Segment Reporting

9 Months Ended

Sep. 30, 2023

Segment Reporting [Abstract]

Segment Reporting

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. Our business generates revenue from the following sources: (i) sales, consisting primarily of supply chain sales, which represent sales of products, supplies and restaurant equipment to franchisees, as well as sales to retailers and sales at restaurants owned by us (“Company restaurants”); (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) advertising revenues and other services, consisting primarily of advertising fund contributions based on a percentage of sales reported by franchise restaurants. We manage each of our brands as an operating segment and each operating segment represents a reportable segment.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues by operating segment:
TH	$	1,060	$	1,033	$	2,976	$	2,830
BK	538		491		1,551		1,407
PLK	188		164		538		477
FHS	51		38		137		102
Total revenues	$	1,837	$	1,726	$	5,202	$	4,816

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues by country (a):
Canada	$	956	$	940	$	2,683	$	2,565
United States	645		587		1,849		1,679
Other	236		199		670		572
Total revenues	$	1,837	$	1,726	$	5,202	$	4,816

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

Our measure of segment income is Adjusted EBITDA. Adjusted EBITDA represents earnings (net income or loss) before interest expense, net, loss on early extinguishment of debt, income tax (benefit) expense, and depreciation and amortization, adjusted to exclude (i) the non-cash impact of share-based compensation and non-cash incentive compensation expense, (ii) (income) loss from equity method investments, net of cash distributions received from equity method investments, (iii) other operating expenses (income), net and, (iv) income/expenses from non-recurring projects and non-operating activities. For the periods referenced, income/expenses from non-recurring projects and non-operating activities included (i) non-recurring fees and expense incurred in connection with the acquisition of Firehouse consisting of professional fees, compensation-related expenses and integration costs (“FHS Transaction costs”); and (ii) 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”).

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Segment income:
TH	$	311	$	305	$	852	$	810
BK	298		262		842		761
PLK	75		62		214		179
FHS	14		13		43		40
Adjusted EBITDA	698		642		1,951		1,790
Share-based compensation and non-cash incentive compensation expense	49		34		141		93
FHS Transaction costs	—		3		19		8
Corporate restructuring and advisory fees	5		12		17		21
Impact of equity method investments (a)	5		13		29		41
Other operating expenses (income), net	10		(27)		20		(68)
EBITDA	629		607		1,725		1,695
Depreciation and amortization	47		46		142		143
Income from operations	582		561		1,583		1,552
Interest expense, net	143		133		430		389
Loss on early extinguishment of debt	16		—		16		—
Income tax expense (benefit)	59		(102)		145		17
Net income	$	364	$	530	$	992	$	1,146

(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.