Restaurant Brands International Inc. [QSR] Filings

10-Q 1 qsr-20230930.htm 10-Q qsr-20230930

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 September 30, 2023


☐			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 October 27, 2023, there were 312,028,584 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	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40

PART II – Other Information
Item 1.	Legal Proceedings	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
	Signatures	44

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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
	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	1,310	$	1,178
Accounts and notes receivable, net of allowance of $35 and $36, respectively	692		614
Inventories, net	160		133
Prepaids and other current assets	221		123
Total current assets	2,383		2,048
Property and equipment, net of accumulated depreciation and amortization of $1,140 and $1,061, respectively	1,904		1,950
Operating lease assets, net	1,060		1,082
Intangible assets, net	10,946		10,991
Goodwill	5,681		5,688
Other assets, net	1,103		987
Total assets	$	23,077	$	22,746
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts and drafts payable	$	693	$	758
Other accrued liabilities	1,132		1,001
Gift card liability	159		230
Current portion of long-term debt and finance leases	87		127
Total current liabilities	2,071		2,116
Long-term debt, net of current portion	12,862		12,839
Finance leases, net of current portion	305		311
Operating lease liabilities, net of current portion	1,003		1,027
Other liabilities, net	864		872
Deferred income taxes, net	1,308		1,313
Total liabilities	18,413		18,478
Shareholders’ equity:
Common shares, no par value; Unlimited shares authorized at September 30, 2023 and December 31, 2022; 317,837,606 shares issued and outstanding at September 30, 2023; 307,142,436 shares issued and outstanding at December 31, 2022	2,267		2,057
Retained earnings	1,268		1,121
Accumulated other comprehensive income (loss)	(627)		(679)
Total Restaurant Brands International Inc. shareholders’ equity	2,908		2,499
Noncontrolling interests	1,756		1,769
Total shareholders’ equity	4,664		4,268
Total liabilities and shareholders’ equity	$	23,077	$	22,746

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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues:
Sales	$	771	$	759	$	2,183	$	2,076
Franchise and property revenues	753		698		2,163		1,989
Advertising revenues and other services	313		269		856		751
Total revenues	1,837		1,726		5,202		4,816
Operating costs and expenses:
Cost of sales	630		615		1,792		1,693
Franchise and property expenses	119		137		372		392
Advertising expenses and other services	326		276		909		782
General and administrative expenses	169		156		507		435
(Income) loss from equity method investments	1		8		19		30
Other operating expenses (income), net	10		(27)		20		(68)
Total operating costs and expenses	1,255		1,165		3,619		3,264
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 before income taxes	423		428		1,137		1,163
Income tax expense (benefit)	59		(102)		145		17
Net income	364		530		992		1,146
Net income attributable to noncontrolling interests (Note 12)	112		170		310		367
Net income attributable to common shareholders	$	252	$	360	$	682	$	779
Earnings per common share
Basic	$	0.80	$	1.18	$	2.19	$	2.53
Diluted	$	0.79	$	1.17	$	2.16	$	2.51
Weighted average shares outstanding (in millions):
Basic	314		306		312		308
Diluted	459		454		458		455

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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income	$	364	$	530	$	992	$	1,146

Foreign currency translation adjustment	(270)		(727)		(36)		(1,015)
Net change in fair value of net investment hedges, net of tax of $4, $(87), $12 and $(100)	182		384		67		575
Net change in fair value of cash flow hedges, net of tax of $(26), $(55), $(42) and $(145)	71		150		114		394
Amounts reclassified to earnings of cash flow hedges, net of tax of $6, $(2), $17 and $(15)	(17)		5		(47)		42
Gain (loss) recognized on other, net of tax of $0, $0, $0 and $0	2		1		4		3
Other comprehensive income (loss)	(32)		(187)		102		(1)
Comprehensive income (loss)	332		343		1,094		1,145
Comprehensive income (loss) attributable to noncontrolling interests	103		110		342		366
Comprehensive income (loss) attributable to common shareholders	$	229	$	233	$	752	$	779

