RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Description of Business and Organization

Restaurant Brands International Inc. (the “Company”, “RBI”, “we”, “us” or “our”) was formed on August 25, 2014 and continued under the laws of Canada. The Company serves as the sole general partner of Restaurant Brands International Limited Partnership (“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 September 30, ~~2019,~~2020, we franchised or owned ~~4,887~~4,934 Tim Hortons restaurants, ~~18,232~~18,675 Burger King restaurants, and ~~3,192~~3,418 Popeyes restaurants, for a total of ~~26,311~~27,027 restaurants, and operate in more than 100 countries and U.S. territories. Approximately 100% of current system-wide restaurants are franchised.

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

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 for an uncertain period to have, an adverse effect on many of our franchisees’ liquidity and we have worked 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 offering rent relief programs for eligible franchisees who lease property from us. See Note 4, Leases, for further information about the rent relief programs. Additionally, we provided cash flow support by extending loans to eligible BK franchisees in the U.S. during the second and third quarters of 2020, and by advancing certain cash payments to eligible TH franchisees in Canada during the second quarter of 2020.

During the nine months ended September 30, 2020, we recorded bad debt expense of $27 million compared to $3 million during the nine months ended September 30, 2019. While these 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 nine months ended September 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 ~~22, 2019.~~21, 2020.

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.

Table of Contents

We are the sole general partner of Partnership and, as such we have 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, subject to the terms of the amended and restated limited partnership agreement of Partnership (the “partnership agreement”) and applicable laws. As a result, we consolidate the results of Partnership and record a noncontrolling interest in our consolidated balance sheets and statements of operations with respect to the remaining economic interest in Partnership we do not hold.

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.

~~Table of Contents~~

Tim Hortons has historically entered into certain arrangements in which an operator acquires the right to operate a restaurant, but Tim Hortons owns the restaurant’s assets. We perform an analysis to determine if the legal entity in which operations are conducted is a VIE and consolidate a VIE entity if we also determine Tim Hortons is the entity’s primary beneficiary (“Restaurant VIEs”). As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we determined that we are the primary beneficiary of 3040 and 1735 Restaurant VIEs, respectively, and accordingly, have consolidated the results of operations, assets and liabilities, and cash flows of these Restaurant VIEs in our Financial Statements. Material intercompany accounts and transactions have been eliminated in consolidation.

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

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

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 reclassification of $25 million from changes in Other long-term assets and liabilities in the Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2018 to Tenant inducements paid to franchisees. These reclassifications had no effect on previously reported net income.

Note 3. New Accounting Pronouncements

~~Lease Accounting~~Credit Losses – In ~~February~~June 2016, the Financial Accounting ~~Standard~~Standards Board ~~(the “FASB”~~(“FASB”) issued ~~new~~ guidance onthat 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. ~~We adopted this new guidance on January 1, 2019. See Note 4,~~ ~~Leases, for further~~Expected credit losses are estimated using relevant information about ~~our transition to this new lease accounting standard.~~

~~Goodwill Impairment~~ ~~– In January 2017,~~past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the ~~FASB issued guidance to simplify how an entity measures goodwill impairment by removing the second step~~collectability of the two-step quantitative goodwill impairment test. An entity will no longer be required to perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured at the amount by which the carrying value exceeds the fair value of a reporting unit; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Thereported amount. This amendment ~~requires prospective adoption and is~~was effective commencing in 2020, ~~with early adoption permitted. The adoption of this new guidance will not have~~using a ~~material impact on our Financial Statements.~~

~~Reclassification of Certain Tax Effects~~ – In February 2018, the FASB issued guidance which allows a reclassification from accumulated other comprehensive income (loss) to retained earnings for the tax effects of certain items within accumulated other comprehensive income (loss). The amendment is effective commencing in 2019 with early adoption permitted.modified retrospective approach. The adoption of this new guidance did not have a material impact on our Financial Statements.

~~Share-based payment arrangements with nonemployees~~Simplifying the Accounting for Income Taxes – In ~~June 2018,~~December 2019, the FASB issued guidance which simplifies the accounting for ~~share-based payments granted~~income taxes by removing certain exceptions and by clarifying and amending existing guidance applicable to ~~nonemployees~~accounting for ~~goods and services. Most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees.~~ income taxes. The amendment is effective commencing in ~~2019~~2021 with early adoption permitted. ~~The~~While we are currently evaluating the impact that the adoption of this new guidance ~~did~~will have on our Financial Statements, we do not currently anticipate this adoption will have a material impact on our Financial Statements.

1011

Table of Contents

Accounting Relief for the Transition Away from LIBOR and Certain other Reference Rates – In March 2020, 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 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 and have not adopted any of the transition relief available under the new guidance as of September 30, 2020.

Note 4. Leases

~~As of~~During the nine months ended September 30, ~~2019,~~2020, we ~~leased or subleased 5,294 restaurant properties to~~offered a rent relief program for eligible TH franchisees in Canada who lease property from us (the “TH rent relief program”) and ~~183 non-restaurant properties to third parties under operating leases~~a rent relief program for eligible BK franchisees in the U.S. and ~~direct financing leases where~~Canada who lease property from us (the “BK rent relief program” and together with the TH rent relief program, the “rent relief programs”), a portion of which concluded during the three months ended September 30, 2020. Under the rent relief programs, we ~~are~~temporarily converted the ~~lessor. Initial lease terms generally range~~rent structure from ~~10 to 20 years. Most leases to franchisees provide for~~a combination of fixed ~~monthly payments and many provide for future rent escalations and renewal options. Certain leases also include provisions for~~plus variable rent ~~determined as~~to 100% variable rent. While in effect, these programs result in a ~~percentage~~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 ~~sales, generally when annual sales exceed specified levels. Lessees typically bear~~ the ~~cost of maintenance, insurance and property taxes.~~

We lease land, buildings, equipment, office space and warehouse space. Land and building leases generally have an initial term of 10 to 30 years, while land-only lease terms can extend longer, and most leases provideCOVID-19 pandemic consistent with how those concessions would be accounted for fixed monthly payments. Many of these leases provide for future rent escalations and renewal options. Certain leases also include provisions for variable rent payments, determined as a percentage of sales, generally when annual sales exceed specified levels. Most leases also obligate us to pay, as lessee, the cost of maintenance, insurance and property taxes.

~~We transitioned to FASB~~under Accounting Standards Codification ~~(“ASC”)~~ Topic 842, Leases (“ASC 842”), ~~from ASC Topic 840,~~ ~~Leases~~ (the “Previous Standard”) on January 1, 2019 on a modified retrospective basis using the effective date transition method. Our Financial Statements reflect the application of ASC 842 guidance beginning in 2019, while our consolidated financial statements for prior periods were prepared under the guidance of the Previous Standard. The new guidance requires lessees to recognize on the balance sheet the assets and liabilities for theas though enforceable rights and obligations ~~created by finance~~for those concessions existed (regardless of whether those enforceable rights and ~~operating leases with~~obligations for the concessions explicitly exist in the contract). Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity is not required 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 ~~terms of more than 12 months, amends various other aspects of accounting for leases by lessees and lessors, and requires enhanced disclosures. Our transition to~~modification guidance in ASC 842 ~~resulted~~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 ~~gross presentation~~rights of property tax and maintenance expenses and related lessee reimbursements as franchise and property expenses and franchise and property revenues, respectively. These expenses and reimbursements were presented on a net basis under the Previous Standard.

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

~~Table of Contents~~

~~Financial Statement Impact of Transition to ASC 842~~

~~Transition Impact on January 1, 2019 Condensed Consolidated Balance Sheet~~

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

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

As Reported Total Adjusted
December 31, 2018 Adjustments January 1, 2019
ASSETS
Current assets:
Cash and cash equivalents $ 913
$ —
$ 913
Accounts and notes receivable, net 452
—
452
Inventories, net 75
—
75
Prepaids and other current assets 60
—
60
Total current assets 1,500
—
1,500
Property and equipment, net 1,996
26
(a) 2,022
Operating lease assets, net —
1,143
(b) 1,143
Intangible assets, net 10,463
(133 ) (c) 10,330
Goodwill 5,486
—
5,486
Net investment in property leased to franchisees 54
—
54
Other assets, net 642
—
642
Total assets $ 20,141
$ 1,036
$ 21,177
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts and drafts payable $ 513
$ —
$ 513
Other accrued liabilities 637
114
(d) 751
Gift card liability 167
—
167
Current portion of long term debt and finance leases 91
—
91
Total current liabilities 1,408
114
1,522
Term debt, net of current portion 11,823
(65 ) (e) 11,758
Finance leases, net of current portion 226
62
(e) 288
Operating lease liabilities, net of current portion —
1,028
(f) 1,028
Other liabilities, net 1,547
(132 ) (g) 1,415
Deferred income taxes, net 1,519
8
(h) 1,527
Total liabilities 16,523
1,015
17,538
Shareholders’ equity:
Common shares 1,737
—
1,737
Retained earnings 674
12
(i) 686
Accumulated other comprehensive income (loss) (800 ) —
(800 )
Total RBI shareholders’ equity 1,611
12
1,623
Noncontrolling interests 2,007
9
(i) 2,016
Total shareholders’ equity 3,618
21
3,639
Total liabilities and shareholders’ equity $ 20,141
$ 1,036
$ 21,177


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


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

~~Table of Contents~~


~~(c)~~	~~Represents the net carrying amount of favorable lease assets associated with leases in which we are the lessee, which have been reclassified to operating lease ROU assets.~~


~~(d)~~	~~Represents the current portion of operating lease liabilities.~~


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


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


~~(g)~~	Represents the net carrying amount of unfavorable lease liabilities associated with leases in which we are the lessee and $64 million of straight-line rent accruals which have been reclassified to operating lease ROU assets.


~~(h)~~	~~Represents the net tax effects of the adjustments noted above, with a corresponding adjustment to shareholders’ equity.~~


~~(i)~~	~~Represents net change in assets and liabilities recorded in connection with built-to-suit leases and the tax effects of adjustments noted above.~~

~~Changes to Lease Accounting Significant Accounting Policies Under ASC 842~~

~~In all leases, whether we are~~ the lessor or ~~lessee, we define lease term as~~ the ~~noncancellable term~~obligations of the ~~lease plus any renewals covered by renewal options that are reasonably certain of exercise based on our assessment of the economic factors relevant~~lessee.

We have elected to apply this interpretive guidance to the ~~lessee. The noncancellable term of the lease commences on the date the lessor makes the underlying property~~rent relief programs while in effect and have assumed that enforceable rights and obligations for those concessions exist in the lease ~~available to~~contract. As such, we recognize reductions in rents arising from the ~~lessee, irrespective of when lease payments begin under the contract.~~

~~Lessor Accounting~~

~~We recognize lease payments for operating leases~~rent relief programs as ~~property revenue on a straight-line basis over the lease term and property revenue is presented net of any related sales tax. Lease incentive payments we make to lessees are amortized as a reduction~~reductions in~~property revenueover the lease term. We account for reimbursements of maintenance and property tax costs paid to us by lessees as variable lease payment property revenue.~~

We also have net investments in properties leased to franchisees, which met the criteria of direct financing leases under the Previous Standard. Investments in direct financing leases are recorded on a net basis, consisting of the gross investment and estimated residual value in the lease, less unearned income. Unearned income on direct financing leases is recognized over the lease term yielding a constant periodic rate of return on the net investment in the lease. We do not remeasure the net investment in a direct financing lease unless the lease is modified and that modification is not accounted for as a separate contract.

~~We recognize variable lease payment income for operating and direct financing leases in the period when changes in facts and circumstances on which the~~ variable lease payments, ~~are based occur.~~

~~Lessee Accounting~~

~~In leases where we are the lessee, we recognize an ROU asset and lease liability at lease commencement, which are measured by discounting lease payments using our incremental borrowing rate~~ as the ~~discount rate. We determine~~rent reductions did not result in a substantial increase in the incremental borrowing rate applicable to each lease by reference to our outstanding secured borrowings and implied spreads over the risk-free discount rates that correspond to the term of each lease, as adjusted for the currencyrights of the ~~lease. Subsequent amortization~~lessor or the obligations of the ROU asset and accretion of the lease liability for an operating lease is recognized as a single lease cost, on a straight-line basis, over the lease term. Amortization of the ROU asset and the change in the lease liability are included in changes in Other long-term assets and liabilities in the Condensed Consolidated Statement of Cash Flows. A finance lease ROU asset is depreciated on a straight-line basis over the lesser of the useful life of the leased asset or lease term. Interest on each finance lease liability is determined as the amount that results in a constant periodic discount rate on the remaining balance of the liability. ROU assets are assessed for impairment in accordance with our long-lived asset impairment policy. We reassess lease classification and remeasure ROU assets and lease liabilities when a lease is modified and that modification is not accounted for as a separate contract or upon certain other events that require reassessment in accordance with ASC 842. Maintenance and property tax expenses are accounted for on an accrual basis as variable lease cost.lessee.

~~We recognize variable lease cost for operating and finance leases in the period when changes in facts and circumstances on which the variable lease payments are based occur.~~

~~Table of Contents~~

~~Company as Lessor~~

~~Assets leased to franchisees and others under operating leases where we are the lessor and which are included within our property and equipment, net are as follows (in millions):~~

As of
September 30, 2019
Land $ 903
Buildings and improvements 1,131
Restaurant equipment 21
2,055
Accumulated depreciation and amortization (451 )
Property and equipment leased, net $ 1,604

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

As of
September 30, 2019
Future rents to be received:
Future minimum lease receipts $ 50
Contingent rents (a) 21
Estimated unguaranteed residual value 15
Unearned income (28 )
58
Current portion included within accounts receivables (11 )
Net investment in property leased to franchisees $ 47


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

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Lease income - operating leases
Minimum lease payments	$	112	$	112	$	333	$	335
Variable lease payments	82		100		191		281
Amortization of favorable and unfavorable income lease contracts, net	1		1		4		5
Subtotal - lease income from operating leases	195		213		528		621
Earned income on direct financing leases	1		2		4		7
Total property revenues	$	196	$	215	$	532	$	628

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

1412

Table of Contents

~~Company as Lessee~~

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

~~Lease Cost (Income)~~

Three months ended September 30, 2019 Nine months ended September 30, 2019
Operating lease cost $ 52
$ 158
Operating lease variable lease cost 51
151
Finance lease cost:
Amortization of right-of-use assets 7
20
Interest on lease liabilities 5
16
Sublease income (164 ) (483 )
Total lease cost (income) $ (49 ) $ (138 )

~~Lease Term and Discount Rate as of September 30, 2019~~



~~Weighted-average remaining lease term (in years):~~
~~Operating leases~~	~~11.0 years~~
~~Finance leases~~	~~11.1 years~~
~~Weighted-average discount rate:~~
~~Operating leases~~	~~6.4~~	%
~~Finance leases~~	~~7.5~~	%

~~Other Information for the nine months ended September 30, 2019~~

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 145
Operating cash flows from finance leases $ 16
Financing cash flows from finance leases $ 20
Right-of-use assets obtained in exchange for new finance lease obligations $ 5
Right-of-use assets obtained in exchange for new operating lease obligations $ 106

~~Maturity Analysis~~

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

Lease Receipts Lease Commitments (a)
Direct
Financing
Leases Operating
Leases Finance
Leases Operating
Leases
Remainder of 2019 $ 3
$ 106
$ 12
$ 49
2020 10
406
46
190
2021 7
383
44
178
2022 5
360
42
166
2023 5
337
39
151
Thereafter 20
1,899
270
961
Total minimum receipts / payments $ 50
$ 3,491
453
1,695
Less amount representing interest (b) (147 ) (518 )
Present value of minimum lease payments 306
1,177
Current portion of lease obligations (27 ) (122 )
Long-term portion of lease obligations $ 279
$ 1,055


~~(a)~~	~~Minimum lease commitments have not been reduced by minimum sublease rentals of $2,298 million due in the future under non-cancelable subleases.~~


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

~~Table of Contents~~

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

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

Current portion of finance lease obligation (21 )
Long-term portion of finance lease obligation $ 226


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

Note 5. Revenue Recognition

Contract Liabilities

Contract liabilities consist of deferred revenue resulting from initial and renewal franchise fees paid by franchisees, as well as upfront fees paid by master franchisees, which are generally recognized on a straight-line basis over the term of the underlying agreement. We 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, ~~2018~~2019 and September 30, ~~2019~~2020 (in millions):

Contract Liabilities TH BK PLK Consolidated
Balance at December 31, 2018 $ 62
$ 405
$ 19
$ 486
Revenue recognized that was included in the contract liability balance at the beginning of the year (7 ) (30 ) (1 ) (38 )
Increase, excluding amounts recognized as revenue during the period 6
55
6
67
Impact of foreign currency translation 1
(9 ) —
(8 )
Balance at September 30, 2019 $ 62
$ 421
$ 24
$ 507


Contract Liabilities	TH		BK		PLK		Consolidated
Balance at December 31, 2019	$	64	$	449	$	28	$	541
Recognized during period and included in the contract liability balance at the beginning of the year	(7)		(50)		(2)		(59)
Increase, excluding amounts recognized as revenue during the period	5		15		9		29
Impact of foreign currency translation	(1)		7		0		6
Balance at September 30, 2020	$	61	$	421	$	35	$	517

The following table illustrates estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, ~~2019~~2020 (in millions):

Contract liabilities expected to be recognized in TH BK PLK Consolidated
Remainder of 2019 $ 2
$ 9
$ —
$ 11
2020 8
32
2
42
2021 7
31
2
40
2022 7
31
2
40
2023 6
30
1
37
Thereafter 32
288
17
337
Total $ 62
$ 421
$ 24
$ 507

~~Table of Contents~~


Contract liabilities expected to be recognized in	TH		BK		PLK		Consolidated
Remainder of 2020	$	2	$	9	$	1	$	12
2021	8		34		2		44
2022	8		33		2		43
2023	7		32		2		41
2024	7		31		2		40
Thereafter	29		282		26		337
Total	$	61	$	421	$	35	$	517

Disaggregation of Total Revenues

Total revenues consist of the following (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Sales	$	541	$	624	$	1,450	$	1,735
Royalties	581		602		1,576		1,706
Property revenues	196		215		532		628
Franchise fees and other revenue	19		17		52		55
Total revenues	$	1,337	$	1,458	$	3,610	$	4,124

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Sales $ 624
$ 609
$ 1,735
$ 1,743
Royalties 602
557
1,706
1,611
Property revenues 215
192
628
560
Franchise fees and other revenue 17
17
55
58
Total revenues $ 1,458
$ 1,375
$ 4,124
$ 3,972

Table of Contents

Note 6. Earnings per Share

An economic interest in Partnership common equity is held by the holders of Class B exchangeable limited partnership units (the “Partnership exchangeable units”), which is reflected as a noncontrolling interest in our equity. See Note 12, Shareholders’ Equity.

