Restaurant Brands International 10Q 2024 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)


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

For the quarterly period ended March 31, 2024


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

For the transition period from to

Commission file number: 001-36786

RESTAURANT BRANDS INTERNATIONAL INC.

(Exact Name of Registrant as Specified in its Charter)



Canada		98-1202754
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

130 King Street West, Suite 300		M5X 1E1
Toronto,	Ontario
(Address of Principal Executive Offices)		(Zip Code)

(905) 339-6011

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbols

Name of each exchange on which registered

Common Shares, without par value

QSR

New York Stock Exchange

Toronto Stock Exchange

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

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

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

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Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of April 23, 2024, there were 316,382,439 common shares of the Registrant outstanding.

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RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES

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		Page

PART I – Financial Information
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40

PART II – Other Information
Item 1.	Legal Proceedings	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
	Signatures	43

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PART I — Financial Information

Item 1. Financial Statements

RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

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

(Unaudited)


	As of
	March 31, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	1,049	$	1,139
Accounts and notes receivable, net of allowance of $46 and $37, respectively	749		749
Inventories, net	152		166
Prepaids and other current assets	121		119
Total current assets	2,071		2,173
Property and equipment, net of accumulated depreciation and amortization of $1,206 and $1,187, respectively	1,929		1,952
Operating lease assets, net	1,141		1,122
Intangible assets, net	10,970		11,107
Goodwill	5,702		5,775
Other assets, net	1,332		1,262
Total assets	$	23,145	$	23,391
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts and drafts payable	$	734	$	790
Other accrued liabilities	893		1,005
Gift card liability	187		248
Current portion of long-term debt and finance leases	110		101
Total current liabilities	1,924		2,144
Long-term debt, net of current portion	12,832		12,854
Finance leases, net of current portion	308		312
Operating lease liabilities, net of current portion	1,075		1,059
Other liabilities, net	862		996
Deferred income taxes, net	1,309		1,296
Total liabilities	18,310		18,661
Shareholders’ equity:
Common shares, no par value; Unlimited shares authorized at March 31, 2024 and December 31, 2023; 316,382,439 shares issued and outstanding at March 31, 2024; 312,454,851 shares issued and outstanding at December 31, 2023	2,076		1,973
Retained earnings	1,640		1,599
Accumulated other comprehensive income (loss)	(747)		(706)
Total Restaurant Brands International Inc. shareholders’ equity	2,969		2,866
Noncontrolling interests	1,866		1,864
Total shareholders’ equity	4,835		4,730
Total liabilities and shareholders’ equity	$	23,145	$	23,391

See accompanying notes to condensed consolidated financial statements.

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RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

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

(Unaudited)


	Three Months Ended March 31,
		2024		2023
Revenues:
Sales		$	729	$	668
Franchise and property revenues		712		668
Advertising revenues and other services		298		254
Total revenues		1,739		1,590
Operating costs and expenses:
Cost of sales		606		550
Franchise and property expenses		126		123
Advertising expenses and other services		311		271
General and administrative expenses		173		175
(Income) loss from equity method investments		(3)		7
Other operating expenses (income), net		(18)		17
Total operating costs and expenses		1,195		1,143
Income from operations		544		447
Interest expense, net		148		142

Income before income taxes		396		305
Income tax expense		68		28
Net income		328		277
Net income attributable to noncontrolling interests (Note 12)		98		88
Net income attributable to common shareholders		$	230	$	189
Earnings per common share
Basic		$	0.73	$	0.61
Diluted		$	0.72	$	0.61
Weighted average shares outstanding (in millions):
Basic		314		309
Diluted		453		456

See accompanying notes to condensed consolidated financial statements.

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RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In millions of U.S. dollars)

(Unaudited)


	Three Months Ended March 31,
		2024		2023
Net income		$	328	$	277

Foreign currency translation adjustment		(240)		40
Net change in fair value of net investment hedges, net of tax of $3 and $4		134		(31)
Net change in fair value of cash flow hedges, net of tax of $(26) and $15		69		(43)
Amounts reclassified to earnings of cash flow hedges, net of tax of $8 and $5		(22)		(13)

Other comprehensive income (loss)		(59)		(47)
Comprehensive income (loss)		269		230
Comprehensive income (loss) attributable to noncontrolling interests		80		73
Comprehensive income (loss) attributable to common shareholders		$	189	$	157

See accompanying notes to condensed consolidated financial statements.

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RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Shareholders’ Equity

(In millions of U.S. dollars, except shares and per share data)

(Unaudited)


	Issued Common Shares			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interest		Total
	Shares	Amount
Balances at December 31, 2023	312,454,851	$	1,973	$	1,599	$	(706)	$	1,864	$	4,730
Stock option exercises	721,052	39		—		—		—		39
Share-based compensation	—	42		—		—		—		42
Issuance of shares	3,204,316	17		—		—		—		17
Dividends declared ($0.58 per share)	—	—		(184)		—		—		(184)
Dividend equivalents declared on restricted stock units	—	5		(5)		—		—		—
Distributions declared by Partnership on Partnership exchangeable units ($0.58 per unit)	—	—		—		—		(77)		(77)
Exchange of Partnership exchangeable units for RBI common shares	2,220	—		—		—		—		—

Restaurant VIE contributions (distributions)	—	—		—		—		(1)		(1)
Net income	—	—		230		—		98		328
Other comprehensive income (loss)	—	—		—		(41)		(18)		(59)
Balances at March 31, 2024	316,382,439	$	2,076	$	1,640	$	(747)	$	1,866	$	4,835

See accompanying notes to condensed consolidated financial statements.

RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Shareholders’ Equity

(In millions of U.S. dollars, except shares and per share data)

(Unaudited)


	Issued Common Shares			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interest		Total
	Shares	Amount
Balances at December 31, 2022	307,142,436	$	2,057	$	1,121	$	(679)	$	1,769	$	4,268
Stock option exercises	124,275	6		—		—		—		6
Share-based compensation	—	41		—		—		—		41
Issuance of shares	1,690,762	15		—		—		—		15
Dividends declared ($0.55 per share)	—	—		(171)		—		—		(171)
Dividend equivalents declared on restricted stock units	—	5		(5)		—		—		—
Distributions declared by Partnership on Partnership exchangeable units ($0.55 per unit)	—	—		—		—		(77)		(77)
Exchange of Partnership exchangeable units for RBI common shares	2,214,072	33		—		(5)		(28)		—

Restaurant VIE contributions (distributions)	—	—		—		—		(1)		(1)
Net income	—	—		189		—		88		277
Other comprehensive income (loss)	—	—		—		(32)		(15)		(47)
Balances at March 31, 2023	311,171,545	$	2,157	$	1,134	$	(716)	$	1,736	$	4,311

See accompanying notes to condensed consolidated financial statements.

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RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In millions of U.S. dollars)

(Unaudited)


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities:
Net income	$	328	$	277
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	49		46

Amortization of deferred financing costs and debt issuance discount	6		7
(Income) loss from equity method investments	(3)		7
(Gain) loss on remeasurement of foreign denominated transactions	(23)		8
Net (gains) losses on derivatives	(41)		(34)
Share-based compensation and non-cash incentive compensation expense	46		45
Deferred income taxes	18		(28)
Other	7		1
Changes in current assets and liabilities, excluding acquisitions and dispositions:
Accounts and notes receivable	(6)		(8)
Inventories and prepaids and other current assets	7		(20)
Accounts and drafts payable	(46)		(81)
Other accrued liabilities and gift card liability	(175)		(123)
Tenant inducements paid to franchisees	(5)		(6)
Other long-term assets and liabilities	(14)		4
Net cash provided by operating activities	148		95
Cash flows from investing activities:
Payments for property and equipment	(26)		(18)
Net proceeds from disposal of assets, restaurant closures, and refranchisings	2		4
Net payments from acquisition of franchised restaurants	(23)		—
Settlement/sale of derivatives, net	16		14

Net cash (used for) provided by investing activities	(31)		—
Cash flows from financing activities:

Repayments of long-term debt and finance leases	(24)		(32)

Payment of dividends on common shares and distributions on Partnership exchangeable units	(245)		(243)

Proceeds from stock option exercises	39		6
Proceeds from derivatives	28		29
Other financing activities, net	(1)		—
Net cash (used for) provided by financing activities	(203)		(240)
Effect of exchange rates on cash and cash equivalents	(4)		—
Increase (decrease) in cash and cash equivalents	(90)		(145)
Cash and cash equivalents at beginning of period	1,139		1,178
Cash and cash equivalents at end of period	$	1,049	$	1,033
Supplemental cash flow disclosures:
Interest paid	$	170	$	163
Income taxes paid	$	87	$	61

See accompanying notes to condensed consolidated financial statements.

