Segment Reporting

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

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

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

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

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

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

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

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Segment income:
TH	$	147	$	287	$	336	$	524
BK	160		252		360		474
PLK	51		41		106		82
Adjusted EBITDA	358		580		802		1,080
Share-based compensation and non-cash incentive compensation expense	23		19		44		44
Corporate restructuring and tax advisory fees	7		11		8		17
Office centralization and relocation costs	—		2		—		6
Impact of equity method investments (a)	18		9		22		10
Other operating expenses (income), net	21		3		5		(14)
EBITDA	289		536		723		1,017
Depreciation and amortization	46		45		91		92
Income from operations	243		491		632		925
Interest expense, net	128		137		247		269
Income tax (benefit) expense	(49)		97		(3)		153
Net income	$	164	$	257	$	388	$	503

(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.