Basic and diluted earnings per share is computed using the weighted average number of shares outstanding for the period. We apply the treasury stock method to determine the dilutive weighted average common shares represented by ~~Partnership exchangeable units and~~ outstanding equity awards, unless the effect of their inclusion is anti-dilutive. The diluted earnings per share calculation assumes conversion of 100% of the Partnership exchangeable units under the “if converted” method. Accordingly, the numerator is also adjusted to include the earnings allocated to the holders of noncontrolling interests.

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

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Numerator:
Net income attributable to common shareholders - basic $ 201
$ 134
$ 478
$ 449
Add: Net income attributable to noncontrolling interests 150
116
376
393
Net income available to common shareholders and noncontrolling interests - diluted $ 351
$ 250
$ 854
$ 842

Denominator:
Weighted average common shares - basic 267
251
258
249
Exchange of noncontrolling interests for common shares (Note 12) 197
218
204
218
Effect of other dilutive securities 6
6
7
7
Weighted average common shares - diluted 470
475
469
474

Basic earnings per share (a) $ 0.76
$ 0.53
$ 1.85
$ 1.81
Diluted earnings per share (a) $ 0.75
$ 0.53
$ 1.82
$ 1.78
Anti-dilutive securities outstanding 3
6
3
6


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Numerator:
Net income attributable to common shareholders - basic	$	145	$	201	$	395	$	478
Add: Net income attributable to noncontrolling interests	78		150		215		376
Net income available to common shareholders and noncontrolling interests - diluted	$	223	$	351	$	610	$	854

Denominator:
Weighted average common shares - basic	303		267		301		258
Exchange of noncontrolling interests for common shares (Note 12)	162		197		164		204
Effect of other dilutive securities	5		6		4		7
Weighted average common shares - diluted	470		470		469		469

Basic earnings per share (a)	$	0.48	$	0.76	$	1.31	$	1.85
Diluted earnings per share (a)	$	0.47	$	0.75	$	1.30	$	1.82
Anti-dilutive securities outstanding	8		3		8		3

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

Table of Contents

Note 7. Intangible Assets, net and Goodwill

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

As of
September 30, 2019 December 31, 2018
Gross Accumulated Amortization Net Gross Accumulated Amortization Net
Identifiable assets subject to amortization:
   Franchise agreements $ 709
$ (214 ) $ 495
$ 705
$ (194 ) $ 511
   Favorable leases (a) 129
(64 ) 65
407
(200 ) 207
      Subtotal 838
(278 ) 560
1,112
(394 ) 718
Indefinite lived intangible assets:
   Tim Hortons brand
$ 6,425
$ —
$ 6,425
$ 6,259
$ —
$ 6,259
   Burger King brand
2,099
—
2,099
2,131
—
2,131
   Popeyes brand
1,355
—
1,355
1,355
—
1,355
      Subtotal 9,879
—
9,879
9,745
—
9,745
Intangible assets, net $ 10,439
$ 10,463

Goodwill
   Tim Hortons segment $ 4,140
$ 4,038

   Burger King segment 593
602

   Popeyes segment 846
846

      Total $ 5,579
$ 5,486

~~(a)~~

The decrease in favorable leases reflects the reclassification of favorable leases where we are the lessee to operating lease right-of-use assets in connection with our transition to ASC 842. See Note 4, ~~Leases~~.


	As of
	September 30, 2020						December 31, 2019
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Identifiable assets subject to amortization:
Franchise agreements	$	724	$	(252)	$	472	$	720	$	(225)	$	495
Favorable leases	116		(63)		53		127		(65)		62
Subtotal	840		(315)		525		847		(290)		557
Indefinite-lived intangible assets:
Tim Hortons brand	$	6,390	$	—	$	6,390	$	6,534	$	—	$	6,534
Burger King brand	2,145		—		2,145		2,117		—		2,117
Popeyes brand	1,355		—		1,355		1,355		—		1,355
Subtotal	9,890		—		9,890		10,006		—		10,006
Intangible assets, net					$	10,415					$	10,563

Goodwill
Tim Hortons segment	$	4,119					$	4,207
Burger King segment	606						598
Popeyes segment	846						846
Total	$	5,571					$	5,651

Amortization expense on intangible assets totaled $11 million and $12 million for the three months ended September 30, 2020 and 2019, respectively, and ~~$17~~$33 million ~~for the same period in the prior year. Amortization expense on intangible assets totaled~~and $33 million for the nine months ended September 30, 2020 and 2019, ~~and $53 million for the same period in the prior year.~~respectively. The change in the brands and goodwill balances during the nine months ended September 30, ~~2019~~2020 was due to the impact of foreign currency translation.

~~Table of Contents~~

Note 8. Equity Method Investments

The aggregate carrying amount of our equity method investments was ~~$274~~$198 million and ~~$259~~$266 million as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, and is included as a component of Other assets, net in our accompanying condensed consolidated balance sheets. TH and BK both have equity method investments. PLK does not have any equity method investments.

With respect to our TH business, the most significant equity method investment is our 50% joint venture interest with The Wendy’s Company (the “TIMWEN Partnership”), which jointly holds real estate underlying Canadian combination restaurants. Distributions received from this joint venture were $2 million and $3 million during the three months ended September 30, 2020 and 2019, ~~and 2018.~~respectively. Distributions received from this joint venture were ~~$10~~$6 million and $9$10 million during the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, 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 ~~15.4%~~15.2% equity interest in Carrols Restaurant Group, Inc. (“Carrols”) based on the quoted market price on September 30, ~~2019~~2020 was approximately ~~$78~~$61 million. The aggregate market value of our ~~9.9%~~9.8% equity interest in BK Brasil Operação e Assessoria a Restaurantes S.A. based on the quoted market price on September 30, ~~2019~~2020 was approximately ~~$111~~$43 million. ~~No quoted market prices are available for our other equity method investments.~~

Table of Contents

We have equity interests in entities that own or franchise Tim Hortons or Burger King restaurants. Franchise and property revenues recognized from franchisees that are owned or franchised by entities in which we have an equity interest consist of the following (in millions):

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Revenues from affiliates:
Royalties $ 89
$ 76
$ 254
$ 218
Property revenues 8
8
25
26
Franchise fees and other revenue 1
3
7
7
Total $ 98
$ 87
$ 286
$ 251


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues from affiliates:
Royalties	$	82	$	89	$	209	$	254
Property revenues	8		8		24		25
Franchise fees and other revenue	4		1		10		7
Total	$	94	$	98	$	243	$	286

We recognized $4 million and $5 million of rent expense associated with the TIMWEN Partnership during the three months ended September 30, 2020 and 2019, ~~and 2018.~~respectively. We recognized ~~$14~~$11 million and ~~$15~~$14 million of rent expense associated with the TIMWEN Partnership during the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively.

At September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we had ~~$34~~$72 million and ~~$41~~$47 million, respectively, of accounts receivable, net from our equity method investments which were recorded in Accounts and notes receivable, net in our condensed consolidated balance sheets.

(Income) loss from equity method investments reflects our share of investee net income or loss, non-cash dilution gains or losses from changes in our ownership interests in equity method investees and basis difference amortization. During the three and nine months ended September 30, 2019, we recorded an increase to the carrying value of our equity method investment balance and a non-cash dilution gain of $11 million related to the merger of one of our equity method investments. During the nine months ended September 30, 2018, we recorded an increase to the carrying value of our equity method investment balance and a non-cash dilution gain of $20 million on the initial public offering by one of our equity method investees.

~~Table of Contents~~

Note 9. Other Accrued Liabilities and Other Liabilities, net

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

As of
September 30,
2019 December 31,
2018
Current:
Dividend payable $ 232
$ 207
Interest payable 91
87
Accrued compensation and benefits 52
69
Taxes payable 153
113
Deferred income 35
27
Accrued advertising expenses 27
30
Restructuring and other provisions 6
11
Current portion of operating lease liabilities (a) 122
—
Other 79
93
Other accrued liabilities $ 797
$ 637
Noncurrent:
Taxes payable $ 585
$ 493
Contract liabilities 507
486
Unfavorable leases (b) 107
192
Derivatives liabilities 267
179
Accrued pension 62
64
Accrued lease straight-lining liability (b) —
69
Deferred income 26
22
Other 44
42
Other liabilities, net $ 1,598
$ 1,547


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


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


	As of
	September 30, 2020		December 31, 2019
Current:
Dividend payable	$	243	$	232
Interest payable	106		71
Accrued compensation and benefits	62		57
Taxes payable	157		126
Deferred income	41		35
Accrued advertising expenses	65		40
Restructuring and other provisions	12		8
Current portion of operating lease liabilities	128		126
Other	69		95
Other accrued liabilities	$	883	$	790
Noncurrent:
Taxes payable	$	604	$	579
Contract liabilities	517		541
Derivatives liabilities	592		341
Unfavorable leases	83		103
Accrued pension	55		65

Deferred income	26		25
Other	40		44
Other liabilities, net	$	1,917	$	1,698

Table of Contents

Note 10. Long-Term Debt

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


	As of
	September 30, 2020		December 31, 2019
Term Loan B (due November 19, 2026)	$	5,310	$	5,350
Term Loan A (due October 7, 2024)	736		750

2017 4.25% Senior Notes (due May 15, 2024)	1,500		1,500
2019 3.875% Senior Notes (due January 15, 2028)	750		750
2020 5.75% Senior Notes (due April 15, 2025)	500		0
2017 5.00% Senior Notes (due October 15, 2025)	2,800		2,800
2019 4.375% Senior Notes (due January 15, 2028)	750		750
TH Facility and other	171		81
Less: unamortized deferred financing costs and deferred issue discount	(139)		(148)
Total debt, net	12,378		11,833
Less: current maturities of debt	(78)		(74)
Total long-term debt	$	12,300	$	11,759

As of
September 30,
2019 December 31,
2018
Term Loan B (due February 17, 2024) $ 6,070
$ 6,338
2015 4.625% Senior Notes (due January 15, 2022) 1,250
1,250
2017 4.25% Senior Notes (due May 15, 2024) 1,500
1,500
2019 3.875% Senior Notes (due January 15, 2028) 750
—
2017 5.00% Senior Notes (due October 15, 2025) 2,800
2,800
Other (a) 79
150
Less: unamortized deferred financing costs and deferred issue discount (132 ) (145 )
Total debt, net 12,317
11,893
Less: current maturities of debt (b) (749 ) (70 )
Total long-term debt $ 11,568
$ 11,823


~~(a)~~	The decrease in Other reflects the de-recognition of obligations associated with build-to-suit leases recorded under the Previous Standard. Liabilities associated with build-to-suit leases were remeasured and recorded as finance lease liabilities in conjunction with our transition to ASC 842.


~~(b)~~	As of September 30, 2019, current maturities of debt includes $750 million of the total outstanding principal balance of the 2015 4.625% Senior Notes (defined below), net of related unamortized deferred financing costs, which is equal to the proceeds received from the issuance of the 2019 3.875% Senior Notes (defined below) that were used to redeem the 2015 4.625% Senior Notes on October 7, 2019.

Credit Facilities

On September 6, 2019, two of our subsidiaries (the "Borrowers") entered into a fourth incremental facility amendment (the "Fourth Incremental Amendment") to the credit agreement governing our senior secured term loan facilities (the "Term Loan Facilities") andIn March 2020, we drew $995 million on our senior secured revolving credit facility ~~(including revolving loans, swingline loans and letters of credit)~~ (the ~~"Revolving~~“Revolving Credit Facility" and together with the Term Loan Facilities, the "Credit Facilities"). Under the Fourth Incremental Amendment, (i) we obtained a new term loan in the aggregate principal amount of $750 million (the "Term Loan A"Facility”), ~~that was funded on October 7, 2019, with a maturity date of October 7, 2024 (subject to earlier maturity~~which we repaid in specified circumstances), (ii) the interest rate applicable to the Term Loan A and Revolving Credit Facility is, at our option, either (a) a base rate, subject to a floor of 1.00%, plus an applicable margin varying from 0.00% to 0.50%, or (b) a Eurocurrency rate, subject to a floor of 0.00%, plus an applicable margin varying between 0.75% and 1.50%, in each case, determined by reference to a net first lien leverage based pricing grid, (iii) the aggregate principal amount of the commitments under our Revolving Credit Facility was increased to $1,000 million effective October 7, 2019, (iv) the maturity date of the Revolving Credit Facility was extended from October 13, 2022 to October 7, 2024 (subject to earlier maturity in specified circumstances), and (v) the commitment fee on the unused portion of the Revolving Credit Facility was decreased from 0.25% to 0.15%. The principal amount of the Term Loan A amortizes in quarterly installments equal to $5 million until October 7, 2022 and thereafter in quarterly installments equal to $9 million until maturity, with the balance payable at maturity. The Term Loan A will require compliance with the first lien leverage ratio. Except as described herein, the Fourth Incremental Amendment did not materially change the terms of the Credit Facilities.

Prior to obtaining the Term Loan A, our Credit Facilities included only 1 senior secured term loan facility (the "Term Loan B" and together with the Term Loan A, the "Term Loan Facilities"). During the quarter ended September 30, 2019, we prepaid $235 million principal amount of our Term Loan B and, in connection with this prepayment, we recorded a loss on early extinguishment of debt of $4 million that primarily reflects the write-off of related unamortized debt issuance costs and discounts.

June 2020. As of September 30, ~~2019,~~2020, we had 0 amounts outstanding under our Revolving Credit ~~Facility.~~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 share repurchases, fund acquisitions or capital expenditures and for other general corporate purposes. We have a $125 million letter of credit sublimit as part of the Revolving Credit Facility, which reduces our borrowing availability thereunder by the cumulative amount of outstanding letters of credit. ~~Under~~

On April 2, 2020, two of our subsidiaries (the “Borrowers”) entered into a fifth amendment (the “Fifth Amendment”) to the ~~Fourth Incremental Amendment, the interest rate applicable to amounts drawn under each letter of~~ credit ~~decreased from a range of 1.25% to 2.00% to a range of 0.75% to 1.50%, depending on~~agreement (the “Credit Agreement”) governing our ~~first lien leverage ratio. As of~~ ~~September 30,~~

~~Table of Contents~~

~~2019, we had $2 million of letters of credit issued against the~~senior secured term loan facilities (the “Term Loan Facilities”) and Revolving Credit ~~Facility, and our borrowing availability was $498 million. As of October 7, 2019, our borrowing availability was $998 million under our Revolving Credit~~ Facility.

~~2019 Senior Notes~~

~~On September 24, 2019,~~ The Fifth Amendment provides the Borrowers ~~entered into an indenture (the "2019 3.875% Senior Notes Indenture") in connection~~ with the ~~issuance of $750~~option to comply with a $1,000 million of 3.875% first lien senior notes due January 15, 2028 (the "2019 3.875% Senior Notes"). NaN principal payments are due until maturity and interest is paid semi-annually. On October 7, 2019, the net proceeds from the offeringminimum liquidity covenant in lieu of the ~~2019 3.875% Senior Notes and a portion of the~~6.50:1.00 net proceeds from the Term Loan A were used to redeem the entire outstanding principal balance of $1,250 million of 4.625% first lien secured notes due January 15, 2022 (the "2015 4.625% Senior Notes") and to pay related fees and expenses. In connection with the issuance of the 2019 3.875% Senior Notes, we capitalized approximately $10 million in debt issuance costs.

Obligations under the 2019 3.875% Senior Notes are guaranteed on a senior secured basis, jointly and severally, by the Borrowers and substantially all of the Borrowers' Canadian and U.S. subsidiaries, including The TDL Group Corp., Burger King Worldwide, Inc., Popeyes Louisiana Kitchen, Inc. and substantially all of their respective Canadian and U.S. subsidiaries (the "Note Guarantors"). The 2019 3.875% Senior Notes are first lien senior secured ~~obligations~~leverage ratio financial maintenance covenant for the period after June 30, 2020 and ~~rank equal in right of payment~~prior to September 30, 2021. Additionally, for the periods ending September 30, 2021 and December 31, 2021, to determine compliance with ~~all of~~ the ~~existing and future~~net first lien senior ~~debt~~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 ~~Borrowers and Note Guarantors, including borrowings and guarantees~~ratio based on Adjusted EBITDA for the prior four quarters. There were no other material changes to the terms of the Credit ~~Facilities.~~

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

TH Facility

One of our subsidiaries entered into a non-revolving delayed drawdown term credit facility in a total aggregate principal amount of C$225 million ~~(increased from C$100 million during the three months ended June 30, 2019)~~ with a maturity date of October 4, 2025 (the “TH Facility”). The interest rate applicable to the TH Facility is the Canadian Bankers’ Acceptance rate plus an applicable margin equal to 1.40% or the Prime Rate plus an applicable margin equal to 0.40%, at our option. Obligations under the TH Facility are guaranteed by ~~three~~four of our subsidiaries, and amounts borrowed under the TH Facility are secured by certain parcels of real estate. AsDuring the nine months ended September 30, 2020, we drew down the remaining availability of C$125 million under the TH Facility and, as of September 30, ~~2019,~~2020, we had outstanding C$~~100~~224 million under the TH Facility with a weighted average interest rate of ~~3.36%~~1.88%.

2020 First Lien Senior Notes

On April 7, 2020, the Borrowers entered into an indenture (the “2020 5.75% Senior Notes Indenture”) in connection with the issuance of $500 million of 5.75% first lien notes due April 15, 2025 (the “2020 5.75% Senior Notes”). NaN principal payments are due until maturity and interest is paid semi-annually. The net proceeds from the offering of the 2020 5.75% Senior Notes were used for general corporate purposes. In connection with the issuance of the 2020 5.75% Senior Notes, we capitalized approximately $9 million in debt issuance costs.

Table of Contents

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

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

2020 Second Lien Senior Notes

On October 5, 2020, the Borrowers entered into an indenture (the “2020 4.00% Senior Notes Indenture”) in connection with the issuance of $1,400 million of 4.00% second lien notes due October 15, 2030 (the “October 2020 4.00% Senior Notes”). NaN principal payments are due until maturity and interest is paid semi-annually. On October 16, 2020, the proceeds from the offering of the October 2020 4.00% Senior Notes were used to redeem $1,350 million of the outstanding aggregate principal amount of our existing $2,800 million 2017 5.00% Senior Notes (due October 15, 2025) and pay related redemption premiums, fees and expenses.