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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”) is a Canadian corporation that 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”), fast food hamburgers principally under the Burger King® brand (“Burger King”), chicken principally under the Popeyes® brand (“Popeyes”) and sandwiches under the Firehouse Subs® brand (“Firehouse”). We are one of the world’s largest quick service restaurant, or QSR, companies as measured by total number of restaurants. As of March 31, 2024, we franchised or owned 5,818 Tim Hortons restaurants, 19,374 Burger King restaurants, 4,625 Popeyes restaurants and 1,296 Firehouse Subs restaurants, for a total of 31,113 restaurants, and operate in more than 120 countries and territories. As of March 31, 2024, nearly all of the 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.

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, 2024.

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. Investments in other affiliates that are owned 50% or less where we have significant influence are accounted for by the equity method. All material intercompany balances and transactions have been eliminated in consolidation.

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 condensed consolidated balance sheets and statements of operations with respect to the remaining economic interest in Partnership we do not hold.

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.

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Supplier Finance Programs

Our TH business includes individually negotiated contracts with suppliers, which include payment terms that range up to 120 days. A global financial institution offers a voluntary supply chain finance (“SCF”) program to certain TH vendors, which provides suppliers that elect to participate with the ability to elect early payment, which is discounted based on the payment terms and a rate based on RBI's credit rating, which may be beneficial to the vendor. Participation in the SCF program is at the sole discretion of the suppliers and financial institution and we are not a party to the arrangements between the suppliers and the financial institution. Our obligations to suppliers are not affected by the suppliers’ decisions to participate in the SCF program and our payment terms remain the same based on the original supplier invoicing terms and conditions. No guarantees are provided by us or any of our subsidiaries in connection with the SCF Program.

Our confirmed outstanding obligations under the SCF program at March 31, 2024 and December 31, 2023 totaled $16 million and $36 million, respectively, and are classified as Accounts and drafts payable in our condensed consolidated balance sheets. All activity related to the obligations is classified as Cost of sales in our condensed consolidated statements of operations and presented within cash flows from operating activities in our condensed consolidated statements of cash flows.

Note 3. New Accounting Pronouncements

Segment Reporting – In November 2023, the Financial Accounting Standards Board (“FASB”) issued guidance that expands segment disclosures for public entities, including requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), the title and position of the CODM and an explanation of how the CODM uses reported measures of segment profit or loss in assessing segment performance and allocating resources. The new guidance also expands disclosures about a reportable segment’s profit or loss and assets in interim periods and clarifies that a public entity may report additional measures of segment profit if the CODM uses more than one measure of a segment’s profit or loss. The new guidance does not remove existing segment disclosure requirements or change how a public entity identifies its operating segments, aggregates those operating segments, or determines its reportable segments. The guidance is effective for annual disclosures for fiscal years beginning after December 15, 2023, and subsequent interim periods with early adoption permitted, and requires retrospective application to all prior periods presented in the financial statements. We are currently evaluating the impact this new guidance will have on our disclosures upon adoption and expect to provide additional detail and disclosures under this new guidance.

Improvements to Income Tax Disclosures – In December 2023, the FASB issued guidance that expands income tax disclosures for public entities, including requiring enhanced disclosures related to the rate reconciliation and income taxes paid information. The guidance is effective for annual disclosures for fiscal years beginning after December 15, 2024, with early adoption permitted. The guidance should be applied on a prospective basis, with retrospective application to all prior periods presented in the financial statements permitted. We are currently evaluating the impact this new guidance will have on our disclosures upon adoption and expect to provide additional detail and disclosures under this new guidance.

Note 4. Leases

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


	Three Months Ended March 31,
		2024		2023
Lease income - operating leases
Minimum lease payments		$	94	$	98
Variable lease payments		108		96

Subtotal - lease income from operating leases		202		194
Earned income on direct financing and sales-type leases		4		2
Total property revenues		$	206	$	196

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Note 5. Revenue Recognition

Contract Liabilities

Contract liabilities consist of deferred revenue resulting from initial and renewal franchise fees paid by franchisees, as well as upfront fees paid by master franchisees, which are generally recognized on a straight-line basis over the term of the underlying agreement. We may recognize unamortized franchise fees and 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 on a consolidated basis between December 31, 2023 and March 31, 2024 (in millions):


Contract Liabilities
Balance at December 31, 2023	$	555

Recognized during period and included in the contract liability balance at the beginning of the year	(19)
Increase, excluding amounts recognized as revenue during the period	13
Impact of foreign currency translation	(4)
Balance at March 31, 2024	$	545

The following table illustrates estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) on a consolidated basis as of March 31, 2024 (in millions):


Contract liabilities expected to be recognized in
Remainder of 2024	$	42
2025	54
2026	50
2027	47
2028	44
Thereafter	308
Total	$	545

Disaggregation of Total Revenues

As described in Note 16, Segment Reporting, during the fourth quarter of 2023, we revised our internal reporting structure, which resulted in a change to our operating and reportable segments. As a result, we manage each of our brands’ United States and Canada operations as an operating and reportable segment and our international operations as an operating and reportable segment.

The following tables disaggregate revenue by segment (in millions):


	Three Months Ended March 31, 2024
	TH		BK		PLK		FHS		INTL		Total
Sales	$	638	$	58	$	23	$	10	$	—	$	729
Royalties	77		116		75		17		188		473
Property revenues	147		56		3		—		—		206
Franchise fees and other revenue	7		3		2		8		13		33
Advertising revenues and other services	70		117		75		15		21		298
Total revenues	$	939	$	350	$	178	$	50	$	222	$	1,739

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	Three Months Ended March 31, 2023
	TH		BK		PLK		FHS		INTL		Total
Sales	$	618	$	19	$	21	$	10	$	—	$	668
Royalties	71		113		68		17		173		442
Property revenues	137		55		3		—		1		196
Franchise fees and other revenue	5		4		2		6		13		30
Advertising revenues and other services	62		106		66		4		16		254
Total revenues	$	893	$	297	$	160	$	37	$	203	$	1,590

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 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 March 31,
		2024		2023
Numerator:
Net income attributable to common shareholders - basic		$	230	$	189
Add: Net income attributable to noncontrolling interests		97		87
Net income available to common shareholders and noncontrolling interests - diluted		$	327	$	276

Denominator:
Weighted average common shares - basic		314		309
Exchange of noncontrolling interests for common shares (Note 12)		134		143
Effect of other dilutive securities		5		4
Weighted average common shares - diluted		453		456

Basic earnings per share (a)		$	0.73	$	0.61
Diluted earnings per share (a)		$	0.72	$	0.61
Anti-dilutive securities outstanding		3		7

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

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Note 7. Intangible Assets, net and Goodwill

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


	As of
	March 31, 2024						December 31, 2023
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Identifiable assets subject to amortization:
Franchise agreements	$	735	$	(353)	$	382	$	727	$	(348)	$	379
Favorable leases	80		(54)		26		81		(54)		27
Subtotal	815		(407)		408		808		(402)		406
Indefinite-lived intangible assets:
Tim Hortons brand	$	6,299	$	—	$	6,299	$	6,423	$	—	$	6,423
Burger King brand	2,092		—		2,092		2,107		—		2,107
Popeyes brand	1,355		—		1,355		1,355		—		1,355
Firehouse Subs brand	816		—		816		816		—		816
Subtotal	10,562		—		10,562		10,701		—		10,701
Intangible assets, net					$	10,970					$	11,107

Goodwill:
TH segment	$	4,042					$	4,118
BK segment	239						232
PLK segment	844						844
FHS segment	193						193
INTL segment	384						388
Total	$	5,702					$	5,775

Amortization expense on intangible assets totaled $9 million for the three months ended March 31, 2024 and 2023. The change in franchise agreements, brands and goodwill balances during the three months ended March 31, 2024 was primarily due to the impact of foreign currency translation.

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Note 8. Equity Method Investments

The aggregate carrying amounts of our equity method investments were $160 million and $163 million as of March 31, 2024 and December 31, 2023, respectively, and are included as a component of Other assets, net in our accompanying condensed consolidated balance sheets.

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 14.7% equity interest in Carrols Restaurant Group, Inc. (“Carrols”) based on the quoted market price on March 31, 2024 was approximately $90 million. Refer to Note 15, Commitments and Contingencies, for a description of the announced Carrols acquisition. The aggregate market value of our 9.4% equity interest in BK Brasil Operação e Assessoria a Restaurantes S.A. based on the quoted market price on March 31, 2024 was approximately $18 million. The aggregate market value of our 4.2% equity interest in TH International Limited based on the quoted market price on March 31, 2024 was approximately $8 million.

We have equity interests in entities that own or franchise Tim Hortons, Burger King and Popeyes restaurants. Sales, 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 March 31,
		2024		2023
Revenues from affiliates:
Royalties		$	101	$	92
Advertising revenues and other services		20		18
Property revenues		8		9
Franchise fees and other revenue		6		5
Sales		4		4
Total		$	139	$	128

At March 31, 2024 and December 31, 2023, we had $59 million and $61 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.

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 $3 million and $2 million during the three months ended March 31, 2024 and 2023, respectively.

Associated with the TIMWEN Partnership, we recognized $5 million and $4 million of rent expense during the three months ended March 31, 2024 and 2023, respectively.

