EXHIBIT 99
Restaurant Brands International Inc. Reports Full Year and Fourth Quarter 2019 Results
RBI delivers consolidated system-wide sales growth of 10% in Q4 and over 8% in 2019
More than 27,000 restaurants now open globally following 1,342 net restaurant openings in 2019
BURGER KING® delivers over 9% system-wide sales growth and adds over 1,000 net new restaurants in 2019
POPEYES® delivers transformational system-wide sales growth of over 42% in Q4 boosted by the Chicken Sandwich
TIM HORTONS® announces plan to reignite growth in Canada by focusing on its fundamentals and founding values
Toronto, Ontario – February 10, 2020 – Restaurant Brands International Inc. (TSX/NYSE: QSR, TSX: QSP) today reported financial results for the full year and fourth quarter ended December 31, 2019.
Jose Cil, Chief Executive Officer of Restaurant Brands International Inc. ("RBI") commented, “We have three iconic restaurant brands that are together growing rapidly around the world. Last year, we shared a long-term aspiration to build the most loved restaurant brands in the world and have more than 40,000 restaurants open within 8-10 years. I'm proud that our 2019 results have us solidly on track."
“Burger King delivered its strongest year of restaurant growth in the last two decades. Popeyes launched an iconic Chicken Sandwich that has proven to be a game changer for the brand in every way. At Tim Hortons, our performance did not reflect the incredible power of our brand and it is clear that we have a large opportunity to refocus on our founding values and what has made us famous with our guests over the years, which will be the basis for our plan in 2020."
2019 Growth and Profitability Highlights:
• | System-wide Sales Growth of 8.3% |
• | Net Restaurant Growth of 5.2% |
• | Diluted EPS of $2.37 versus $2.42 in prior year |
• | Adjusted Diluted EPS of $2.72 versus $2.63 in prior year |
• | Net Income Attributable to Common Shareholders and Noncontrolling Interests of $1,109 million versus $1,143 million in prior year |
• | Adjusted EBITDA of $2,304 million increased 6.5% organically versus the prior year |
• | Net cash provided by operating activities of $1,476 million and Free Cash Flow of $1,414 million |
Dividend Update:
• | RBI announced that its board of directors declared a dividend of $0.52 per common share and partnership exchangeable unit of Restaurant Brands International Limited Partnership (“RBI LP”) for Q1 of 2020 |
• | In connection with the declared dividend, RBI also announced that it is targeting a total of $2.08 in dividends per common share and partnership exchangeable unit of RBI LP for 2020 |
1
Consolidated Operational Highlights
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(unaudited) | (unaudited) | ||||||||||||||
System-wide Sales Growth | |||||||||||||||
TH | (2.9 | )% | 2.4 | % | (0.3 | )% | 2.4 | % | |||||||
BK | 8.4 | % | 8.4 | % | 9.3 | % | 8.9 | % | |||||||
PLK | 42.3 | % | 6.3 | % | 18.5 | % | 8.9 | % | |||||||
Consolidated | 9.9 | % | 6.8 | % | 8.3 | % | 7.4 | % | |||||||
System-wide Sales (in US$ millions) | |||||||||||||||
TH | $ | 1,679 | $ | 1,727 | $ | 6,716 | $ | 6,869 | |||||||
BK | $ | 5,905 | $ | 5,528 | $ | 22,921 | $ | 21,624 | |||||||
PLK | $ | 1,327 | $ | 934 | $ | 4,397 | $ | 3,732 | |||||||
Consolidated | $ | 8,911 | $ | 8,189 | $ | 34,034 | $ | 32,225 | |||||||
Net Restaurant Growth | |||||||||||||||
TH | 1.8 | % | 2.1 | % | 1.8 | % | 2.1 | % | |||||||
BK | 5.9 | % | 6.1 | % | 5.9 | % | 6.1 | % | |||||||
PLK | 6.9 | % | 7.3 | % | 6.9 | % | 7.3 | % | |||||||
Consolidated | 5.2 | % | 5.5 | % | 5.2 | % | 5.5 | % | |||||||
System Restaurant Count at Period End | |||||||||||||||
TH | 4,932 | 4,846 | 4,932 | 4,846 | |||||||||||
BK | 18,838 | 17,796 | 18,838 | 17,796 | |||||||||||
PLK | 3,316 | 3,102 | 3,316 | 3,102 | |||||||||||
Consolidated | 27,086 | 25,744 | 27,086 | 25,744 | |||||||||||
Comparable Sales | |||||||||||||||
TH | (4.3 | )% | 1.9 | % | (1.5 | )% | 0.6 | % | |||||||
BK | 2.8 | % | 1.7 | % | 3.4 | % | 2.0 | % | |||||||
PLK | 34.4 | % | 0.1 | % | 12.1 | % | 1.6 | % | |||||||
Note: System-wide sales growth and comparable sales are calculated on a constant currency basis and include sales at franchise restaurants and company-owned restaurants. System-wide sales are driven by sales at franchised restaurants, as approximately 100% of current restaurants are franchised. We do not record franchise sales as revenues; however, our franchise revenues include royalties based on a percentage of franchise sales.
2
Consolidated Financial Highlights
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
(in US$ millions, except per share data) | 2019 | 2018 | 2019 | 2018 | |||||||||||
(unaudited) | (unaudited) | ||||||||||||||
Total Revenues | $ | 1,479 | $ | 1,385 | $ | 5,603 | $ | 5,357 | |||||||
Net Income Attributable to Common Shareholders and Noncontrolling Interests | $ | 255 | $ | 301 | $ | 1,109 | $ | 1,143 | |||||||
Diluted Earnings per Share | $ | 0.54 | $ | 0.64 | $ | 2.37 | $ | 2.42 | |||||||
TH Adjusted EBITDA(1) | $ | 297 | $ | 297 | $ | 1,122 | $ | 1,127 | |||||||
BK Adjusted EBITDA(1) | $ | 266 | $ | 247 | $ | 994 | $ | 928 | |||||||
PLK Adjusted EBITDA(1) | $ | 59 | $ | 37 | $ | 188 | $ | 157 | |||||||
Adjusted EBITDA(2) | $ | 622 | $ | 581 | $ | 2,304 | $ | 2,212 | |||||||
Adjusted Net Income(2) | $ | 351 | $ | 318 | $ | 1,274 | $ | 1,242 | |||||||
Adjusted Diluted Earnings per Share(2) | $ | 0.75 | $ | 0.68 | $ | 2.72 | $ | 2.63 | |||||||
As of December 31, | |||||||
2019 | 2018 | ||||||
(unaudited) | |||||||
LTM Free Cash Flow(2) | $ | 1,414 | $ | 1,079 | |||
Net Debt | $ | 10,763 | $ | 11,372 | |||
Net Leverage(2) | 4.7x | 5.1x | |||||
(1) | TH Adjusted EBITDA, BK Adjusted EBITDA, and PLK Adjusted EBITDA are our measures of segment profitability. |
(2) | Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted Earnings per Share, LTM Free Cash Flow, and Net Leverage are non-GAAP financial measures. Please refer to "Non-GAAP Financial Measures" for further detail. |
Effective January 1, 2019, we adopted the new lease accounting standard ("New Standard"). Our consolidated financial statements for 2019 reflect the application of the New Standard, while our consolidated financial statements for 2018 were prepared under the guidance of the previously applicable lease accounting standard (“Previous Standard”).