On October 14, 2020, the Borrowers entered into a purchase agreement relating to the sale of $1,500 million in aggregate principal amount of 4.00% second lien notes due October 15, 2030 (the “November 2020 4.00% Senior Notes” and together with the October 2020 4.00% Senior Notes, the “2020 4.00% Senior Notes”), which will be issued as additional notes under the 2020 4.00% Senior Notes Indenture. The closing of the offering of the November 2020 4.00% Senior Notes is expected to occur on or about November 2, 2020, subject to customary closing conditions. The November 2020 4.00% Senior Notes are treated as a single series with the October 2020 4.00% Senior Notes and have the same terms for all purposes under the 2020 4.00% Senior Notes Indenture, including waivers, amendments, redemptions and offers to purchase. The net proceeds from the offering of the November 2020 4.00% Senior Notes will be used to redeem the remaining $1,450 million principal amount outstanding of the 2017 5.00% Senior Notes on or about November 13, 2020 and pay related redemption premiums, fees and expenses.

Obligations under the 2020 4.00% Senior Notes are guaranteed on a senior secured basis, jointly and severally, by the Borrowers and Note Guarantors. The 2020 4.00% Senior Notes are second lien senior secured obligations and rank equal in right of payment will all of the existing and future senior debt of the Borrowers and Note Guarantors and effectively subordinated to all of the existing and future first lien senior debt of the Borrowers and Note Guarantors.

Our 2020 4.00% Senior Notes may be redeemed in whole or in part, on or after October 15, 2025 at the redemption prices set forth in the 2020 4.00% Senior Notes Indenture, plus accrued and unpaid interest, if any, at the date of redemption. The 2020 4.00% Senior Notes Indenture also contains optional redemption provisions related to tender offers, change of control and equity offerings, among others.

2020 3.50% First Lien Notes

On October 20, 2020, the Borrowers entered into a purchase agreement relating to the sale of $750 million in aggregate principal amount of 3.50% first lien notes due February 15, 2029 (the “2020 3.50% Senior Notes”). The closing of the offering of the 2020 3.50% Senior Notes is expected to occur on or about November 9, 2020, subject to customary closing conditions. The net proceeds from the offering of the 2020 3.50% Senior Notes will be used to redeem $725 million of our 4.25% first lien notes due 2024 and pay related redemption premiums, fees and expenses.

Restrictions and Covenants

As of September 30, 2020, we were in compliance with all applicable financial debt covenants under the Credit Facilities, the TH Facility, and the indentures governing our Senior Notes.

Table of Contents

Fair Value Measurement

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

As of
September 30,
2019 December 31,
2018
Fair value of our variable term debt and senior notes $ 12,557
$ 11,237
Principal carrying amount of our variable term debt and senior notes 12,370
11,888


	As of
	September 30, 2020		December 31, 2019
Fair value of our variable term debt and senior notes	$	12,283	$	12,075
Principal carrying amount of our variable term debt and senior notes	12,346		11,900

Interest Expense, net

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Debt (a)	$	119	$	130	$	351	$	382
Finance lease obligations	4		5		14		16
Amortization of deferred financing costs and debt issuance discount	7		7		19		22
Interest income	(1)		(5)		(8)		(14)
Interest expense, net	$	129	$	137	$	376	$	406

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Debt (a) $ 130
$ 125
$ 382
$ 375
Finance lease obligations 5
6
16
18
Amortization of deferred financing costs and debt issuance discount 7
8
22
22
Interest income (5 ) (4 ) (14 ) (10 )
Interest expense, net $ 137
$ 135
$ 406
$ 405
(a)Amount includes $15 million and $16 million benefit during the three months ended September 30, 2020 and 2019, respectively, and $56 million and $53 million benefit during the nine months ended September 30, 2020 and 2019, respectively, related to the amortization of the Excluded Component as defined in Note 13, Derivatives.


~~(a)~~	Amount includes $16 million and $15 million benefit during the three months ended September 30, 2019 and 2018, respectively, and $53 million and $39 million benefit during the nine months ended September 30, 2019 and 2018, respectively, related to the amortization of the Excluded Component as defined in Note 13, ~~Derivatives~~.

~~Table of Contents~~

Note 11. Income Taxes

Our effective tax rate was 22.6% and 9.2% for the three and nine months ended September 30, 2020, respectively. The effective tax rate during these periods reflects the mix of income from multiple tax jurisdictions and the impact of internal financing arrangements. Additionally, the effective tax rate during the nine months ended September 30, 2020 reflects a $64 million increase in deferred tax assets which decreased the effective tax rate by (9.5)% during this period. Based on the analysis of final guidance related to the Tax Cuts and Jobs Act (the “Tax Act”) received during this period, a deferred tax asset was recorded.

Our effective tax rate was 18.3% and 21.4% for the three and nine months ended September 30, ~~2019.~~2019, respectively. The effective tax rate during these periods reflects the mix of income from multiple tax jurisdictions, the impact of internal financing arrangements and stock option exercises. Additionally, the effective tax rate during the nine months ended September 30, 2019 reflects a $37 million increase in the provision for unrecognized tax benefits related to a prior restructuring transaction that is not applicable to ongoing operations which increased the effective tax rate by 3.4% during this period. Benefits from stock option exercises reduced the effective tax rate by 1.2% and 2.9% for the three and nine months ended September 30, 2019, respectively.

~~Our effective tax rate was 27.0% for the three months ended September 30, 2018. This rate was primarily a result~~

Table of the mix of income from multiple tax jurisdictions, the year to date impact from the realignment of various internal financing arrangements and the increase in valuation allowance on deferred tax assets. Our effective tax rate was 15.4% for the nine months ended September 30, 2018. This rate was primarily a result of the mix of income from multiple tax jurisdictions, the benefit from reserve releases due to audit settlements during the first half of 2018, and the realignment of various internal financing arrangements. In addition, benefits from stock option exercises reduced the effective tax rate by 0.9% and 6.9% for the three and nine months ended September 30, 2018, respectively.Contents

Note 12. Shareholders’ Equity

Noncontrolling Interests

The holders of Partnership exchangeable units held an economic interest of approximately ~~35.7%~~34.8% and ~~45.2%~~35.7% in Partnership common equity through the ownership of ~~165,529,822~~162,212,231 and ~~207,523,591~~165,507,199 Partnership exchangeable units as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

During the nine months ended September 30, ~~2019,~~2020, Partnership exchanged ~~41,993,769~~3,294,968 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. See Note 17, Subsequent Events, for detail of Partnership exchangeable units repurchased for cash on October 2, 2020. The exchanges represented increases in our ownership interest in Partnership and were accounted for as equity transactions, with no gain or loss recorded in the accompanying condensed consolidated statement of operations. 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)
Balance at December 31, 2019	$	199	$	(19)	$	(943)	$	(763)
Foreign currency translation adjustment	—		—		(170)		(170)
Net change in fair value of derivatives, net of tax	(229)		—		—		(229)
Amounts reclassified to earnings of cash flow hedges, net of tax	51		—		—		51

Amounts attributable to noncontrolling interests	64		—		50		114
Balance at September 30, 2020	$	85	$	(19)	$	(1,063)	$	(997)

Derivatives Pensions Foreign Currency Translation Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2018 $ 253
$ (15 ) $ (1,038 ) $ (800 )
Foreign currency translation adjustment —
—
185
185
Net change in fair value of derivatives, net of tax (89 ) —
—
(89 )
Amounts reclassified to earnings of cash flow hedges, net of tax 7
—
—
7
Amounts attributable to noncontrolling interests 70
(3 ) (234 ) (167 )
Balance at September 30, 2019 $ 241
$ (18 ) $ (1,087 ) $ (864 )

~~Table of Contents~~

Note 13. Derivative Instruments

Disclosures about Derivative Instruments and Hedging Activities

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

Interest Rate Swaps

At September 30, ~~2019,~~2020, we had outstanding ~~a series of~~ receive-variable, pay-fixed interest rate swaps with a total notional value of $3,500 million to hedge the variability in the interest payments on a portion of our ~~Term~~senior secured term loan facilities (the “Term Loan ~~Facilities~~Facilities”) beginning ~~March 29, 2018~~October 31, 2019 through the ~~expiration~~termination date of ~~the final swap on February 17, 2024, with each swap resetting each March.~~November 19, 2026. Additionally, at September 30, ~~2019,~~2020, we also had outstanding receive-variable, pay-fixed interest rate swaps with a total notional value of $500 million to hedge the variability in the interest payments on a portion of our Term Loan Facilities effective September 30, 2019 through the termination date of September 30, 2026. At inception, all of these interest rate swaps were designated as cash flow hedges for hedge accounting. The unrealized changes in market value are recorded in AOCI and reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.

During ~~2015,~~2019, we ~~entered into a series~~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 ~~a notional value of $2,500 million to hedge~~ the ~~variability in the interest payments on a portion~~new maturity date of our Term Loan ~~Facility beginning May 28, 2015. All~~B. The extension of ~~these~~the term resulted in a de-designation and re-designation of the interest rate swaps ~~were settled on April 26, 2018~~and the swaps continue to be accounted for ~~an insignificant cash receipt. At inception, these interest rate swaps were designated~~ as a cash flow ~~hedges~~hedge for hedge accounting. ~~The~~In connection with the de-designation, we recognized a net unrealized ~~changes in market value were recorded~~loss of $213 million in AOCI and this amount gets reclassified into ~~earnings during~~Interest expense, net as the ~~period in which the hedged~~original forecasted transaction affects earnings. The amount of pre-tax losses in AOCI as of September 30, 2020 that we expect to be reclassified into interest expense within the next 12 months is $51 million.

Table of Contents

During 2015, we settled certain interest rate swaps and recognized a net unrealized loss of $85 million in AOCI at the date of settlement. This amount gets reclassified into Interest expense, net as the original hedged forecasted transaction affects earnings. The amount of pre-tax losses in AOCI as of September 30, ~~2019~~2020 that we expect to be reclassified into interest expense within the next 12 months is $12 million.

Cross-Currency Rate Swaps

To protect the value of our investments in our foreign operations against adverse changes in foreign currency exchange rates, we hedge a portion of our net investment in one or more of our foreign subsidiaries by using cross-currency rate swaps. At September 30, ~~2019,~~2020, we had outstanding cross-currency rate swap contracts between the Canadian dollar and U.S. dollar and the Euro and U.S. dollar that have been designated as net investment hedges of a portion of our equity in foreign operations in those currencies. The component of the gains and losses on our net investment in these designated foreign operations driven by changes in foreign exchange rates are economically partly offset by movements in the fair value of our cross-currency swap contracts. The fair value of the swaps is calculated each period with changes in fair value reported in AOCI, net of tax. Such amounts will remain in AOCI until the complete or substantially complete liquidation of our investment in the underlying foreign operations.

At September 30, ~~2019,~~2020, we had outstanding fixed-to-fixed cross-currency rate swaps to partially hedge the net investment in our Canadian subsidiaries. At inception, these cross-currency rate swaps were designated as a hedge and are accounted for as net investment hedges. These swaps are contracts to exchange quarterly fixed-rate interest payments we make on the Canadian dollar notional amount of C$6,754 million for quarterly fixed-rate interest payments we receive on the U.S. dollar notional amount of $5,000 million through the maturity date of June 30, 2023.

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

~~Table of Contents~~

The fixed to fixed cross-currency rate swaps hedging Canadian dollar and Euro net investments utilized the forward method of effectiveness assessment prior to March 15, 2018. On March 15, 2018, we ~~dedesignated~~de-designated and subsequently ~~redesignated~~re-designated the outstanding fixed to fixed cross-currency rate swaps to prospectively use the spot method of hedge effectiveness assessment. Additionally, as a result of adopting new hedge accounting guidance during 2018, we elected to exclude the interest component (the “Excluded Component”) from the accounting hedge without affecting net investment hedge accounting and elected to amortize the Excluded Component over the life of the derivative instrument. The amortization of the Excluded Component is recognized in Interest expense, net in the condensed consolidated statement of operations. The change in fair value that is not related to the Excluded Component is recorded in AOCI and will be reclassified to earnings when the foreign subsidiaries are sold or substantially liquidated.

Foreign Currency Exchange Contracts

We use foreign exchange derivative instruments to manage the impact of foreign exchange fluctuations on U.S. dollar purchases and payments, such as coffee purchases made by our Canadian Tim Hortons operations. At September 30, ~~2019,~~2020, we had outstanding forward currency contracts to manage this risk in which we sell Canadian dollars and buy U.S. dollars with a notional value of ~~$132~~$98 million with maturities to November ~~2020.~~2021. 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.

Table of Contents

Quantitative Disclosures about Derivative Instruments and Fair Value Measurements

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


	Gain or (Loss) Recognized in Other Comprehensive Income (Loss)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Derivatives designated as cash flow hedges(1)
Interest rate swaps	$	(22)	$	(35)	$	(370)	$	(156)
Forward-currency contracts	$	(2)	$	1	$	3	$	(3)
Derivatives designated as net investment hedges
Cross-currency rate swaps	$	(238)	$	180	$	51	$	25

Gain or (Loss) Recognized in Other Comprehensive Income (Loss)
Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Derivatives designated as cash flow hedges⁽¹⁾

Interest rate swaps $ (35 ) $ 22
$ (156 ) $ 46
Forward-currency contracts $ 1
$ (5 ) $ (3 ) $ 8
Derivatives designated as net investment hedges
Cross-currency rate swaps $ 180
$ (83 ) $ 25
$ 71
(1)We did not exclude any components from the cash flow hedge relationships presented in this table.


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


	Location of Gain or (Loss) Reclassified from AOCI into Earnings	Gain or (Loss) Reclassified from AOCI into Earnings
		Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019
Derivatives designated as cash flow hedges
Interest rate swaps	Interest expense, net	$	(30)	$	(7)	$	(71)	$	(14)
Forward-currency contracts	Cost of sales	$	0	$	0	$	2	$	4

	Location of Gain or (Loss) Recognized in Earnings	Gain or (Loss) Recognized in Earnings (Amount Excluded from Effectiveness Testing)
		Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019
Derivatives designated as net investment hedges
Cross-currency rate swaps	Interest expense, net	$	15	$	16	$	56	$	53

Table of Contents


	Fair Value as of
	September 30, 2020		December 31, 2019		Balance Sheet Location
Assets:
Derivatives designated as cash flow hedges
Interest rate	$	0	$	7	Other assets, net

Derivatives designated as net investment hedges
Foreign currency	18		22		Other assets, net
Total assets at fair value	$	18	$	29

Liabilities:
Derivatives designated as cash flow hedges
Interest rate	$	490	$	175	Other liabilities, net
Foreign currency	1		2		Other accrued liabilities
Derivatives designated as net investment hedges
Foreign currency	102		166		Other liabilities, net
Total liabilities at fair value	$	593	$	343

Location of Gain or (Loss) Reclassified from AOCI into Earnings Gain or (Loss) Reclassified from AOCI into Earnings
Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Derivatives designated as cash flow hedges
Interest rate swaps Interest expense, net $ (7 ) $ (5 ) $ (14 ) $ (16 )
Forward-currency contracts Cost of sales $ —
$ (2 ) $ 4
$ 1

Location of Gain or (Loss) Recognized in Earnings
Gain or (Loss) Recognized in Earnings
(Amount Excluded from Effectiveness Testing)
Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Derivatives designated as net investment hedges
Cross-currency rate swaps Interest expense, net $ 16
$ 15
$ 53
$ 39

Fair Value as of
September 30, 2019 December 31, 2018 Balance Sheet Location
Assets:
Derivatives designated as cash flow hedges
Foreign currency $ 1
$ 7
Prepaids and other current assets
Derivatives designated as net investment hedges
Foreign currency 39
58
Other assets, net
Total assets at fair value $ 40
$ 65

Liabilities:
Derivatives designated as cash flow hedges
Interest rate $ 223
$ 72
Other liabilities, net
Derivatives designated as net investment hedges
Foreign currency 44
107
Other liabilities, net
Total liabilities at fair value $ 267
$ 179

Note 14. Other Operating Expenses (Income), net

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

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings $ 6
$ 7
$ (1 ) $ 17
Litigation settlements (gains) and reserves, net 1
5
1
(1 )
Net losses (gains) on foreign exchange (35 ) (3 ) (38 ) (19 )
Other, net (2 ) 17
(6 ) 12
Other operating expenses (income), net $ (30 ) $ 26
$ (44 ) $ 9


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings	$	4	$	6	$	2	$	(1)
Litigation settlements (gains) and reserves, net	4		1		5		1
Net losses (gains) on foreign exchange	44		(35)		54		(38)
Other, net	2		(2)		(2)		(6)
Other operating expenses (income), net	$	54	$	(30)	$	59	$	(44)

Net losses (gains) on disposal of assets, restaurant closures, and refranchisings represent sales of properties and other costs related to restaurant closures and refranchisings.

~~Table of Contents~~

~~Litigation settlements (gains)~~ Gains and ~~reserves, net primarily reflects accruals~~losses recognized in the current period may reflect certain costs related to closures and ~~proceeds received~~refranchisings that occurred in ~~connection with litigation matters.~~previous periods.

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

~~Other, net during the three and nine months ended September 30, 2018 is comprised primarily~~

Table of ~~an expense in connection with the settlement of certain provisions associated with the 2017 redemption of our preferred shares as a result of changes in Treasury regulations.~~Contents

Note 15. Commitments and Contingencies

Litigation

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

On October 5, 2018, a class action complaint was filed against Burger King Worldwide, Inc. (“BKW”) and Burger King Corporation (“BKC”) in the U.S. District Court for the Southern District of Florida by Jarvis Arrington, individually and on behalf of all others similarly situated. On October 18, 2018, a second class action complaint was filed against ~~the Company,~~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 ~~the Company,~~RBI, BKW and BKC in the U.S. District Court for the Southern District of Florida by Sandra Muster, individually and on behalf of all others similarly situated. These complaints 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. While we currently believe these claims are without merit, we are unable to predict the ultimate outcome of these cases or estimate the range of possible loss, if any.

In 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.

While we currently believe ~~these claims are~~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. 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 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, 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 any of these cases or estimate the range of possible loss, if any.