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

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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
	March 31, 2024		December 31, 2023
Current:
Dividend payable	$	261	$	245
Interest payable	91		67
Accrued compensation and benefits	67		147
Taxes payable	96		129
Deferred income	84		77
Accrued advertising expenses	45		58
Restructuring and other provisions	16		18
Current portion of operating lease liabilities	148		147
Other	85		117
Other accrued liabilities	$	893	$	1,005
Noncurrent:
Taxes payable	$	60	$	57
Contract liabilities	545		555
Derivatives liabilities	98		227
Unfavorable leases	38		42
Accrued pension	35		34
Deferred income	63		57
Other	23		24
Other liabilities, net	$	862	$	996

Note 10. Long-Term Debt

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


	As of
	March 31, 2024		December 31, 2023
Term Loan B	$	5,162	$	5,175
Term Loan A	1,275		1,275

3.875% First Lien Senior Notes due 2028	1,550		1,550
3.50% First Lien Senior Notes due 2029	750		750
5.75% First Lien Senior Notes due 2025	500		500
4.375% Second Lien Senior Notes due 2028	750		750
4.00% Second Lien Senior Notes due 2030	2,900		2,900
TH Facility and other	137		143
Less: unamortized deferred financing costs and deferred issue discount	(117)		(122)
Total debt, net	12,907		12,921
Less: current maturities of debt	(75)		(67)
Total long-term debt	$	12,832	$	12,854

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Revolving Credit Facility

As of March 31, 2024, 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 under our Revolving Credit Facility was $1,248 million. Funds available under the Revolving Credit Facility may be used to repay other debt, finance debt or equity 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.

TH Facility

One of our subsidiaries entered into a non-revolving delayed drawdown term credit facility in a total aggregate principal amount of C$225 million with a maturity date of October 4, 2025 (the “TH Facility”). The interest rate applicable to the TH Facility is the Canadian Bankers’ Acceptance rate plus an applicable margin equal to 1.40% or the Prime Rate plus an applicable margin equal to 0.40%, at our option. Obligations under the TH Facility are guaranteed by four of our subsidiaries, and amounts borrowed under the TH Facility are secured by certain parcels of real estate. As of March 31, 2024, we had approximately C$177 million outstanding under the TH Facility with a weighted average interest rate of 6.69%.

Restrictions and Covenants

As of March 31, 2024, we were in compliance with all applicable financial debt covenants under our senior secured term loan facilities and Revolving Credit Facility (together the "Credit Facilities"), the TH Facility, and the indentures governing our Senior Notes.

Fair Value Measurement

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


	As of
	March 31, 2024		December 31, 2023
Fair value of our variable term debt and senior notes	$	12,343	$	12,401
Principal carrying amount of our variable term debt and senior notes	12,887		12,900

Interest Expense, net

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


	Three Months Ended March 31,
		2024		2023
Debt (a)		$	148	$	138
Finance lease obligations		5		4
Amortization of deferred financing costs and debt issuance discount		6		7
Interest income		(11)		(7)
Interest expense, net		$	148	$	142

(a)Amount includes $11 million and $15 million benefit during the three months ended March 31, 2024 and 2023, respectively, related to the quarterly net settlements of our cross-currency rate swaps and amortization of the Excluded Component as defined in Note 13, Derivative Instruments.

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Note 11. Income Taxes

Our effective tax rate was 17.2% for the three months ended March 31, 2024. The effective tax rate during this period was primarily the result of the mix of income from multiple tax jurisdictions, the impact of internal financing arrangements, equity-based compensation and recently implemented Organization for Economic Cooperation and Development related tax changes.

Our effective tax rate was 9.1% for the three months ended March 31, 2023. The effective tax rate during this period reflects the mix of income from multiple tax jurisdictions, the impact of internal financing arrangements and favorable structural changes implemented in 2022.

Note 12. Shareholders’ Equity

Noncontrolling Interests

The holders of Partnership exchangeable units held an economic interest of approximately 29.7% and 29.9% in Partnership common equity through the ownership of 133,595,544 and 133,597,764 Partnership exchangeable units as of March 31, 2024 and December 31, 2023, respectively.

During the three months ended March 31, 2024, Partnership exchanged 2,220 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. In connection with an amendment to the partnership agreement, Partnership exchangeable units exchanged for RBI common shares subsequent to December 31, 2023 also result in the issuance of additional Partnership Class A common units to RBI in an amount equal to the number of RBI common shares exchanged. 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 is automatically deemed cancelled concurrently with the exchange.

Share Repurchases

On August 31, 2023, our Board of Directors approved a share repurchase program that allows us to purchase up to $1,000 million of our common shares until September 30, 2025. For the three months ended March 31, 2024, we did not repurchase any of our common shares and as of March 31, 2024 had $500 million remaining under the authorization.

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, 2023	$	480	$	(13)	$	(1,173)	$	(706)
Foreign currency translation adjustment	—		—		(240)		(240)
Net change in fair value of derivatives, net of tax	203		—		—		203
Amounts reclassified to earnings of cash flow hedges, net of tax	(22)		—		—		(22)

Amounts attributable to noncontrolling interests	(54)		—		72		18
Balance at March 31, 2024	$	607	$	(13)	$	(1,341)	$	(747)

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Note 13. Derivative Instruments

Disclosures about Derivative Instruments and Hedging Activities

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

Interest Rate Swaps

At March 31, 2024, we had outstanding receive-variable, pay-fixed interest rate swaps with a total notional value of $3,500 million to hedge the variability in the interest payments on a portion of our Term Loan Facilities, including any subsequent refinancing or replacement of the Term Loan Facilities, beginning August 31, 2021 through the termination date of October 31, 2028. Additionally, at March 31, 2024, 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. Following the discontinuance of the U.S. dollar LIBOR after June 30, 2023, the interest rate on all these interest rate swaps transitioned from LIBOR to SOFR, with no impact to hedge effectiveness and no change in accounting treatment as a result of applicable accounting relief guidance for the transition away from LIBOR. 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, net of tax, and reclassified into interest expense during the period in which the hedged forecasted transaction affects earnings. The net amount of pre-tax gains in connection with these net unrealized gains in AOCI as of March 31, 2024 that we expect to be reclassified into interest expense within the next 12 months is $129 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 March 31, 2024, 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 March 31, 2024, we had outstanding cross-currency rate swaps that we entered into during 2022 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 in which we receive quarterly fixed-rate interest payments on the U.S. dollar notional amount of $5,000 million through the maturity date of September 30, 2028.

At March 31, 2024, we had outstanding cross-currency rate swap contracts between the euro and U.S. dollar in which we receive quarterly fixed-rate interest payments on the U.S. dollar aggregate amount of $2,750 million, of which $1,400 million have a maturity date of October 31, 2026, $1,200 million have a maturity date of November 30, 2028, and $150 million have a maturity date of October 31, 2028. At inception, these cross-currency rate swaps were designated and continue to be hedges and are accounted for as a net investment hedge. During 2023, we settled our previously existing cross-currency rate swaps in which we paid 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 and an original maturity date of February 17, 2024. During 2023, we also settled our previously existing cross-currency rate swap contracts between the euro and U.S. dollar with a notional value of $900 million and an original maturity date of February 17, 2024.

In connection with the cross-currency rate swaps hedging Canadian dollar and euro net investments, we utilize the spot method to exclude the interest component (the “Excluded Component”) from the accounting hedge without affecting net investment hedge accounting and 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.

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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 March 31, 2024, 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 $168 million with maturities to May 15, 2025. 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.

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 March 31,
		2024		2023
Derivatives designated as cash flow hedges(1)
Interest rate swaps		$	92	$	(57)
Forward-currency contracts		$	3	$	(1)
Derivatives designated as net investment hedges
Cross-currency rate swaps		$	131	$	(35)

(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 March 31,
			2024		2023
Derivatives designated as cash flow hedges
Interest rate swaps	Interest expense, net		$	30	$	15
Forward-currency contracts	Cost of sales		$	—	$	3

	Location of Gain or (Loss) Recognized in Earnings		Gain or (Loss) Recognized in Earnings (Amount Excluded from Effectiveness Testing)
		Three Months Ended March 31,
			2024		2023
Derivatives designated as net investment hedges
Cross-currency rate swaps	Interest expense, net		$	11	$	15

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	Fair Value as of
	March 31, 2024		December 31, 2023		Balance Sheet Location
Assets:
Derivatives designated as cash flow hedges
Interest rate	$	248	$	190	Other assets, net
Foreign currency	1		—		Prepaids and other current assets
Derivatives designated as net investment hedges
Foreign currency	9		7		Other assets, net

Total assets at fair value	$	258	$	197

Liabilities:
Derivatives designated as cash flow hedges

Foreign currency	$	—	$	2	Other accrued liabilities
Derivatives designated as net investment hedges
Foreign currency	98		227		Other liabilities, net
Total liabilities at fair value	$	98	$	229

Note 14. Other Operating Expenses (Income), net

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


	Three Months Ended March 31,
		2024		2023
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings		$	2	$	(2)
Litigation settlements (gains) and reserves, net		—		1
Net losses (gains) on foreign exchange		(23)		8
Other, net		3		10
Other operating expenses (income), net		$	(18)	$	17

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

Net losses (gains) on foreign exchange is primarily related to revaluation of foreign denominated assets and liabilities, primarily those denominated in euros and Canadian dollars.

