Segment Reporting

9 Months Ended

Sep. 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 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,
	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

(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 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 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”).

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 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	—		—		—		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	—		4		—		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.