Reiterates Guidance for Full-Year 2016
Operating Profit Growth in Constant Currency of 10%
Yum! Brands, Inc. (NYSE: YUM) today reported results for the
fourth quarter ended December 26, 2015. Fourth-quarter EPS
excluding Special Items was $0.68, an increase of 11%. Reported EPS
was $0.63 for the quarter and $2.92 for the year.
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FOURTH-QUARTER
HIGHLIGHTS
- Worldwide system sales grew 6%.
Worldwide restaurant margin increased 3.4 percentage points to
13.6%. Worldwide operating profit increased 17%.
- New global restaurants totaled 1,160,
including 384 in China, 374 at KFC, 270 at Pizza Hut, 109 at Taco
Bell and 23 in India; 83% of international development occurred in
emerging markets.
- China Division system sales increased
7%, driven by 7% unit growth and 2% same-store sales growth.
Restaurant margin increased 4.3 percentage points to 11.4%.
Operating profit increased 207%.
- KFC Division system sales increased 6%,
driven by 3% unit growth and 3% same-store sales growth. Operating
margin increased 0.4 percentage points to 22.4%. Operating profit
increased 7%.
- Pizza Hut Division system sales
increased 2%, driven by 1% unit growth and 1% same-store sales
growth. Operating margin increased 1.0 percentage point to 23.4%.
Operating profit increased 6%.
- Taco Bell Division system sales
increased 7%, driven by 3% unit growth and 4% same-store sales
growth. Operating margin decreased 2.7 percentage points to 25.0%.
Operating profit decreased 7%.
- India Division system sales decreased
9%, driven by a 13% same-store sales decline.
- Worldwide effective tax rate decreased
to 29.4% from 30.0%.
- Foreign currency translation negatively
impacted operating profit by $37 million.
FULL-YEAR HIGHLIGHTS
- Worldwide system sales grew 5%.
Worldwide restaurant margin increased 1.5 percentage points to
16.0%. Worldwide operating profit increased 7%.
- New global restaurants totaled 2,365,
including 743 in China, 715 at KFC, 577 at Pizza Hut, 276 at Taco
Bell and 54 in India; 80% of international development occurred in
emerging markets.
- China Division system sales increased
2%, driven by 7% unit growth and partially offset by a 4%
same-store sales decline. Restaurant margin increased 1.1
percentage points to 15.9%. Operating profit increased 8%.
- KFC Division system sales increased 7%,
driven by 3% unit growth and 3% same-store sales growth. Operating
margin increased 0.8 percentage points to 23.0%. Operating profit
increased 8%.
- Pizza Hut Division system sales
increased 2%, driven by 1% unit growth and 1% same-store sales
growth. Operating margin decreased 0.4 percentage points to 25.2%.
Operating profit increased 1%.
- Taco Bell Division system sales
increased 8%, driven by 3% unit growth and 5% same-store sales
growth. Operating margin increased 1.3 percentage points to 27.1%.
Operating profit increased 12%.
- India Division system sales decreased
5%, driven by a 13% same-store sales decline.
- Worldwide effective tax rate increased
to 25.6% from 25.5%.
- Foreign currency translation negatively
impacted operating profit by $107 million.
Note: All comparisons are versus the same period a year ago and
exclude Special Items unless noted. System sales and operating
profit figures on this page exclude foreign currency translation;
restaurant margin and operating margin figures are as reported.
SUMMARY FINANCIAL TABLE
Fourth
Quarter
Full
Year
2015 2014
% Change 2015
2014 %
Change EPS Excluding Special Items $0.68 $0.61 11% $3.18
$3.09 3% Special Items Gain/(Loss)1 $(0.05) $(0.81) NM $(0.26)
$(0.77) NM EPS $0.63 $(0.20)
NM $2.92 $2.32 26%
1 See Reconciliation of Non-GAAP
Measurements to GAAP Results for further detail of Special Items.
Special Items for 2015 are primarily related to charges for the
refranchising of certain international markets, U.S. refranchising
gains and charges associated with the agreement reached with KFC
U.S. franchisees. Special Items for 2014 are primarily related to
the impairment of Little Sheep and U.S. refranchising gains.
GREG CREED COMMENTS
Greg Creed, CEO, said, “I’m pleased with the positive sales
momentum we generated across the majority of Yum! in the fourth
quarter. KFC China, for example, grew same-store sales 6% in the
last quarter of 2015. Outside of China, each of our brand divisions
grew same-store sales on a one-year and a two-year basis. Our U.S.
results were particularly strong on a two-year basis, with growth
of 2% at Pizza Hut, 8% at KFC and 10% at Taco Bell.
Fourth-quarter EPS grew 11%, with full-year EPS growth of 3%
despite a 7% decline in the first half and six percentage points of
foreign currency headwinds. For the full year, our brand divisions
collectively grew operating profit 8% in constant currency, led by
12% operating profit growth at Taco Bell. Operating profit grew 8%
in constant currency in China with impressive cost management
partially offsetting weaker than originally anticipated sales
results.
New-unit development continues to be a bright spot for our
company. We added more than 2,300 new units globally in 2015. This
year we expect to open nearly 2,400 new restaurants, which means
we’re opening over six new restaurants a day, laying the groundwork
for future growth. With all of this in mind, we are reiterating the
guidance we initially gave in December. Given the results we have
seen year-to-date and the plans we have laid out for each of the
brands, we're confident in our ability to deliver 10% operating
profit growth in constant currency in 2016.
2016 will be a transformational year for Yum! as we are on track
to complete the spin-off of our China Division, ultimately creating
two powerful, independent, focused growth companies. The
fundamental goal of Yum!, however, is unchanged. We are 100%
dedicated to building and strengthening KFC, Pizza Hut and Taco
Bell all around the world, as strong brands are critical to
delivering sustained growth and creating shareholder value over the
long term."