In March 2019, the Company settled the 2 class action lawsuits filed in the Ontario Superior Court of Justice against The TDL Group Corp., a subsidiary of the Company (“TDL”), and certain other defendants, as described in the Company’s Annual Report on Form 10-K filed with the SEC on February 22, 2019. The court approved the settlement on April 29, 2019. Under the terms of the settlement, TDL is contributing C$6 million to the Tim Hortons Advertising Fund in Canada over two years, such amount to be spent on marketing activities. In addition, TDL has paid C$6 million for legal, administrative and other third-party expenses. These amounts were accrued by TDL during 2018.

Table of Contents

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 revenues, consisting primarily of royalties based on a percentage of sales reported by franchise restaurants and franchise fees paid by franchisees; (ii) property revenues from properties we lease or sublease to franchisees; and (iii) sales at restaurants owned by us ("(“Company ~~restaurants"~~restaurants”). In addition, our TH business generates revenue from sales to franchisees related to our supply chain operations, including manufacturing, procurement, warehousing and distribution, as well as sales to retailers. We manage each of our brands as an operating segment and each operating segment represents a reportable segment.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues by operating segment:
TH	$	762	$	881	$	2,028	$	2,472
BK	433		457		1,168		1,315
PLK	142		120		414		337
Total revenues	$	1,337	$	1,458	$	3,610	$	4,124

Three Months Ended September 30, Nine Months Ended
September 30,
2019 2018 2019 2018
Revenues by operating segment:
     TH $ 881
$ 854
$ 2,472
$ 2,440
     BK 457
416
1,315
1,224
     PLK 120
105
337
308
Total revenues $ 1,458
$ 1,375
$ 4,124
$ 3,972


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues by country (a):
Canada	$	691	$	805	$	1,837	$	2,245
United States	499		489		1,392		1,412
Other	147		164		381		467
Total revenues	$	1,337	$	1,458	$	3,610	$	4,124

Three Months Ended September 30, Nine Months Ended
September 30,
2019 2018 2019 2018
Revenues by country (a):
     Canada $ 805
$ 776
$ 2,245
$ 2,214
     United States 489
448
1,412
1,319
     Other 164
151
467
439
Total revenues $ 1,458
$ 1,375
$ 4,124
$ 3,972


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

~~Table~~ of ~~Contents~~our total revenues in each period presented.

Our measure of segment income is Adjusted EBITDA. Adjusted EBITDA represents earnings (net income or loss) before interest expense, net, ~~(gain)~~ loss on early extinguishment of debt, income tax expense, and depreciation and amortization, adjusted to exclude (i) the non-cash impact of share-based compensation and non-cash incentive compensation expense, ~~and~~(ii) (income) loss from equity method investments, net of cash distributions received from equity method investments, ~~as well as~~(iii) other operating expenses (income), ~~net. Other specifically identified costs associated with~~net and, (iv) income/expenses from non-recurring projects ~~are also excluded from Adjusted EBITDA, including fees~~ and ~~expenses associated with~~non-operating activities. For the Popeyes Acquisition (“PLK Transaction costs”), Corporate restructuring and tax advisory fees related to the interpretation and implementation of comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act enacted by the U.S. government on December 22, 2017 and non-operational Office centralization and relocationperiods referenced, this included costs incurred 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.~~ respectively, and from professional advisory and consulting services associated with certain transformational corporate restructuring initiatives that rationalize our structure and optimize cash movements, including consulting services related to the interpretation of final and proposed regulations and guidance under the Tax Cuts and Jobs Act (the “Tax Act”).

Table of Contents

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 ~~performance or the performance of an acquired~~ business. A reconciliation of segment income to net income ~~(loss)~~ consists of the following (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Segment income:
TH	$	258	$	301	$	594	$	825
BK	245		254		605		728
PLK	58		47		164		129
Adjusted EBITDA	561		602		1,363		1,682
Share-based compensation and non-cash incentive compensation expense	19		18		63		62
Corporate restructuring and tax advisory fees	3		5		11		22
Office centralization and relocation costs	0		0		0		6
Impact of equity method investments (a)	20		(9)		42		1
Other operating expenses (income), net	54		(30)		59		(44)
EBITDA	465		618		1,188		1,635
Depreciation and amortization	48		47		139		139
Income from operations	417		571		1,049		1,496
Interest expense, net	129		137		376		406
Loss on early extinguishment of debt	0		4		0		4
Income tax expense	65		79		62		232
Net income	$	223	$	351	$	611	$	854

(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.

Three Months Ended September 30, Nine Months Ended
September 30,
2019 2018 2019 2018
Segment income:
     TH $ 301
$ 299
$ 825
$ 830
     BK 254
231
728
681
     PLK 47
41
129
120
          Adjusted EBITDA 602
571
1,682
1,631
Share-based compensation and non-cash incentive compensation expense 18
13
62
44
PLK Transaction costs —
—
—
10
Corporate restructuring and tax advisory fees 5
5
22
19
Office centralization and relocation costs —
4
6
16
Impact of equity method investments (a) (9 ) —
1
(6 )
Other operating expenses (income), net (30 ) 26
(44 ) 9
          EBITDA 618
523
1,635
1,539
Depreciation and amortization 47
45
139
138
          Income from operations 571
478
1,496
1,401
Interest expense, net 137
135
406
405
Loss on early extinguishment of debt 4
—
4
—
Income tax expense 79
93
232
153
          Net income $ 351
$ 250
$ 854
$ 843


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

Table of Contents

Note 17. Subsequent Events

Exchange of Partnership Exchangeable Units

In September 2020 Partnership received an exchange notice for 6,757,692 Partnership exchange units (the “Exchangeable Units”). In accordance with the terms of the partnership agreement, Partnership chose to satisfy the exchange by repurchasing all of these Exchangeable Units on October 2, 2020 for approximately $380 million with available cash on hand. The exchange represented an increase in our ownership interest in Partnership and will be accounted for as an equity transaction, with no gain or loss recorded in the condensed consolidated statement of operations. Pursuant to the terms of the partnership agreement, upon the exchange of Partnership exchangeable units, each such Partnership exchangeable unit is automatically deemed cancelled.

Dividends

On October ~~3, 2019,~~2, 2020, we paid a cash dividend of ~~$0.50~~$0.52 per common share to common shareholders of record on September ~~17, 2019.~~18, 2020. On such date, Partnership also made a distribution in respect of each Partnership exchangeable unit in the amount of ~~$0.50~~$0.52 per exchangeable unit to holders of record on September ~~17, 2019.~~18, 2020.

~~Our~~Subsequent to September 30, 2020, our board of directors ~~has~~ declared a cash dividend of ~~$0.50~~$0.52 per common share, which will be paid on January ~~3, 2020~~5, 2021 to common shareholders of record on December ~~17, 2019.~~21, 2020. Partnership will also make a distribution in respect of each Partnership exchangeable unit in the amount of ~~$0.50~~$0.52 per Partnership exchangeable unit, and the record date and payment date for distributions on Partnership exchangeable units are the same as the record date and payment date set forth above.

~~Term Loan A Proceeds~~Issuance of Senior Notes and Redemption of Senior Notes

As ~~disclosed~~discussed in Note 10, Long-Term Debt, on October 5, 2020, the ~~net~~Borrowers entered into the 2020 4.00% Senior Notes Indenture in connection with the issuance of the October 2020 4.00% Senior Notes. The proceeds from the ~~Term Loan A~~offering of the October 2020 4.00% Senior Notes were ~~obtained~~used to redeem $1,350 million of the outstanding aggregate principal amount of our existing $2,800 million 2017 5.00% Senior Notes (due October 15, 2025) on October ~~7, 2019.~~16, 2020 and pay related redemption premiums, fees and expenses.

Also as discussed in Note 10, Long-Term Debt, on October 14, 2020, the Borrowers entered into a purchase agreement relating to the sale of the November 2020 4.00% Senior Notes, which will be issued as additional notes under the 2020 4.00% Senior Notes Indenture. The closing of the offering of the November 2020 4.00% Senior Notes is expected to occur on or about November 2, 2020, subject to customary closing conditions. The net proceeds from the offering of the ~~2019 3.875%~~November 2020 4.00% Senior Notes will be used to redeem the remaining $1,450 million principal amount outstanding of the 2017 5.00% Senior Notes and pay related redemption premiums, fees and expenses.

As additionally discussed in Note 10, Long-Term Debt, onOctober 20, 2020, the Borrowers entered into a ~~portion~~purchase agreement relating to the sale of the 2020 3.50% Senior Notes. The closing of the offering of the 2020 3.50% Senior Notes is expected to occur on or about November 9, 2020, subject to customary closing conditions. The net proceeds from the ~~Term Loan A were~~offering of the 2020 3.50% Senior Notes will be used to redeem $725 million of our 4.25% first lien notes due 2024 and pay related redemption premiums, fees and expenses.

During the ~~entire outstanding principal balance~~three months ending December 31, 2020, 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 ~~2015 4.625% Senior Notes~~notes discussed above.

Litigation

On October 26, 2020, City of Warwick Municipal Employees Pension Fund, a purported stockholder of Restaurant Brands International, individually and on ~~October 7, 2019~~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 the Company and ~~to pay related fees~~certain of its officers, directors and selling shareholders as defendants alleging violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, in connection with the offering of securities by an affiliate of 3G Capital Partners Ltd. 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. ~~Additionally,~~The Company is currently evaluating the ~~aggregate principal amount~~lawsuit, but believes that the claims are without merit and intends to vigorously defend. While we believe these

Table of Contents

claims are without merit, we are unable to predict the ~~commitments under our Revolving Credit Facility was increased to $1,000 million effective October 7, 2019.~~ultimate outcome of this case or estimate the range of possible loss, if any.

*****

Table of Contents

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 “RBI”, the “Company”, “we”, “us” or “our” are to Restaurant Brands International Inc. and its subsidiaries, collectively.

Overview

We are one of the world’s largest quick service restaurant (“QSR”) companies with ~~more than $33~~approximately $31 billion in annual system-wide sales and ~~over 26,000~~approximately 27,000 restaurants in more than 100 countries and U.S. territories as of September 30, ~~2019.~~2020. 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 revenues, consisting primarily of royalties based on a percentage of sales reported by franchise restaurants and franchise fees paid by franchisees; (ii) property revenues from properties we lease or sublease to franchisees; and (iii) sales at restaurants owned by us (“Company restaurants”). In addition, our TH business generates revenue from sales to franchisees related to our supply chain operations, including manufacturing, procurement, warehousing, and distribution, as well as sales to retailers.

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 nine months ended September 30, 2020, which is expected to continue with the timing of recovery uncertain. System-wide sales growth, system-wide sales and comparable sales were also negatively impacted for the three and nine months ended September 30, 2020 as a result of the impact of COVID-19. During the first nine months of 2020, substantially all TH, BK and PLK restaurants remained open in North America with limited operations, such as Drive-thru, Takeout and Delivery (where applicable) and that currently remains 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 all restaurants and the restaurants that remained open or have reopened may have limited operations. As of the end of September, 96% of our restaurants were open worldwide, including substantially all of our restaurants in North America, Asia Pacific and Europe, Middle East and Africa and approximately 92% of our restaurants in Latin America.

Table of Contents

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 have worked closely with our franchisees around 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 nine months ended September 30, 2020, we offered rent relief programs to eligible TH franchisees in Canada and eligible BK franchisees in the U.S. and Canada who lease property from us, a portion of which concluded during the third quarter. While in effect, these programs provide working capital support to franchisees and result in a reduction in our property revenues. See Note 4 to the accompanying unaudited condensed consolidated financial statements.

We also provided cash flow support by extending loans to eligible BK franchisees in the U.S. during the second and third quarters of 2020, and by advancing certain cash payments to eligible TH franchisees in Canada during the second quarter of 2020. Additionally, we 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.

During the nine months ended September 30, 2020, we recorded higher bad debt expense than the nine months ended September 30, 2019. While these 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 nine months ended September 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.

While we do not know the future impact COVID-19 will have on our business, or when our business will fully return to normal operations, we expect to see a continued impact from COVID-19 on our results in the fourth quarter.

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 ~~current~~ system-wide restaurants are franchised. Franchise sales represent sales at all franchise restaurants and are revenues to our franchisees. We do not record franchise sales as revenues; however, our royalty revenues are calculated based on a percentage of franchise sales.

•Net restaurant growth ~~reflects~~refers to the ~~percentage change~~net increase in restaurant count (openings, net of permanent closures) over a trailing ~~twelve-month~~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

~~Transition to New Lease Accounting Standard~~

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

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

Beginning on January 1, 2019, we record lease income and lease cost on a gross basis for lessee reimbursements of costs such as property taxes and maintenance when we are the lessor in the lease. Although there was no net impact to our consolidated statement of operations from this change, the presentation resulted in total increases to both franchise and property revenues and franchise and property expenses of $32 million ($22 million related to our TH segment and $10 million related to our BK segment ) during the three months ended September 30, 2019 and $99 million ($65 million related to our TH segment, $33 million related to our BK segment and $1 million related to our PLK segment) during the nine months ended September 30, 2019, compared to the three and nine months ended September 30, 2018, respectively, when such amounts were recorded on a net basis.

•

~~As described in Note 4,~~ ~~Leases~~, to the accompanying unaudited condensed consolidated financial statements, the transition provisions of ASC 842 required the reclassification of favorable lease assets and unfavorable lease liabilities where we are the lessee in the underlying lease to the right-of-use (“ROU”) asset recorded for the underlying lease. As a result of this reclassification, the amortization period for certain favorable lease assets and unfavorable lease liabilities was reduced, resulting in $1 million and $5 million net increases in non-cash amortization expense during the three and nine months ended September 30, 2019, respectively, compared to the three and nine months ended September 30, 2018, respectively. Favorable lease assets and unfavorable lease liabilities associated with leases where we are the lessor were not impacted by our transition to ASC 842.

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

~~Table of Contents~~

~~PLK Transaction Costs~~

On March 27, 2017, we completed the acquisition of Popeyes Louisiana Kitchen, Inc. (the "Popeyes Acquisition"). In connection with the Popeyes Acquisition, we incurred certain non-recurring fees and expenses (“PLK Transaction costs”) totaling $10 million during the nine months ended September 30, 2018 consisting primarily of professional fees and compensation related expenses, all of which are classified as selling, general and administrative expenses in our condensed consolidated statements of operations. We did not incur any PLK Transaction costs during the three and nine months ended September 30, 2019.

~~Tax~~ Reform

In December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) that significantly revised the U.S. tax code generally effective January 1, 2018 by, among other changes, lowering the federal corporate income tax rate from 35% to 21%, limiting deductibility of interest expense and performance based incentive compensation and implementing a modified territorial tax system. As a Canadian entity, we generally would be classified as a foreign entity (and, therefore, a non-U.S. tax resident) under general rules of U.S. federal income taxation. However, we have subsidiaries subject to U.S. federal income taxation and therefore the Tax Act impacted our consolidated results of operations in ~~2018~~2019 and the current period, and is expected to continue to impact our consolidated results of operations in future periods.

We recorded $3 million and $5 million of costs during ~~each of~~ the three months ended September 30, 2020 and 2019, respectively, and ~~2018~~$11 million and $22 ~~million and $19~~ million of costs during the nine months ended September 30, ~~2019~~2020 and ~~2018,~~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 certain transformational corporate restructuring initiatives that rationalize our structure and optimize cash movement within our structure, including consulting services related to the interpretation of final and ~~implementation of~~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”). ~~We expect to continue to incur and separately disclose Corporate restructuring and tax advisory fees related~~

During the nine months ended September 30, 2020, various guidance was issued by the U.S. Treasury relating to the Tax ~~Act~~Act. After review of such guidance, we recorded a deferred tax asset of approximately $64 million during the nine months ended September 30, 2020 related to certain tax attribute carryforwards, which we now expect to be able to deduct in ~~2019.~~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"~~costs”) totaling ~~$4 million during the three months ended September 30, 2018 and~~ $6 ~~million and $16~~ million during the nine months ended September 30, 2019 ~~and 2018, respectively,~~ consisting primarily of moving costs and relocation-driven compensation expenses, which are classified as selling, general and administrative expenses in our condensed consolidated statements of operations. We did not incur any Office centralization and relocation costs during the three months ended September 30, 2019 and during 2020 and do not expect to ~~separately disclose~~incur any additional Office centralization and relocation ~~costs.~~

costs during 2020.

Table of Contents

Results of Operations for the Three and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

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


Consolidated	Three Months Ended September 30,				Variance		FX Impact (a)		Variance Excluding FX Impact		Nine Months Ended September 30,				Variance		FX Impact (a)		Variance Excluding FX Impact
	2020		2019		Favorable / (Unfavorable)						2020		2019		Favorable / (Unfavorable)
Revenues:
Sales	$	541	$	624	$	(83)	$	(4)	$	(79)	$	1,450	$	1,735	$	(285)	$	(26)	$	(259)
Franchise and property revenues	796		834		(38)		(6)		(32)		2,160		2,389		(229)		(33)		(196)
Total revenues	1,337		1,458		(121)		(10)		(111)		3,610		4,124		(514)		(59)		(455)
Operating costs and expenses:
Cost of sales	418		475		57		3		54		1,156		1,334		178		20		158
Franchise and property expenses	128		133		5		—		5		388		401		13		4		9
Selling, general and administrative expenses	302		320		18		—		18		922		948		26		5		21
(Income) loss from equity method investments	18		(11)		(29)		1		(30)		36		(11)		(47)		—		(47)
Other operating expenses (income), net	54		(30)		(84)		1		(85)		59		(44)		(103)		—		(103)
Total operating costs and expenses	920		887		(33)		5		(38)		2,561		2,628		67		29		38
Income from operations	417		571		(154)		(5)		(149)		1,049		1,496		(447)		(30)		(417)
Interest expense, net	129		137		8		—		8		376		406		30		—		30
Loss on early extinguishment of debt	—		4		4		—		4		—		4		4		—		4
Income before income taxes	288		430		(142)		(5)		(137)		673		1,086		(413)		(30)		(383)
Income tax expense	65		79		14		—		14		62		232		170		1		169
Net income	$	223	$	351	$	(128)	$	(5)	$	(123)	$	611	$	854	$	(243)	$	(29)	$	(214)

Consolidated Three Months Ended September 30, Variance FX Impact (a) Variance Excluding FX Impact Nine Months Ended September 30, Variance FX Impact (a) Variance Excluding FX Impact
2019 2018 Favorable / (Unfavorable) 2019 2018 Favorable / (Unfavorable)
Revenues:
Sales $ 624
$ 609
$ 15
$ (5 ) $ 20
$ 1,735
$ 1,743
$ (8 ) $ (44 ) $ 36
Franchise and property revenues 834
766
68
(8 ) 76
2,389
2,229
160
(49 ) 209
Total revenues 1,458
1,375
83
(13 ) 96
4,124
3,972
152
(93 ) 245
Operating costs and expenses:
Cost of sales 475
470
(5 ) 4
(9 ) 1,334
1,348
14
34
(20 )
Franchise and property expenses 133
107
(26 ) 1
(27 ) 401
314
(87 ) 7
(94 )
Selling, general and administrative expenses 320
298
(22 ) 2
(24 ) 948
917
(31 ) 11
(42 )
(Income) loss from equity method investments (11 ) (4 ) 7
—
7
(11 ) (17 ) (6 ) (3 ) (3 )
Other operating expenses (income), net (30 ) 26
56
—
56
(44 ) 9
53
(2 ) 55
Total operating costs and expenses 887
897
10
7
3
2,628
2,571
(57 ) 47
(104 )
Income from operations 571
478
93
(6 ) 99
1,496
1,401
95
(46 ) 141
Interest expense, net 137
135
(2 ) —
(2 ) 406
405
(1 ) —
(1 )
Loss on early extinguishment of debt 4
—
(4 ) —
(4 ) 4
—
(4 ) —
(4 )
Income before income taxes 430
343
87
(6 ) 93
1,086
996
90
(46 ) 136
Income tax expense 79
93
14
9
5
232
153
(79 ) 11
(90 )
Net income $ 351
$ 250
$ 101
$ 3
$ 98
$ 854
$ 843
$ 11
$ (35 ) $ 46
(a)We calculate the FX Impact by translating prior year results at current year monthly average exchange rates. We analyze these results on a constant currency basis as this helps identify underlying business trends, without distortion from the effects of currency movements.