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, 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
Stock option exercises	920,438	43		—		—		—		43
Share-based compensation	—	42		—		—		—		42
Issuance of shares	87,695	—		—		—		—		—
Dividends declared ($0.55 per share)	—	—		(172)		—		—		(172)
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	23,787	—		—		—		—		—

Restaurant VIE contributions (distributions)	—	—		—		—		(1)		(1)
Net income	—	—		241		—		110		351
Other comprehensive income (loss)	—	—		—		125		56		181
Balances at June 30, 2023	312,203,465	$	2,247	$	1,198	$	(591)	$	1,824	$	4,678
Stock option exercises	43,596	3		—		—		—		3
Share-based compensation	—	44		—		—		—		44
Issuance of shares	119,571	—		—		—		—		—
Dividends declared ($0.55 per share)	—	—		(176)		—		—		(176)
Dividend equivalents declared on restricted stock units	—	6		(6)		—		—		—
Distributions declared by Partnership on Partnership exchangeable units ($0.55 per unit)	—	—		—		—		(74)		(74)
Exchange of Partnership exchangeable units for RBI common shares	7,161,017	109		—		(13)		(96)		—
Repurchase of RBI common shares	(1,690,043)	(142)		—		—		—		(142)
Restaurant VIE contributions (distributions)	—	—		—		—		(1)		(1)
Net income	—	—		252		—		112		364
Other comprehensive income (loss)	—	—		—		(23)		(9)		(32)
Balances at September 30, 2023	317,837,606	$	2,267	$	1,268	$	(627)	$	1,756	$	4,664

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, 2021	309,025,068	$	2,156	$	791	$	(710)	$	1,616	$	3,853
Stock option exercises	87,177	3		—		—		—		3
Share-based compensation	—	24		—		—		—		24
Issuance of shares	906,260	13		—		—		—		13
Dividends declared ($0.54 per share)	—	—		(167)		—		—		(167)
Dividend equivalents declared on restricted stock units	—	3		(3)		—		—		—
Distributions declared by Partnership on Partnership exchangeable units ($0.54 per unit)	—	—		—		—		(78)		(78)
Exchange of Partnership exchangeable units for RBI common shares	1,525,900	21		—		(3)		(18)		—
Repurchase of RBI common shares	(2,860,002)	(161)		—		—		—		(161)
Restaurant VIE contributions (distributions)	—	—		—		—		(1)		(1)
Net income	—	—		183		—		87		270
Other comprehensive income (loss)	—	—		—		140		65		205
Balances at March 31, 2022	308,684,403	$	2,059	$	804	$	(573)	$	1,671	$	3,961
Stock option exercises	25,277	1		—		—		—		1
Share-based compensation	—	29		—		—		—		29
Issuance of shares	124,065	—		—		—		—		—
Dividends declared ($0.54 per share)	—	—		(166)		—		—		(166)
Dividend equivalents declared on restricted stock units	—	3		(3)		—		—		—
Distributions declared by Partnership on Partnership exchangeable units ($0.54 per unit)	—	—		—		—		(77)		(77)
Exchange of Partnership exchangeable units for RBI common shares	151,154	2		—		—		(2)		—
Repurchase of RBI common shares	(3,241,362)	(165)		—		—		—		(165)
Restaurant VIE contributions (distributions)	—	—		—		—		(1)		(1)
Net income	—	—		236		—		110		346
Other comprehensive income (loss)	—	—		—		(13)		(6)		(19)
Balances at June 30, 2022	305,743,537	$	1,929	$	871	$	(586)	$	1,695	$	3,909
Stock option exercises	48,422	2		—		—		—		2
Share-based compensation	—	29		—		—		—		29
Issuance of shares	49,603	—		—		—		—		—
Dividends declared ($0.54 per share)	—	—		(165)		—		—		(165)
Dividend equivalents declared on restricted stock units	—	4		(4)		—		—		—
Distributions declared by Partnership on Partnership exchangeable units ($0.54 per unit)	—	—		—		—		(77)		(77)
Exchange of Partnership exchangeable units for RBI common shares	17,805	—		—		—		—		—