The year-over-year change in Total Revenues on a GAAP basis was primarily driven by system-wide sales growth, the impact of the New Standard on franchise and property revenues and an increase in supply chain sales, which include sales of products, supplies and restaurant equipment, as well as sales to retailers, partially offset by FX movements.
The decrease in Net Income Attributable to Common Shareholders and Noncontrolling Interests for the full year and fourth quarter was primarily driven by an increase in income tax expense, the change in other operating expenses (income), net (driven by FX) and loss on early extinguishment of debt, partially offset by growth in segment income.
The year-over year change in Adjusted EBITDA on an organic basis was primarily driven by system-wide sales growth.
3
TH Segment Results
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
(in US$ millions) | 2019 | 2018 | 2019 | 2018 | |||||||||||
(unaudited) | (unaudited) | ||||||||||||||
System-wide Sales Growth | (2.9 | )% | 2.4 | % | (0.3 | )% | 2.4 | % | |||||||
System-wide Sales | $ | 1,679 | $ | 1,727 | $ | 6,716 | $ | 6,869 | |||||||
Comparable Sales | (4.3 | )% | 1.9 | % | (1.5 | )% | 0.6 | % | |||||||
Net Restaurant Growth | 1.8 | % | 2.1 | % | 1.8 | % | 2.1 | % | |||||||
System Restaurant Count at Period End | 4,932 | 4,846 | 4,932 | 4,846 | |||||||||||
Sales | $ | 586 | $ | 574 | $ | 2,204 | $ | 2,201 | |||||||
Franchise and Property Revenues | $ | 286 | $ | 278 | $ | 1,140 | $ | 1,091 | |||||||
Total Revenues | $ | 872 | $ | 852 | $ | 3,344 | $ | 3,292 | |||||||
Cost of Sales | $ | 444 | $ | 438 | $ | 1,677 | $ | 1,688 | |||||||
Franchise and Property Expenses | $ | 90 | $ | 69 | $ | 358 | $ | 279 | |||||||
Segment SG&A | $ | 73 | $ | 76 | $ | 309 | $ | 314 | |||||||
Segment Depreciation and Amortization | $ | 26 | $ | 24 | $ | 106 | $ | 102 | |||||||
Adjusted EBITDA(1)(3) | $ | 297 | $ | 297 | $ | 1,122 | $ | 1,127 | |||||||
(3) | TH Adjusted EBITDA includes $5 million of cash distributions received from equity method investments for each of the three months ended December 31, 2019 and 2018. TH Adjusted EBITDA includes $16 million and $15 million of cash distributions received from equity method investments for the twelve months ended December 31, 2019 and 2018, respectively. |
For the full year and fourth quarter, system-wide sales growth was primarily driven by a decrease in comparable sales of (1.5)% and (4.3)%, respectively, including Canada comparable sales of (1.4)% and (4.6)% for the same periods, partially offset by net restaurant growth of 1.8%.
The year-over-year change in Total Revenues on a GAAP basis was primarily driven by the impact of the New Standard on franchise and property revenues and supply chain sales, which include sales of products, supplies and restaurant equipment, as well as sales to retailers, partially offset by FX movements. On an organic basis, the year-over-year change in Total Revenues was primarily driven by supply chain sales.
The year-over-year change in Adjusted EBITDA on a GAAP and on an organic basis was primarily driven by supply chain and was offset by FX movements on a GAAP basis.
4
BK Segment Results
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
(in US$ millions) | 2019 | 2018 | 2019 | 2018 | |||||||||||
(unaudited) | (unaudited) | ||||||||||||||
System-wide Sales Growth | 8.4 | % | 8.4 | % | 9.3 | % | 8.9 | % | |||||||
System-wide Sales | $ | 5,905 | $ | 5,528 | $ | 22,921 | $ | 21,624 | |||||||
Comparable Sales | 2.8 | % | 1.7 | % | 3.4 | % | 2.0 | % | |||||||
Net Restaurant Growth | 5.9 | % | 6.1 | % | 5.9 | % | 6.1 | % | |||||||
System Restaurant Count at Period End | 18,838 | 17,796 | 18,838 | 17,796 | |||||||||||
Sales | $ | 19 | $ | 19 | $ | 76 | $ | 75 | |||||||
Franchise and Property Revenues | $ | 443 | $ | 408 | $ | 1,701 | $ | 1,576 | |||||||
Total Revenues | $ | 462 | $ | 427 | $ | 1,777 | $ | 1,651 | |||||||
Cost of Sales | $ | 18 | $ | 17 | $ | 71 | $ | 67 | |||||||
Franchise and Property Expenses | $ | 44 | $ | 34 | $ | 168 | $ | 131 | |||||||
Segment SG&A | $ | 151 | $ | 144 | $ | 600 | $ | 577 | |||||||
Segment Depreciation and Amortization | $ | 12 | $ | 12 | $ | 49 | $ | 48 | |||||||
Adjusted EBITDA(1)(4) | $ | 266 | $ | 247 | $ | 994 | $ | 928 | |||||||
(4) | BK Adjusted EBITDA includes $4 million of cash distributions received from equity method investments for each of the three months ended December 31, 2019 and 2018. BK Adjusted EBITDA includes $6 million and $5 million of cash distributions received from equity method investments for the twelve months ended December 31, 2019 and 2018, respectively. |
For the full year and fourth quarter, global system-wide sales growth included system-wide sales growth in the US of 2.7% and 1.4%, respectively, and system-wide sales growth in the rest of the world of 15.3% and 14.5%, respectively. For the full year and fourth quarter, net restaurant growth was 5.9%, while global comparable sales grew 3.4% and 2.8%, respectively, including US comparable sales growth of 1.7% and 0.6%, respectively.