~~(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 September 30,				Variance		FX Impact (a)		Variance Excluding FX Impact		Nine Months Ended September 30,				Variance		FX Impact (a)		Variance Excluding FX Impact
	2020		2019		Favorable / (Unfavorable)						2020		2019		Favorable / (Unfavorable)
Revenues:
Sales	$	506	$	584	$	(78)	$	(4)	$	(74)	$	1,345	$	1,618	$	(273)	$	(26)	$	(247)
Franchise and property revenues	256		297		(41)		(3)		(38)		683		854		(171)		(14)		(157)
Total revenues	762		881		(119)		(7)		(112)		2,028		2,472		(444)		(40)		(404)
Cost of sales	388		441		53		3		50		1,061		1,233		172		20		152
Franchise and property expenses	83		91		8		—		8		250		268		18		4		14
Segment SG&A	63		77		14		—		14		211		236		25		3		22
Segment depreciation and amortization (b)	28		28		—		—		—		82		80		(2)		1		(3)
Segment income (c)	258		301		(43)		(2)		(41)		594		825		(231)		(13)		(218)

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

(c)TH segment income includes $2 million and $3 million of cash distributions received from equity method investments for the three months ended September 30, 2020 and 2019, respectively. TH segment income includes $6 million and $11 million of cash distributions received from equity method investments for the nine months ended September 30, 2020 and 2019, respectively.

TH Segment Three Months Ended September 30, Variance FX Impact (a) Variance Excluding FX Impact Nine Months Ended September 30, Variance FX Impact (a) Variance Excluding FX Impact
2019 2018 Favorable / (Unfavorable) 2019 2018 Favorable / (Unfavorable)
Revenues:
Sales $ 584
$ 571
$ 13
$ (5 ) $ 18
$ 1,618
$ 1,627
$ (9 ) $ (44 ) $ 35
Franchise and property revenues 297
283
14
(3 ) 17
854
813
41
(22 ) 63
Total revenues 881
854
27
(8 ) 35
2,472
2,440
32
(66 ) 98
Cost of sales 441
437
(4 ) 4
(8 ) 1,233
1,250
17
34
(17 )
Franchise and property expenses 91
72
(19 ) 1
(20 ) 268
210
(58 ) 6
(64 )
Segment SG&A 77
76
(1 ) —
(1 ) 236
238
2
6
(4 )
Segment depreciation and amortization (b) 28
26
(2 ) —
(2 ) 80
78
(2 ) 2
(4 )
Segment income (c) 301
299
2
(2 ) 4
825
830
(5 ) (22 ) 17


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


~~(c)~~	TH segment income includes $3 million and $4 million of cash distributions received from equity method investments for the three months ended September 30, 2019 and 2018, respectively. TH segment income includes $11 million and $10 million of cash distributions received from equity method investments for the nine months ended September 30, 2019 and 2018, respectively.

Table of Contents


BK Segment	Three Months Ended September 30,				Variance		FX Impact (a)		Variance Excluding FX Impact		Nine Months Ended September 30,				Variance		FX Impact (a)		Variance Excluding FX Impact
	2020		2019		Favorable / (Unfavorable)						2020		2019		Favorable / (Unfavorable)
Revenues:
Sales	$	17	$	19	$	(2)	$	—	$	(2)	$	49	$	57	$	(8)	$	—	$	(8)
Franchise and property revenues	416		438		(22)		(2)		(20)		1,119		1,258		(139)		(18)		(121)
Total revenues	433		457		(24)		(2)		(22)		1,168		1,315		(147)		(18)		(129)
Cost of sales	16		18		2		—		2		49		53		4		—		4
Franchise and property expenses	42		39		(3)		—		(3)		129		124		(5)		—		(5)
Segment SG&A	142		159		17		—		17		422		449		27		1		26
Segment depreciation and amortization (b)	13		12		(1)		—		(1)		37		37		—		—		—
Segment income (d)	245		254		(9)		(2)		(7)		605		728		(123)		(17)		(106)

(d)No cash distributions were received from equity method investments for the three months ended September 30, 2020 and 2019 and no significant amounts of cash distributions were received during the nine months ended September 30, 2020. BK segment income includes $2 million of cash distributions received from equity method investments for the nine months ended September 30, 2019.


PLK Segment	Three Months Ended September 30,				Variance		FX Impact (a)		Variance Excluding FX Impact		Nine Months Ended September 30,				Variance		FX Impact (a)		Variance Excluding FX Impact
	2020		2019		Favorable / (Unfavorable)						2020		2019		Favorable / (Unfavorable)
Revenues:
Sales	$	18	$	21	$	(3)	$	—	$	(3)	$	56	$	60	$	(4)	$	—	$	(4)
Franchise and property revenues	124		99		25		(1)		26		358		277		81		(1)		82
Total revenues	142		120		22		(1)		23		414		337		77		(1)		78
Cost of sales	14		16		2		—		2		46		48		2		—		2
Franchise and property expenses	3		3		—		—		—		9		9		—		—		—
Segment SG&A	70		56		(14)		—		(14)		201		159		(42)		—		(42)
Segment depreciation and amortization (b)	2		2		—		—		—		6		8		2		—		2
Segment income	58		47		11		(1)		12		164		129		35		(1)		36

BK Segment Three Months Ended September 30, Variance FX Impact (a) Variance Excluding FX Impact Nine Months Ended September 30, Variance FX Impact (a) Variance Excluding FX Impact
2019 2018 Favorable / (Unfavorable) 2019 2018 Favorable / (Unfavorable)
Revenues:
Sales $ 19
$ 18
$ 1
$ —
$ 1
$ 57
$ 56
$ 1
$ —
$ 1
Franchise and property revenues 438
398
40
(5 ) 45
1,258
1,168
90
(26 ) 116
Total revenues 457
416
41
(5 ) 46
1,315
1,224
91
(26 ) 117
Cost of sales 18
17
(1 ) —
(1 ) 53
50
(3 ) —
(3 )
Franchise and property expenses 39
33
(6 ) —
(6 ) 124
97
(27 ) 1
(28 )
Segment SG&A 159
147
(12 ) —
(12 ) 449
433
(16 ) 2
(18 )
Segment depreciation and amortization (b) 12
12
—
—
—
37
36
(1 ) —
(1 )
Segment income (d) 254
231
23
(4 ) 27
728
681
47
(23 ) 70


~~(d)~~	No cash distributions were received from equity method investments for the three months ended September 30, 2019 and 2018. BK segment income includes $2 million and $1 million of cash distributions received from equity method investments for the nine months ended September 30, 2019 and 2018, respectively.

PLK Segment Three Months Ended September 30, Variance FX Impact (a) Variance Excluding FX Impact Nine Months Ended September 30, Variance FX Impact (a) Variance Excluding FX Impact
2019 2018 Favorable / (Unfavorable) 2019 2018 Favorable / (Unfavorable)
Revenues:
Sales $ 21
$ 20
$ 1
$ —
$ 1
$ 60
$ 60
$ —
$ —
$ —
Franchise and property revenues 99
85
14
—
14
277
248
29
(1 ) 30
Total revenues 120
105
15
—
15
337
308
29
(1 ) 30
Cost of sales 16
16
—
—
—
48
48
—
—
—
Franchise and property expenses 3
2
(1 ) —
(1 ) 9
7
(2 ) —
(2 )
Segment SG&A 56
48
(8 ) —
(8 ) 159
141
(18 ) —
(18 )
Segment depreciation and amortization (b) 2
3
1
—
1
8
8
—
—
—
Segment income 47
41
6
—
6
129
120
9
(1 ) 10

Table of Contents


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,						Nine Months Ended September 30,
Key Business Metrics	2019			2018			2019			2018			Key Business Metrics	2020			2019			2020			2019
System-wide sales growth													System-wide sales growth
TH	(0.1		)%	2.8		%	0.6		%	2.4		%	TH	(13.7)		%	(0.1)		%	(19.1)		%	0.6		%
BK	10.7		%	7.8		%	9.6		%	9.1		%	BK	(7.9)		%	10.7		%	(12.1)		%	9.6		%
PLK	15.6		%	7.9		%	10.5		%	9.8		%	PLK	21.5		%	15.6		%	25.7		%	10.5		%
Consolidated	8.9		%	6.7		%	7.8		%	7.7		%	Consolidated	(5.4)		%	8.9		%	(8.9)		%	7.8		%
System-wide sales													System-wide sales
TH	$	1,774		$	1,793		$	5,037		$	5,143		TH	$	1,520		$	1,774		$	4,010		$	5,037
BK	$	6,010		$	5,544		$	17,016		$	16,096		BK	$	5,484		$	6,010		$	14,610		$	17,016
PLK	$	1,103		$	956		$	3,070		$	2,797		PLK	$	1,331		$	1,103		$	3,836		$	3,070
Consolidated	$	8,887		$	8,293		$	25,123		$	24,036		Consolidated	$	8,335		$	8,887		$	22,456		$	25,123
Comparable sales													Comparable sales
TH	(1.4		)%	0.6		%	(0.5		)%	0.1		%	TH	(12.5)		%	(1.4)		%	(17.2)		%	(0.5)		%
BK	4.8		%	1.0		%	3.6		%	2.1		%	BK	(7.0)		%	4.8		%	(7.9)		%	3.6		%
PLK	9.7		%	0.5		%	4.5		%	2.1		%	PLK	17.4		%	9.7		%	22.5		%	4.5		%

							As of September 30,													As of September 30,
							2019			2018										2020			2019
Net restaurant growth													Net restaurant growth
TH							1.7		%	2.7		%	TH							1.0		%	1.7		%
BK							5.8		%	6.1		%	BK							2.4		%	5.8		%
PLK							5.6		%	7.6		%	PLK							7.1		%	5.6		%
Consolidated							5.0		%	5.6		%	Consolidated							2.7		%	5.0		%
Restaurant count													Restaurant count
TH							4,887			4,805			TH							4,934			4,887
BK							18,232			17,239			BK							18,675			18,232
PLK							3,192			3,022			PLK							3,418			3,192
Consolidated							26,311			25,066			Consolidated							27,027			26,311

Comparable Sales

TH comparable sales were ~~(1.4)~~(12.5)% during the three months ended September 30, ~~2019,~~2020, including Canada comparable sales of ~~(1.2)~~(13.7)%. TH comparable sales were ~~(0.5)~~(17.2)% during the nine months ended September 30, ~~2019,~~2020, including Canada comparable sales of ~~(0.3)~~(18.0)%.

BK comparable sales were ~~4.8%~~(7.0)% during the three months ended September 30, ~~2019,~~2020, including U.S. comparable sales of ~~5.0%~~(3.2)%. BK comparable sales were ~~3.6%~~(7.9)% during the nine months ended September 30, ~~2019,~~2020, including U.S. comparable sales of ~~2.0%~~(6.5)%.

PLK comparable sales were ~~9.7%~~17.4% during the three months ended September 30, ~~2019,~~2020, including U.S. comparable sales of ~~10.2%~~19.7%. PLK comparable sales were ~~4.5%~~22.5% during the nine months ended September 30, ~~2019,~~2020, including U.S. comparable sales of ~~4.6%~~25.6%.

~~Table of Contents~~

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

During the three months ended September 30, ~~2019,~~2020, the ~~increase~~decrease in sales was driven primarily by ~~an increase~~a decrease of ~~$18~~$74 million in our TH segment, ~~partially offset by~~a decrease of $2 million in our BK segment, a decrease of $3 million in our PLK segment, and an unfavorable FX Impact of $5$4 million. The ~~increase~~decrease in our TH segment was driven by a ~~$12 million increase~~decrease in supply chain sales ~~and a $6 million~~due to the decrease in system-wide sales, net of an increase in ~~Company restaurant revenue.~~sales to retailers.

During the nine months ended September 30, ~~2019,~~2020, the decrease in sales was driven primarily by a decrease of $247 million in our TH segment, a decrease of $8 million in our BK segment, a decrease of $4 million in our PLK segment, and an unfavorable FX Impact of ~~$44~~$26 million. The decrease in our TH segment was driven by a $255 million decrease 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 ~~$35~~$8 million in ~~our TH segment driven primarily by~~Company restaurant revenue due to an increase in ~~supply chain sales.~~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 fourth quarter of 2020.

During the three months ended September 30, 2019, the increase in cost of sales was driven primarily by an increase of $8 million in our TH segment, partially offset by a $4 million favorable FX Impact. The increase in our TH segment was driven primarily by an increase of $6 million in Company restaurant cost of sales and an increase in supply chain cost of sales.

~~During the nine months ended September 30, 2019,~~2020, the decrease in cost of sales was driven primarily by a ~~$34 million favorable FX Impact, partially offset by an increase~~decrease of ~~$17~~$50 million in our TH segment, ~~and an increase~~a decrease of $3$2 million in our BK ~~segment.~~segment, a decrease of $2 million in our PLK segment and a $3 million favorable FX Impact. The ~~increase~~decrease in our TH segment was driven ~~primarily~~ by ~~an increase~~a decrease in supply chain cost of sales due to the decrease in system-wide sales, net of an increase in sales to retailers.

During the nine months ended September 30, 2020, the decrease in cost of sales was driven primarily by a decrease of $152 million in our TH segment, a decrease of $4 million in our BK segment, a decrease of $2 million in our PLK segment and a $20 million favorable FX Impact. The decrease in our TH segment was driven primarily by a decrease of $161 million in supply chain ~~sales.~~cost of sales due to the 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 $9 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 September 30, ~~2019,~~2020, the ~~increase~~decrease in franchise and property revenues was driven by ~~an increase~~a decrease of ~~$45~~$38 million in our TH segment, a decrease of $20 million in our BK segment, and a $6 million unfavorable FX Impact, partially offset by an increase of ~~$17~~$26 million in our PLK segment. The decrease in our TH segment was primarily driven by decreases in royalties and ~~an increase of $14 million~~rent from decreases in ~~our PLK segment, partially offset by an $8 million unfavorable FX Impact.~~system-wide sales and rent relief provided to eligible franchisees during the current period. The ~~increases~~decrease in our BK ~~and PLK segments were~~segment was primarily driven by ~~increases~~a decrease in royalties as a result of a decrease in system-wide ~~sales growth.~~sales. The increase in our PLK segment was primarily driven by an increase in royalties as a result of an increase in system-wide sales.

During the nine months ended September 30, ~~2019,~~2020, the ~~increase~~decrease in franchise and property revenues was driven by ~~an increase~~a decrease of ~~$116~~$157 million in our TH segment, a decrease of $121 million in our BK segment, and a $33 million unfavorable FX Impact, partially offset by an increase of ~~$63~~$82 million in our PLK segment. The decrease in our TH segment was primarily driven by decreases in royalties and ~~an increase of $30 million~~rent from decreases in ~~our PLK segment, partially offset by a $49 million unfavorable FX Impact.~~system-wide sales and rent relief provided to eligible franchisees during the current period. The ~~increases~~decrease in our BK ~~and PLK segments were~~segment was primarily driven by ~~increases~~a decrease in royalties as a result of a decrease in system-wide ~~sales growth.~~

~~Additionally, the~~sales. The increase in ~~franchise and property revenues~~our PLK segment was primarily driven by an increase in all of our segments during the three and nine months ended September 30, 2019 reflected the gross recognition of property income from lessee reimbursements of costs such as property taxes and maintenance when we are the lessor in the leaseroyalties as a result of an increase in system-wide sales.

We cannot currently estimate the ~~application~~duration or future negative impact of ~~ASC 842 beginning January 1, 2019.~~the COVID-19 pandemic on our system-wide sales and, along with rent concessions remaining in place 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 fourth quarter of 2020.

During the three months ended September 30, ~~2019,~~2020, the ~~increase~~decrease in franchise and property expenses was driven by ~~an increase~~a decrease of ~~$20~~$8 million in our TH segment ~~and~~partially offset by an increase of $6$3 million in our BK segment.

During the nine months ended September 30, ~~2019,~~2020, the ~~increase~~decrease in franchise and property expenses was driven by ~~an increase~~a decrease of ~~$64~~$14 million in our TH segment and a $4 million favorable FX Impact, partially offset by an increase of ~~$28~~$5 million

Table of Contents

in our BK ~~segment, and an increase of $2 million~~segment. Overall, the decrease was driven by a decrease in ~~our PLK segment,~~property expenses partially offset by ~~a $7 million favorable FX Impact. The~~an increase in all of our segments during the three and nine months ended September 30, 2019 was driven by the gross recognition of property expense for costs such as property taxes and maintenance paid by us and reimbursed by lessees when we are the lessor in the lease as a result of the application of ASC 842 beginning January 1, 2019.

~~Table of Contents~~

bad debt expense.

