees experience financial distress, it could negatively affect (i) our operating results as a result of delayed or reduced payments of royalties, advertising fund contributions and rents for properties we lease to them or claims under our lease guarantees, (ii) our future revenue, earnings and cash flow growth and (iii) our financial condition.

COVID-19 or other events could lead to delays or interruptions in the delivery of food or other supplies to our franchised restaurants arising from delays or restrictions on shipping and/or manufacturing, closures of supplier or distributor facilities or financial distress or insolvency of suppliers or distributors and also could lead to difficulties in maintaining appropriate staffing of restaurants. Food distributors and suppliers often operate with thin margins and therefore may be more vulnerable to governmental actions which result in significantly reduced activity or to general economic downturns. As of December 31,

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2019, four distributors serviced approximately 92% of BK restaurants in the U.S. and five distributors serviced approximately 85% of PLK restaurants in the U.S. Consequently, our operations could be adversely affected if any of these distributors were unable to fulfill their responsibilities and we were unable to locate a substitute distributor in a timely manner. In addition, as COVID-19 may be transmitted through human contact, the risk or perceived risk of contracting COVID-19 could adversely affect the ability, or the cost, of staffing restaurants, which could be exacerbated to the extent that we or our franchisees have employees who test positive for the virus.

We cannot predict the duration or scope of the COVID-19 pandemic or when operations will cease to be affected by it. Furthermore, we cannot predict the effects that actual or threatened armed conflicts, terrorist attacks, efforts to combat terrorism or heightened security requirements will have on our future operations. Because a significant portion of our restaurant operating costs are fixed or semi-fixed in nature, the loss of sales during these periods hurts our and our franchisees’ operating margins and can result in restaurant operating losses and our loss of royalties. We expect the COVID-19 pandemic to negatively impact our financial results and based on the duration and scope, such impact could be material.

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Item 6. Exhibits



Exhibit Number						Description

10.79						Purchase Agreement, dated as of June 15, 2021, among J.P. Morgan Securities LLC as representative of the several Initial Purchasers (as defined therein), the Issuers (as defined therein) and the Guarantors (as defined therein) (incorporated herein by reference to Exhibit 10.79 to the Form 10-Q of Restaurant Brands International Inc. filed on Jul 30, 2021).

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)

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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: ~~August 6, 2020~~July 30, 2021

By:

/s/ Matthew Dunnigan

Name:

Matthew Dunnigan

Title:

Chief Financial Officer of Restaurant Brands International Inc.
(principal financial officer)
(duly authorized officer)

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	Payment Due by Period as of June 30, 2020
Contractual Obligations	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
	(In millions)
Credit Facilities, including interest (a)	$	6,750	$	186	$	383	$	989	$	5,192
Senior Notes, including interest (b)	7,891		294		589		2,511		4,497
Other long term debt	183		7		23		36		117