CHINA DIVISION
Fourth
Quarter
Full
Year
% Change %
Change 2015
2014 Reported
Ex F/X 2015
2014 Reported
Ex F/X System Sales Growth +3 +7 Even +2
Same-Store Sales Growth (%) +2 (16) NM NM (4) (5) NM NM Franchise
& License Fees ($MM) 37 33 +12 +16 120 113 +7 +9 Restaurant
Margin (%) 11.4 7.1 4.3 4.3 15.9 14.8 1.1 1.0 Operating Profit
($MM) 96 32 +195
+207 757 713 +6
+8
- China Division system sales
increased 7% for the quarter and 2% for the year, excluding foreign
currency translation.
- KFC same-store sales increased 6% for
the quarter and declined 4% for the year.
- Pizza Hut Casual Dining same-store
sales declined 8% for the quarter and 5% for the year.
- China Division opened 384 new
restaurants in the quarter. For the year, China Division opened 743
new restaurants, including 351 at KFC, 280 at Pizza Hut Casual
Dining and 75 at Pizza Hut Home Service.
China Units Q4 2015
% Change2
Restaurants1 7,176 +7 KFC 5,003 +4
Pizza Hut Casual Dining 1,572 +20 Home Service 331
+28
1 Total includes East Dawning and Little
Sheep units.
2 Represents year-over-year change.
- Restaurant margin increased 4.3
percentage points to 11.4% for the quarter driven by productivity
initiatives and KFC sales leverage. Restaurant margin increased 1.1
percentage points to 15.9% for the year driven by productivity
initiatives, partially offset by sales deleverage.
- Foreign currency translation negatively
impacted operating profit by $4 million for the quarter and $15
million for the year.
KFC DIVISION
Fourth
Quarter
Full
Year
% Change
% Change 2015
2014 Reported
Ex F/X 2015
2014 Reported
Ex F/X Restaurants 14,577 14,197 +3 NA 14,577
14,197 +3 NA System Sales Growth (5) +6 (4) +7 Same-Store Sales
Growth (%) +3 +4 NM NM +3 +3 NM NM Franchise & License Fees
($MM) 263 277 (5) +7 842 873 (4) +7 Restaurant Margin (%) 14.7 13.8
0.9 0.8 14.8 13.3 1.5 1.4 Operating Profit ($MM) 206 221 (7) +7 677
708 (4) +8 Operating Margin (%) 22.4
22.0 0.4 0.3 23.0
22.2 0.8 0.4
- KFC Division system sales
increased 6% for the quarter and 7% for the year, excluding foreign
currency translation.
% Change Int'l Emerging
Markets Int'l Developed Markets
U.S.
FourthQuarter
Full Year
FourthQuarter
Full Year
FourthQuarter
Full Year System Sales Growth (Ex F/X) +10
+11 +6 +6
+1 +2 Same-Store Sales Growth +2
+3 +3 +3 +3
+4
- KFC Division opened 370 new
international restaurants during the quarter.
- For the year, KFC Division opened 705
new international restaurants in 85 countries, including 524 units
in emerging markets. 85% of these new units were opened by
franchisees.
- Operating margin increased 0.4
percentage points for the quarter and 0.8 percentage points for the
year driven by same-store sales growth and new-unit
development.
- Foreign currency translation negatively
impacted operating profit by $31 million for the quarter and $85
million for the year, as approximately 90% of division profits are
generated outside the U.S.
KFC MARKETS1
Percent of KFCSystem Sales
2
SYSTEM Sales Growth Ex F/X
Fourth Quarter (%) Full Year
(%) Emerging Markets Asia (e.g. Malaysia,
Indonesia, Philippines) 8% +8 +6 Africa 6% +4 +9 Latin America
(e.g. Mexico, Peru) 6% +7 +8 Middle East / North Africa 6% +3 +3
Russia 5% +35 +42 Thailand 3% +6 +6 Continental Europe (e.g.
Poland) 3% +12 +13
Developed Markets U.S. 24% +1 +2
Australia 10% +7 +9 Asia (e.g. Japan, Korea, Taiwan) 9% +7 +5 U.K.
9% +2 +3 Continental Europe (e.g. France, Germany) 7% +11 +9 Canada
3% +4 +2 Latin America (e.g. Puerto Rico) 1%
+3 +3
1 See website www.yum.com
under tab "Investors" for a list of the countries within each of
the markets.
2 Reflects Full Year 2015.
PIZZA HUT DIVISION
Fourth
Quarter
Full
Year
% Change
% Change 2015
2014 Reported
Ex F/X 2015
2014 Reported
Ex F/X Restaurants 13,728 13,602 +1 NA 13,728
13,602 +1 NA System Sales Growth (2) +2 (2) +2 Same-Store Sales
Growth (%) +1 Even NM NM +1 (1) NM NM Franchise & License Fees
($MM) 169 167 Even +5 536 541 (1) +3 Restaurant Margin (%) 9.6 6.4
3.2 2.4 9.7 8.2 1.5 1.0 Operating Profit ($MM) 81 80 +3 +6 289 295
(2) +1 Operating Margin (%) 23.4 22.4
1.0 0.6 25.2
25.6 (0.4) (0.6)
- Pizza Hut Division system sales
increased 2% for both the quarter and the year, excluding foreign
currency translation.
% Change Int'l Emerging
Markets Int'l Developed Markets
U.S.
FourthQuarter
Full Year
FourthQuarter
Full Year
FourthQuarter
Full Year System Sales Growth (Ex F/X) +7
+7 Even +1
+2 +1 Same-Store Sales Growth +3
+3 (1) (1) +2
+1
- Pizza Hut Division opened 223 new
international restaurants during the quarter.