The year-over-year change in Total Revenues on a GAAP basis was primarily driven by system-wide sales growth and the impact of the New Standard on franchise and property revenues, partially offset by FX movements. On an organic basis, the year-over-year change in Total Revenues was primarily driven by system-wide sales growth.
The year-over-year change in Adjusted EBITDA on a GAAP and on an organic basis was primarily driven by system-wide sales growth. This was partially offset by FX movements on a GAAP basis.
5
PLK Segment Results
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
(in US$ millions) | 2019 | 2018 | 2019 | 2018 | |||||||||||
(unaudited) | (unaudited) | ||||||||||||||
System-wide Sales Growth | 42.3 | % | 6.3 | % | 18.5 | % | 8.9 | % | |||||||
System-wide Sales | $ | 1,327 | $ | 934 | $ | 4,397 | $ | 3,732 | |||||||
Comparable Sales | 34.4 | % | 0.1 | % | 12.1 | % | 1.6 | % | |||||||
Net Restaurant Growth | 6.9 | % | 7.3 | % | 6.9 | % | 7.3 | % | |||||||
System Restaurant Count at Period End | 3,316 | 3,102 | 3,316 | 3,102 | |||||||||||
Sales | $ | 22 | $ | 19 | $ | 82 | $ | 79 | |||||||
Franchise and Property Revenues | $ | 123 | $ | 87 | $ | 400 | $ | 335 | |||||||
Total Revenues | $ | 145 | $ | 106 | $ | 482 | $ | 414 | |||||||
Cost of Sales | $ | 17 | $ | 15 | $ | 65 | $ | 63 | |||||||
Franchise and Property Expenses | $ | 5 | $ | 5 | $ | 14 | $ | 12 | |||||||
Segment SG&A | $ | 66 | $ | 52 | $ | 225 | $ | 193 | |||||||
Segment Depreciation and Amortization | $ | 3 | $ | 2 | $ | 11 | $ | 10 | |||||||
Adjusted EBITDA(1) | $ | 59 | $ | 37 | $ | 188 | $ | 157 | |||||||
For the full year and fourth quarter, system-wide sales growth was primarily driven by comparable sales growth and net restaurant growth of 6.9%. For the full year and fourth quarter, comparable sales were 12.1% and 34.4%, respectively, including US comparable sales of 13.0% and 37.9%, respectively.
The year-over-year change in Total Revenues on a GAAP and on an organic basis was primarily driven by system-wide sales growth.
The year-over-year change in Adjusted EBITDA on a GAAP and on an organic basis was primarily driven by system-wide sales growth.
6
Cash and Liquidity
As of December 31, 2019, total debt was $12.3 billion, and net debt (total debt less cash and cash equivalents of $1.5 billion) was $10.8 billion, and net leverage was 4.7x. In the fourth quarter, we took advantage of favorable market conditions to refinance our Term Loan B and issue a New Second Lien Note with a favorable reduction to our overall cost of capital and extension of our debt maturity profile. The RBI board of directors has declared a dividend of $0.52 per common share and partnership exchangeable unit of RBI LP for the first quarter of 2020. The dividend will be payable on April 3, 2020 to shareholders and unitholders of record at the close of business on March 16, 2020. In connection with the declared dividend, RBI also announced that it is targeting a total of $2.08 in dividends per common share and partnership exchangeable unit of RBI LP for 2020.
Investor Conference Call
We will host an investor conference call and webcast at 8:30 a.m. Eastern Time on Monday, February 10, 2020, to review financial results for the full year and fourth quarter ended December 31, 2019. The earnings call will be broadcast live via our investor relations website at http://investor.rbi.com and a replay will be available for 30 days following the release. The dial-in number is (877) 317-6711 for U.S. callers, (866) 450-4696 for Canadian callers, and (412) 317-5475 for callers from other countries.
Contacts
Investors: [email protected]
Media: [email protected]
About Restaurant Brands International Inc.
Restaurant Brands International Inc. (“RBI”) is one of the world’s largest quick service restaurant companies with more than $34 billion in system-wide sales and over 27,000 restaurants in more than 100 countries and U.S. territories. RBI owns three of the world’s most prominent and iconic quick service restaurant brands – TIM HORTONS®, BURGER KING®, and POPEYES®. These independently operated brands have been serving their respective guests, franchisees and communities for over 45 years. To learn more about RBI, please visit the company’s website at www.rbi.com.
Forward-Looking Statements
This press release contains certain forward-looking statements and information, which reflect management's current beliefs and expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties. These forward-looking statements include statements about our expectations regarding our long-term restaurant growth goal and our progress toward that goal, our future plans with respect to our brands and our total dividend target for 2020. The factors that could cause actual results to differ materially from RBI’s expectations are detailed in filings of RBI with the Securities and Exchange Commission and applicable Canadian securities regulatory authorities, such as its annual and quarterly reports and current reports on Form 8-K, and include the following: risks related to RBI’s ability to successfully implement its domestic and international growth strategy and risks related to its international operations; risks related to RBI’s ability to compete domestically and internationally in an intensely competitive industry; risks related to technology; and changes in applicable tax laws or interpretations thereof. Other than as required under U.S. federal securities laws or Canadian 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, change in expectations or otherwise.
