Yum! Brands, Inc. (NYSE: YUM) today reported results for the
second-quarter ended June 30, 2020. Worldwide system sales
excluding foreign currency translation declined (12)%, with a (15)%
same-store sales decline and 3% net-new unit growth. Second-quarter
GAAP EPS was $0.67, a decrease of (27)% over the prior year
quarter. Second-quarter EPS excluding Special Items was $0.82, a
decrease of (12)% over the prior year quarter.
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DAVID GIBBS COMMENTS
David Gibbs, CEO, said “While second-quarter results were
meaningfully impacted by COVID-19, I couldn’t be prouder of how our
brands adapted with remarkable agility, leveraging consumer
insights and digitally enabled off-premise capabilities to adjust
operations, menu options and marketing across the globe. Digital
sales were a big driver of the dramatic improvement in sales from
the initial impact of COVID-19, reaching an all-time high of $3.5
billion for the quarter, an increase of more than $1 billion over
the prior year. World-class operations, including rapid
implementation of contactless options, supported a steady pace of
store reopening through the quarter, with approximately 95% of our
global system restaurants now at least partially open. Same-store
sales trends for open stores stabilized in June just a few points
short of flat, despite the majority of our dining rooms still
remaining closed, and these trends have continued into July.
As we continue to reopen our restaurants across the globe, we
remain focused on our Recipe for Growth and Good strategy and on
ensuring customers can access our delicious food in a safe,
low-contact manner with outstanding value. Leveraging our scale and
capabilities as the world’s largest restaurant company, our four
iconic brands are optimally positioned to drive profitable system
sales growth in the new customer environment. While COVID-19 has
presented incredible challenges for the entire restaurant industry,
I remain confident in the power and resiliency of our unique and
highly diversified global business model and that we will emerge an
even stronger growth company for all our stakeholders.”
SECOND-QUARTER
HIGHLIGHTS
- Worldwide system sales excluding foreign currency translation
declined (12)%, with KFC at (18)%, Pizza Hut at (10)% and Taco Bell
at (6)%.
- We reported 3% year-over-year net unit growth and net units
declined (118) during the quarter.
- We recorded $84 million of pre-tax investment income related to
the change in fair value of our investment in Grubhub, which
resulted in a $0.21 benefit to EPS on the second-quarter. As we
recorded $24 million of pre-tax investment income in the
second-quarter of 2019 for a $0.06 benefit to EPS, our Grubhub
investment favorably impacted year-over-year EPS growth by
$0.15.
- Foreign currency translation unfavorably impacted divisional
operating profit by $6 million.
% Change
System Sales Ex F/X
Same-Store Sales
Net-New Units
GAAP Operating Profit
Core
Operating Profit2
KFC Division
(18)
(21)
+6
(41)
(40)
Pizza Hut Division
(10)
(9)
(1)
(9)
(8)
Taco Bell Division
(6)
(8)
+4
(3)
(3)
Worldwide1
(12)
(15)
+3
(36)
(25)
Second-Quarter
Year-to-Date
2020
2019
% Change
2020
2019
% Change
GAAP EPS
$0.67
$0.92
(27)
$0.94
$1.75
(46)
Special Items EPS2
$(0.15)
$(0.01)
NM
$(0.52)
$(0.01)
NM
EPS Excluding Special Items
$0.82
$0.93
(12)
$1.46
$1.76
(17)
1 Worldwide system sales ex F/X and
net-new units include the benefit of our acquisition of Habit
Burger Grill on March 18, 2020. Same-store sales reflects the
inclusion of Habit Burger Grill in the prior year base.
2 See reconciliation of Non-GAAP
Measurements to GAAP Results within this release for further detail
of Core Operating Profit and Special Items.
All comparisons are versus the same period
a year ago.
System sales growth figures exclude
foreign currency translation ("F/X") and core operating profit
growth figures exclude F/X and Special Items. Special Items are not
allocated to any segment and therefore only impact worldwide GAAP
results. See reconciliation of Non-GAAP Measurements to GAAP
Results within this release for further details.
KFC DIVISION
Second-Quarter
Year-to-Date
%/ppts Change
%/ppts Change
2020
2019
Reported
Ex F/X
2020
2019
Reported
Ex F/X
Restaurants
24,390
23,118
+6
N/A
24,390
23,118
+6
N/A
System Sales ($MM)
5,288
6,648
(20)
(18)
11,575
13,195
(12)
(10)
Same-Store Sales Growth (%)
(21)
+6
NM
NM
(15)
+5
NM
NM
Franchise and Property Revenues ($MM)
251
332
(24)
(22)
566
655
(14)
(11)
Operating Profit ($MM)
153
261
(41)
(40)
377
497
(24)
(22)
Operating Margin (%)
37.4
44.7
(7.3)
(7.8)
38.7
43.2
(4.5)
(4.8)
Second-Quarter (%
Change)
Year-to-Date (%
Change)
International
U.S.