- For the year, Pizza Hut Division opened
429 new international restaurants in 64 countries, including 243
units in emerging markets. 92% of these new units were opened by
franchisees.
- Operating margin increased 1.0
percentage point for the quarter led by an increase of 3.2
percentage points in restaurant margin. For the year, operating
margin decreased 0.4 percentage points driven by strategic
investments in international G&A.
- Foreign currency translation negatively
impacted operating profit by $2 million for the quarter and $8
million for the year.
PIZZA HUT MARKETS1
Percent of PizzaHut System
Sales2
SYSTEM Sales Growth Ex F/X Fourth Quarter
(%) Full Year (%) Emerging Markets
Latin America (e.g. Mexico, Peru) 7% +9 +9 Asia (e.g. Malaysia,
Indonesia, Philippines) 5% +5 +4 Middle East / North Africa 5% +5
+6 Continental Europe (e.g. Poland) 1% +14 +11
Developed
Markets U.S. 55% +2 +1 Asia (e.g. Japan, Korea, Taiwan) 9% (2)
(1) U.K. 7% +4 +4 Continental Europe (e.g. France, Germany) 5% +4
+3 Canada 3% +7 +5 Australia 2% (12) (8) Latin America (e.g. Puerto
Rico) 1% (12) (4)
1 See website www.yum.com
under tab "Investors" for a list of the countries within each of
the markets.
2 Reflects Full Year 2015.
TACO BELL DIVISION
Fourth
Quarter
Full
Year
% Change
% Change 2015
2014 Reported
Ex F/X 2015
2014 Reported
Ex F/X Restaurants 6,400 6,199 +3 NA 6,400
6,199 +3 NA System Sales Growth +7 +7 +8 +8 Same-Store Sales Growth
(%) +4 +6 NM NM +5 +3 NM NM Franchise & License Fees ($MM) 138
130 +7 +7 447 411 +9 +9 Restaurant Margin (%) 23.7 20.6 3.1 3.1
22.3 18.9 3.4 3.4 Operating Profit ($MM) 152 163 (7) (7) 539 480
+12 +12 Operating Margin (%) 25.0 27.7
(2.7) (2.7) 27.1
25.8 1.3 1.3
- Taco Bell Division system sales
increased 7% for the quarter and 8% for the year.
- Taco Bell Division opened 109 new
restaurants in the fourth quarter. For the year, Taco Bell Division
opened 276 new restaurants; 87% of these new units were opened by
franchisees.
- Restaurant margin increased 3.1
percentage points to 23.7% for the quarter driven by favorable U.S.
commodities and same-store sales growth. Restaurant margin
increased 3.4 percentage points to 22.3% for the year driven by
same-store sales growth.
- Operating margin decreased 2.7
percentage points for the quarter driven by an expected increase in
G&A related to incentive compensation, investment spending on
strategic growth and technology initiatives, legal costs and
creation of the Live Más scholarship program. The majority of the
increase is either nonrecurring in nature or represents investments
to sustain positive brand momentum. This was partially offset by
same-store sales growth. For the year, operating margin increased
1.3 percentage points driven by same-store sales growth, partially
offset by an increase in G&A primarily attributable to
incentive compensation, pension and previously mentioned
investments.
INDIA DIVISION
- India Division system sales
decreased 9% for the quarter and 5% for the year, excluding foreign
currency translation.
- Operating loss was $4 million for the
quarter and $19 million for the year.
- During the quarter, we refranchised 86
KFC units, reducing equity ownership in India from 25% to 15%.
India Units
Q4 2015 % Change2
Restaurants1 811 (3) KFC 372 (6) Pizza
Hut Casual Dining 170 (8) Home Service 262
+7
1 Total includes 7 Taco Bell units.
2 Represents year-over-year change.
SPECIAL ITEMS / SHARE REPURCHASE
UPDATE
- For the fourth quarter in the U.S., we
refranchised 36 Taco Bell units and sold real estate related to 19
previously refranchised KFC units, resulting in total proceeds of
$75 million. We recorded pre-tax U.S. refranchising gains of $51
million in Special Items. At the end of the fourth quarter, our
company ownership in the U.S. across our three branded divisions
was 9%.
- During the first quarter of 2015, we
reached an agreement with our KFC U.S. franchisees that will give
us brand marketing control, as well as an accelerated path to
expanded menu offerings, improved assets and an enhanced customer
experience. In connection with this agreement, we recognized a
Special Items charge of $41 million during the fourth quarter,
primarily related to the funding of investments for new
back-of-house equipment for franchisees.
- In the fourth quarter, we repurchased
11.4 million shares totaling $830 million at an average price of
$73. For the year, we repurchased 15.9 million shares totaling $1.2
billion at an average price of $75, with 420 million shares
outstanding as of year end. During 2015, we reduced our outstanding
share count by 14 million. For fiscal year 2016 through February 2,
2016, we repurchased 10.8 million shares totaling $749 million at
an average price of $70.
CONFERENCE CALL
Yum! Brands, Inc. will host a conference call to review the
company's financial performance and strategies at 9:15 a.m. Eastern
Time Thursday, February 4, 2016. The number is 877/815-2029 for
U.S. callers and 706/645-9271 for international callers.
The call will be available for playback beginning at 12:30 p.m.
Eastern Time Thursday, February 4, through midnight Thursday, March
3, 2016. To access the playback, dial 855/859-2056 in the United
States and 404/537-3406 internationally. The playback passcode is
19873670.
The webcast and the playback can be accessed via the internet by
visiting Yum! Brands' website, www.yum.com/investors and selecting “Q4 2015
Earnings Conference Call” under “Events & Presentations.”
ADDITIONAL INFORMATION
ONLINE
Quarter end dates for each division, restaurant-count details
and definitions of terms are available online at www.yum.com under
“Investors.”