Other, net for the three months ended March 31, 2023 is primarily related to payments in connection with FHS area representative buyouts.

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Note 15. Commitments and Contingencies

Acquisition of Carrols Restaurant Group

On January 16, 2024, we announced that we have reached an agreement to acquire all of Carrols issued and outstanding shares that are not already held by RBI or its affiliates for $9.55 per share in an all cash transaction, or an aggregate total enterprise value of approximately $1.0 billion. Carrols is the largest Burger King franchisee in the U.S. today, currently operating approximately 1,020 Burger King restaurants and approximately 60 Popeyes restaurants.

The transaction is expected to be completed in the second quarter of 2024 and is subject to customary closing conditions, including approval by the holders of the majority of common stock held by Carrols stockholders excluding shares held by RBI and its affiliates and officers of Carrols in addition to approval by holders of a majority of outstanding common stock of Carrols.

The transaction is not subject to a financing contingency and is expected to be financed with cash on hand of approximately $230 million and term loan debt. We secured financing whereby lenders will provide an additional $750 million of Term Loan B loans on the same terms as the existing Term Loan B under our Credit Agreement, subject to the closing of the Carrols acquisition.

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 Company, successor in interest, (“BKC”) in the U.S. District Court for the Southern District of Florida by Jarvis Arrington, individually and on behalf of all others similarly situated. On October 18, 2018, a second class action complaint was filed against RBI, BKW and BKC in the U.S. District Court for the Southern District of Florida by Monique Michel, individually and on behalf of all others similarly situated. On October 31, 2018, a third class action complaint was filed against BKC and BKW in the U.S. District Court for the Southern District of Florida by Geneva Blanchard and Tiffany Miller, individually and on behalf of all others similarly situated. On November 2, 2018, a fourth class action complaint was filed against RBI, BKW and BKC in the U.S. District Court for the Southern District of Florida by Sandra Munster, 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 appealed this ruling. In August 2022, the federal appellate court reversed the lower court's decision to dismiss the case and remanded the case to the lower court for further proceedings. While we intend to vigorously defend these claims, we are unable to predict the ultimate outcome of this case or estimate the range of possible loss, if any.

On April 23, 2024, a purported shareholder of Carrols Restaurant Group, Inc. (“CRG”), filed a complaint against CRG, its directors, RBI and BK Cheshire Corp. (our wholly-owned merger subsidiary) in the Supreme Court of the State of New York County of Westchester. The complaint alleges various breaches under Delaware law of fiduciary duties by the CRG directors and disclosure obligations by CRG with respect to the Agreement and Plan of Merger, dated as of January 16, 2024 among RBI, BK Cheshire Corp. and CRG (the “Merger Agreement”). In addition, the complaint alleges that RBI aided and abetted these breaches through its actions in negotiating the transaction and assistance in the dissemination of proxy statement related to the stockholder approval of the Merger Agreement. The complaint seeks, among other things, to enjoin the stockholder vote to approve the Merger Agreement and/or the consummation of the sale pending resolution of the complaint as well as compensatory and/or rescissory damages and fees and expenses. We intend to vigorously defend these claims, however, we are unable to predict the ultimate outcome of this case, estimate the range of possible loss, if any, or whether such complaint could adversely affect our ability to consummate the Merger Agreement.

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Note 16. Segment Reporting

As stated in Note 1, Description of Business and Organization, we manage four 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. Under the Firehouse Subs brand, we operate in the specialty subs category of the quick service segment of the restaurant industry.

We generate revenues from the following sources: (i) sales, consisting primarily of (1) Tim Hortons supply chain sales, which represent sales of products, supplies and restaurant equipment to franchisees, as well as sales of consumer packaged goods (“CPG”), and (2) sales at Company restaurants; (ii) franchise revenues, consisting primarily of royalties based on a percentage of sales reported by franchised restaurants and franchise fees paid by franchisees; (iii) property revenues from properties we lease or sublease to franchisees; and (iv) advertising revenues and other services, consisting primarily of (1) advertising fund contributions based on a percentage of sales reported by franchised restaurants to fund advertising expenses and (2) tech fees and revenues that vary by market and partially offset expenses related to technology initiatives. All Tim Hortons global supply chain sales, including coffee to International franchisees, are included in the TH segment.

During the fourth quarter of 2023, we revised our internal reporting structure, which resulted in a change to our operating and reportable segments. As a result, we manage each of our brands’ United States and Canada operations as an operating and reportable segment and our international operations as a separate operating and reportable segment.

Consequently, we have five operating and reportable segments: (1) TH, which includes all operations of our Tim Hortons brand in the United States and Canada, (2) BK, which includes all operations of our Burger King brand in the United States and Canada, (3) PLK, which includes all operations of our Popeyes brand in the United States and Canada, (4) FHS, which includes all operations of our Firehouse Subs brand in the United States and Canada, and (5) INTL, which includes all operations of each of our brands outside the United States and Canada. Our five operating segments represent our reportable segments. Prior year amounts presented have been reclassified to conform to this new segment presentation with no effect on previously reported consolidated results.

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


	Three Months Ended March 31,
		2024		2023
Revenues by operating segment:
TH		$	939	$	893
BK		350		297
PLK		178		160
FHS		50		37
INTL		222		203
Total revenues		$	1,739	$	1,590


	Three Months Ended March 31,
		2024		2023
Revenues by country (a):
Canada		$	856	$	814
United States		661		573
Other		222		203
Total revenues		$	1,739	$	1,590

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

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In connection with our change in operating and reportable segments, we also transitioned our definition of segment income from Adjusted EBITDA to Adjusted Operating Income which represents income from operations adjusted to exclude (i) franchise agreement amortization as a result of acquisition accounting, (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, income/expenses from non-recurring projects and non-operating activities included (i) non-recurring fees and expense incurred in connection with the announced acquisition of Carrols consisting primarily of professional fees (“CRG Transaction costs”); (ii) non-recurring fees and expense incurred in connection with the acquisition of Firehouse consisting primarily of professional fees, compensation-related expenses and integration costs (“FHS Transaction costs”); and (iii) non-operating costs from professional advisory and consulting services associated with certain transformational corporate restructuring initiatives that rationalize our structure and optimize cash movements as well as services related to significant tax reform legislation and regulations (“Corporate restructuring and advisory fees”). Unlike Adjusted EBITDA, our previous measure of segment income, Adjusted Operating Income includes depreciation and amortization (excluding franchise agreement amortization) as well as share-based compensation and non-cash incentive compensation expense. Prior year amounts presented have been reclassified to conform to this new segment income presentation with no effect on previously reported consolidated results.

Adjusted Operating Income 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. A reconciliation of segment income to net income consists of the following (in millions):


	Three Months Ended March 31,
		2024		2023
Segment income:
TH		$	224	$	212
BK		106		96
PLK		58		51
FHS		10		9
INTL		142		137
Adjusted Operating Income		540		505
Franchise agreement amortization		8		8
CRG Transaction costs		4		—
FHS Transaction costs		—		19
Corporate restructuring and advisory fees		2		5
Impact of equity method investments (a)		—		9
Other operating expenses (income), net		(18)		17
Income from operations		544		447
Interest expense, net		148		142

Income tax expense		68		28
Net income		$	328	$	277

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

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Note 17. Subsequent Events

Dividends

On April 4, 2024, we paid a cash dividend of $0.58 per common share to common shareholders of record on March 21, 2024. On such date, Partnership also made a distribution in respect of each Partnership exchangeable unit in the amount of $0.58 per exchangeable unit to holders of record on March 21, 2024.

Subsequent to March 31, 2024, our board of directors declared a cash dividend of $0.58 per common share, which will be paid on July 5, 2024 to common shareholders of record on June 21, 2024. Partnership will also make a distribution in respect of each Partnership exchangeable unit in the amount of $0.58 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.

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

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

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

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

Operating results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for the fiscal year and our operating metrics, 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 and all references in this section to “Partnership” are to Restaurant Brands International Limited Partnership and its subsidiaries, collectively.

Overview

We are a Canadian corporation that serves as the indirect holding company for the entities that own and franchise the Tim Hortons®, Burger King®, Popeyes® and Firehouse Subs® brands. We are one of the world’s largest quick service restaurant (“QSR”) companies with over $40 billion in annual system-wide sales and over 30,000 restaurants in more than 120 countries and territories as of March 31, 2024. Our Tim Hortons®, Burger King®, Popeyes®, and Firehouse Subs® brands have similar franchised business models with complementary daypart mixes and product platforms. Our four 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, 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 food items. Popeyes restaurants are quick service restaurants that distinguish themselves with a unique “Louisiana” style menu featuring fried chicken, chicken sandwiches, chicken tenders, wings, fried shrimp and other seafood, red beans and rice and other regional items. Firehouse Subs restaurants are quick service restaurants featuring hot and hearty subs piled high with quality meats and cheese as well as chopped salads, chili and soups, signature and other sides, soft drinks and local specialties.