7
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 December 31, | Twelve Months Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Sales | $ | 627 | $ | 612 | $ | 2,362 | $ | 2,355 | |||||||
Franchise and property revenues | 852 | 773 | 3,241 | 3,002 | |||||||||||
Total revenues | 1,479 | 1,385 | 5,603 | 5,357 | |||||||||||
Operating costs and expenses: | |||||||||||||||
Cost of sales | 479 | 470 | 1,813 | 1,818 | |||||||||||
Franchise and property expenses | 139 | 108 | 540 | 422 | |||||||||||
Selling, general and administrative expenses | 316 | 297 | 1,264 | 1,214 | |||||||||||
(Income) loss from equity method investments | — | (5 | ) | (11 | ) | (22 | ) | ||||||||
Other operating expenses (income), net | 34 | (1 | ) | (10 | ) | 8 | |||||||||
Total operating costs and expenses | 968 | 869 | 3,596 | 3,440 | |||||||||||
Income from operations | 511 | 516 | 2,007 | 1,917 | |||||||||||
Interest expense, net | 126 | 130 | 532 | 535 | |||||||||||
Loss on early extinguishment of debt | 19 | — | 23 | — | |||||||||||
Income before income taxes | 366 | 386 | 1,452 | 1,382 | |||||||||||
Income tax expense | 109 | 85 | 341 | 238 | |||||||||||
Net income | 257 | 301 | 1,111 | 1,144 | |||||||||||
Net income attributable to noncontrolling interests | 92 | 138 | 468 | 532 | |||||||||||
Net income attributable to common shareholders | $ | 165 | $ | 163 | $ | 643 | $ | 612 | |||||||
Earnings per common share: | |||||||||||||||
Basic | $ | 0.55 | $ | 0.65 | $ | 2.40 | $ | 2.46 | |||||||
Diluted | $ | 0.54 | $ | 0.64 | $ | 2.37 | $ | 2.42 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 298 | 251 | 268 | 249 | |||||||||||
Diluted | 469 | 469 | 469 | 473 | |||||||||||
Cash dividends declared per common share | $ | 0.50 | $ | 0.45 | $ | 2.00 | $ | 1.80 | |||||||
8
RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In millions of U.S. dollars, except share data)
(Unaudited)
As of | |||||||
December 31, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,533 | $ | 913 | |||
Accounts and notes receivable, net of allowance of $13 and $14, respectively | 527 | 452 | |||||
Inventories, net | 84 | 75 | |||||
Prepaids and other current assets | 52 | 60 | |||||
Total current assets | 2,196 | 1,500 | |||||
Property and equipment, net of accumulated depreciation and amortization of $746 and $704, respectively | 2,007 | 1,996 | |||||
Operating lease assets, net | 1,176 | — | |||||
Intangible assets, net | 10,563 | 10,463 | |||||
Goodwill | 5,651 | 5,486 | |||||
Net investment in property leased to franchisees | 48 | 54 | |||||
Other assets, net | 719 | 642 | |||||
Total assets | $ | 22,360 | $ | 20,141 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts and drafts payable | $ | 644 | $ | 513 | |||
Other accrued liabilities | 790 | 637 | |||||
Gift card liability | 168 | 167 | |||||
Current portion of long term debt and finance leases | 101 | 91 | |||||
Total current liabilities | 1,703 | 1,408 | |||||
Term debt, net of current portion | 11,759 | 11,823 | |||||
Finance leases, net of current portion | 288 | 226 | |||||
Operating lease liabilities, net of current portion | 1,089 | — | |||||
Other liabilities, net | 1,698 | 1,547 | |||||
Deferred income taxes, net | 1,564 | 1,519 | |||||
Total liabilities | 18,101 | 16,523 | |||||
Commitments and contingencies | |||||||
Shareholders’ equity: | |||||||
Common shares, no par value; unlimited shares authorized at December 31, 2019 and December 31, 2018; 298,281,081 shares issued and outstanding at December 31, 2019; 251,532,493 shares issued and outstanding at December 31, 2018 | 2,478 | 1,737 | |||||
Retained earnings | 775 | 674 | |||||
Accumulated other comprehensive income (loss) | (763 | ) | (800 | ) | |||
Total Restaurant Brands International Inc. shareholders’ equity | 2,490 | 1,611 | |||||
Noncontrolling interests | 1,769 | 2,007 | |||||
Total shareholders’ equity | 4,259 | 3,618 | |||||
Total liabilities and shareholders’ equity | $ | 22,360 | $ | 20,141 | |||
9
RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In millions of U.S. dollars)
(Unaudited)
Twelve Months Ended December 31, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 1,111 | $ | 1,144 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 185 | 180 | |||||
Premiums paid and non-cash loss on early extinguishment of debt | 16 | — | |||||
Amortization of deferred financing costs and debt issuance discount | 29 | 29 | |||||
(Income) loss from equity method investments | (11 | ) | (22 | ) | |||
Loss (gain) on remeasurement of foreign denominated transactions | (14 | ) | (33 | ) | |||
Net (gains) losses on derivatives | (49 | ) | (40 | ) | |||
Share-based compensation expense | 68 | 48 | |||||
Deferred income taxes | 58 | 29 | |||||
Other | 6 | 5 | |||||
Changes in current assets and liabilities, excluding acquisitions and dispositions: | |||||||
Accounts and notes receivable | (53 | ) | 19 | ||||
Inventories and prepaids and other current assets | (15 | ) | (7 | ) | |||
Accounts and drafts payable | 112 | 41 | |||||
Other accrued liabilities and gift card liability | (51 | ) | (219 | ) | |||
Tenant inducements paid to franchisees | (54 | ) | (52 | ) | |||
Other long-term assets and liabilities | 138 | 43 | |||||
Net cash provided by operating activities | 1,476 | 1,165 | |||||
Cash flows from investing activities: | |||||||
Payments for property and equipment | (62 | ) | (86 | ) | |||
Proceeds from disposal of assets, restaurant closures and refranchisings | 8 | 8 | |||||
Settlement/sale of derivatives, net | 24 | 17 | |||||
Other investing activities, net | — | 17 | |||||
Net cash provided by (used for) investing activities | (30 | ) | (44 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from issuance of long-term debt | 2,250 | 75 | |||||
Repayments of long-term debt and finance leases | (2,266 | ) | (74 | ) | |||
Payments in connection with redemption of preferred shares | — | (60 | ) | ||||
Payment of financing costs | (50 | ) | (3 | ) | |||
Payment of dividends on common and preferred shares and distributions on Partnership exchangeable units | (901 | ) | (728 | ) | |||
Repurchase of Partnership exchangeable units | — | (561 | ) | ||||
Proceeds from stock option exercises | 102 | 61 | |||||
Proceeds from derivatives | 23 | — | |||||
Other financing activities, net | — | 5 | |||||
Net cash used for financing activities | (842 | ) | (1,285 | ) | |||
Effect of exchange rates on cash and cash equivalents | 16 | (20 | ) | ||||
Increase (decrease) in cash and cash equivalents | 620 | (184 | ) | ||||
Cash and cash equivalents at beginning of period | 913 | 1,097 | |||||
Cash and cash equivalents at end of period | $ | 1,533 | $ | 913 | |||
Supplemental cash flow disclosures: | |||||||
Interest paid | $ | 584 | $ | 561 | |||
Income taxes paid | $ | 248 | $ | 433 | |||
10
RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
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 franchise and company-owned restaurants 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 TH and BK and 17 months or longer for PLK. System-wide sales growth and comparable sales are measured on a constant currency basis, which means that results exclude the effect of foreign currency translation and are calculated by translating prior year results at current year monthly average exchange rates. We analyze key operating metrics on a constant currency basis as this helps identify underlying business trends, without distortion from the effects of currency movements.