This announcement may contain “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. We intend all
forward-looking statements to be covered by the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements generally can be identified by the fact
that they do not relate strictly to historical or current facts and
by the use of forward-looking words such as “expect,”
“expectation,” “believe,” “anticipate,” “may,” “could,” “intend,”
“belief,” “plan,” “estimate,” “target,” “predict,” “likely,”
“will,” “should,” “forecast,” “outlook” or similar terminology.
These statements are based on current estimates and assumptions
made by us in light of our experience and perception of historical
trends, current conditions and expected future developments, as
well as other factors that we believe are appropriate and
reasonable under the circumstances, but there can be no assurance
that such estimates and assumptions will prove to be correct.
Forward-looking statements reflect our current expectations,
estimates or projections concerning future results or events,
including, without limitation, statements regarding the intended
capital return to shareholders as well as the related borrowing
required to fund such capital return, the planned separation of the
Yum! Brands and Yum! China businesses, the timing of any such
separation, the future earnings and performance as well as capital
structure of Yum! Brands, Inc. or any of its businesses, including
the Yum! Brands and Yum! China businesses on a standalone basis if
the separation is completed. Forward-looking statements are not
guarantees of performance and are inherently subject to known and
unknown risks, uncertainties and assumptions that are difficult to
predict and could cause our actual results to differ materially
from those indicated by those statements. We cannot assure you that
any of our expectations, estimates or projections will be achieved.
The forward-looking statements included in this announcement are
only made as of the date of this announcement and we disclaim any
obligation to publicly update any forward-looking statement to
reflect subsequent events or circumstances. Numerous factors could
cause our actual results and events to differ materially from those
expressed or implied by forward-looking statements, including,
without limitation: whether we are able to return capital to
shareholders at the times and in the amounts currently anticipated,
if at all, as well as the corresponding costs of borrowing to fund
such capital return as well as other costs; whether the separation
of the Yum! Brands and Yum! China businesses is completed, as
expected or at all, and the timing of any such separation; whether
the operational and strategic benefits of the separation can be
achieved; whether the costs and expenses of the separation can be
controlled within expectations, including potential tax costs; as
well as other risks. In addition, other risks and uncertainties not
presently known to us or that we currently believe to be immaterial
could affect the accuracy of any such forward-looking statements.
All forward-looking statements should be evaluated with the
understanding of their inherent uncertainty. You should consult our
filings with the Securities and Exchange Commission (including the
information set forth under the captions “Risk Factors” and
“Forward-Looking Statements” in our Annual Report on Form 10-K) for
additional detail about factors that could affect our financial and
other results. Reconciliation of non-GAAP financial measures to the
most directly comparable GAAP measures are included on our website
at www.yum.com/investors.
Yum! Brands, Inc., based in Louisville, Kentucky, has over
42,500 restaurants in more than 130 countries and territories. Yum!
is ranked #228 on the Fortune 500 List with revenues of over $13
billion in 2015 and is one of the Aon Hewitt Top Companies for
Leaders in North America. The Company's restaurant brands - KFC,
Pizza Hut and Taco Bell - are the global leaders of the chicken,
pizza and Mexican-style food categories. Outside the United States,
the Yum! Brands system opens over five new restaurants per day on
average, making it a leader in international retail
development.
YUM! Brands, Inc.
Consolidated Summary of Results
(amounts in millions, except per share
amounts)
(unaudited)
Quarter ended % Change Year ended % Change 12/26/15
12/27/14 B/(W) 12/26/15 12/27/14 B/(W)
Company sales $ 3,339 $ 3,383 (1) $ 11,145 $ 11,324 (2) Franchise
and license fees and income 612 614 — 1,960
1,955 — Total revenues 3,951 3,997 (1) 13,105
13,279 (1) Company restaurant expenses Food
and paper 1,045 1,116 6 3,507 3,678 5 Payroll and employee benefits
797 824 3 2,517 2,579 2 Occupancy and other operating expenses
1,043 1,099 5 3,335 3,425 3 Company
restaurant expenses 2,885 3,039 5 9,359 9,682 3 General and
administrative expenses 528 473 (11) 1,504 1,419 (6) Franchise and
license expenses 96 51 (88) 242 160 (51) Closures and impairment
(income) expenses 49 505 90 79 535 85 Refranchising (gain) loss (50
) (6 ) NM 10 (33 ) NM Other (income) expense 2 (22 ) NM (10
) (41 ) (75) Total costs and expenses, net 3,510 4,040
13 11,184 11,722 5 Operating Profit
(loss) 441 (43 ) NM 1,921 1,557 23 Interest expense, net 35
40 8 134 130 (4) Income (loss) before income
taxes 406 (83 ) NM 1,787 1,427 25 Income tax provision 131
36 NM 489 406 (20) Net income (loss) -
including noncontrolling interests 275 (119 ) NM 1,298 1,021 27 Net
income (loss) - noncontrolling interests — (33 ) (98) 5
(30 ) NM Net income (loss) - YUM! Brands, Inc. $ 275
$ (86 ) NM $ 1,293 $ 1,051 23
Effective tax
rate
32.2 % (44.1 )% NM 27.3 % 28.5 % 1.2 ppts.
Basic EPS
Data
EPS $ 0.64 $ (0.20 ) NM $ 2.97 $ 2.37 25
Weighted average shares used in computation 433 441 2
436 444 2
Diluted EPS
Data
EPS $ 0.63 $ (0.20 ) NM $ 2.92 $ 2.32 26
Weighted average shares used in computation 439 441 —
443 453 2 Dividends declared per common share
$ 0.92 $ 0.82 $ 1.74 $ 1.56
See accompanying notes.
Percentages may not recompute due to rounding.
YUM! Brands, Inc.