Restaurant VIE contributions (distributions)	—	—		—		—		(2)		(2)
Net income	—	—		360		—		170		530
Other comprehensive income (loss)	—	—		—		(127)		(60)		(187)
Balances at September 30, 2022	305,859,367	$	1,964	$	1,062	$	(713)	$	1,726	$	4,039

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)


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net income	$	992	$	1,146
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	142		143
Non-cash loss on early extinguishment of debt	5		—
Amortization of deferred financing costs and debt issuance discount	21		21
(Income) loss from equity method investments	19		30
(Gain) loss on remeasurement of foreign denominated transactions	(11)		(82)
Net (gains) losses on derivatives	(111)		17
Share-based compensation and non-cash incentive compensation expense	141		93
Deferred income taxes	(47)		(29)
Other	19		8
Changes in current assets and liabilities, excluding acquisitions and dispositions:
Accounts and notes receivable	(86)		(93)
Inventories and prepaids and other current assets	(49)		(67)
Accounts and drafts payable	(62)		113
Other accrued liabilities and gift card liability	(62)		(74)
Tenant inducements paid to franchisees	(15)		(13)
Other long-term assets and liabilities	24		(146)
Net cash provided by operating activities	920		1,067
Cash flows from investing activities:
Payments for property and equipment	(73)		(52)
Net proceeds from disposal of assets, restaurant closures, and refranchisings	23		11
Net payments in connection with purchase of Firehouse Subs	—		(12)
Settlement/sale of derivatives, net	40		22
Other investing activities, net	(1)		(35)
Net cash (used for) provided by investing activities	(11)		(66)
Cash flows from financing activities:
Proceeds from long-term debt	55		2
Repayments of long-term debt and finance leases	(79)		(71)
Payment of financing costs	(43)		—
Payment of dividends on common shares and distributions on Partnership exchangeable units	(741)		(728)
Repurchase of common shares	(115)		(326)
Proceeds from stock option exercises	52		7
(Payments) proceeds from derivatives	100		8
Other financing activities, net	(3)		(3)
Net cash (used for) provided by financing activities	(774)		(1,111)
Effect of exchange rates on cash and cash equivalents	(3)		(31)
Increase (decrease) in cash and cash equivalents	132		(141)
Cash and cash equivalents at beginning of period	1,178		1,087
Cash and cash equivalents at end of period	$	1,310	$	946
Supplemental cash flow disclosures:
Interest paid	$	544	$	318
Income taxes paid	$	184	$	177

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” or “TH”), fast food hamburgers principally under the Burger King® brand (“Burger King” or “BK”), chicken principally under the Popeyes® brand (“Popeyes” or “PLK”) and sandwiches under the Firehouse Subs® brand (“Firehouse” or “FHS”). We are one of the world’s largest quick service restaurant, or QSR, companies as measured by total number of restaurants. As of September 30, 2023, we franchised or owned 5,701 Tim Hortons restaurants, 19,035 Burger King restaurants, 4,373 Popeyes restaurants and 1,266 Firehouse Subs restaurants, for a total of 30,375 restaurants, and operate in more than 100 countries. Approximately 100% of 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, 2023.

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 September 30, 2023 and December 31, 2022 totaled $29 million and $47 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

Accounting Relief for the Transition Away from LIBOR and Certain other Reference Rates – In March 2020 and as clarified in January 2021 and December 2022, the Financial Accounting Standards Board (“FASB”) issued guidance which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. This amendment is effective as of March 12, 2020 through December 31, 2024. The expedients and exceptions provided by this new guidance do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2024, except for hedging relationships existing as of December 31, 2024, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationships. During 2021, we adopted certain of the expedients as it relates to hedge accounting as certain of our debt agreements and hedging relationships bear interest at variable rates, primarily U.S. dollar LIBOR. Additionally, during the three months ended September 30, 2023, we amended the LIBOR-referencing credit agreement governing our senior secured term loan facilities to reference the Secured Overnight Financing Rate (SOFR) as further disclosed in Note 10, Long-Term Debt. As of September 30, 2023, none of our debt agreements and hedging relationships make reference to LIBOR. The adoption of and future elections under this new guidance did not and are not expected to have a material impact on our Financial Statements.