On January 16, 2024, we announced that we have reached an agreement to acquire all of Carrols Restaurant Group Inc. (“Carrols”) issued and outstanding shares that are not held by RBI or its affiliates. The transaction is expected to close in the second quarter of 2024 and is subject to customary closing conditions. In connection with the announced acquisition of Carrols, we incurred certain non-recurring fees and expenses (“CRG Transaction costs”) totaling $4 million during the three months ended March 31, 2024, consisting primarily of professional fees, all of which are classified as general and administrative expenses in the condensed consolidated statement of operations. We expect to incur additional CRG Transaction costs through 2024 as we complete the acquisition and the integration of the operations of Carrols.

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We report results under five operating and reportable segments consisting of the following:

1.Tim Hortons – operations of our Tim Hortons brand in Canada and the U.S. (“TH”);

2.Burger King – operations of our Burger King brand in the U.S. and Canada (“BK”);

3.Popeyes Louisiana Kitchen – operations of our Popeyes brand in the U.S. and Canada (“PLK”);

4.Firehouse Subs – operations of our Firehouse Subs brand in the U.S. and Canada (“FHS”); and

5.International – operations of each of our brands outside the U.S. and Canada (“INTL”).

Operating costs and expenses for our segments include:

•cost of sales comprised of (i) costs associated with the management of our Tim Hortons supply chain, including cost of goods, direct labor, depreciation, and cost of CPG products sold to retailers as well as (ii) food, paper and labor costs of Company restaurants;

•franchise and property expenses comprised 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);

•advertising expenses and other services comprised primarily of expenses relating to marketing, advertising and promotion, including market research, production, advertising costs, sales promotions, social media campaigns, technology initiatives, depreciation and amortization and other related support functions for the respective brands. We generally manage advertising expenses to equal advertising revenues in the long term, however in some periods there may be a mismatch in the timing of revenues and expenses or higher expenses due to our support initiatives behind marketing programs; and

•segment general and administrative expenses (“Segment G&A”) comprised primarily of salary and employee-related costs for non-restaurant employees, professional fees, information technology systems, general overhead for our corporate offices, share-based compensation and non-cash incentive compensation expense, and depreciation and amortization.

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Key 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 franchised 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 Tim Hortons, Burger King and Firehouse Subs and 17 months or longer for Popeyes. 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 franchised restaurants and Company restaurants. System-wide results are driven by our franchised restaurants, as nearly all system-wide restaurants are franchised. Franchise sales represent sales at all franchised restaurants and are revenues to our franchisees. We do not record franchise sales as revenues; however, our royalty revenues and advertising fund contributions are calculated based on a percentage of franchise sales.

•Net restaurant growth refers to the net change in restaurant count (openings, net of permanent closures) over a trailing twelve month period, divided by the restaurant count at the beginning of the trailing twelve month period. In determining whether a restaurant meets our definition of a restaurant that will be included in our net restaurant growth, we consider factors such as scope of operations, format and image, separate franchise agreement, and minimum sales thresholds. We refer to restaurants that do not meet our definition as “alternative formats.” These alternative formats are helpful to build brand awareness, test new concepts and provide convenience in certain markets.

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.

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	Three Months Ended March 31,
Key Operating Metrics		2024			2023
System-wide sales growth
TH		7.8		%	16.1		%
BK		2.6		%	8.5		%
PLK		10.4		%	9.6		%
FHS		4.3		%	8.7		%
INTL		11.6		%	21.6		%
Consolidated		8.1		%	14.7		%
System-wide sales (in US$ millions)
TH		$	1,725		$	1,596
BK		$	2,753		$	2,684
PLK		$	1,517		$	1,374
FHS		$	301		$	289
INTL		$	4,216		$	3,889
Consolidated		$	10,512		$	9,832
Comparable sales
TH		6.9		%	14.9		%
BK		3.8		%	8.7		%
PLK		5.7		%	3.6		%
FHS		0.3		%	6.2		%
INTL		4.2		%	12.6		%
Consolidated		4.6		%	10.3		%

		As of March 31,
		2024			2023
Net restaurant growth
TH		—		%	(0.9)		%
BK		(2.4)		%	(1.3)		%
PLK		4.7		%	6.3		%
FHS		3.6		%	2.2		%
INTL		8.4		%	8.9		%
Consolidated		3.9		%	4.2		%
Restaurant count
TH		4,505			4,507
BK		7,139			7,317
PLK		3,412			3,260
FHS		1,277			1,233
INTL		14,780			13,639
Consolidated		31,113			29,956

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Results of Operations for the Three Months Ended March 31, 2024 and 2023

Tabular amounts in millions of U.S. dollars unless noted otherwise. Total revenues and segment income for each segment may not calculate exactly due to rounding.


Consolidated		Three Months Ended March 31,			Variance		FX Impact (a)		Variance Excluding FX Impact
	2024	2023	Favorable / (Unfavorable)
Revenues:
Sales			$	729	$	668	$	61	$	2	$	59
Franchise and property revenues			712		668		44		(3)		47
Advertising revenues and other services			298		254		44		—		44
Total revenues			1,739		1,590		149		(1)		150
Operating costs and expenses:
Cost of sales			606		550		(56)		(1)		(55)
Franchise and property expenses			126		123		(3)		—		(3)
Advertising expenses and other services			311		271		(40)		(1)		(39)
General and administrative expenses			173		175		2		(1)		3
(Income) loss from equity method investments			(3)		7		10		—		10
Other operating expenses (income), net			(18)		17		35		(1)		36
Total operating costs and expenses			1,195		1,143		(52)		(4)		(48)
Income from operations			544		447		97		(5)		102
Interest expense, net			148		142		(6)		—		(6)

Income before income taxes			396		305		91		(5)		96
Income tax expense			68		28		(40)		—		(40)
Net income			$	328	$	277	$	51	$	(5)	$	56

(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.

Sales and Cost of Sales

During the three months ended March 31, 2024, the increase in sales was primarily driven by an increase of $39 million in our BK segment, an increase of $18 million in our TH segment, an increase of $2 million in our PLK segment, and a favorable FX Impact of $2 million.

During the three months ended March 31, 2024, the increase in cost of sales was primarily driven by an increase of $35 million in our BK segment, an increase of $19 million in our TH segment, and an unfavorable FX Impact of $1 million.

Franchise and Property

During the three months ended March 31, 2024, the increase in franchise and property revenues was primarily driven by an increase of $19 million in our INTL segment, an increase of $17 million in our TH segment, an increase of $7 million in our PLK segment, an increase of $3 million in our BK segment, and an increase of $2 million in our FHS segment, partially offset by an unfavorable FX Impact of $3 million.

During the three months ended March 31, 2024, the increase in franchise and property expenses was primarily driven by an increase of $4 million in our INTL segment and an increase of $3 million in our TH segment, partially offset by a decrease of $3 million in our BK segment.

Advertising and Other Services

During the three months ended March 31, 2024, the increase in advertising revenues and other services was primarily driven by an increase of $11 million in our BK segment, an increase of $10 million in our FHS segment, an increase of $9 million in our PLK segment, an increase of $8 million in our TH segment, and an increase of $5 million in our INTL segment.

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During the three months ended March 31, 2024, the increase in advertising expenses and other services was primarily driven by an increase of $11 million in our FHS segment, an increase of $10 million in our PLK segment, an increase of $9 million in our BK segment, an increase of $5 million in our TH segment, an increase of $5 million in our INTL segment, and an unfavorable FX Impact of $1 million.

General and Administrative Expenses

Our general and administrative expenses consisted of the following:


	Three Months Ended March 31,		Variance
					$			%
		2024	2023			Favorable / (Unfavorable)
Segment G&A (b):
TH			$	42		$	37		$	(5)	(14)	%
BK			36			34			(2)		(6)	%
PLK			22			21			(1)		(5)	%
FHS			14			13			(1)		(8)	%
INTL			53			46			(7)		(15)	%
CRG Transaction costs			4			—			(4)		NM
FHS Transaction costs			—			19			19		100	%
Corporate restructuring and advisory fees			2			5			3		60	%
General and administrative expenses			$	173		$	175		$	2	1	%

NM - Not meaningful

(b)Segment G&A includes share-based compensation and non-cash incentive compensation expense of $46 million and $45 million for the three months ended March 31, 2024 and 2023, respectively. Segment G&A excludes income/expenses from non-recurring projects and non-operating activities, such as CRG Transaction costs, FHS Transaction costs (as defined below) and Corporate restructuring and advisory fees (as defined below).

During the three months ended March 31, 2024, the decrease in general and administrative expenses was primarily driven by the non-recurrence of FHS Transaction costs and a decrease in Corporate restructuring and advisory fees, partially offset by an increase in segment G&A and CRG Transaction costs.

In connection with the acquisition and integration of Firehouse Subs, we incurred certain non-recurring fees and expenses (“FHS Transaction costs”) consisting of professional fees, compensation related expenses and integration costs. We did not incur any additional FHS Transaction costs subsequent to March 31, 2023 and do not expect to incur any additional FHS Transaction costs in the future.