System-wide sales represent sales at all franchise restaurants and company-owned restaurants. We do not record franchise sales as revenues; however, our franchise revenues include royalties based on a percentage of franchise sales.
Net restaurant growth refers to the net increase in restaurant count (openings, net of closures) over a trailing twelve month period, divided by the restaurant count at the beginning of the trailing twelve month period.
11
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
KPIs by Market | 2019 | 2018 | 2019 | 2018 | |||||||||||
(unaudited) | (unaudited) | ||||||||||||||
System-wide Sales Growth | |||||||||||||||
TH - Canada | (3.3 | )% | 2.2 | % | (0.4 | )% | 2.4 | % | |||||||
TH - Rest of World | (0.1 | )% | 3.6 | % | 0.5 | % | 1.9 | % | |||||||
TH - Global | (2.9 | )% | 2.4 | % | (0.3 | )% | 2.4 | % | |||||||
BK - US | 1.4 | % | 3.0 | % | 2.7 | % | 3.3 | % | |||||||
BK - Rest of World | 14.5 | % | 13.5 | % | 15.3 | % | 14.2 | % | |||||||
BK - Global | 8.4 | % | 8.4 | % | 9.3 | % | 8.9 | % | |||||||
PLK - US | 45.0 | % | 5.0 | % | 18.4 | % | 7.0 | % | |||||||
PLK - Rest of World | 25.2 | % | 14.7 | % | 19.1 | % | 22.0 | % | |||||||
PLK - Global | 42.3 | % | 6.3 | % | 18.5 | % | 8.9 | % | |||||||
System-wide Sales (in US$ millions) | |||||||||||||||
TH - Canada | $ | 1,457 | $ | 1,505 | $ | 5,856 | $ | 6,014 | |||||||
TH - Rest of World | $ | 222 | $ | 222 | $ | 860 | $ | 855 | |||||||
TH - Global | $ | 1,679 | $ | 1,727 | $ | 6,716 | $ | 6,869 | |||||||
BK - US | $ | 2,565 | $ | 2,529 | $ | 10,204 | $ | 9,939 | |||||||
BK - Rest of World | $ | 3,340 | $ | 2,999 | $ | 12,717 | $ | 11,685 | |||||||
BK - Global | $ | 5,905 | $ | 5,528 | $ | 22,921 | $ | 21,624 | |||||||
PLK - US | $ | 1,164 | $ | 802 | $ | 3,812 | $ | 3,221 | |||||||
PLK - Rest of World | $ | 163 | $ | 132 | $ | 585 | $ | 511 | |||||||
PLK - Global | $ | 1,327 | $ | 934 | $ | 4,397 | $ | 3,732 | |||||||
Comparable Sales | |||||||||||||||
TH - Canada | (4.6 | )% | 2.2 | % | (1.4 | )% | 0.9 | % | |||||||
TH - Rest of World | (2.5 | )% | — | % | (2.1 | )% | (1.8 | )% | |||||||
TH - Global | (4.3 | )% | 1.9 | % | (1.5 | )% | 0.6 | % | |||||||
BK - US | 0.6 | % | 0.8 | % | 1.7 | % | 1.4 | % | |||||||
BK - Rest of World | 4.7 | % | 2.4 | % | 4.9 | % | 2.5 | % | |||||||
BK - Global | 2.8 | % | 1.7 | % | 3.4 | % | 2.0 | % | |||||||
PLK - US | 37.9 | % | (0.1 | )% | 13.0 | % | 0.9 | % | |||||||
PLK - Rest of World | 10.3 | % | 1.4 | % | 5.7 | % | 7.1 | % | |||||||
PLK - Global | 34.4 | % | 0.1 | % | 12.1 | % | 1.6 | % | |||||||
12
As of December 31, | |||||
KPIs by Market | 2019 | 2018 | |||
(unaudited) | |||||
Net Restaurant Growth | |||||
TH - Canada | 1.5 | % | 1.1 | % | |
TH - Rest of World | 3.0 | % | 6.7 | % | |
TH - Global | 1.8 | % | 2.1 | % | |
BK - US | 0.2 | % | 1.4 | % | |
BK - Rest of World | 9.8 | % | 9.7 | % | |
BK - Global | 5.9 | % | 6.1 | % | |
PLK - US | 5.5 | % | 6.1 | % | |
PLK - Rest of World | 11.3 | % | 11.0 | % | |
PLK - Global | 6.9 | % | 7.3 | % | |
Restaurant Count | |||||
TH - Canada | 4,014 | 3,955 | |||
TH - Rest of World | 918 | 891 | |||
TH - Global | 4,932 | 4,846 | |||
BK - US | 7,346 | 7,330 | |||
BK - Rest of World | 11,492 | 10,466 | |||
BK - Global | 18,838 | 17,796 | |||
PLK - US | 2,476 | 2,347 | |||
PLK - Rest of World | 840 | 755 | |||
PLK - Global | 3,316 | 3,102 | |||
13
RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Supplemental Disclosure
(Unaudited)
Selling, General and Administrative Expenses
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
(in US$ millions) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Segment SG&A TH(1) | $ | 73 | $ | 76 | $ | 309 | $ | 314 | |||||||
Segment SG&A BK(1) | 151 | 144 | 600 | 577 | |||||||||||
Segment SG&A PLK(1) | 66 | 53 | 225 | 193 | |||||||||||
Share-based compensation and non-cash incentive compensation expense | 12 | 10 | 74 | 55 | |||||||||||
Depreciation and amortization(2) | 5 | 4 | 19 | 20 | |||||||||||
PLK Transaction costs | — | — | — | 10 | |||||||||||
Corporate restructuring and tax advisory fees | 9 | 6 | 31 | 25 | |||||||||||
Office centralization and relocation costs | — | 4 | 6 | 20 | |||||||||||
Selling, general and administrative expenses | $ | 316 | $ | 297 | $ | 1,264 | $ | 1,214 | |||||||
(1) | Segment SG&A includes segment selling expenses and segment general and administrative expenses and excludes share-based compensation and non-cash incentive compensation expense, depreciation and amortization, PLK transaction costs, corporate restructuring and tax advisory fees, and office centralization and relocation costs. |
(2) | Segment depreciation and amortization reflects depreciation and amortization included in the respective segment cost of sales and the respective segment franchise and property expenses. Depreciation and amortization included in selling, general and administrative expenses reflects all other depreciation and amortization. |
Other Operating Expenses (Income), net
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
(in US$ millions) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings(3) | $ | 8 | $ | 2 | $ | 7 | $ | 19 | |||||||
Litigation settlements and reserves, net | 1 | 12 | 2 | 11 | |||||||||||
Net losses (gains) on foreign exchange(4) | 23 | (14 | ) | (15 | ) | (33 | ) | ||||||||
Other, net | 2 | (1 | ) | (4 | ) | 11 | |||||||||
Other operating expenses (income), net | $ | 34 | $ | (1 | ) | $ | (10 | ) | $ | 8 | |||||
(3) | 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. |
(4) | Net losses (gains) on foreign exchange is primarily related to revaluation of foreign denominated assets and liabilities. |
14
RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Non-GAAP Financial Measures
(Unaudited)
Below, we define the non-GAAP financial measures, provide a reconciliation of each non-GAAP financial measure to the most directly comparable financial measure calculated in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), and discuss the reasons why we believe this information is useful to management and may be useful to investors. These measures do not have standardized meanings under GAAP and may differ from similarly captioned measures of other companies in our industry.