CHINA DIVISION Operating
Results
(amounts in millions)
(unaudited)
Quarter ended % Change Year ended % Change 12/26/15
12/27/14 B/(W) 12/26/15 12/27/14 B/(W)
Company sales $ 2,011 $ 1,973 2 $ 6,789 $ 6,821 — Franchise and
license fees and income 37 33 12 120 113
7 Total revenues 2,048 2,006 2 6,909
6,934 — Company restaurant expenses Food and paper
641 660 3 2,159 2,207 2 Payroll and employee benefits 453 463 2
1,386 1,407 2 Occupancy and other operating expenses 686 710
3 2,167 2,198 1 Company restaurant expenses
1,780 1,833 3 5,712 5,812 2 General and administrative expenses 139
132 (5) 397 391 (2) Franchise and license expenses 5 5 (4) 20 16
(25) Closures and impairment (income) expenses 42 31 (37) 64 54
(19) Other (income) expense (14 ) (27 ) (46) (41 ) (52 ) (22) Total
costs and expenses, net 1,952 1,974 1 6,152
6,221 1 Operating Profit $ 96 $ 32 NM $ 757
$ 713 6 Company sales 100.0 % 100.0 % 100.0 %
100.0 % Food and paper 31.8 33.4 1.6 ppts. 31.8 32.4 0.6 ppts.
Payroll and employee benefits 22.6 23.5 0.9 ppts. 20.4 20.6 0.2
ppts. Occupancy and other operating expenses 34.2 36.0
1.8 ppts. 31.9 32.2 0.3 ppts. Restaurant
margin 11.4 % 7.1 % 4.3 ppts. 15.9 % 14.8 % 1.1 ppts.
Operating margin 4.7 % 1.6 % 3.1 ppts. 11.0 % 10.3 % 0.7 ppts.
See accompanying notes.
Percentages may not recompute due to rounding.
YUM! Brands, Inc.
KFC DIVISION Operating Results
(amounts in millions)
(unaudited)
Quarter ended % Change Year ended % Change 12/26/15
12/27/14 B/(W) 12/26/15 12/27/14 B/(W)
Company sales $ 655 $ 727 (10) $ 2,106 $ 2,320 (9) Franchise and
license fees and income 263 277 (5) 842 873
(4) Total revenues 918 1,004 (9) 2,948
3,193 (8) Company restaurant expenses Food and paper
222 254 12 717 809 11 Payroll and employee benefits 155 168 8 497
552 10 Occupancy and other operating expenses 182 206
12 580 651 11 Company restaurant expenses 559 628 11
1,794 2,012 11 General and administrative expenses 122 122 — 386
383 (1) Franchise and license expenses 26 26 (3) 85 80 (7) Closures
and impairment (income) expenses 6 7 18 8 9 15 Other (income)
expense (1 ) — NM (2 ) 1 NM Total costs and expenses,
net 712 783 9 2,271 2,485 9 Operating
Profit $ 206 $ 221 (7) $ 677 $ 708 (4)
Company sales 100.0 % 100.0 % 100.0 % 100.0 % Food and paper
33.8 34.8 1.0 ppts. 34.0 34.8 0.8 ppts. Payroll and employee
benefits 23.7 23.0 (0.7 ppts.) 23.6 23.8 0.2 ppts. Occupancy and
other operating expenses 27.8 28.4 0.6 ppts. 27.6
28.1 0.5 ppts. Restaurant margin 14.7 % 13.8 % 0.9
ppts. 14.8 % 13.3 % 1.5 ppts. Operating margin 22.4 % 22.0 %
0.4 ppts. 23.0 % 22.2 % 0.8 ppts.
See accompanying notes.
Percentages may not recompute due to rounding.
YUM! Brands, Inc.
PIZZA HUT DIVISION Operating
Results
(amounts in millions)
(unaudited)
Quarter ended % Change Year ended % Change 12/26/15
12/27/14 B/(W) 12/26/15 12/27/14 B/(W)
Company sales $ 179 $ 185 (3) $ 609 $ 607 — Franchise and license
fees and income 169 167 — 536 541 (1)
Total revenues 348 352 (1) 1,145 1,148
— Company restaurant expenses Food and paper 49 54 9 169 180
6 Payroll and employee benefits 57 59 4 190 188 (1) Occupancy and
other operating expenses 56 60 7 191 189
(1) Company restaurant expenses 162 173 6 550 557 1 General
and administrative expenses 90 81 (9) 266 246 (8) Franchise and
license expenses 14 15 15 39 44 14 Closures and impairment (income)
expenses 1 3 48 3 5 29 Other (income) expense — — 17
(2 ) 1 NM Total costs and expenses, net 267 272
3 856 853 — Operating Profit $ 81 $ 80
3 $ 289 $ 295 (2) Company sales 100.0 %
100.0 % 100.0 % 100.0 % Food and paper 27.9 29.6 1.7 ppts. 27.8
29.7 1.9 ppts. Payroll and employee benefits 31.3 31.6 0.3 ppts.
31.1 30.9 (0.2 ppts.) Occupancy and other operating expenses 31.2
32.4 1.2 ppts. 31.4 31.2 (0.2 ppts.)
9.6 % 6.4 % 3.2 ppts. 9.7 % 8.2 % 1.5 ppts. Operating margin
23.4 % 22.4 % 1.0 ppts. 25.2 % 25.6 % (0.4 ppts.)
See accompanying notes.
Percentages may not recompute due to rounding.
YUM! Brands, Inc.