In connection with certain transformational corporate restructuring initiatives that rationalize our structure and optimize cash movement within our structure as well as services related to significant tax reform legislation and regulations, we incurred non-operating expenses primarily from professional advisory and consulting services (“Corporate restructuring and advisory fees”).

(Income) Loss from Equity Method Investments

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

The change in (income) loss from equity method investments during the three months ended March 31, 2024 reflects changes in earnings of our equity method investments during the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

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Other Operating Expenses (Income), net

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


	Three Months Ended March 31,
		2024		2023
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings		$	2	$	(2)
Litigation settlements (gains) and reserves, net		—		1
Net losses (gains) on foreign exchange		(23)		8
Other, net		3		10
Other operating expenses (income), net		$	(18)	$	17

Net losses (gains) on foreign exchange are primarily related to revaluation of foreign denominated assets and liabilities, primarily those denominated in euros and Canadian dollars.

Other, net for the three months ended March 31, 2023 is primarily related to payments in connection with FHS area representative buyouts.

Interest Expense, net

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


	Three Months Ended March 31,
		2024			2023
Interest expense, net		$	148		$	142
Weighted average interest rate on long-term debt		5.0		%	4.9		%

During the three months ended March 31, 2024, interest expense, net increased primarily due to an increase in the weighted average interest rate driven by increases in interest rates which impacts our variable rate debt and the impact of our September 2023 term loan refinancing.

Income Tax Expense

Our effective tax rate was 17.2% and 9.1% for the three months ended March 31, 2024 and 2023, respectively. The increase in our effective tax rate was primarily due to a favorable structural change benefiting 2023, unfavorable impacts of recently implemented Organization for Economic Cooperation and Development related tax changes and changes in the mix of income from multiple jurisdictions, partially offset by incremental excess tax benefits on equity-based compensation.

Net Income

We reported net income of $328 million for the three months ended March 31, 2024, compared to net income of $277 million for the three months ended March 31, 2023. The increase in net income is primarily due to a $35 million favorable change in the results from other operating expenses (income), net, the non-recurrence of $19 million of FHS Transaction costs, a $12 million increase in TH segment income, a $10 million increase in BK segment income, a $9 million favorable change from the impact of equity method investments, a $7 million increase in PLK segment income, a $5 million increase in INTL segment income, a $3 million decrease in Corporate restructuring and advisory fees, and a $1 million increase in FHS segment income. These factors were partially offset by a $40 million increase in income tax expense, a $6 million increase in interest expense, net and $4 million of CRG Transaction costs. Amounts above include a total unfavorable FX Impact to net income of $5 million.

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Macro Economic Environment

During the three months ended March 31, 2024 and 2023, there were increases in commodity, labor, and energy costs which have resulted in increases in inflation, foreign exchange volatility, rising interest rates and general softening in the consumer environment which have been exacerbated by conflicts in the Middle East. These pressures could have an adverse impact on our business and results of operations if we and our franchisees are not able to manage costs effectively without negatively impacting consumers.

Segment Results of Operations for the Three Months Ended March 31, 2024 and 2023


TH Segment		Three Months Ended March 31,			Variance		FX Impact (a)		Variance Excluding FX Impact
	2024	2023	Favorable / (Unfavorable)
Revenues:
Sales			$	637	$	618	$	20	$	2	$	18
Franchise and property revenues			231		213		17		1		17
Advertising revenues and other services			70		62		8		—		8
Total revenues			939		893		45		2		43
Cost of sales			526		505		(20)		(1)		(19)
Franchise and property expenses			81		79		(3)		—		(3)
Advertising expenses and other services			70		65		(5)		—		(5)
Segment G&A (a)			42		37		(5)		—		(5)
Adjustments:
Franchise agreement amortization (b)			2		2		—		—		—
Cash distributions received from equity method investments			3		3		—		—		—
Segment income			224		212		12		1		11

(a)Segment G&A includes share-based compensation and non-cash incentive compensation expense of $12 million for the three months ended March 31, 2024 and 2023.

(b)Franchise agreement amortization is included in franchise and property expenses.

System-wide Sales

During the three months ended March 31, 2024, the increase in TH system-wide sales of 7.8% was primarily driven by comparable sales of 6.9%, including Canada comparable sales of 7.5%.

Sales and Cost of Sales

During the three months ended March 31, 2024, the increase in sales was primarily driven by increases in supply chain sales, mainly due to increases in system-wide sales, increases in equipment sales, and a favorable FX Impact, partially offset by a decrease in CPG sales as a result of increases in promotional activity and trade investments.

During the three months ended March 31, 2024, the increase in cost of sales was primarily driven by increases in supply chain sales, increases in equipment sales, an increase in supply chain bad debt expense and an unfavorable FX Impact.

Franchise and Property

During the three months ended March 31, 2024, the increase in franchise and property revenues was primarily driven by increases in royalties and rent, as a result of increases in system-wide sales, and a favorable FX Impact.

During the three months ended March 31, 2024, the increase in franchise and property expenses was primarily driven by an increase in rent expense as a result of increases in system-wide sales.

Advertising and Other Services

During the three months ended March 31, 2024, the increase in advertising revenues and other services was primarily driven by increases in advertising fund contributions by franchisees, as a result of increases in system-wide sales.

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During the three months ended March 31, 2024, the increase in advertising expenses and other services was driven primarily by an increases in advertising revenues and other services.

Segment G&A

During the three months ended March 31, 2024, the increase in Segment G&A was primarily driven by higher salary and employee-related costs for non-restaurant employees and an increase in professional fees.


BK Segment		Three Months Ended March 31,			Variance		FX Impact (a)		Variance Excluding FX Impact
	2024	2023	Favorable / (Unfavorable)
Revenues:
Sales			$	58	$	19	$	39	$	—	$	39
Franchise and property revenues			175		172		3		—		3
Advertising revenues and other services			117		106		11		—		11
Total revenues			350		297		53		—		53
Cost of sales			52		17		(35)		—		(35)
Franchise and property expenses			33		36		3		—		3
Advertising expenses and other services			125		117		(9)		—		(9)
Segment G&A (a)			36		34		(2)		—		(2)
Adjustments:
Franchise agreement amortization (b)			2		3		(1)		—		(1)

Segment income			106		96		10		—		10

(a)Segment G&A includes share-based compensation and non-cash incentive compensation expense of $10 million for the three months ended March 31, 2024 and 2023.

System-wide Sales

During the three months ended March 31, 2024, the increase in BK system-wide sales of 2.6% was primarily driven by comparable sales of 3.8%, including US comparable sales of 3.9%, partially offset by net restaurant growth of (2.4)%.

Sales and Cost of Sales

During the three months ended March 31, 2024, the increase in sales and cost of sales was primarily driven by increases in Company restaurants due to franchisee restaurant acquisitions during 2024 and 2023.

Franchise and Property

During the three months ended March 31, 2024, the increase in franchise and property revenues was primarily driven by increases in royalties, as a result of increases in system-wide sales.

During the three months ended March 31, 2024, the decrease in franchise and property expenses was primarily driven by bad debt recoveries in 2024 compared to bad debt expenses in 2023.

Advertising and Other Services

During the three months ended March 31, 2024, the increase in advertising revenues and other services was primarily driven by increases in advertising fund contributions from vendors and franchisees.

During the three months ended March 31, 2024, the increase in advertising expenses and other services was driven primarily by increases in advertising revenues and other services.

Segment G&A

During the three months ended March 31, 2024, the increase in Segment G&A was primarily driven by higher salary and employee-related costs for non-restaurant employees.

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PLK Segment		Three Months Ended March 31,			Variance		FX Impact (a)		Variance Excluding FX Impact
	2024	2023	Favorable / (Unfavorable)
Revenues:
Sales			$	23	$	21	$	2	$	—	$	2
Franchise and property revenues			80		73		7		—		7
Advertising revenues and other services			75		66		9		—		9
Total revenues			178		159		18		—		18
Cost of sales			19		19		—		—		—
Franchise and property expenses			2		2		—		—		—
Advertising expenses and other services			76		67		(10)		—		(10)
Segment G&A (a)			22		21		(1)		—		(1)
Adjustments:
Franchise agreement amortization (b)			1		1		—		—		—

Segment income			58		51		7		—		7

(a)Segment G&A includes share-based compensation and non-cash incentive compensation expense of $7 million and $6 million for the three months ended March 31, 2024 and 2023, respectively.

System-wide Sales

During the three months ended March 31, 2024, the increase in PLK system-wide sales of 10.4% was primarily driven by comparable sales of 5.7%, including US comparable sales of 6.2%, and net restaurant growth of 4.7%.

Sales and Cost of Sales

During the three months ended March 31, 2024, sales remained relatively consistent with the prior year.

During the three months ended March 31, 2024, cost of sales remained consistent with the prior year.

Franchise and Property

During the three months ended March 31, 2024, the increase in franchise and property revenues was primarily driven by increases in royalties, as a result of increases in system-wide sales.