Non-GAAP Measures
To supplement our condensed consolidated financial statements presented on a GAAP basis, RBI reports the following non-GAAP financial measures: EBITDA, Adjusted EBITDA, LTM Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted Earnings per Share (“Adjusted Diluted EPS”), Organic revenue growth, Organic Adjusted EBITDA growth, Free Cash Flow, Unlevered Free Cash Flow, and Net Leverage. We believe that these non-GAAP measures are useful to investors in assessing our operating performance or liquidity, 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 these non-GAAP measures, we intend to provide investors with a consistent comparison of our operating results and trends for the periods presented.
EBITDA is defined as earnings (net income or loss) before interest expense, net, loss on early extinguishment of debt, income tax (benefit) expense, and depreciation and amortization and is used by management to measure operating performance of the business. Adjusted EBITDA is defined as EBITDA excluding 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 PLK transaction costs associated with the acquisition of Popeyes, corporate restructuring and tax advisory fees, and office centralization and relocation costs. 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. Adjusted EBITDA, as defined above, also represents our measure of segment income for each of our three operating segments.
Adjusted Net Income is defined as net income excluding (i) franchise agreement amortization as a result of acquisition accounting, (ii) amortization of deferred financing costs and debt issuance discount, (iii) loss on early extinguishment of debt and interest expense, which represents non-cash interest expense related to losses reclassified from accumulated comprehensive income (loss) into interest expense in connection with interest rate swaps de-designated in May 2015 and November 2019, (iv) (income) loss from equity method investments, net of cash distributions received from equity method investments, (v) other operating expenses (income), net, and (vi) other specifically identified costs associated with non-recurring projects.
Adjusted Diluted EPS is calculated by dividing Adjusted Net Income by the weighted average diluted shares outstanding of RBI during the reporting period. Adjusted Net Income and Adjusted Diluted EPS are used by management to evaluate the operating performance of the business, excluding certain 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.
LTM Adjusted EBITDA is defined as Adjusted EBITDA for the last twelve month period to the date reported.
Net Leverage is defined as net debt (total debt less cash and cash equivalents) divided by LTM Adjusted EBITDA. Net Leverage is a performance measure that we believe provides investors a more complete understanding of our leverage position and borrowing capacity after factoring in cash and cash equivalents that eventually could be used to repay outstanding debt.
Revenue growth and Adjusted EBITDA growth, on an organic basis, are non-GAAP measures that exclude the impact of FX movements. Management believes that organic growth is an important metric for measuring the operating
15
performance of our business as it helps identify underlying business trends, without distortion from the effects of FX movements. We calculate the impact of FX movements by translating prior year results at current year monthly average exchange rates. Additionally, for comparability purposes, we are calculating organic growth under Previous Standard for both periods presented.
Free Cash Flow is the total of Net cash provided by (used for) operating activities minus Payments for property and equipment. Free Cash Flow is a liquidity measure used by management as one factor in determining the amount of cash that is available for working capital needs or other uses of cash, however, it does not represent residual cash flows available for discretionary expenditures. Commencing in the first quarter of 2019, we changed our calculation of Free Cash Flow to be defined as Net cash provided by (used for) operating activities minus Payments for property and equipment, as management believes that the other components of Net cash provided by (used for) investing activities that were previously included in the definition (such as restaurant closures/refranchisings and settlement of derivatives) are not core to the business and are subject to significant quarterly fluctuations.
Unlevered Free Cash Flow is the total of net cash provided by operating activities minus payments for property and equipment plus interest paid. Unlevered Free Cash Flow is a liquidity measure used by management as one factor in determining the amount of cash that is available for working capital needs or other uses of cash, however, it does not represent residual cash flows available for discretionary expenditures. 2018 Unlevered Free Cash Flow includes an adjustment for the Part VI.1 Tax Payment made in Q1’18, which was a one-time preferred redemption tax paid as part of a make-whole agreement triggered by the early redemption of preferred shares.