International
U.S.
System Sales Growth Ex F/X
(23)
+8
(12)
+4
Same-Store Sales Growth
(27)
+7
(18)
+2
- KFC Division opened 234 gross new restaurants in 36
countries.
- Operating margin decreased 7.3 percentage points driven by
lower same-store sales, higher bad debt expense and lower company
restaurant margins due to COVID-19, partially offset by net-new
unit growth.
- Foreign currency translation unfavorably impacted operating
profit by $5 million.
KFC Markets1
Percent of KFC System
Sales2
System Sales Growth Ex
F/X
Second-Quarter (%
Change)
Year-to-Date (%
Change)
China
27%
(6)
(10)
United States
16%
+8
+4
Asia
12%
(11)
(4)
Russia, Central & Eastern Europe
8%
(41)
(19)
Australia
7%
(3)
+3
United Kingdom
6%
(58)
(23)
Western Europe
6%
(34)
(20)
Latin America
5%
(41)
(19)
Africa
4%
(58)
(24)
Middle East / Turkey / North Africa
4%
(48)
(23)
Canada
2%
(4)
(3)
Thailand
2%
(15)
(5)
India
1%
(74)
(40)
1Refer to investors.yum.com under
Financial Reports for a list of the countries within each of the
markets.
2Reflects Full Year 2019.
PIZZA HUT DIVISION
Second-Quarter
Year-to-Date
%/ppts Change
%/ppts Change
2020
2019
Reported
Ex F/X
2020
2019
Reported
Ex F/X
Restaurants
18,326
18,515
(1)
N/A
18,326
18,515
(1)
N/A
System Sales ($MM)
2,753
3,098
(11)
(10)
5,554
6,229
(11)
(10)
Same-Store Sales Growth (%)
(9)
+2
NM
NM
(10)
+1
NM
NM
Franchise and Property Revenues ($MM)
126
143
(12)
(11)
259
288
(10)
(10)
Operating Profit ($MM)
87
96
(9)
(8)
163
193
(15)
(14)
Operating Margin (%)
36.8
38.7
(1.9)
(1.9)
34.8
39.4
(4.6)
(4.6)
Second-Quarter (%
Change)
Year-to-Date (%
Change)
International
U.S.
International
U.S.
System Sales Growth Ex F/X
(18)
+1
(15)
(3)
Same-Store Sales Growth
(19)
+5
(17)
(1)
- Pizza Hut Division opened 70 gross new restaurants in 14
countries.
- Operating margin decreased 1.9 percentage points driven by
lower same-store sales, partially offset by U.S. franchise bad debt
recoveries.
- Foreign currency translation unfavorably impacted operating
profit by $1 million.
- Pizza Hut U.S. off-premise channel generated 21% same-store
sales growth when excluding closed Express units, or 16% same-store
sales growth when including closed Express units.
Pizza Hut Markets1
Percent of Pizza Hut System
Sales2
System Sales Growth Ex
F/X
Second-Quarter (%
Change)
Year-to-Date (%
Change)
United States
42%
+1
(3)
China
17%
(12)
(25)
Asia
13%
+8
+8
Latin America / Spain / Portugal
11%
(37)
(21)
Europe (excluding Spain &
Portugal)
9%
(32)
(19)
Middle East / Turkey / North Africa
4%
(46)
(25)
Canada
2%
+18
+11
India
1%
(66)
(38)
Africa
<1%
(38)
(11)
1Refer to investors.yum.com under
Financial Reports for a list of the countries within each of the
markets.
2Reflects Full Year 2019.
TACO BELL DIVISION
Second-Quarter
Year-to-Date
%/ppts Change
%/ppts Change
2020
2019
Reported
Ex F/X
2020
2019
Reported
Ex F/X
Restaurants
7,400
7,136
+4
N/A
7,400
7,136
+4
N/A
System Sales ($MM)
2,564
2,727
(6)
(6)
5,160
5,233
(1)
(1)
Same-Store Sales Growth (%)
(8)
+7
NM
NM
(4)
+6
NM
NM
Franchise and Property Revenues ($MM)
147
158
(7)
(6)
295
302
(2)
(2)
Operating Profit ($MM)
154
159
(3)
(3)
298
297
Even
Even
Operating Margin (%)
34.4
33.2
1.2
1.2
33.0
32.1
0.9
0.9
- Taco Bell Division opened 22 gross new restaurants in 4
countries.