Selling, General and Administrative Expenses

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

Three Months Ended September 30, Variance Nine Months Ended September 30, Variance
$ % $ %
2019 2018 Favorable / (Unfavorable) 2019 2018 Favorable / (Unfavorable)
Segment SG&A:
TH $ 77
$ 76
$ (1 ) (1.3 )% $ 236
$ 238
$ 2
0.8 %
BK 159
147
(12 ) (8.2 )% 449
433
(16 ) (3.7 )%
PLK 56
48
(8 ) (16.7 )% 159
141
(18 ) (12.8 )%
Share-based compensation and non-cash incentive compensation expense 18
13
(5 ) (38.5 )% 62
44
(18 ) (40.9 )%
Depreciation and amortization 5
5
—
— % 14
16
2
12.5 %
PLK Transaction costs —
—
—
— % —
10
10
NM
Corporate restructuring and tax advisory fees 5
5
—
— % 22
19
(3 ) (15.8 )%
Office centralization and relocation costs —
4
4
NM
6
16
10
62.5 %
Selling, general and administrative expenses $ 320
$ 298
$ (22 ) (7.4 )% $ 948
$ 917
$ (31 ) (3.4 )%

~~NM - not meaningful~~


	Three Months Ended September 30,				Variance				Nine Months Ended September 30,				Variance
					$		%						$		%
	2020		2019		Favorable / (Unfavorable)				2020		2019		Favorable / (Unfavorable)
Segment SG&A:
TH	$	63	$	77	$	14	18.2	%	$	211	$	236	$	25	10.6	%
BK	142		159		17		10.7	%	422		449		27		6.0	%
PLK	70		56		(14)		(25.0)	%	201		159		(42)		(26.4)	%
Share-based compensation and non-cash incentive compensation expense	19		18		(1)		(5.6)	%	63		62		(1)		(1.6)	%
Depreciation and amortization	5		5		—		—	%	14		14		—		—	%
Corporate restructuring and tax advisory fees	3		5		2		40.0	%	11		22		11		50.0	%
Office centralization and relocation costs	—		—		—		—	%	—		6		6		100.0	%
Selling, general and administrative expenses	$	302	$	320	$	18	5.6	%	$	922	$	948	$	26	2.7	%

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

During the three and nine months ended September 30, ~~2019,~~2020, the decrease in Segment SG&A in our TH and BK segments was primarily due to a decrease in advertising fund expenses. During the three and nine months ended September 30, 2020, the increase in Segment SG&A in our ~~BK and~~ PLK ~~segments is~~segment was primarily due to an increase in advertising fund ~~expenses.~~expenses resulting from an increase in advertising fund revenue.

During the three and nine months ended September 30, ~~2019, the increase in~~2020, share-based compensation and non-cash incentive compensation expense was ~~primarily due to an increase in the number of equity awards granted during 2019 and an increase associated~~consistent with ~~equity award modifications in the nine months ended September 30, 2019.~~prior year.

(Income) Loss from Equity Method Investments

The change in (income) loss from equity method investments during the three and nine months ended September 30, ~~2019~~2020 was primarily driven by an increase in equity method investment net losses that we recognized during the ~~recognition~~current year, driven by the negative impact of the COVID-19 pandemic, and the non-recurrence of an $11 million non-cash dilution gain during 2019 from the issuance of additional shares in connection with a merger by one of our equity method ~~investees, partially offset by an increase in equity method investment net losses that we recognized during the current year.~~investees.

The change in (income) loss from equity method investments during the nine months ended September 30, 2019 was primarily driven by the recognition of an $11 million non-cash dilution gain during 2019 (described above), a $20 million non-cash dilution gain during 2018 on the initial public offering by one of our equity method investees and a decrease in equity method investment net losses that we recognized during the current year.

Table of Contents

Other Operating Expenses (Income), net

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


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,				Nine Months Ended September 30,
	2019			2018			2019			2018				2020		2019		2020		2019
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings	$	6		$	7		$	(1	)	$	17		Net losses (gains) on disposal of assets, restaurant closures, and refranchisings	$	4	$	6	$	2	$	(1)
Litigation settlements (gains) and reserves, net	1			5			1			(1		)	Litigation settlements (gains) and reserves, net	4		1		5		1
Net losses (gains) on foreign exchange	(35		)	(3		)	(38		)	(19		)	Net losses (gains) on foreign exchange	44		(35)		54		(38)
Other, net	(2		)	17			(6		)	12			Other, net	2		(2)		(2)		(6)
Other operating expenses (income), net	$	(30	)	$	26		$	(44	)	$	9		Other operating expenses (income), net	$	54	$	(30)	$	59	$	(44)

Net losses (gains) on disposal of assets, restaurant closures, and refranchisings represent sales of properties and other costs related to restaurant closures and refranchisings.

~~Litigation settlements (gains)~~ Gains and ~~reserves, net primarily reflects payments made~~losses recognized in the current period may reflect certain costs related to closures and ~~proceeds received~~refranchisings that occurred in ~~connection with litigation matters.~~previous periods.

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

Other, net during the three and nine months ended September 30, 2018 is comprised primarily of an expense in connection with the settlement of certain provisions associated with the 2017 redemption of our preferred shares as a result of changes in Treasury regulations.

Interest Expense, net

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


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Interest expense, net	$	129		$	137		$	376		$	406
Weighted average interest rate on long-term debt	4.5		%	5.1		%	4.6		%	5.1		%

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Interest expense, net $ 137
$ 135
$ 406
$ 405
Weighted average interest rate on long-term debt 5.1 % 5.1 % 5.1 % 4.9 %

During the three and nine months ended September 30, ~~2019,~~2020, interest expense, net ~~increased~~decreased primarily due to ~~an increase~~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 a $53 million benefit during the nine months ended September 30, 2019 compared to a $39 million benefit during the period from March 15, 2018 to September 30, 2018 related to the amortization of amounts other than currency movements of our net investment hedges, which is excluded from the accounting hedge. Refer to Note 13, ~~Derivative Instruments, to the accompanying unaudited condensed consolidated financial statements for further details of the effects of this excluded component.~~

~~Loss on early extinguishment of debt~~

~~During the quarter ended September 30, 2019, we prepaid $235 million principal amount of our existing senior secured term loan and,~~an increase in ~~connection with this prepayment, we recorded a loss on early extinguishment of debt of $4 million that primarily reflects the write-off of unamortized debt issuance costs and discounts.~~long-term debt.

Income Tax Expense

Our effective tax rate was ~~18.3%~~22.6% and ~~27.0%~~18.3% for the three months ended September 30, 2020 and 2019, respectively. Our effective tax rate was higher primarily due to changes in our relative mix of income from multiple tax jurisdictions, unfavorable movements in foreign exchange rates related to unremitted earnings and ~~2018, respectively. The decrease in~~lower benefits from stock option exercises for the quarter. There may continue to be some quarter-to-quarter volatility of our effective tax rate ~~reflects~~as our mix of income from multiple tax jurisdictions and related income forecasts change due to the ~~non-recurrence~~effects of the cumulative impact in the 2018 quarter of certain aspects of U.S. corporate tax reform as well as the benefit in 2019 of internal financing arrangements and a higher tax benefit from stock option exercises. The effective tax rate was reduced by 1.2% and 0.9% for the three months ended September 30, 2019 and 2018, respectively, as a result of benefits from stock option exercises. We expect quarter-to-quarter volatility in the impact of stock option exercises on our effective tax rate based on fluctuations in stock option exercises.

~~Table of Contents~~COVID-19.

Our effective tax rate was ~~21.4%~~9.2% and ~~15.4%~~21.4% for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The effective tax rate for the nine months ended September 30, 2020 reflects a $64 million benefit due to an increase in deferred tax assets which decreased the effective tax rate by (9.5)%. Based on the analysis of final guidance related to the Tax Act received during this period, a deferred tax asset was recorded. The effective tax rate for the nine months ended September 30, 2019 ~~reflects~~included a $37 million increase in the provision for unrecognized tax benefits related to a prior restructuring transaction that iswas not applicable to ongoing operations which increased ~~our~~the effective tax rate by 3.4% ~~for~~during the period. The increase in our effective tax rate also reflects a lower tax benefit from stock option exercises and the benefit from reserve releases in 2018 due to audit settlements, partially offset by the benefits

Table of internal financing arrangements in 2019. The effective tax rate was reduced by 2.9% and 6.9% for the nine months ended September 30, 2019 and 2018, respectively, as a result of benefits from stock option exercises.Contents

Net Income

We reported net income of $223 million for the three months ended September 30, 2020, compared to net income of $351 million for the three months ended September 30, ~~2019, compared to net income of $250 million for the three months ended September 30, 2018.~~2019. The ~~increase~~decrease in net income is primarily due to ~~a $56~~an $84 million ~~favorable~~unfavorable change in the results from other operating expenses (income), net, a ~~$31~~$29 million ~~increase in segment income in all of our segments, a $14 million decrease in income tax expense, a $9 million favorable~~unfavorable change from the impact of equity method investments, ~~and the non-recurrence of $4~~a $43 million ~~of Office centralization and relocation costs. These factors were partially offset by~~decrease in TH segment income, a $5$9 million decrease in BK segment income, a $1 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 $14 million decrease in income tax expense, an $11 million increase in PLK segment income, an $8 million decrease in interest expense, net, the non-recurrence of $4 million in loss on early extinguishment of debt, ~~in the current year, a $2 million increase in depreciation and amortization,~~ and a $2 million ~~increase~~decrease in ~~interest expense, net.~~Corporate restructuring and tax advisory fees. Amounts above include a total unfavorable FX Impact to net income of $5 million.

We reported net income of $611 million for the nine months ended September 30, 2020, compared to net income of $854 million for the nine months ended September 30, ~~2019, compared to net income of $843 million for the nine months ended September 30, 2018.~~2019. The ~~increase~~decrease in net income is primarily due to a ~~$53~~$231 million ~~favorable~~decrease in TH segment income, a $123 million decrease in BK segment income, a $103 million unfavorable change in the results from other operating expenses (income), net, a $47 million increase in BK segment income, the non-recurrence of $10 million of PLK Transaction costs incurred in the prior period, a $10 million decrease in Office centralization and relocation costs, and a $9 million increase in PLK segment income. These factors were partially offset by a $79 million increase in income tax expense, an $18 million increase in share-based compensation and non-cash incentive compensation expense, a $7$41 million unfavorable change from the impact of equity method investments and a $5$1 million increase in share-based compensation and non-cash incentive compensation expense. These factors were partially offset by a $170 million decrease in THincome tax expense, a $35 million increase in PLK segment income, a $4$30 million ~~loss on early extinguishment of debt~~decrease in ~~the current year, and a $3~~interest expense, net, an $11 million ~~increase~~decrease in Corporate restructuring and tax advisory ~~fees.~~fees, the non-recurrence of $6 million in Office Centralization and relocation costs, and the non-recurrence of $4 million in loss on early extinguishment of debt. Amounts above include a total unfavorable FX Impact to net income of $29 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 fourth 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 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, ~~and~~(ii) (income) loss from equity method investments, net of cash distributions received from equity method investments, ~~as well as~~(iii) other operating expenses (income), ~~net. Other specifically identified costs associated with~~net and, (iv) income/expenses from non-recurring projects ~~are also excluded from Adjusted EBITDA, including PLK Transaction~~and non-operating activities. For the periods referenced, this included costs associated with the Popeyes Acquisition, Corporate restructuring and tax advisory fees related to the interpretation and implementation of the Tax Act, including Treasury regulations proposed in late 2018, and non-operational Office centralization and relocation costsincurred 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.~~ respectively, and from professional advisory and consulting services associated with certain transformational corporate restructuring initiatives that rationalize our structure and optimize cash movements, including consulting services related to the interpretation of final and proposed regulations and guidance under the Tax Act. 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.

Table of Contents

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 ~~performance or the performance of an acquired~~ business. Adjusted EBITDA, as defined above, also represents our measure of segment income for each of our three operating segments.

~~Table of Contents~~


	Three Months Ended September 30,					Variance					Nine Months Ended September 30,							Variance							Three Months Ended September 30,							Variance						Nine Months Ended September 30,							Variance
						$			%								$				%										$				%									$				%
	2019			2018		Favorable / (Unfavorable)						2019			2018				Favorable / (Unfavorable)								2020			2019				Favorable / (Unfavorable)						2020			2019				Favorable / (Unfavorable)
Segment income:																								Segment income:
TH	$	301		$	299	$	2		0.7	%	$	825		$	830			$	(5	)		(0.6	)%	TH	$	258		$	301			$	(43)			(14.1)	%	$	594		$	825			$	(231)			(27.9)	%
BK	254			231		23			10.0	%	728			681				47				6.9	%	BK	245			254				(9)				(3.3)	%	605			728				(123)				(16.9)	%
PLK	47			41		6			12.3	%	129			120				9				7.3	%	PLK	58			47				11				23.4	%	164			129				35				26.9	%
Adjusted EBITDA	602			571		31			5.3	%	1,682			1,631				51				3.1	%	Adjusted EBITDA	561			602				(41)				(6.6)	%	1,363			1,682				(319)				(18.9)	%
Share-based compensation and non-cash incentive compensation expense	18			13		(5		)	(38.5	)%	62			44				(18		)		(40.9	)%	Share-based compensation and non-cash incentive compensation expense	19			18				(1)				(5.6)	%	63			62				(1)				(1.6)	%
PLK Transaction costs	—			—		—			NM		—			10				10				NM
Corporate restructuring and tax advisory fees	5			5		—			—	%	22			19				(3		)		(15.8	)%	Corporate restructuring and tax advisory fees	3			5				2				40.0	%	11			22				11				50.0	%
Office centralization and relocation costs	—			4		4			NM		6			16				10				62.5	%	Office centralization and relocation costs	—			—				—				NM		—			6				6				100.0	%
Impact of equity method investments (a)	(9		)	—		9			NM		1			(6		)		(7		)		NM		Impact of equity method investments (a)	20			(9)				(29)				NM		42			1				(41)				NM
Other operating expenses (income), net	(30		)	26		56			NM		(44		)	9				53				NM		Other operating expenses (income), net	54			(30)				(84)				NM		59			(44)				(103)				NM
EBITDA	618			523		95			18.2	%	1,635			1,539				96				6.2	%	EBITDA	465			618				(153)				(24.8)	%	1,188			1,635				(447)				(27.3)	%
Depreciation and amortization	47			45		(2		)	(4.4	)%	139			138				(1		)		(0.7	)%	Depreciation and amortization	48			47				(1)				(2.1)	%	139			139				—				—	%
Income from operations	571			478		93			19.5	%	1,496			1,401				95				6.8	%	Income from operations	417			571				(154)				(27.0)	%	1,049			1,496				(447)				(29.9)	%
Interest expense, net	137			135		(2		)	(1.5	)%	406			405				(1		)		(0.2	)%	Interest expense, net	129			137				8				5.8	%	376			406				30				7.4	%
Loss on early extinguishment of debt	4			—		(4		)	NM		4			—				(4		)		NM		Loss on early extinguishment of debt	—			4				4				NM		—			4				4				NM
Income tax expense	79			93		14			15.1	%	232			153				(79		)		(51.6	)%	Income tax expense	65			79				14				17.7	%	62			232				170				73.3	%
Net income	$	351		$	250	$	101		40.4	%	$	854		$	843			$	11			1.3	%	Net income	$	223		$	351			$	(128)			(36.5)	%	$	611		$	854			$	(243)			(28.5)	%

NM - ~~not meaningful~~Not Meaningful


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

The decrease in Adjusted EBITDA for the three and nine months ended September 30, 2020 reflects the decreases in segment income in our TH and BK segments, partially offset by an increase in ~~Adjusted EBITDA~~segment income in our PLK segment. Segment income in our TH and BK segments for the three months ended September 30, ~~2019 reflects the increases in segment income in all~~2020 includes an increase of ~~our segments. The increase in Adjusted EBITDA~~$14 million and for the nine months ended September 30, ~~2019 reflects~~2020 includes a decrease of $18 million, related to the ~~increases~~timing of advertising fund revenue and expenses.

The decrease in EBITDA for the three and nine months ended September 30, 2020 is primarily due to decreases in segment income in our TH and BK segments and ~~PLK segments, partially offset by a decrease in our TH segment.~~

~~The increase in EBITDA for the three months ended September 30, 2019 is primarily due to favorable~~unfavorable results from other operating expenses (income), net, ~~in the current period, increases in segment income in all our segments, favorable results from~~and the impact of equity method investments, 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 ~~partially offset by an increase~~ in ~~share-based compensation and non-cash incentive compensation expense.~~

~~The increase in EBITDA for~~ the nine months ~~ended September 30, 2019 is primarily due to favorable results from other operating expenses (income), net in~~period.

While we cannot currently estimate the ~~current period, an increase in~~duration or future negative impact of the COVID-19 pandemic on our segment income, ~~in our BK~~Adjusted EBITDA and ~~PLK segments,~~EBITDA, we expect the ~~non-recurrence~~negative effects to continue into the fourth quarter of PLK Transaction costs and a decrease in Office centralization and relocation cost, partially offset by an increase in share-based compensation and non-cash incentive compensation expense, unfavorable results from the impact2020.

Table of ~~equity method investments, a decrease in segment income in our TH segment, and an increase in Corporate restructuring and tax advisory fees.~~Contents

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 repurchase our 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 pay dividends on our common shares and make 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.

~~Table of Contents~~

As of September 30, ~~2019,~~2020, we had cash and cash equivalents of ~~$1,732~~$1,919 million, working capital of ~~$196~~$1,059 million and borrowing availability of ~~$498~~$998 million under our ~~Revolving~~senior secured revolving credit facility (the “Revolving Credit Facility”). During the first quarter of 2020, we drew down the remaining availability of C$125 million under the TH Facility (defined below). ~~During~~On April 7, 2020, two of our subsidiaries (the “Borrowers”) entered into an indenture (the “2020 5.75% Senior Notes Indenture”) in connection with the ~~three months ended September 30, 2019, we~~issuance of $500 million of 5.75% first lien notes due April 15, 2025 (the “2020 5.75% Senior Notes”). No principal payments are due until maturity and interest is paid semi-annually. The net proceeds from the offering of the 2020 5.75% Senior Notes were used for general corporate purposes.