16
RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Non-GAAP Financial Measures
Organic Growth in Revenue and Adjusted EBITDA
Three and Twelve Months Ended December 31, 2019
(Unaudited)
Impact of | Impact of FX | |||||||||||||||||||||||||||||
Actual | Q4 '19 vs. Q4 '18 | New Standard | Movements | Organic Growth | ||||||||||||||||||||||||||
(in US$ millions) | Q4 '19 | Q4 '18 | $ | % | $ | $ | $ | % | ||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||
TH | $ | 872 | $ | 852 | $ | 20 | 2.4 | % | $ | 20 | $ | — | $ | — | (0.1 | )% | ||||||||||||||
BK | $ | 462 | $ | 427 | $ | 35 | 8.4 | % | $ | 10 | $ | (4 | ) | $ | 29 | 7.1 | % | |||||||||||||
PLK | $ | 145 | $ | 106 | $ | 39 | 35.8 | % | $ | 1 | $ | — | $ | 38 | 35.5 | % | ||||||||||||||
Total Revenues | $ | 1,479 | $ | 1,385 | $ | 94 | 6.8 | % | $ | 31 | $ | (4 | ) | $ | 67 | 4.9 | % | |||||||||||||
Adjusted EBITDA | ||||||||||||||||||||||||||||||
TH | $ | 297 | $ | 297 | $ | — | (0.1 | )% | $ | — | $ | — | $ | — | (0.2 | )% | ||||||||||||||
BK | $ | 266 | $ | 247 | $ | 19 | 7.7 | % | $ | — | $ | (3 | ) | $ | 22 | 9.2 | % | |||||||||||||
PLK | $ | 59 | $ | 37 | $ | 22 | 62.4 | % | $ | — | $ | — | $ | 22 | 62.7 | % | ||||||||||||||
Adjusted EBITDA | $ | 622 | $ | 581 | $ | 41 | 7.2 | % | $ | — | $ | (3 | ) | $ | 44 | 7.8 | % | |||||||||||||
Note: Percentage changes may not recalculate due to rounding.
The change in Adjusted EBITDA during the three months ended December 31, 2019 compared to the three months
ended December 31, 2018 includes a decrease of $4 million related to the temporary mismatch between advertising
fund revenues and expenses which had a negative impact of approximately (0.7%) on the organic Adjusted EBITDA
growth rate.
Impact of | Impact of FX | |||||||||||||||||||||||||||||
Actual | 2019 vs. 2018 | New Standard | Movements | Organic Growth | ||||||||||||||||||||||||||
(in US$ millions) | 2019 | 2018 | $ | % | $ | $ | $ | % | ||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||
TH | $ | 3,344 | $ | 3,292 | $ | 52 | 1.6 | % | $ | 85 | $ | (66 | ) | $ | 33 | 1.0 | % | |||||||||||||
BK | $ | 1,777 | $ | 1,651 | $ | 126 | 7.7 | % | $ | 43 | $ | (30 | ) | $ | 113 | 7.0 | % | |||||||||||||
PLK | $ | 482 | $ | 414 | $ | 68 | 16.4 | % | $ | 2 | $ | (1 | ) | $ | 67 | 16.2 | % | |||||||||||||
Total Revenues | $ | 5,603 | $ | 5,357 | $ | 246 | 4.6 | % | $ | 130 | $ | (97 | ) | $ | 213 | 4.0 | % | |||||||||||||
Adjusted EBITDA | ||||||||||||||||||||||||||||||
TH | $ | 1,122 | $ | 1,127 | $ | (5 | ) | (0.5 | )% | $ | — | $ | (22 | ) | $ | 17 | 1.5 | % | ||||||||||||
BK | $ | 994 | $ | 928 | $ | 66 | 7.1 | % | $ | — | $ | (26 | ) | $ | 92 | 10.2 | % | |||||||||||||
PLK | $ | 188 | $ | 157 | $ | 31 | 20.2 | % | $ | — | $ | (1 | ) | $ | 32 | 20.7 | % | |||||||||||||
Adjusted EBITDA | $ | 2,304 | $ | 2,212 | $ | 92 | 4.2 | % | $ | — | $ | (49 | ) | $ | 141 | 6.5 | % | |||||||||||||
Note: Percentage changes may not recalculate due to rounding.
The change in Adjusted EBITDA during the twelve months ended December 31, 2019 compared to the twelve months
ended December 31, 2018 includes a decrease of $12 million related to the temporary mismatch between advertising
fund revenues and expenses which had a negative impact of approximately (0.6%) on the organic Adjusted EBITDA
growth rate.
17
RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Non-GAAP Financial Measures
Reconciliation of EBITDA and Adjusted EBITDA to Net Income
(Unaudited)
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
(in US$ millions) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Segment income: | ||||||||||||||||
TH | $ | 297 | $ | 297 | $ | 1,122 | $ | 1,127 | ||||||||
BK | 266 | 247 | 994 | 928 | ||||||||||||
PLK | 59 | 37 | 188 | 157 | ||||||||||||
Adjusted EBITDA | 622 | 581 | 2,304 | 2,212 | ||||||||||||
Share-based compensation and non-cash incentive compensation expense(1) | 12 | 10 | 74 | 55 | ||||||||||||
PLK Transaction costs(2) | — | — | — | 10 | ||||||||||||
Corporate restructuring and tax advisory fees(3) | 9 | 6 | 31 | 25 | ||||||||||||
Office centralization and relocation costs(4) | — | 4 | 6 | 20 | ||||||||||||
Impact of equity method investments(5) | 10 | 3 | 11 | (3 | ) | |||||||||||
Other operating expenses (income), net | 34 | (1 | ) | (10 | ) | 8 | ||||||||||
EBITDA | 557 | 559 | 2,192 | 2,097 | ||||||||||||
Depreciation and amortization | 46 | 43 | 185 | 180 | ||||||||||||
Income from operations | 511 | 516 | 2,007 | 1,917 | ||||||||||||
Interest expense, net | 126 | 130 | 532 | 535 | ||||||||||||
Loss on early extinguishment of debt | 19 | — | 23 | — | ||||||||||||
Income tax expense(6)(7) | 109 | 85 | 341 | 238 | ||||||||||||
Net income | $ | 257 | $ | 301 | $ | 1,111 | $ | 1,144 | ||||||||
Reconciliation of Net Income to Adjusted Net Income and Adjusted Diluted EPS
(Unaudited)
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
(in US$ millions, except per share data) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income | $ | 257 | $ | 301 | $ | 1,111 | $ | 1,144 | ||||||||
Income tax expense(6)(7) | 109 | 85 | 341 | 238 | ||||||||||||
Income before income taxes | 366 | 386 | 1,452 | 1,382 | ||||||||||||
Adjustments: | ||||||||||||||||
Franchise agreement amortization | 8 | 8 | 31 | 31 | ||||||||||||
Amortization of deferred financing costs and debt issuance discount | 7 | 7 | 29 | 29 | ||||||||||||
Interest expense and loss on extinguished debt(8) | 24 | 3 | 37 | 12 | ||||||||||||
PLK Transaction costs(2) | — | — | — | 10 | ||||||||||||
Corporate restructuring and tax advisory fees(3) | 9 | 6 | 31 | 25 | ||||||||||||
Office centralization and relocation costs(4) | — | 4 | 6 | 20 | ||||||||||||
Impact of equity method investments(5) | 10 | 3 | 11 | (3 | ) | |||||||||||