During the three months ended March 31, 2024, franchise and property expenses remained consistent with the prior year.

Advertising and Other Services

During the three months ended March 31, 2024, the increase in advertising expenses and other services was primarily driven by increases in advertising revenues and other services.

Segment G&A

During the three months ended March 31, 2024, Segment G&A remained relatively consistent with the prior year.

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FHS Segment		Three Months Ended March 31,			Variance		FX Impact (a)		Variance Excluding FX Impact
	2024	2023	Favorable / (Unfavorable)
Revenues:
Sales			$	10	$	10	$	—	$	—	$	—
Franchise and property revenues			25		23		2		—		2
Advertising revenues and other services			15		4		10		—		10
Total revenues			50		37		13		—		13
Cost of sales			9		8		—		—		—
Franchise and property expenses			2		2		—		—		—
Advertising expenses and other services			15		5		(11)		—		(11)
Segment G&A (a)			14		13		(1)		—		(1)



Segment income			10		9		1		—		1

(a)Segment G&A includes share-based compensation and non-cash incentive compensation expense of $3 million for the three months ended March 31, 2024 and 2023.

System-wide Sales

During the three months ended March 31, 2024, the increase in FHS system-wide sales of 4.3% was primarily driven by net restaurant growth of 3.6% and relatively flat comparable sales of 0.3%, including US comparable sales of 0.3%.

Sales and Cost of Sales

During the three months ended March 31, 2024, sales and cost of sales remained consistent with the prior year.

Franchise and Property

During the three months ended March 31, 2024, franchise and property revenues remained relatively consistent with the prior year.

During the three months ended March 31, 2024, franchise and property expenses remained consistent with the prior year.

Advertising and Other Services

During the three months ended March 31, 2024, the increases in advertising revenues and other services and advertising expenses and other services reflect modification of the advertising fund arrangements to be more consistent with those of our other brands.

Segment G&A

During the three months ended March 31, 2024, Segment G&A remained relatively consistent with the prior year.


INTL Segment		Three Months Ended March 31,			Variance		FX Impact (a)		Variance Excluding FX Impact
	2024	2023	Favorable / (Unfavorable)
Revenues:
Sales			$	—	$	—	$	—	$	—	$	—
Franchise and property revenues			201		187		15		(4)		19
Advertising revenues and other services			21		16		5		1		5
Total revenues			222		203		20		(4)		23
Cost of sales			—		—		—		—		—
Franchise and property expenses			8		5		(4)		—		(4)
Advertising expenses and other services			23		18		(6)		(1)		(5)
Segment G&A (a)			53		46		(7)		(1)		(6)
Adjustments:
Franchise agreement amortization (b)			3		3		1		—		1

Segment income			142		137		5		(5)		10

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(a)Segment G&A includes share-based compensation and non-cash incentive compensation expense of $14 million for the three months ended March 31, 2024 and 2023.

System-wide Sales

During the three months ended March 31, 2024, the increase in INTL system-wide sales of 11.6% was primarily driven by net restaurant growth of 8.4% and comparable sales of 4.2%.

Franchise and Property

During the three months ended March 31, 2024, the increase in franchise and property revenues was primarily driven by increases in royalties, primarily at Burger King, as a result of increases in system-wide sales, partially offset by an unfavorable FX Impact.

During the three months ended March 31, 2024, the increase in franchise and property expenses was primarily related to Tim Hortons due to an increase in bad debt expenses.

Advertising and Other Services

During the three months ended March 31, 2024, the increase in advertising revenues and other services was primarily driven by increases in advertising fund contributions from franchisees and vendors in the limited number of markets where we manage the advertising funds.

During the three months ended March 31, 2024, the increases in advertising expenses and other services were driven primarily by increases in advertising revenues.

Segment G&A

During the three months ended March 31, 2024, the increase in Segment G&A was primarily driven by higher salary and employee-related costs for non-restaurant employees.

Non-GAAP Reconciliations

The table below contains information regarding Adjusted Operating Income, which is a non-GAAP measure. This non-GAAP measure does not have a standardized meaning under U.S. GAAP and may differ from a similar captioned measure of other companies in our industry. We believe this non-GAAP measure is useful to investors in assessing our operating performance, as it provides 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 this non-GAAP measure, we intend to provide investors with a consistent comparison of our operating results and trends for the periods presented. Adjusted Operating Income is defined as income from operations excluding (i) franchise agreement amortization as a result of acquisition accounting, (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, income/expenses from non-recurring projects and non-operating activities included (i) non-recurring fees and expense incurred in connection with the announced acquisition of Carrols consisting primarily of professional fees; (ii) non-recurring fees and expense incurred in connection with the acquisition of Firehouse consisting of professional fees, compensation related expenses and integration costs; and (iii) non-operating costs from professional advisory and consulting services associated with certain transformational corporate restructuring initiatives that rationalize our structure and optimize cash movements as well as services related to significant tax reform legislation and regulations. Management believes that these types of expenses are either not related to our underlying profitability drivers or not likely to re-occur in the foreseeable future and the varied timing, size and nature of these projects may cause volatility in our results unrelated to the performance of our core business that does not reflect trends of our core operations.

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Adjusted Operating Income 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. Adjusted Operating Income, as defined above, also represents our measure of segment income for each of our five operating segments.


	Three Months Ended March 31,		Variance
					$			%
		2024	2023			Favorable / (Unfavorable)

Income from operations			$	544		$	447		$	97	22	%
Franchise agreement amortization			8			8			—		—	%
CRG Transaction costs			4			—			(4)		NM
FHS Transaction costs			—			19			19		100	%
Corporate restructuring and advisory fees			2			5			3		60	%
Impact of equity method investments (a)			—			9			9		100	%
Other operating expenses (income), net			(18)			17			35		NM
Adjusted Operating Income			$	540		$	505		$	35	7	%

Segment income:
TH			$	224		$	212		$	12	6	%
BK			106			96			10		10	%
PLK			58			51			7		14	%
FHS			10			9			1		10	%
INTL			142			137			5		3	%
Adjusted Operating Income			$	540		$	505		$	35	7	%

NM - not meaningful

The increase in Adjusted Operating Income for the three months ended March 31, 2024 reflects an increase in segment income in all of our segments, partially offset by an unfavorable FX Impact of $5 million.

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 affiliates’ outstanding debt, to fund acquisitions and other investing activities, such as capital expenditures and joint ventures, and to pay dividends on our common shares and make distributions on the Partnership exchangeable units. Our liquidity requirements are significant, primarily due to debt service requirements.

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As of March 31, 2024, we had cash and cash equivalents of $1,049 million and borrowing availability of $1,248 million under our senior secured revolving credit facility (the “Revolving Credit Facility”). 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.

In September 2022, Burger King shared the details of its “Reclaim the Flame” plan to accelerate sales growth and drive franchisee profitability. We are investing $400 million over the life of the plan, comprised of $150 million in advertising and digital investments (“Fuel the Flame”) and $250 million in high-quality remodels and relocations, restaurant technology, kitchen equipment, and building enhancements (“Royal Reset”). During the three months ended March 31, 2024, we funded $6 million toward the Fuel the Flame investment and $19 million toward our Royal Reset investment and as of March 31, 2024, we have funded a total of $79 million toward the Fuel the Flame investment and $81 million toward our Royal Reset investment.

In April 2024, Burger King announced plans to extend its Long-Term Royal Reset program with plans to invest an additional $300 million in remodels from 2025 through 2028.

On January 16, 2024, we announced that we have reached an agreement to acquire all of Carrols Restaurant Group, Inc. (“Carrols”) issued and outstanding shares that are not already held by RBI or its affiliates for $9.55 per share in an all cash transaction, or an aggregate total enterprise value of approximately $1.0 billion. The transaction is expected to be completed in the second quarter of 2024 and is subject to customary closing conditions, including approval by the holders of the majority of common stock held by Carrols stockholders excluding shares held by RBI and its affiliates and officers of Carrols in addition to approval by holders of a majority of outstanding common stock of Carrols. The transaction is not subject to a financing contingency and is expected to be financed with cash on hand of approximately $230 million and term loan debt. We secured financing whereby lenders will provide an additional $750 million of Term Loan B loans on the same terms as the existing Term Loan B under our Credit Agreement, subject to the closing of the Carrols acquisition.

On August 31, 2023, our board of directors approved a share repurchase authorization of up to $1,000 million of our common shares until September 30, 2025. This approval follows the expiration of RBI's prior two-year authorization to repurchase up to the same $1,000 million of our common shares. On September 13, 2023, we announced that the Toronto Stock Exchange (the “TSX”) had accepted and approved the notice of our intention to renew the normal course issuer bid, permitting the repurchase up to 30,895,637 common shares for the 12-month period ending on September 14, 2024. 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. During the three months ended March 31, 2024, we did not repurchase any RBI common shares on the open market and as of March 31, 2024, had $500 million remaining under the authorization. Repurchases under the Company's authorization will be made in the open market or through privately negotiated transactions.