Additionally, on October 5, 2020, the Borrowers entered into an indenture (the “2020 4.00% Senior Notes Indenture”) in connection with the issuance of $1,400 million of 4.00% second lien notes due October 15, 2030 (the “October 2020 4.00% Senior Notes”). No principal payments are due until maturity and interest is paid semi-annually. On October 16, 2020 the proceeds from the offering of the October 2020 4.00% Senior Notes were used to redeem $1,350 million of our existing $2,800 million 2017 5.00% Senior Notes (due October 15, 2025) and pay related redemption premiums, fees and expenses.

On October 14, 2020, the Borrowers entered into a purchase agreement relating to the sale of $1,500 million in aggregate principal amount of 4.00% second lien notes due October 15, 2030 (the "November 2020 4.00% Senior Notes" and together with the October 2020 4.00% Senior Notes, the "2020 4.00% Senior Notes"), which will be issued as additional notes under the 2020 4.00% Senior Notes Indenture. The closing of the offering of the November 2020 4.00% Senior Notes is expected to occur on or about November 2, 2020, subject to customary closing conditions. The November 2020 4.00% Senior Notes are treated as a single series with the October 2020 4.00% Senior Notes and have the same terms for all purposes under the 2020 4.00% Senior Notes Indenture, including waivers, amendments, redemptions and offers to purchase. The net proceeds from the offering of the November 2020 4.00% Senior Notes will be used to redeem the remaining $1,450 million principal amount outstanding of the 2017 5.00% Senior Notes and pay related redemption premiums, fees and expenses.

On October 20, 2020, the Borrowers entered into a purchase agreement relating to the sale of $750 million in aggregate principal amount of ~~3.875%~~3.50% first lien ~~senior~~ notes ~~and~~due February 15, 2029 (the “2020 3.50% Senior Notes”). The closing of the offering of the 2020 3.50% Senior Notes is expected to occur on or about November 9, 2020, subject to customary closing conditions. The net proceeds ~~reflected in~~from the offering of the 2020 3.50% Senior Notes will be used to redeem $725 million of our 4.25% first lien notes due 2024 and pay related redemption premiums, fees and expenses.

In September ~~30, 2019~~2020, Partnership received an exchange notice for 6,757,692 Partnership exchange units (the “Exchangeable Units”). In accordance with the terms of the partnership agreement, Partnership chose to satisfy the exchange by repurchasing all of these Exchangeable Units on October 2, 2020 for approximately $380 million with available cash on hand. The cash and cash equivalents balance as ~~well as proceeds received from~~of September 30, 2020 does not reflect (i) the ~~Term Loan A (defined below)~~issuance of the October 2020 4.00% Senior Notes on October ~~7, 2019, were used to redeem~~5, 2020, (ii) the ~~entire outstanding principal balance~~redemption of ~~$1,250~~$1,350 million of our ~~2015 4.625%~~existing $2,800 million 2017 5.00% Senior Notes ~~(defined below)~~ on October ~~7, 2019. Additionally, in connection with an amendment to our credit agreement,~~16, 2020, (iii) the ~~aggregate principal amount~~repurchase of the ~~commitments under our Revolving Credit Facility (defined below) was increased to $1,000 million effective~~Exchangeable Units on October ~~7, 2019.~~2, 2020, (iv) the expected issuance and use of proceeds of the November 2020 4.00% Senior Notes in November 2020, and (v) the expected issuance and use of proceeds of the 2020 3.50% Senior Notes in November 2020. 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 our franchisees’ sales volumes, restaurant profitability, and financial stability. The financial impact of COVID-19 has had, and is expected to continue for an uncertain period to have, an adverse effect on our franchisees’ liquidity and we have worked closely with our franchisees around the world to monitor and assist them with access to appropriate sources of liquidity in order to sustain their businesses throughout this crisis. We provided cash flow support by extending loans to eligible BK franchisees in the U.S. during the second and third quarters of 2020 and by advancing certain cash payments to eligible TH franchisees in Canada during the second quarter of 2020. Also, during the nine months ended September 30, 2020, we offered a rent relief program for eligible TH franchisees in Canada and extended payment terms for eligible TH franchisees in Canada and the U.S. who lease property from us and also offered rent relief programs and extended payment terms for eligible BK franchisees in the U.S. and Canada who lease property from us. A

Table of Contents

portion of these rent relief programs concluded during the three months ended September 30, 2020. We also temporarily deferred franchisee capital investment commitments for restaurant renovations and new restaurant development globally, based on individual circumstances of relevant markets and restaurant owners. These actions are expected to adversely affect our cash flow and financial results at least through the fourth 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.

On August 2, 2016, our board of directors approved a share repurchase authorization that allows us to purchase up to $300 million of our common shares through July 2021. Repurchases under the Company’s authorization will be made in the open market or through privately negotiated transactions. On August ~~2, 2019,~~6, 2020, we announced that the Toronto Stock Exchange (the “TSX”) had accepted the notice of our intention to renew the normal course issuer bid. Under this normal course issuer bid, we are permitted to repurchase up to ~~24,853,565~~30,000,015 common shares for the one-year period commencing on August 8, ~~2019~~2020 and ending on August 7, ~~2020,~~2021, or earlier if we complete the repurchases prior to such date. Under our prior normal course issuer bid that commenced on August 8, 2018, we sought and received approval from the TSX to purchase up to 24,087,172 common shares and did not repurchase any common shares for cancellation in the past 12 months. Share repurchases under the normal course issuer bid will be made through the facilities of the TSX, the New York Stock Exchange (the “NYSE”) and/or other exchanges and alternative Canadian or foreign trading systems, if eligible, or by such other means as may be permitted by the TSX and/or the NYSE under applicable law. Shareholders may obtain a copy of the prior notice, free of charge, by contacting us.

Prior to the Tax Act, we provided deferred taxes on certain undistributed foreign earnings. Under our transition to a modified territorial tax system whereby all previously untaxed undistributed foreign earnings are subject to a transition tax charge at reduced rates and future repatriations of foreign earnings will generally be exempt from U.S. tax, we wrote off the existing deferred tax liability on undistributed foreign earnings and recorded the impact of the new transition tax charge on foreign earnings during the fourth quarter of 2017. We ~~will continue to monitor available evidence and our plans for foreign earnings and expect to continue to~~ provide ~~any~~ applicable deferred taxes based on the tax liability or withholding taxes that would be due upon repatriation of ~~amounts not considered permanently reinvested.~~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 September 30, ~~2019,~~2020, our long-term debt consists primarily of borrowings under our Credit Facilities, amounts outstanding under our ~~2015 4.625% Senior Notes,~~ 2017 4.25% Senior Notes, 2019 3.875% Senior Notes, 2020 5.75% Senior Notes, 2017 5.00% Senior Notes, 2019 4.375% 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

OnAs of September ~~6, 2019, two of our subsidiaries (the "Borrowers") entered into a fourth incremental facility amendment (the "Fourth Incremental Amendment") to the credit agreement governing~~30, 2020, there was $6,046 million outstanding principal amount under our senior secured term loan facilities (the ~~"Term~~“Term Loan ~~Facilities"~~Facilities”) and our senior secured revolving credit facility (including revolving loans, swingline loans and letters of credit) (the "Revolving Credit Facility" and together with the Term Loan Facilities, the "Credit Facilities"). Under the Fourth Incremental Amendment, (i) we obtained a new term loan in the aggregate principal amount of $750 million (the "Term Loan A"), that was funded on October 7, 2019, with a maturity date of October 7, 2024 (subject to earlier maturity in specified circumstances), (ii) the interest rate applicable to the Term Loan A and Revolving Credit Facility is, at our option, either (a) a base rate, subject to floor of 1.00%, plus an applicable margin varying from 0.00% to 0.50%, or (b) a Eurocurrency rate, subject to a floor of 0.00%, plus an applicable margin varying between 0.75% and 1.50%, in each case, determined by reference to a net first lien leverage based pricing grid, (iii) the aggregate principal amount of the commitments under our Revolving Credit Facility was increased to $1,000 million effective October 7, 2019, (iv) the maturity date of the Revolving Credit Facility was extended from October 13, 2022 to October 7, 2024 (subject to earlier maturity in specified circumstances), and (v) the commitment fee on the unused portion of the Revolving Credit Facility was decreased from 0.25% to 0.15%. The principal amount of the Term Loan A amortizes in quarterly installments equal to $5 million until October 7, 2022 and thereafter in quarterly installments equal to $9 million until maturity, with the balance payable at maturity. The Term Loan A will require compliance with the first lien leverage ratio. Except as described herein, the Fourth Incremental Amendment did not materially change the terms of the Credit Facilities.

Prior to obtaining the Term Loan A, our Credit Facilities included only one senior secured term loan facility (the "Term Loan B" and together with the Term Loan A, the "Term Loan Facilities"). During the quarter ended September 30, 2019, we

~~Table of Contents~~

prepaid $235 million principal amount of our Term Loan B. As a result of this prepayment, we are not required to make any principal payments on the Term Loan B until March 31, 2023. As such, as of October 7, 2019, there was $6,820 million outstanding principal amount under our Term Loan Facilities with a weighted average interest rate of ~~4.18%~~1.84%. Based on the amounts outstanding under the Term Loan Facilities ~~as of October 7, 2019~~ and LIBOR as of September 30, ~~2019,~~2020, subject to a floor of 0.00% ~~for the Term Loan A and a floor of 1.00% for the Term Loan B,~~, required debt service for the next twelve months is estimated to be approximately ~~$289~~$112 million in interest payments and ~~$14~~$72 million in principal payments. In addition, based on LIBOR as of September 30, ~~2019,~~2020, net cash settlements that we expect to pay on our $4,000 million interest rate swap are estimated to be approximately ~~$26~~$91 million for the next twelve months.

On April 2, 2020, the Borrowers entered into a fifth amendment (the “Fifth Amendment”) to the credit agreement (the “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.

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 ~~2.00%~~1.00%, plus an applicable margin of ~~1.25%~~0.75% or (ii) a Eurocurrency rate, subject to a floor of ~~1.00%~~0.00%, plus an applicable margin of ~~2.25%~~1.75%.

As of September 30, ~~2019,~~2020, 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 ~~$498~~$998 million. ~~As of October 7, 2019, we had borrowing availability of $998 million under our Revolving Credit Facility.~~ Funds available under the Revolving Credit Facility may be used to repay other debt, finance debt or share repurchases, fund acquisitions or capital expenditures, and for other general corporate purposes. We have a $125 million letter of credit sublimit as part of the Revolving Credit Facility, which reduces our borrowing availability thereunder by the cumulative amount of outstanding letters of credit. ~~Under the Fourth Incremental Amendment, the interest rate applicable to amounts drawn under each letter~~

Table of ~~credit decreased from a range of 1.25% to 2.00% to a range of 0.75% to 1.50%, depending on our first lien leverage ratio.~~Contents

Senior Notes

On September 24, 2019, the Borrowers entered into an indenture (the "2019 3.875% Senior Notes Indenture") in connection with the issuance of $750 million of 3.875% first lien senior notes due January 15, 2028 (the "2019 3.875% Senior Notes"). No principal payments are due until maturity and interest is paid semi-annually. On October 7, 2019, the net proceeds from the offering of the 2019 3.875% Senior Notes and a portion of the net proceeds from the Term Loan A were used to redeem the entire outstanding principal balance of $1,250 million of 4.625% first lien secured notes due January 15, 2022 (the "2015 4.625% Senior Notes") and to pay related fees and expenses.

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

Based on the amounts outstanding at ~~October 7, 2019 after the redemption of the 2015 4.625% Senior Notes,~~September 30, 2020, required debt service for the next twelve months on all of the Senior Notes outstanding is approximately ~~$233~~$294 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 ~~(increased from C$100 million during the three months ended June 30, 2019)~~ with a maturity date of October 4, 2025 (the “TH Facility”). The interest rate applicable to the TH Facility is the Canadian Bankers’ Acceptance rate plus an applicable margin equal to 1.40% or the Prime Rate plus an applicable margin equal to 0.40%, at our option. Obligations under the TH Facility are guaranteed by ~~three~~four of our subsidiaries, and amounts borrowed under the TH Facility are secured by certain parcels of real estate. As of September 30, ~~2019,~~2020, we had outstanding C$~~100~~224 million under the TH Facility with a weighted average interest rate of ~~3.36%~~1.88%.

~~Table~~Based on the amounts outstanding under the TH Facility as of ~~Contents~~

September 30, 2020, required debt service for the next twelve months is estimated to be approximately $3 million in interest payments and $4 million in principal payments.

Restrictions and Covenants

As of September 30, ~~2019,~~2020, we were in compliance with all applicable financial debt covenants under the Credit Facilities, the TH Facility, ~~2015 4.625%~~and the Senior Notes Indenture, 2017 4.25% Senior Notes Indenture, 2019 3.875% Senior Notes Indenture, and 2017 5.00% Senior Notes Indenture, and there were no limitations on our ability to draw on the remaining availability under our Revolving Credit Facility and TH Facility.Indentures.

Cash Dividends

On October ~~3, 2019,~~2, 2020, we paid a dividend of ~~$0.50~~$0.52 per common share and Partnership made a distribution in respect of each Partnership exchangeable unit in the amount of ~~$0.50~~$0.52 per Partnership exchangeable unit.

Our board of directors has declared a cash dividend of ~~$0.50~~$0.52 per common share, which will be paid on January ~~3, 2020~~5, 2021 to common shareholders of record on December ~~17, 2019.~~21, 2020. Partnership will also make a distribution in respect of each Partnership exchangeable unit in the amount of ~~$0.50~~$0.52 per Partnership exchangeable unit, and the record date and payment date for distributions on Partnership exchangeable units are the same as the record date and payment date set forth above.

In addition, because we are a holding company, our ability to pay cash dividends on our common shares may be limited by restrictions under our debt agreements. Although we do not have a formal dividend policy, our board of directors may, subject to compliance with the covenants contained in our debt agreements and other considerations, determine to pay dividends in the future. We expect to pay all dividends from cash generated from our operations.

Outstanding Security Data

As of October ~~24, 2019,~~20, 2020, we had outstanding ~~298,114,230~~303,902,641 common shares and one special voting share. The special voting share is held by a trustee, entitling the trustee to that number of votes on matters on which holders of 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 the Company, holders of our common shares vote together as a single class with the special voting share except as otherwise provided by law. For information on our share-based compensation and our outstanding equity awards, see Note 15 to the audited consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, filed with the SEC and Canadian securities regulatory authorities on February ~~22, 2019.~~21, 2020.

There were ~~165,514,822~~155,453,689 Partnership exchangeable units outstanding as of October ~~24, 2019.~~20, 2020. During the nine months ended September 30, ~~2019,~~2020, Partnership exchanged ~~41,993,769~~3,294,968 Partnership exchangeable units pursuant to exchange notices received. Since December 12, 2015, the holders of Partnership exchangeable units have had the right to require Partnership to

Table of Contents

exchange all or any portion of such holder’s Partnership exchangeable units for our common shares at a ratio of one share for each Partnership exchangeable unit, subject to our right as the general partner of Partnership to determine to settle any such exchange for a cash payment in lieu of our common shares.

Comparative Cash Flows

Operating Activities

Cash provided by operating activities was ~~$911~~$608 million ~~during~~for the nine months ended September 30, ~~2019,~~2020, compared to ~~$673~~$911 million during the same period in the prior year. The ~~increase~~decrease in cash provided by operating activities was driven by a decrease in TH segment income, ~~tax payments, primarily due to the 2018 payment of accrued income taxes related to the December 2017 redemption of preferred shares, an increase~~a decrease in BK segment income, a decrease in cash provided by other long term assets and liabilities and an increase in ~~PLK segment income.~~cash used for working capital. These factors were partially offset by a decrease in interest payments, an increase in ~~interest payments~~PLK segment income, and a decrease in ~~TH segment income.~~income tax payments.

Investing Activities

Cash ~~provided by~~used for investing activities was $7$33 million for the nine months ended September 30, ~~2019,~~2020, compared to ~~$28~~$7 million of cash ~~used for~~provided from investing activities during the same period in the prior year. The change in investing activities was driven by an increase in ~~net proceeds from disposal of assets, restaurant closures and refranchisings and a decrease in~~ capital ~~expenditures.~~expenditures during the current period.

Financing Activities

Cash used for financing activities was ~~$106~~$182 million for the nine months ended September 30, ~~2019,~~2020, compared to ~~$589~~$106 million during the same period in the prior year. The change in financing activities was driven primarily by a decrease in proceeds from the issuance of ~~the 2019 3.875%~~ Senior Notes, ~~during 2019, an increase in proceeds from stock option exercises, proceeds from~~

~~Table of Contents~~

~~derivatives and the non-recurrence of the 2018 payments in connection with the December 2017 redemption of preferred shares, partially offset by Term Loan B prepayments during 2019,~~ an increase in RBI common share dividends and distributions on Partnership exchangeable units, payments from derivatives in 2020 compared to proceeds from derivatives in 2019, and ~~payment~~a decrease in proceeds from stock option exercises, partially offset by proceeds from the draw down on the remaining availability under the TH Facility in 2020 and the non-recurrence of ~~financing costs.~~the Term Loan B prepayments in 2019.

Contractual Obligations and Commitments

Except as described herein, there were no material changes to our contractual obligations, which are detailed in our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 filed with the SEC and Canadian securities regulatory authorities on February ~~22, 2019,~~21, 2020, other than the following.

During the ~~three months ended September 30, 2019,~~first quarter of 2020, we ~~issued~~drew down the ~~2019 3.875% Senior Notes and prepaid $235~~remaining availability of C$125 million ~~principal amount of~~under the ~~Term Loan B.~~TH Facility. Additionally, on ~~October~~April 7, ~~2019,~~2020, we obtained the proceeds from the ~~Term Loan A~~2020 5.75% Senior Notes. Also, on October 5, 2020, we issued the October 2020 4.00% Senior Notes and used the net proceeds to redeemed ~~all~~$1,350 million of ~~the outstanding 2015 4.625%~~our existing $2,800 million 2017 5.00% Senior ~~Notes.~~Notes on October 16, 2020. Each of these terms is defined and described above. The following table provides contractual obligations ~~as of September 30, 2019 and an update as of October 7, 2019, which reflects all of the debt transactions disclosed above, of the contractual obligations~~ under our Credit Facilities, senior notes and other long term debt ~~presented~~as of September 30, 2020 and October 16, 2020, which reflects all of the debt transactions disclosed above but does not reflect the expected issuance of the November 2020 4.00% Senior Notes and the 2020 3.50% Senior Notes or redemption of the remaining $1,450 million principal amount outstanding of the 2017 5.00% Senior Notes and $725 million of the 4.25% First Lien Notes due 2024, which transactions have not closed as of the date of this report.


