Segment Reporting

6 Months Ended

Jun. 30, 2017

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

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

Each brand is managed by a brand president that reports directly to our Chief Executive Officer, who is our Chief Operating Decision Maker. Therefore, we have three operating segments: (1) TH, which includes all operations of our Tim Hortons brand, (2) BK, which includes all operations of our Burger King brand, and (3) PLK, which includes all operations of our Popeyes brand. Our three operating segments represent our reportable segments. PLK revenues and segment income from March 28, 2017 through June 30, 2017 are included in our consolidated statement of operations for the three months ended June 30, 2017.

The following table presents revenues, by segment and by country (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Revenues by operating segment:
TH	$	772.3	$	759.8	$	1,505.9	$	1,417.6
BK	293.7		280.4		560.7		541.1
PLK	66.7		—		66.7		—
Total revenues	$	1,132.7	$	1,040.2	$	2,133.3	$	1,958.7
Revenues by country (a):
Canada	$	687.9	$	683.0	$	1,344.9	$	1,264.2
United States	313.2		246.3		545.6		475.8
Other	131.6		110.9		242.8		218.7
Total revenues	$	1,132.7	$	1,040.2	$	2,133.3	$	1,958.7

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

Our measure of segment income is Adjusted EBITDA. Adjusted EBITDA represents earnings (net income or loss) before interest, (gain) loss on early extinguishment of debt, taxes, and depreciation and amortization, adjusted to exclude the non-cash impact of share-based compensation and non-cash incentive compensation expense and (income) loss from equity method investments, net of cash distributions received from equity method investments, as well as other operating expenses (income), net. Other specifically identified costs associated with non-recurring projects are also excluded from Adjusted EBITDA, including fees and expenses associated with the Popeyes Acquisition ("PLK Transaction costs"), and integration costs associated with the acquisition of Tim Hortons. Adjusted EBITDA is used by management to measure operating performance of the business, excluding these non-cash and other specifically identified items that management believes are not relevant to management’s assessment of operating performance or the performance of an acquired business. A reconciliation of segment income to net income (loss) consists of the following (in millions).

	Three Months Ended June 30,					Six Months Ended June 30,
	2017		2016			2017		2016
Segment income:
TH	$	281.1	$	279.0		$	537.3	$	506.8
BK	216.8		200.1			403.9		380.1
PLK	33.2		—			33.2		—
Adjusted EBITDA	531.1		479.1			974.4		886.9
Share-based compensation and non-cash incentive compensation expense	11.9		11.3			30.4		19.2
PLK Transaction costs	8.5		—			42.9		—
Integration costs	—		3.8			—		6.0
Impact of equity method investments (a)	4.1		7.8			1.2		(7.9		)
Other operating expenses (income), net	46.8		(11.3		)	60.6		29.5
EBITDA	459.8		467.5			839.3		840.1
Depreciation and amortization	45.4		43.5			88.7		85.5
Income from operations	414.4		424.0			750.6		754.6
Interest expense, net	128.0		117.2			239.4		232.3
Loss on early extinguishment of debt	—		—			20.4		—
Income tax expense	42.9		59.2			80.7		106.4
Net income	$	243.5	$	247.6		$	410.1	$	415.9

(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.