TACO BELL DIVISION Operating
Results
(amounts in millions)
(unaudited)
Quarter ended % Change Year ended % Change 12/26/15
12/27/14 B/(W) 12/26/15 12/27/14 B/(W)
Company sales $ 470 $ 460 2 $ 1,541 $ 1,452 6 Franchise and license
fees and income 138 130 7 447 411 9
Total revenues 608 590 3 1,988 1,863 7
Company restaurant expenses Food and paper 124 134 8 421 431
2 Payroll and employee benefits 128 127 — 427 414 (3) Occupancy and
other operating expenses 107 104 (3) 350 333
(5) Company restaurant expenses 359 365 2 1,198 1,178 (2)
General and administrative expenses 88 57 (56) 228 185 (23)
Franchise and license expenses 10 5 NM 22 18 (24) Closures and
impairment (income) expenses — 1 NM 3 3 (35) Other (income) expense
(1 ) (1 ) (11) (2 ) (1 ) NM Total costs and expenses, net 456
427 (7) 1,449 1,383 (5) Operating
Profit $ 152 $ 163 (7) $ 539 $ 480 12
Company sales 100.0 % 100.0 % 100.0 % 100.0 % Food and paper
26.4 29.2 2.8 ppts. 27.3 29.7 2.4 ppts. Payroll and employee
benefits 27.2 27.7 0.5 ppts. 27.7 28.5 0.8 ppts. Occupancy and
other operating expenses 22.7 22.5 (0.2 ppts.) 22.7
22.9 0.2 ppts. 23.7 % 20.6 % 3.1 ppts. 22.3 % 18.9 %
3.4 ppts. Operating margin 25.0 % 27.7 % (2.7 ppts.) 27.1 %
25.8 % 1.3 ppts.
See accompanying notes.
Percentages may not recompute due to rounding.
YUM! Brands, Inc.
Consolidated Balance Sheets
(amounts in millions)
(unaudited) 12/26/2015
12/27/2014
ASSETS Current Assets Cash and cash
equivalents $ 737 $ 578 Accounts and notes receivable, less
allowance: $16 in 2015 and $12 in 2014 377 325 Inventories 229 301
Prepaid expenses and other current assets 242 254 Advertising
cooperative assets, restricted 103 95
Total
Current Assets 1,688 1,553
Property, plant and equipment, net of
accumulated depreciation and amortization of $3,643 in 2015 and
$3,584 in 2014
4,189 4,498 Goodwill 656 700 Intangible assets, net 271 318
Investments in unconsolidated affiliates 61 52 Other assets 534 560
Deferred income taxes 676 653
Total Assets $
8,075 $ 8,334
LIABILITIES AND SHAREHOLDERS'
EQUITY Current Liabilities Accounts payable and other
current liabilities $ 1,985 $ 1,970 Income taxes payable 77 77
Short-term borrowings 923 267 Advertising cooperative liabilities
103 95
Total Current Liabilities 3,088
2,409 Long-term debt 3,054 3,077 Other liabilities
and deferred credits 958 1,235
Total
Liabilities 7,100 6,721 Redeemable
noncontrolling interest 6 9
Shareholders'
Equity Common stock, no par value, 750 shares authorized; 420
shares and 434 shares issued in 2015 and 2014, respectively — —
Retained earnings 1,150 1,737 Accumulated other comprehensive
income (loss) (239 ) (190 )
Total Shareholders' Equity - YUM!
Brands, Inc. 911 1,547 Noncontrolling interests 58 57
Total Shareholders' Equity 969 1,604
Total Liabilities, Redeemable Noncontrolling Interest and
Shareholders' Equity $ 8,075 $ 8,334
See accompanying notes.
YUM! Brands, Inc.
Consolidated Statements of Cash
Flows
(amounts in millions)
Year ended (unaudited) 12/26/15 12/27/14
Cash Flows - Operating Activities Net income - including
noncontrolling interests $ 1,298 $ 1,021 Depreciation and
amortization 747 739 Closures and impairment (income) expenses 79
535 Refranchising (gain) loss 10 (33 ) Contributions to defined
benefit pension plans (98 ) (18 ) Losses and other costs related to
the extinguishment of debt — — Deferred income taxes (89 ) (172 )
Equity income from investments in unconsolidated affiliates (41 )
(30 ) Distribution of income received from unconsolidated
affiliates 21 28 Excess tax benefit from share-based compensation
(50 ) (42 ) Share-based compensation expense 57 55 Changes in
accounts and notes receivable
(54
) (21 ) Changes in inventories 58 (22 ) Changes in prepaid expenses
and other current assets (22 ) 12 Changes in accounts payable and
other current liabilities
128
60 Changes in income taxes payable 20 (143 ) Other, net
75
80
Net Cash Provided by Operating Activities
2,139 2,049
Cash Flows - Investing
Activities Capital spending (973 ) (1,033 ) Proceeds from
refranchising of restaurants 246 114 Acquisitions (9 ) (28 ) Other,
net 54 11
Net Cash Used in Investing
Activities (682 ) (936 )
Cash Flows - Financing
Activities Proceeds from long-term debt — — Repayments of
long-term debt (263 ) (66 ) Revolving credit facilities, three
months or less, net 285 416 Short-term borrowings, by original
maturity More than three months - proceeds 609 2 More than three
months - payments — (2 ) Three months or less, net — — Repurchase
shares of Common Stock (1,200 ) (820 ) Excess tax benefit from
share-based compensation 50 42 Employee stock option proceeds 12 29
Dividends paid on Common Stock (730 ) (669 ) Other, net (55 ) (46 )
Net Cash Used in Financing Activities (1,292 ) (1,114 )
Effect of Exchange Rate on Cash and Cash Equivalents (6 ) 6
Net Increase in Cash and Cash Equivalents 159 5
Cash and Cash Equivalents - Beginning of Period 578
573
Cash and Cash Equivalents - End of Period $ 737
$ 578
See accompanying notes.
Reconciliation of Non-GAAP Measurements to
GAAP Results(amounts in millions, except per share
amounts)(unaudited)
In addition to the results provided in accordance with U.S.