Other operating expenses (income), net | 34 | (1 | ) | (10 | ) | 8 | ||||||||||
Total adjustments | 92 | 30 | 135 | 132 | ||||||||||||
Adjusted income before income taxes | 458 | 416 | 1,587 | 1,514 | ||||||||||||
Adjusted income tax expense(6)(7)(9) | 107 | 98 | 313 | 272 | ||||||||||||
Adjusted net income | $ | 351 | $ | 318 | $ | 1,274 | $ | 1,242 | ||||||||
Adjusted diluted earnings per share | $ | 0.75 | $ | 0.68 | $ | 2.72 | $ | 2.63 | ||||||||
Weighted average diluted shares outstanding | 469 | 469 | 469 | 473 | ||||||||||||
18
RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Non-GAAP Financial Measures
Reconciliation of Net Leverage, Free Cash Flow and Unlevered Free Cash Flow
(Unaudited)
As of December 31, | ||||||||
(in US$ millions, except ratio) | 2019 | 2018 | ||||||
Term debt, net of current portion | $ | 11,759 | $ | 11,823 | ||||
Finance leases, net of current portion | 288 | 226 | ||||||
Current portion of long term debt and finance leases | 101 | 91 | ||||||
Unamortized deferred financing costs and deferred issue discount | 148 | 145 | ||||||
Total debt | $ | 12,296 | $ | 12,285 | ||||
Cash and cash equivalents | $ | 1,533 | $ | 913 | ||||
Net debt | 10,763 | 11,372 | ||||||
LTM adjusted EBITDA | 2,304 | 2,212 | ||||||
Net leverage | 4.7x | 5.1x | ||||||
Twelve Months Ended December 31, | ||||||||
(in US$ millions) | 2019 | 2018 | ||||||
Net cash provided by operating activities | $ | 1,476 | $ | 1,165 | ||||
Payments for property and equipment | (62 | ) | (86 | ) | ||||
Free cash flow | $ | 1,414 | $ | 1,079 | ||||
Twelve Months Ended December 31, | Nine Months Ended September 30, | Three Months Ended December 31, | ||||||||||
(in US$ millions) | 2019 | 2019 | 2019 | |||||||||
Calculation: | A | B | A - B | |||||||||
Net cash provided by operating activities | $ | 1,476 | $ | 911 | $ | 565 | ||||||
Payments for property and equipment | (62 | ) | (32 | ) | (30 | ) | ||||||
Free cash flow | $ | 1,414 | $ | 879 | $ | 535 | ||||||
Twelve Months Ended December 31, | ||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
(in US$ millions) | ||||||||||||||||||||
Net cash provided by operating activities | $ | 1,476 | $ | 1,165 | $ | 1,391 | $ | 1,250 | $ | 1,211 | ||||||||||
Payments for property and equipment | (62 | ) | (86 | ) | (37 | ) | (34 | ) | (115 | ) | ||||||||||
Interest paid | 584 | 561 | 447 | 407 | 408 | |||||||||||||||
Part VI.1 Tax Payment | — | 277 | — | — | — | |||||||||||||||
Unlevered Free Cash Flow | $ | 1,998 | $ | 1,917 | $ | 1,801 | $ | 1,623 | $ | 1,504 | ||||||||||
19
Non-GAAP Financial Measures
Footnotes to Reconciliation Tables
(1) | Represents share-based compensation expense associated with equity awards for the periods indicated; also |
includes the portion of annual non-cash incentive compensation expense that eligible employees elected to
receive or are expected to elect to receive as common equity in lieu of their 2018 and 2019 cash bonus,
respectively.
(2) | In connection with the acquisition of Popeyes Louisiana Kitchen, Inc., we incurred certain non-recurring selling, |
general and administrative expenses primarily consisting of professional fees and compensation related
expenses.
(3) | Costs arising primarily from professional advisory and consulting services associated with corporate restructuring |
initiatives related to the interpretation and implementation of the Tax Cuts and Jobs Act, which was enacted on
December 22, 2017, including final, proposed and temporary Treasury regulations issued in 2018 and 2019.
(4) | In connection with the centralization and relocation of our Canadian and U.S. restaurant support centers to new |
offices in Toronto, Ontario, and Miami, Florida, respectively, we incurred certain non-operational expenses consisting primarily of duplicate rent expense, moving costs, and relocation-driven compensation expenses.
(5) | 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.
(6) | The effective tax rate for the twelve months ended December 31, 2019 reflects a $37 million income tax expense provision adjustment related to a prior restructuring transaction not applicable to ongoing operations which increased our effective tax rate by 2.5% during the twelve months ended December 31, 2019. The effective tax rate for the three and twelve months ended December 31, 2019 also reflects a $16 million income tax expense provision adjustment related to revaluing our Swiss net deferred tax liabilities due to Swiss tax reform which increased our effective tax rate by 4.3% and 1.1% during the three and twelve months ended December 31, 2019, respectively. Adjusted income tax expense excludes the impact of these adjustments. |
(7) | The effective tax rate was reduced by 0.1% and 0.2% for the three months ended December 31, 2019 and 2018, respectively, and our adjusted effective tax rate was reduced by 0.1% and 0.2% for the three months ended December 31, 2019 and 2018, respectively, as a result of benefits from stock option exercises. The effective tax rate was reduced by 2.2% and 5.0% for the twelve months ended December 31, 2019 and 2018, respectively, and our adjusted effective tax rate was reduced by 2.0% and 4.6% for the twelve months ended December 31, 2019 and 2018, respectively, as a result of benefits from stock option exercises. |
(8) | Represents loss on early extinguishment of debt and interest expense, which represents non-cash interest expense related to losses reclassified from accumulated comprehensive income (loss) into interest expense in connection with interest rate swaps de-designated in May 2015 and November 2019. |
(9) | Adjusted income tax expense includes the tax impact of the non-GAAP adjustments and is calculated using our |
statutory tax rate in the jurisdiction in which the costs were incurred.
20