01—Abstract
Summary
Summary of the 10-K filed February 23, 2021. Cited figures are marked; the original filing is the authoritative source.
Restaurant Brands International Inc. (QSR) reported 2020 results as a Canadian holding company for Tim Hortons, Burger King and Popeyes, with approximately $31 billiona in system-wide sales and approximately 27,000 restaurants in more than 100 countries as of December 31, 2020.
Approximately 100% of system-wide restaurants are franchised. Total revenues fell to $4,968 millionb in 2020 from $5,603 million in 2019, and net income declined to $750 million from $1,111 million. The decline was driven mainly by lower segment income at Tim Hortons ($823 million vs. $1,122 million) and Burger King ($823 million vs. $994 million), partially offset by growth at Popeyes ($218 million vs. $188 million).
Consolidated system-wide sales growth was (8.6)%, and COVID-19 weighed heavily on restaurant operations and franchisee liquidity, which the company supported through rent relief, loans and advanced payments. Cash flow and balance sheet data show cash from operations of $921 millionc in 2020 versus $1,476 million in 2019, cash and cash equivalents of $1,560 million, and total debt and finance lease obligations of $12,823 million. Management refinanced a substantial portion of its debt in 2020, issuing new senior notes and redeeming higher-coupon notes, and recorded a $98 million loss on early extinguishment of debt.
Effective tax rate fell to 8.0% from 23.5%, reflecting a $105 milliond increase in deferred tax assets. The company declared a $0.53 quarterly dividend for the first quarter of 2021 and is targeting $2.12 in total declared dividends per common share for 2021. The filing also highlights ongoing legal exposure, including class actions relating to no-solicitation clauses in franchise agreements, privacy claims tied to the Tim Hortons mobile app, and securities lawsuits.
3G RBH holds approximately 31% of combined voting power. Management expects COVID-19 to continue affecting results in 2021.
02—Key points
Key Highlights
- Total revenues were $4,968 million in 2020, down from $5,603 million in 2019; net income was $750 million versus $1,111 million.
- Consolidated system-wide sales were approximately $30.7 billion in 2020, with consolidated system-wide sales growth of (8.6)%; Tim Hortons (17.5)%, Burger King (11.1)%, Popeyes 17.7%.
- Popeyes segment income rose to $218 million from $188 million, while Tim Hortons and Burger King segment income each declined to $823 million.
- Adjusted EBITDA was $1,864 million in 2020 compared with $2,304 million in 2019.
- Total debt and finance lease obligations were $12,823 million at December 31, 2020, with cash and cash equivalents of $1,560 million and $998 million of revolver availability.
- The company declared a $0.53 per share dividend for Q1 2021 and targets $2.12 in total declared dividends per common share for 2021.
- Ongoing litigation includes class actions over franchise no-poaching clauses, Tim Hortons mobile app privacy claims, and securities lawsuits filed in 2020 and 2021.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Restaurant Brands International kept $0.10.
- Revenue$4.97B100.0%
- Cost of revenue−$1.61B32.4%
- Gross profit$3.36B67.6%
- Operating costs−$1.94B39.0%
- Operating income$1.42B28.6%
- Interest, other & tax−$936.0M18.8%
- Net income$486.0M9.8%
Where FY2020 revenue went
$4.97B- Cost of revenue: $1.61B, 32% of revenue
- SG&A: $1.26B, 25% of revenue
- Interest, other & tax: $936.0M, 19% of revenue
- Other operating costs: $672.0M, 14% of revenue
- Net income: $486.0M, 9.8% of revenue
Kept 9.8% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 23, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $4.97B$5.60B | −11.3% |
| Cost of Revenue | $1.61B$1.81B | −11.2% |
| Gross Profit | $3.36B$3.79B | −11.4% |
| SG&A Expenses | $1.26B$1.26B | 0.0% |
| Operating Expenses | $3.55B$3.60B | −1.4% |
| Operating Income | $1.42B$2.01B | −29.1% |
| Net Income | $486.00M$643.00M | −24.4% |
| EPS (Basic) | $1.61$2.40 | −32.9% |
| EPS (Diluted) | $1.60$2.37 | −32.5% |
| Shares Outstanding (Basic) | 302.00M268.00M | +12.7% |
| Shares Outstanding (Diluted) | 468.00M469.00M | −0.2% |
05—Questions
Frequently Asked Questions
Why did net income decline in 2020?
The filing attributes the decrease primarily to a $299 million decline in Tim Hortons segment income, a $171 million decline in Burger King segment income, a $115 million unfavorable change in other operating expenses (income), net, and a $75 million increase in the loss on early extinguishment of debt. These were partially offset by a $275 million decrease in income tax expense and a $30 million increase in Popeyes segment income.
How did COVID-19 affect the business and franchisees?
Some restaurants were temporarily closed and many operated with limited drive-thru, takeout and delivery service. Over 96% of restaurants were open worldwide as of December 2020. The company offered rent relief to eligible TH and BK franchisees, extended loans to eligible BK franchisees in the U.S., advanced cash payments to eligible TH franchisees in Canada, and temporarily deferred franchisee capital commitments. Management expects continued impact on 2021 results.
What is the company's debt position and how did it change in 2020?
Total debt and finance lease obligations were $12,823 million at December 31, 2020, up from $12,148 million in 2019. During 2020 the company issued $500 million of 5.75% first lien notes, $2,900 million of 4.00% second lien notes and $750 million of 3.50% first lien notes, using proceeds to redeem the 2017 5.00% and 4.25% senior notes. A $98 million loss on early extinguishment of debt was recorded. Borrowing availability under the Revolving Credit Facility was $998 million.
What drove the lower effective tax rate in 2020?
The effective tax rate was 8.0% in 2020 versus 23.5% in 2019. The filing cites a $105 million increase in deferred tax assets, including $64 million from final guidance on a tax attribute carryforward under the Tax Act and $41 million related to Swiss tax reform, which reduced the effective tax rate by 12.9%.
Who controls the company and what are the main legal risks?
3G RBH owns approximately 31% of the combined voting power in the Company and may exert strong influence over decisions. Legal matters include class actions alleging the no-solicitation clauses in BK and TH franchise agreements violated antitrust law, class actions over geolocation data collected through the Tim Hortons mobile app, and securities lawsuits. The company states it believes these claims are without merit and cannot predict their outcomes or estimate possible losses.
06—Continue