Generally Accepted Accounting Principles ("GAAP") throughout this
document, the Company has provided non-GAAP measurements which
present operating results in 2015 and 2014 on a basis before
Special Items. Included in Special Items are gains/(losses)
associated with the refranchising of equity markets outside the
U.S., costs associated with the KFC U.S. Acceleration Agreement, a
loss associated with the planned sale of an aircraft in China,
costs associated with the planned spin-off of the China business
and YUM! recapitalization, U.S. refranchising gains and the
impairment of certain Little Sheep assets in 2014. These amounts
are described in (c), (d), (e), (f), (g) and (h) in the
accompanying notes.
The Company uses earnings before Special Items as a key
performance measure of results of the operations for the purpose of
evaluating performance internally and Special Items are not
included in any of our segment results. This non-GAAP measurement
is not intended to replace the presentation of our financial
results in accordance with GAAP. Rather, the Company believes that
the presentation of earnings before Special Items provides
additional information to investors to facilitate the comparison of
past and present operations, excluding items in the quarters and
years to date ended December 26, 2015 and December 27, 2014 that
the Company does not believe are indicative of our ongoing
operations due to their size and/or nature.
Quarter ended Year ended 12/26/15
12/27/14 12/26/15 12/27/14
Detail of
Special Items
Gains (Losses) associated with the
refranchising of equity markets outside the U.S.(c)
$ (3 ) $ — $ (96 ) $ 7
Costs associated with KFC U.S.
Acceleration Agreement(d)
(41 ) — (72 ) — Loss associated with planned sale of China
aircraft(e) (15 ) — (15 ) — Costs associated with the planned
spin-off of the China business and YUM recapitalization(f) (9 ) —
(9 ) — U.S. Refranchising gain (loss)(g) 51 (5 ) 75 6 Little Sheep
impairment(h) — (463 ) — (463 ) Other Special Items Income
(Expense) — 3 1 3 Special Items Income
(Expense) before income taxes (17 ) (465 ) (116 ) (447 ) Tax
Benefit (Expense) on Special Items (6 ) 78 (1 ) 72
Special Items Income (Expense), net of tax - including
noncontrollng interests (23 ) (387 ) (117 ) (375 ) Special Items
Income (Expense), net of tax - noncontrolling interests — 26
— 26 Special Items Income (Expense), net of
tax - Yum Brands, Inc. $ (23 ) $ (361 ) $ (117 ) $ (349 ) Weighted
average shares used in computation 439 441 443
453 Special Items diluted EPS $ (0.05 ) $ (0.81 ) $ (0.26 )
$ (0.77 )
Reconciliation of Operating Profit Before
Special Items to Reported Operating Profit Operating Profit
Before Special Items $ 458 $ 422 $ 2,037 $ 2,004 Special Items
Income (Expense) - Operating Profit (17 ) (465 ) (116 ) (447 )
Reported Operating Profit (loss) $ 441 $ (43 ) $ 1,921
$ 1,557
Reconciliation of EPS Before
Special Items to Reported EPS Diluted EPS Before Special Items
$ 0.68 $ 0.61 $ 3.18 $ 3.09 Special Items EPS (0.05 ) (0.81 ) (0.26
) (0.77 ) Reported EPS $ 0.63 $ (0.20 ) $ 2.92 $ 2.32
Reconciliation of Effective Tax Rate Before
Special Items to Reported Effective Tax Rate Effective Tax Rate
Before Special Items 29.4 % 30.0 % 25.6 % 25.5 % Impact on Tax Rate
as a result of Special Items 2.8 % (74.1 )% 1.7 % 3.0 % Reported
Effective Tax Rate 32.2 % (44.1 )% 27.3 % 28.5 %
YUM! Brands, Inc.
Segment Results
(amounts in millions)
(unaudited)
Quarter Ended 12/26/15 China KFC Pizza Hut Taco Bell
India
Corporate
and
Unallocated
Consolidated Total revenues $ 2,048 $ 918 $ 348
$ 608 $ 29 $ — $ 3,951
Company restaurant expenses 1,780 559 162 359 25 — 2,885 General
and administrative expenses 139 122 90 88 7 82 528 Franchise and
license expenses 5 26 14 10 1 40 96 Closures and impairment
(income) expenses 42 6 1 — — — 49 Refranchising (gain) loss — — — —
— (50 ) (50 ) Other (income) expense (14 ) (1 ) — (1 ) —
18 2 1,952 712 267 456
33 90 3,510 Operating Profit (loss) $
96 $ 206 $ 81 $ 152 $ (4 ) $ (90 ) $
441
Quarter Ended 12/27/14 China KFC
Pizza Hut Taco Bell India
Corporate
and
Unallocated
Consolidated Total revenues $ 2,006 $ 1,004 $ 352
$ 590 $ 45 $ — $ 3,997
Company restaurant expenses 1,833 628 173 365 39 1 3,039 General
and administrative expenses 132 122 81 57 8 73 473 Franchise and
license expenses 5 26 15 5 — — 51 Closures and impairment (income)
expenses 31 7 3 1 — 463 505 Refranchising (gain) loss — — — — — (6
) (6 ) Other (income) expense (27 ) — — (1 ) —
6 (22 ) 1,974 783 272 427 47
537 4,040 Operating Profit (loss) $ 32
$ 221 $ 80 $ 163 $ (2 ) $ (537 ) $ (43 )
The above tables reconcile segment information, which is based
on management responsibility, with our Consolidated Summary of
Results. Corporate and unallocated expenses comprise items that are
not allocated to segments for performance reporting purposes.
The Corporate and Unallocated column in the above tables
includes, among other amounts, all amounts that we have deemed
Special Items. See Reconciliation of Non-GAAP Measurements to GAAP
Results.
YUM! Brands, Inc.