Liabilities—Supplier Finance Programs – In September 2022, the FASB issued guidance that requires buyers in a supplier finance program to disclose sufficient information about the program to allow investors to understand the program's nature, activity during the period, changes from period to period, and potential magnitude. These disclosures would include the key terms of the program, as well as the obligation amount that the buyer has confirmed as valid to the third party that is outstanding at the end of the reporting period, a rollforward of that amount, and a description of where that amount is presented in the balance sheet. This amendment is effective in 2023, except for the amendment on rollforward information which is effective in 2024, with early adoption permitted. This guidance should be applied retrospectively to each period in which a balance sheet is presented, except for the amendment on rollforward information, which should be applied prospectively. During the first quarter of 2023, we adopted this guidance and added necessary disclosures upon adoption as disclosed in Note 2, Basis of Presentation and Consolidation.

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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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Lease income - operating leases
Minimum lease payments	$	95	$	100	$	290	$	314
Variable lease payments	122		112		337		291
Amortization of favorable and unfavorable income lease contracts, net	—		—		1		1
Subtotal - lease income from operating leases	217		212		628		606
Earned income on direct financing and sales-type leases	4		2		9		5
Total property revenues	$	221	$	214	$	637	$	611

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, 2022 and September 30, 2023 (in millions):


Contract Liabilities
Balance at December 31, 2022	$	540

Recognized during period and included in the contract liability balance at the beginning of the year	(44)
Increase, excluding amounts recognized as revenue during the period	40
Impact of foreign currency translation	(2)
Balance at September 30, 2023	$	534

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 September 30, 2023 (in millions):


Contract liabilities expected to be recognized in
Remainder of 2023	$	14
2024	52
2025	50
2026	47
2027	44
Thereafter	327
Total	$	534

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Disaggregation of Total Revenues

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


	Three months ended September 30, 2023
	TH		BK		PLK		FHS		Total
Sales	$	717	$	21	$	23	$	10	$	771
Royalties	94		307		85		17		503
Property revenues	161		57		3		—		221
Franchise fees and other revenue	6		12		2		9		29
Advertising revenues and other services	82		141		75		15		313
Total revenues	$	1,060	$	538	$	188	$	51	$	1,837


	Nine months ended September 30, 2023
	TH		BK		PLK		FHS		Total
Sales	$	2,023	$	64	$	66	$	30	$	2,183
Royalties	261		882		241		52		1,436
Property revenues	456		171		10		—		637
Franchise fees and other revenue	19		40		10		21		90
Advertising revenues and other services	217		394		211		34		856
Total revenues	$	2,976	$	1,551	$	538	$	137	$	5,202


	Three months ended September 30, 2022
	TH		BK		PLK		FHS		Total
Sales	$	710	$	19	$	21	$	9	$	759
Royalties	87		274		74		16		451
Property revenues	154		57		3		—		214
Franchise fees and other revenue	9		18		1		5		33
Advertising revenues and other services	73		123		65		8		269
Total revenues	$	1,033	$	491	$	164	$	38	$	1,726


	Nine months ended September 30, 2022
	TH		BK		PLK		FHS		Total
Sales	$	1,937	$	52	$	58	$	29	$	2,076
Royalties	239		791		213		49		1,292
Property revenues	433		169		9		—		611
Franchise fees and other revenue	22		42		8		14		86
Advertising revenues and other services	199		353		189		10		751
Total revenues	$	2,830	$	1,407	$	477	$	102	$	4,816

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.