We generally provide applicable deferred taxes based on the tax liability or withholding taxes that would be due upon repatriation of cash associated with unremitted earnings. We will continue to monitor our plans for such cash and related foreign earnings but our expectation is to continue to provide taxes on unremitted earnings that we expect to distribute.

Debt Instruments and Debt Service Requirements

As of March 31, 2024, our long-term debt consists primarily of borrowings under our Credit Facilities, amounts outstanding under our 3.875% First Lien Senior Notes due 2028, 5.75% First Lien Senior Notes due 2025, 3.50% First Lien Senior Notes due 2029, 4.375% Second Lien Senior Notes due 2028, 4.00% Second Lien Senior Notes due 2030 (together, the “Senior Notes”), TH Facility, 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.

As of March 31, 2024, there was $6,437 million outstanding principal amount under our Term Loan Facilities with a weighted average interest rate of 7.33%. 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) Term SOFR (Secured Overnight Financing Rate), subject to a floor of 0.00%, plus an applicable margin varying between 0.75% to 1.50%, in each case, determined by reference to a net first lien leverage based pricing grid. The interest rate applicable to borrowings under our Term Loan B is, at our option, either (i) a base rate, subject to a floor of 1.00%, plus an applicable margin of 1.25%, or (ii) Term SOFR, subject to a floor of 0.00%, plus an applicable margin of 2.25%.

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Based on the amounts outstanding under the Term Loan Facilities and SOFR as of March 31, 2024, subject to a floor of 0.00%, required debt service for the next twelve months is estimated to be approximately $480 million in interest payments and $60 million in principal payments. In addition, based on SOFR as of March 31, 2024, net cash settlements that we expect to receive on our $4,000 million interest rate swaps are estimated to be approximately $128 million for the next twelve months. Based on the amounts outstanding at March 31, 2024, required debt service for the next twelve months on all of the Senior Notes outstanding is approximately $264 million in interest payments. Based on the amounts outstanding under the TH Facility as of March 31, 2024, required debt service for the next twelve months is estimated to be approximately $8 million in interest payments and $16 million in principal payments.

Restrictions and Covenants

As of March 31, 2024, we were in compliance with all applicable financial debt covenants under the Credit Facilities, the TH Facility, and the indentures governing our Senior Notes.

Cash Dividends

On April 4, 2024, we paid a dividend of $0.58 per common share and Partnership made a distribution in respect of each Partnership exchangeable unit in the amount of $0.58 per Partnership exchangeable unit.

Our board of directors has declared a cash dividend of $0.58 per common share, which will be paid on July 5, 2024 to common shareholders of record on June 21, 2024. Partnership will also make a distribution in respect of each Partnership exchangeable unit in the amount of $0.58 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 April 23, 2024, we had outstanding 316,382,439 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 13 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, 2023, filed with the U.S Securities and Exchange Commission (the “SEC”) and Canadian securities regulatory authorities on February 22, 2023.

There were 133,595,544 Partnership exchangeable units outstanding as of April 23, 2024. During the three months ended March 31, 2024, Partnership exchanged 2,220 Partnership exchangeable units pursuant to exchange notices received. The holders of Partnership exchangeable units have the right to require Partnership to 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 $148 million for the three months ended March 31, 2024, compared to $95 million during the same period in the prior year. The increase in cash provided by operating activities was primarily driven by a decrease in cash used for working capital and an increase in segment income in each of our segments, partially offset by an increase in income tax payments and an increase in interest payments.

Investing Activities

Cash used for investing activities was $31 million for the three months ended March 31, 2024, compared to no net cash provided by or used from investing activities during the same period in the prior year. This change was primarily driven by current year net payments from the acquisition of franchised restaurants and an increase in capital expenditures.

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Financing Activities

Cash used for financing activities was $203 million for the three months ended March 31, 2024, compared to $240 million during the same period in the prior year. The change in cash used for financing activities was driven primarily by an increase in proceeds from stock option exercises and a decrease in long-term debt repayments.

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 SEC on February 22, 2024.

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 three months ended March 31, 2024 to the disclosures made in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC and Canadian securities regulatory authorities on February 22, 2024.

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 March 31, 2024. 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 March 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Special Note Regarding Forward-Looking Statements

Certain information contained in this report, including information regarding future financial performance and plans, targets, aspirations, expectations, and objectives of management, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of Canadian securities laws. We refer to all of these as forward-looking statements. Forward-looking statements are forward-looking in nature and, accordingly, are subject to risks and uncertainties. These forward-looking statements can generally be identified by the use of words such as “believe”, “anticipate”, “expect”, “intend”, “estimate”, “plan”, “continue”, “will”, “may”, “could”, “would”, “target”, “potential” and other similar expressions and include, without limitation, statements regarding our expectations or beliefs regarding (i) the effects and continued impact of the conflict in the Middle East and related macro-economic pressures, such as inflation, rising interest rates and currency fluctuations on our results of operations, business, liquidity, prospects and restaurant operations and those of our franchisees; (ii) our commitment to growth opportunities, plans and strategies for each of our brands and ability to enhance operations and drive long-term, sustainable growth; (iii) the amount and timing of future Corporate restructuring costs, (iv) advisory fees and costs associated with the FHS and Carrols Transactions; (v) 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; (vi) our exposure to changes in interest rates and foreign currency exchange rates and the impact of changes in interest rates and foreign currency exchange rates on the amount of our interest payments, future earnings and cash flows; (vii) certain tax matters, including our estimates with respect to tax matters and their impact on future periods; (viii) the amount of net cash settlements we expect to pay or receive on our derivative instruments; (ix) certain accounting matters and (x) our expectation

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that the Carrols transaction will be completed in the second quarter of 2024 and financed with cash on hand and term loan debt for which RBI has received a financing commitment.

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 risks and uncertainties and actual results may differ materially from those expressed or implied in such statements. Important factors that could cause actual results, level of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements include, among other things, risks related to: (1) our substantial indebtedness, which could adversely affect our financial condition and prevent us from fulfilling our obligations; (2) global economic or other business conditions that may affect the desire or ability of our customers to purchase our products, such as inflationary pressures, high unemployment levels, declines in median income growth, consumer confidence and consumer discretionary spending and changes in consumer perceptions of dietary health and food safety; (3) our relationship with, and the success of, our franchisees and risks related to our nearly fully franchised business model; (4) our franchisees' financial stability and their ability to access and maintain the liquidity necessary to operate their businesses; (5) our supply chain operations; (6) our ownership and leasing of real estate; (7) the effectiveness of our marketing, advertising and digital programs and franchisee support of these programs; (8) significant and rapid fluctuations in interest rates and in the currency exchange markets and the effectiveness of our hedging activity; (9) our ability to successfully implement our domestic and international growth strategy for each of our brands and risks related to our international operations; (10) our reliance on franchisees, including subfranchisees to accelerate restaurant growth; (11) unforeseen events such as pandemics; (12) the ability of the counterparties to our credit facilities’ and derivatives’ to fulfill their commitments and/or obligations; (13) changes in applicable tax laws or interpretations thereof, and our ability to accurately interpret and predict the impact of such changes or interpretations on our financial condition and results; (14) evolving legislation and regulations in the area of franchise and labor and employment law; (15) our ability to address environmental and social sustainability issues; (16) the conflict between Russia and Ukraine, and the conflict in the Middle East; (17) our and Carrols ability to meet all the closing conditions such that timing of the acquisition of Carrols is consummated as anticipated; (18) our ability to utilize secured loans to fund the Carrols acquisition and (19) litigation or other regulatory matters that could impact the acquisition of Carrols.

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, 2023 filed with the SEC and Canadian securities regulatory authorities on February 22, 2024, 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.

Part II – Other Information

Item 1. Legal Proceedings

See Part I, Notes to Condensed Consolidated Financial Statements, Note 15, Commitments and Contingencies.

Item 5. Other Information

During the three months ended March 31, 2024, no director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits



Exhibit Number						Description


10.88(a)*						Amendment to Offer Letter dated as of March 14, 2024 by and among David Shear, Burger King Europe GmbH, PLK Europe GmbH, Tim Hortons Restaurants International GmbH and Firehouse Subs Europe GmbH.

10.88(b)*						Separation Agreement dated as of March 14, 2024 by and among David Shear, Burger King Europe GmbH, PLK Europe GmbH, Tim Hortons Restaurants International GmbH and Firehouse Subs Europe GmbH.

10.89(a)*						Employment and Post-Employment Covenants Agreement dated as of March 14, 2024 by and between Sami Siddiqui and Restaurant Brands International Inc.

10.89(b)*						Employment and Post-Employment Covenants Agreement dated as of March 14, 2024 by and between Sami Siddiqui and Restaurant Brands International US Services LLC.

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)

* Management contract or compensatory plan or arrangement

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

RESTAURANT BRANDS INTERNATIONAL INC.

(Registrant)

Date: April 30, 2024

By:

/s/ Sami Siddiqui

Name:

Sami Siddiqui

Title:

Chief Financial Officer
(principal financial officer)
(duly authorized officer)

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Restaurant Brands International (QSR) 10-Q2024 Q1 Quarterly report

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