Segment Results
(amounts in millions)
(unaudited)
Year Ended 12/26/15 China KFC Pizza Hut Taco Bell
India
Corporate
and
Unallocated
Consolidated Total revenues $ 6,909 $ 2,948 $ 1,145
$ 1,988 $ 115 $ — $ 13,105
Company restaurant expenses 5,712 1,794 550 1,198 105 —
9,359 General and administrative expenses 397 386 266 228 23 204
1,504 Franchise and license expenses 20 85 39 22 5 71 242 Closures
and impairment (income) expenses 64 8 3 3 1 — 79 Refranchising
(gain) loss — — — — — 10 10 Other (income) expense (41 ) (2 ) (2 )
(2 ) — 37 (10 ) 6,152 2,271 856
1,449 134 322 11,184 Operating Profit
(loss) $ 757 $ 677 $ 289 $ 539 $ (19 )
$ (322 ) $ 1,921
Year Ended 12/27/14
China KFC Pizza Hut Taco Bell India
Corporate
and
Unallocated
Consolidated Total revenues $ 6,934 $ 3,193 $ 1,148
$ 1,863 $ 141 $ — $ 13,279
Company restaurant expenses 5,812 2,012 557 1,178 122 1
9,682 General and administrative expenses 391 383 246 185 25 189
1,419 Franchise and license expenses 16 80 44 18 2 — 160 Closures
and impairment (income) expenses 54 9 5 3 1 463 535 Refranchising
(gain) loss — — — — — (33 ) (33 ) Other (income) expense (52 ) 1
1 (1 ) — 10 (41 ) 6,221 2,485
853 1,383 150 630 11,722
Operating Profit (loss) $ 713 $ 708 $ 295 $
480 $ (9 ) $ (630 ) $ 1,557
The above tables reconcile segment information, which is based
on management responsibility, with our Consolidated Summary of
Results. Corporate and unallocated expenses comprise items that are
not allocated to segments for performance reporting purposes.
The Corporate and Unallocated column in the above tables
includes, among other amounts, all amounts that we have deemed
Special Items. See Reconciliation of Non-GAAP Measurements to GAAP
Results.
Notes to the Consolidated Summary of
Results, Consolidated Balance Sheets
and Consolidated Statements of Cash
Flows
(amounts in millions, except per share
amounts)
(unaudited)
(a) Amounts presented as of and for the quarter and year
ended December 26, 2015 are preliminary. (b) Other (income)
expense for the China Division primarily consists of equity income
(loss) from investments in unconsolidated affiliates. The quarters
ended December 26, 2015 and December 27, 2014 also include
insurance recoveries of $5 million and $25 million, respectively,
related to the 2012 poultry supply incident. (c) In 2010 we
refranchised our then remaining Company-operated restaurants in
Mexico. To the extent we owned it, we did not sell the real estate
related to certain of these restaurants, instead leasing it to the
franchisee. During the quarter ended June 13, 2015 we initiated
plans to sell this real estate and determined it was held for sale
in accordance with GAAP. During the quarter ended December 26,
2015, we sold the real estate for approximately $58 million. While
these proceeds exceeded the book value of the real estate, the sale
represented a substantial liquidation of our Mexican operations
under U.S. GAAP. Accordingly, we were required to write-off
accumulated translation losses associated with our Mexican
business. As such, during the year to date ended December 26, 2015
we recorded charges of $80 million, representing the excess of the
sum of the book value of the real estate and other related assets
and our accumulated translation losses over the sales price.
Consistent with the classification of the original market
refranchising transaction, these charges were classified as
Refranchising Loss within Special Items. Additionally, during the
quarter and year to date ended December 26, 2015 we recognized
Special Items charges of $3 million and $16 million, respectively,
associated with the refranchising of our Pizza Hut Korea
restaurants. The carrying value of the remaining restaurants not
yet sold as of year end is not significant. While additional
charges may occur as the refranchising plans move forward, such
charges are not expected to be material at this time. (d)
During the first quarter of 2015, we reached an agreement with our
KFC U.S. franchisees that gave us brand marketing control as well
as an accelerated path to improved assets and customer experience.
In connection with this agreement we recognized Special Item
charges for the quarter and year to date ended December 26, 2015 of
$41 million and $72 million, respectively, primarily related to the
funding of investments for new back-of-house equipment for
franchisees. (e) During the quarter ended December 26, 2015,
we initiated plans to sell an aircraft used in our China Division
and determined it was held for sale, resulting in a write down of
$15 million. (f)
In October 2015 we announced our intent to
spin off YUM!’s China Division from YUM! Brands into a separate
independent, publicly-traded company by the end of 2016. A part of
this plan is to optimize the capital structure of YUM! Brands
through the issuance of new debt that will allow us to return
significant capital to shareholders. During the quarter ended
December 26, 2015 we incurred costs of $9 million related to these
initiatives.
(g) During the quarters ended December 26, 2015 and December
27, 2014, we recorded Special Item gains of $51 million and losses
of $5 million, respectively, related to refranchising in the U.S.
During the years to date ended December 26, 2015 and December 27,
2014, we recorded Special Item gains of $75 million and $6 million,
respectively, related to refranchising in the U.S. Refranchising
gains and losses in the U.S. have been reflected as Special Items
due to the scope of our U.S. refranchising program in recent years
and the volatility in associated gains and losses. (h)
During the quarter ended December 27, 2014, we recorded an
impairment charge related to Little Sheep totaling $361 million
(net of income tax benefit of $76 million and amounts allocated to
noncontrolling interests of $26 million). This charge was driven by
a write down in trademark from $342 million to $58 million and a
write off of all remaining goodwill of $160 million.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160203006508/en/
Yum! Brands, Inc.Analysts:Steve Schmitt, 888-298-6986Vice
President, Investor Relations & Corporate StrategyorElizabeth
Grenfell, 888-298-6986Director, Investor RelationsorMedia:Virginia
Ferguson, 502-874-8200Director, Public Relations
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