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The following table summarizes the basic and diluted earnings per share calculations (in millions, except per share amounts):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Numerator:
Net income attributable to common shareholders - basic	$	252	$	360	$	682	$	779
Add: Net income attributable to noncontrolling interests	111		169		307		364
Net income available to common shareholders and noncontrolling interests - diluted	$	363	$	529	$	989	$	1,143

Denominator:
Weighted average common shares - basic	314		306		312		308
Exchange of noncontrolling interests for common shares (Note 12)	139		143		141		144
Effect of other dilutive securities	6		5		5		3
Weighted average common shares - diluted	459		454		458		455

Basic earnings per share (a)	$	0.80	$	1.18	$	2.19	$	2.53
Diluted earnings per share (a)	$	0.79	$	1.17	$	2.16	$	2.51
Anti-dilutive securities outstanding	6		4		6		4

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

Note 7. Intangible Assets, net and Goodwill

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


	As of
	September 30, 2023						December 31, 2022
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Identifiable assets subject to amortization:
Franchise agreements	$	717	$	(335)	$	382	$	720	$	(313)	$	407
Favorable leases	81		(53)		28		90		(57)		33
Subtotal	798		(388)		410		810		(370)		440
Indefinite-lived intangible assets:
Tim Hortons brand	$	6,285	$	—	$	6,285	$	6,292	$	—	$	6,292
Burger King brand	2,080		—		2,080		2,088		—		2,088
Popeyes brand	1,355		—		1,355		1,355		—		1,355
Firehouse Subs brand	816		—		816		816		—		816
Subtotal	10,536		—		10,536		10,551		—		10,551
Intangible assets, net					$	10,946					$	10,991

Goodwill:
Tim Hortons segment	$	4,054					$	4,059
Burger King segment	588						590
Popeyes segment	846						846
Firehouse Subs segment	193						193
Total	$	5,681					$	5,688

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Amortization expense on intangible assets totaled $9 million for the three months ended September 30, 2023 and 2022. Amortization expense on intangible assets totaled $28 million and $29 million for the nine months ended September 30, 2023 and 2022, respectively. The change in brands and goodwill balances during the nine months ended September 30, 2023 was due to the impact of foreign currency translation.

Note 8. Equity Method Investments

The aggregate carrying amounts of our equity method investments were $135 million and $167 million as of September 30, 2023 and December 31, 2022, 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. based on the quoted market price on September 30, 2023 was approximately $62 million. 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 September 30, 2023 was approximately $32 million. The aggregate market value of our 4.2% equity interest in TH International Limited based on the quoted market price on September 30, 2023 was approximately $12 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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues from affiliates:
Royalties	$	106	$	92	$	301	$	266
Advertising revenues and other services	21		20		59		54
Property revenues	6		8		24		23
Franchise fees and other revenue	6		3		15		12
Sales	4		4		14		12
Total	$	143	$	127	$	413	$	367

At September 30, 2023 and December 31, 2022, we had $58 million and $42 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 $4 million and $5 million during the three months ended September 30, 2023 and 2022, respectively. Distributions received from this joint venture were $9 million and $10 million during the nine months ended September 30, 2023 and 2022, respectively.

Associated with the TIMWEN Partnership, we recognized $5 million of rent expense during the three months ended September 30, 2023 and 2022, and $15 million and $14 million of rent expense during the nine months ended September 30, 2023 and 2022, 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
	September 30, 2023		December 31, 2022
Current:
Dividend payable	$	249	$	243
Interest payable	88		89
Accrued compensation and benefits	110		124
Taxes payable	255		190
Deferred income	86		43
Accrued advertising expenses	55		37
Restructuring and other provisions	16		29
Current portion of operating lease liabilities	140		137
Other	133		109
Other accrued liabilities	$	1,132	$	1,001
Noncurrent:
Taxes payable	$	164	$	139
Contract liabilities	534		540
Derivatives liabilities	—		34
Unfavorable leases	43		50
Accrued pension	41		40
Deferred income	58		44
Other	24		25
Other liabilities, net	$	864	$	872

Note 10. Long-Term Debt

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


	As of
	September 30, 2023		December 31, 2022
Term Loan B	$	5,175	$	5,190
Term Loan A	1,275		1,250

3.875% First Lien Senior Notes due 2028	1,550		1,550
3.50% First Lien Senior Notes due 2029	750