			Payment Due by Period as of October 16, 2020
Contractual Obligations	Total as of September 30, 2020		Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
			(In millions)
Credit Facilities, including interest (a)	$	6,700	$	6,700	$	186	$	386	$	976	$	5,152
Senior Notes, including interest (b)	7,818		8,092		285		566		2,465		4,776
Other long term debt	184		184		9		24		37		114

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

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

Table of Contents

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 ~~year ended December 31, 2018.~~potential impact of the COVID-19 pandemic on asset impairment assessments.

Payment Due by Period as of October 7, 2019
Contractual Obligations Total as of September 30, 2019 Total Less Than
1 Year 1-3 Years 3-5 Years More Than
5 Years
(In millions)
Credit Facilities, including interest (a) $ 7,235
$ 8,104
$ 305
$ 617
$ 6,558
$ 624
Senior Notes, including interest (b) 7,683
6,432
233
466
1,942
3,791
Other long term debt 92
92
3
10
19
60


~~(a)~~	~~We have estimated our interest payments through the maturity of our Credit Facilities based on LIBOR as of September 30, 2019.~~


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

New Accounting Pronouncements

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There were no material changes during the nine months ended September 30, ~~2019~~2020 to the disclosures made in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 filed with the SEC and Canadian securities regulatory authorities on February ~~22, 2019.~~21, 2020.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation was conducted under the supervision and with the participation of management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and Exchange Act Rules 15d-15(e)) as of September 30, ~~2019.~~2020. Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of such date.

Internal Control Over Financial Reporting

The Company’s management, including the CEO and CFO, confirm there were no changes in the Company’s internal control over financial reporting during the three months ended September 30, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. During the nine months ended September 30, 2019, the Company modified existing controls and processes to support the adoption of the new lease accounting standard that the Company adopted as of January 1, 2019 which included the implementation of a new lease accounting system. There were no significant changes to the Company's internal control over financial reporting due to the adoption of the new standard.

~~Table of Contents~~

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 of the COVID-19 pandemic on our results of operations, business, liquidity and prospects and those of our franchisees, (ii) 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; ~~(ii)~~(iii) expected timing of debt refinancing transactions; (iv) our efforts to assist restaurant owners in maintaining liquidity and the impact of these programs on our future cash flow and financial results; (v) the amount and timing of additional Corporate restructuring and tax advisory fees related to the Tax Act and Office centralization and relocation costs; ~~(iii)~~(vi) certain tax matters, including the impact of the Tax Act on future periods; ~~(iv)~~(vii) the amount of net cash settlements we expect to pay on our derivative instruments; and ~~(v)~~(viii) certain accounting ~~matters, including the impact of changes in accounting and our transition to ASC 842.~~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 the Company 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

Table of Contents

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) supply chain operations; (6) our ownership and leasing of real estate; (7) the effectiveness of our marketing and advertising programs and franchisee support of these programs; ~~(5)~~(8) significant and rapid fluctuations in interest rates and in the currency exchange markets and the effectiveness of our hedging activity; ~~(6)~~(9) our ability to successfully implement our domestic and international growth strategy for our brands and risks related to our international operations; ~~(7)~~(10) our reliance on master franchisees and subfranchisees to accelerate restaurant growth; ~~(8)~~(11) the ability of the counterparties to our credit facilities and derivatives to fulfill their commitments and/or obligations; and ~~(9)~~(12) changes in applicable tax laws or interpretations ~~thereof;~~thereof, and risks related to the complexity of the Tax Act and our ability to accurately interpret and predict its impact on our financial condition and results.

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

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Finally, our future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 filed with the SEC and Canadian securities regulatory authorities on February ~~22, 2019,~~21, 2020, 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.

Table of Contents

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 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. 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 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, 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. We intend to vigorously defend against these lawsuits, but we are unable to predict the ultimate outcome of any of these cases.

On October 26, 2020, City of Warwick Municipal Employees Pension Fund, a purported stockholder of Restaurant Brands International, individually and 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 the Company and certain of its officers, directors and selling shareholders as defendants alleging violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, in connection with the offering of securities by an affiliate of 3G Capital Partners Ltd. 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. The Company is currently evaluating the lawsuit, but believes that the claims are without merit and intends 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.

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 limited operations. As of the end of September, restaurants in most markets have reopened, many 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.

Table of Contents

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 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. 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 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 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 delayed 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, 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.

Table of Contents

Item 6. Exhibits




Exhibit Number	Description

~~10.67~~10.74		Purchase Agreement, dated as of September ~~6, 2019,~~16, 2020, among Morgan Stanley & Co., LLC, as representative of the Initial ~~Purchasers~~Purchaser (as defined therein), the Issuers (as defined therein) and the Guarantors (as defined therein).

~~31.1~~10.75		Purchase Agreement, dated as of October 14, 2020, among Morgan Stanley & Co., LLC, as representative of the Initial Purchaser (as defined therein), the Issuers (as defined therein) and the Guarantors (as defined therein).

31.1		Certification of Chief Executive Officer of Restaurant Brands International Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer of Restaurant Brands International Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer of Restaurant Brands International Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Chief Financial Officer of Restaurant Brands International Inc. 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)

Table of Contents

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 INC.

(Registrant)

Date: October 28, ~~2019~~2020

By:

/s/ Matthew Dunnigan

Name:

Matthew Dunnigan

Title:

Chief Financial Officer

(principal financial officer)

(duly authorized officer)



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



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



		Page
		~~Page~~

PART I – Financial Information
Item 1.	Financial Statements	34
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3129
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4544
Item 4.	Controls and Procedures	4544

PART II – Other Information
Item 6.1.	~~Exhibits~~Legal Proceedings	4746
Item 1A.	~~Signatures~~Risk Factors	46
Item 6.	Exhibits	48
	Signatures	49



	As of
	September 30, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	1,732		$	913
Accounts and notes receivable, net of allowance of $16 and $14, respectively	472			452
Inventories, net	83			75
Prepaids and other current assets	86			60
Total current assets	2,373			1,500
Property and equipment, net of accumulated depreciation and amortization of $709 and $704, respectively	1,981			1,996
Operating lease assets, net	1,147			—
Intangible assets, net	10,439			10,463
Goodwill	5,579			5,486
Net investment in property leased to franchisees	47			54
Other assets, net	683			642
Total assets	$	22,249		$	20,141
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts and drafts payable	$	510		$	513
Other accrued liabilities	797			637
Gift card liability	94			167
Current portion of long term debt and finance leases (Note 10)	776			91
Total current liabilities	2,177			1,408
Term debt, net of current portion	11,568			11,823
Finance leases, net of current portion	279			226
Operating lease liabilities, net of current portion	1,055			—
Other liabilities, net	1,598			1,547
Deferred income taxes, net	1,509			1,519
Total liabilities	18,186			16,523
Shareholders’ equity:
Common shares, no par value; unlimited shares authorized at September 30, 2019 and December 31, 2018; 298,095,767 shares issued and outstanding at September 30, 2019; 251,532,493 shares issued and outstanding at December 31, 2018	2,460			1,737
Retained earnings	762			674
Accumulated other comprehensive income (loss)	(864		)	(800		)
Total Restaurant Brands International Inc. shareholders’ equity	2,358			1,611
Noncontrolling interests	1,705			2,007
Total shareholders’ equity	4,063			3,618
Total liabilities and shareholders’ equity	$	22,249		$	20,141


																				Issued Common Shares							Retained Earnings				Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interest		Total
	Issued Common Shares			Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Noncontrolling Interest			Total					Shares				Amount
	Shares	Amount
Balances at December 31, 2018	251,532,493	$	1,737				$				674								$	(800	)	$	2,007		$	3,618
Cumulative effect adjustment	—	—		12				—				9			21
Balances at December 31, 2019																		Balances at December 31, 2019		298,281,081				$	2,478				$	775			(763)		$	1,769	$	4,259
Stock option exercises	2,019,620	42		—				—				—			42			Stock option exercises		1,053,264				30			—				—		—		30
Share-based compensation	—	22		—				—				—			22			Share-based compensation		—				19			—				—		—		19
Issuance of shares	134,809	7		—				—				—			7			Issuance of shares		255,325				6			—				—		—		6
Dividends declared ($0.50 per share)	—	—		(127		)		—				—			(127		)
Dividends declared ($0.52 per share)																		Dividends declared ($0.52 per share)		—				—			(156)				—		—		(156)
Dividend equivalents declared on restricted stock units	—	2		(2		)		—				—			—			Dividend equivalents declared on restricted stock units		—				2			(2)				—		—		0
Distributions declared by Partnership on Partnership exchangeable units ($0.50 per unit)	—	—		—				—				(104		)	(104		)
Exchange of Partnership exchangeable units for RBI common shares	141,190	2		—				(1		)		(1		)	—
Net income	—	—		135				—				111			246
Other comprehensive income (loss)	—	—		—				26				22			48
Balances at March 31, 2019	253,828,112	$	1,812	$	692			$	(775	)		$	2,044		$	3,773
Stock option exercises	1,697,488	38		—				—				—			38
Share-based compensation	—	17		—				—				—			17
Issuance of shares	59,970	—		—				—				—			—
Dividends declared ($0.50 per share)	—	—		(128		)		—				—			(128		)
Dividend equivalents declared on restricted stock units	—	2		(2		)		—				—			—
Distributions declared by Partnership on Partnership exchangeable units ($0.50 per unit)	—	—		—				—				(103		)	(103		)
Distributions declared by Partnership on Partnership exchangeable units ($0.52 per unit)																		Distributions declared by Partnership on Partnership exchangeable units ($0.52 per unit)		—				—			—				—		(86)		(86)
Exchange of Partnership exchangeable units for RBI common shares	45,325	1		—				—				(1		)	—			Exchange of Partnership exchangeable units for RBI common shares		178,046				2			—				—		(2)		0
Restaurant VIE contributions (distributions)	—	—		—				—				1			1			Restaurant VIE contributions (distributions)		—				—			—				—		(1)		(1)
Net income	—	—		142				—				115			257			Net income		—				—			144				—		80		224
Other comprehensive income (loss)	—	—		—				58				47			105			Other comprehensive income (loss)		—				—			—				(350)		(193)		(543)
Balances at June 30, 2019	255,630,895	$	1,870	$	704			$	(717	)		$	2,103		$	3,960
Balances at March 31, 2020																		Balances at March 31, 2020		299,767,716				$	2,537		$	761			$	(1,113)	$	1,567	$	3,752
Stock option exercises	636,918	19		—				—				—			19			Stock option exercises		316,172				11			—				—		—		11
Share-based compensation	—	17		—				—				—			17			Share-based compensation		—				20			—				—		—		20
Issuance of shares	20,700	—		—				—				—			—			Issuance of shares		45,071				0			—				—		—		0
Dividends declared ($0.50 per share)	—	—		(141		)		—				—			(141		)
Dividends declared ($0.52 per share)																		Dividends declared ($0.52 per share)		—				—			(158)				—		—		(158)
Dividend equivalents declared on restricted stock units	—	2		(2		)		—				—			—			Dividend equivalents declared on restricted stock units		—				1			(1)				—		—		0
Distributions declared by Partnership on Partnership exchangeable units ($0.50 per unit)	—	—		—				—				(92		)	(92		)
Distributions declared by Partnership on Partnership exchangeable units ($0.52 per unit)																		Distributions declared by Partnership on Partnership exchangeable units ($0.52 per unit)		—				—			—				—		(85)		(85)
Exchange of Partnership exchangeable units for RBI common shares	41,807,254	552		—				(118		)		(434		)	—			Exchange of Partnership exchangeable units for RBI common shares		2,494,854				33			—				(9)		(24)		0
Restaurant VIE contributions (distributions)	—	—		—				—				(1		)	(1		)	Restaurant VIE contributions (distributions)		—				—			—				—		(1)		(1)
Net income	—	—		201				—				150			351			Net income		—				—			106				—		58		164
Other comprehensive income (loss)	—	—		—				(29		)		(21		)	(50		)	Other comprehensive income (loss)		—				—			—				97		52		149
Balances at September 30, 2019	298,095,767	$	2,460	$	762			$	(864	)		$	1,705		$	4,063
Balances at June 30, 2020																		Balances at June 30, 2020		302,623,813				$	2,602		$	708			$	(1,025)	$	1,567	$	3,852
Stock option exercises																		Stock option exercises		567,636				19			—				—		—		19
Share-based compensation																		Share-based compensation		—				16			—				—		—		16
Issuance of shares																		Issuance of shares		63,686				—			—				—		—		—
Dividends declared ($0.52 per share)																		Dividends declared ($0.52 per share)		—				—			(158)				—		—		(158)
Dividend equivalents declared on restricted stock units																		Dividend equivalents declared on restricted stock units		—				3			(3)				—		—		—
Distributions declared by Partnership on Partnership exchangeable units ($0.52 per unit)																		Distributions declared by Partnership on Partnership exchangeable units ($0.52 per unit)		—				—			—				—		(84)		(84)
Exchange of Partnership exchangeable units for RBI common shares																		Exchange of Partnership exchangeable units for RBI common shares		622,068				8			—				(2)		(6)		—
Restaurant VIE contributions (distributions)																		Restaurant VIE contributions (distributions)		—				—			—				—		1		1
Net income																		Net income		—				—			145				—		78		223
Other comprehensive income (loss)																		Other comprehensive income (loss)		—				—			—				30		16		46
Balances at September 30, 2020																		Balances at September 30, 2020		303,877,203				$	2,648		$	692			$	(997)	$	1,572	$	3,915



	As Reported			Total				Adjusted
	December 31, 2018			Adjustments				January 1, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	913		$	—			$	913
Accounts and notes receivable, net	452			—				452
Inventories, net	75			—				75
Prepaids and other current assets	60			—				60
Total current assets	1,500			—				1,500
Property and equipment, net	1,996			26			(a)	2,022
Operating lease assets, net	—			1,143			(b)	1,143
Intangible assets, net	10,463			(133		)	(c)	10,330
Goodwill	5,486			—				5,486
Net investment in property leased to franchisees	54			—				54
Other assets, net	642			—				642
Total assets	$	20,141		$	1,036			$	21,177
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts and drafts payable	$	513		$	—			$	513
Other accrued liabilities	637			114			(d)	751
Gift card liability	167			—				167
Current portion of long term debt and finance leases	91			—				91
Total current liabilities	1,408			114				1,522
Term debt, net of current portion	11,823			(65		)	(e)	11,758
Finance leases, net of current portion	226			62			(e)	288
Operating lease liabilities, net of current portion	—			1,028			(f)	1,028
Other liabilities, net	1,547			(132		)	(g)	1,415
Deferred income taxes, net	1,519			8			(h)	1,527
Total liabilities	16,523			1,015				17,538
Shareholders’ equity:
Common shares	1,737			—				1,737
Retained earnings	674			12			(i)	686
Accumulated other comprehensive income (loss)	(800		)	—				(800		)
Total RBI shareholders’ equity	1,611			12				1,623
Noncontrolling interests	2,007			9			(i)	2,016
Total shareholders’ equity	3,618			21				3,639
Total liabilities and shareholders’ equity	$	20,141		$	1,036			$	21,177



	As of
	September 30, 2019
Land	$	903
Buildings and improvements	1,131
Restaurant equipment	21
	2,055
Accumulated depreciation and amortization	(451		)
Property and equipment leased, net	$	1,604



	As of
	September 30, 2019
Future rents to be received:
Future minimum lease receipts	$	50
Contingent rents (a)	21
Estimated unguaranteed residual value	15
Unearned income	(28		)
	58
Current portion included within accounts receivables	(11		)
Net investment in property leased to franchisees	$	47



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



	Three months ended September 30, 2019			Nine months ended September 30, 2019
Operating lease cost	$	52		$	158
Operating lease variable lease cost	51			151
Finance lease cost:
Amortization of right-of-use assets	7			20
Interest on lease liabilities	5			16
Sublease income	(164		)	(483		)
Total lease cost (income)	$	(49	)	$	(138	)



Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	145
Operating cash flows from finance leases	$	16
Financing cash flows from finance leases	$	20
Right-of-use assets obtained in exchange for new finance lease obligations	$	5
Right-of-use assets obtained in exchange for new operating lease obligations	$	106



	Lease Receipts				Lease Commitments (a)
	Direct Financing Leases		Operating Leases		Finance Leases			Operating Leases
Remainder of 2019	$	3	$	106	$	12		$	49
2020	10		406		46			190
2021	7		383		44			178
2022	5		360		42			166
2023	5		337		39			151
Thereafter	20		1,899		270			961
Total minimum receipts / payments	$	50	$	3,491	453			1,695
Less amount representing interest (b)					(147		)	(518		)
Present value of minimum lease payments					306			1,177
Current portion of lease obligations					(27		)	(122		)
Long-term portion of lease obligations					$	279		$	1,055



Contract Liabilities	TH			BK			PLK			Consolidated
Balance at December 31, 2018	$	62		$	405		$	19		$	486
Revenue recognized that was included in the contract liability balance at the beginning of the year	(7		)	(30		)	(1		)	(38		)
Increase, excluding amounts recognized as revenue during the period	6			55			6			67
Impact of foreign currency translation	1			(9		)	—			(8		)
Balance at September 30, 2019	$	62		$	421		$	24		$	507



	Location of Gain or (Loss) Reclassified from AOCI into Earnings	Gain or (Loss) Reclassified from AOCI into Earnings
		Three Months Ended September 30,						Nine Months Ended September 30,
		2019			2018			2019			2018
Derivatives designated as cash flow hedges
Interest rate swaps	Interest expense, net	$	(7	)	$	(5	)	$	(14	)	$	(16	)
Forward-currency contracts	Cost of sales	$	—		$	(2	)	$	4		$	1

	Location of Gain or (Loss) Recognized in Earnings	Gain or (Loss) Recognized in Earnings (Amount Excluded from Effectiveness Testing)
	Location of Gain or (Loss) Recognized in Earnings	Three Months Ended September 30,						Nine Months Ended September 30,
		2019			2018			2019			2018
Derivatives designated as net investment hedges
Cross-currency rate swaps	Interest expense, net	$	16		$	15		$	53		$	39



			Payment Due by Period as of October 7, 2019
Contractual Obligations	Total as of September 30, 2019		Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
			(In millions)
Credit Facilities, including interest (a)	$	7,235	$	8,104	$	305	$	617	$	6,558	$	624
Senior Notes, including interest (b)	7,683		6,432		233		466		1,942		3,791
Other long term debt	92		92		3		10		19		60