- Operating margin increased 1.2 percentage points due to lower
general and administrative and franchise and property expenses,
partially offset by the impact of same-store sales declines.
HABIT BURGER GRILL
DIVISION
- The Habit Burger Grill Division same-store sales declined 18%
during the second-quarter.
- The Habit Burger Grill Division opened 2 gross new restaurants
in the U.S.
OTHER ITEMS
- Disclosures pertaining to outstanding debt in our Restricted
Group capital structure will be provided at the time of the filing
of the second-quarter Form 10-Q.
- Digital sales include orders placed on mobile device, Internet
and kiosk.
CONFERENCE CALL
Yum! Brands, Inc. will host a conference call to review the
company's financial performance and strategies at 8:15 a.m. Eastern
Time July 30, 2020. The number is 877/871-3172 for U.S. callers,
412/902-6603 for international callers, conference ID 9876991.
The call will be available for playback beginning at 10:00 a.m.
Eastern Time July 30, 2020 through August 6, 2020. To access the
playback, dial 877/344-7529 in the U.S., 855/669-9658 in Canada,
and 412/317-0088 internationally, conference ID 10145598.
The webcast and the playback can be accessed by visiting Yum!
Brands' website, investors.yum.com/events-and-presentations and
selecting “Q2 2020 Yum! Brands, Inc. Earnings Call.”
ADDITIONAL INFORMATION
ONLINE
Quarter end dates for each division, restaurant count details,
definitions of terms and Restricted Group financial information are
available at investors.yum.com. Reconciliation of non-GAAP
financial measures to the most directly comparable GAAP measures
are included within this release.
FORWARD-LOOKING
STATEMENTS
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,”
“seek,” “project,” “model,” “ongoing,” “will,” “should,”
“forecast,” “outlook” or similar terminology. These statements are
based on and reflect our current expectations, estimates,
assumptions and/or projections, our perception of historical trends
and current conditions, as well as other factors that we believe
are appropriate and reasonable under the circumstances.
Forward-looking statements are neither predictions nor guarantees
of future events, circumstances or performance and are inherently
subject to known and unknown risks, uncertainties and assumptions
that could cause our actual results to differ materially from those
indicated by those statements. There can be no assurance that our
expectations, estimates, assumptions and/or projections, including
with respect to the future earnings and performance or capital
structure of Yum! Brands, will prove to be correct or that any of
our expectations, estimates or projections will be achieved.
Numerous factors could cause our actual results and events to
differ materially from those expressed or implied by
forward-looking statements, including, without limitation: the
severity and duration of the COVID-19 pandemic, food safety and
food borne-illness issues; health concerns arising from outbreaks
of a significant health epidemic; the success of our franchisees
and licensees; our significant exposure to the Chinese market;
changes in economic and political conditions in countries and
territories outside of the U.S. where we operate; our ability to
protect the integrity and security of individually identifiable
data of our customers and employees; our ability to successfully
implement technology initiatives; our increasing dependence on
digital commerce platforms and information technology systems; the
impact of social media; our ability to secure and maintain
distribution and adequate supply to our restaurants; the loss of
key personnel, or labor shortages or difficulty finding qualified
employees; the success of our development strategy in emerging
markets; changes in commodity, labor and other operating costs;
harm or dilution to our brands caused by franchisee and third party
activity; pending or future litigation and legal claims or
proceedings; changes in or noncompliance with government
regulations, including labor standards and anti-bribery or
anti-corruption laws; tax matters, including changes in tax laws or
disagreements with taxing authorities; consumer preferences and
perceptions of our brands; failure to protect our service marks or
other intellectual property; changes in consumer discretionary
spending and general economic conditions; competition within the
retail food industry; not realizing the anticipated benefits from
past or potential future acquisitions, investments or other
strategic transactions, and risks relating to our significant
amount of indebtedness. 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.
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. 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 most recently filed Annual
Report on Form 10-K and Quarterly Report on Form 10-Q) for
additional detail about factors that could affect our financial and
other results.
Yum! Brands, Inc., based in Louisville, Kentucky, has over
50,000 restaurants in more than 150 countries and territories
primarily operating the company’s brands – KFC, Pizza Hut and Taco
Bell – global leaders of the chicken, pizza and Mexican-style food
categories. The Company’s family of brands also includes The Habit
Burger Grill, a fast-casual restaurant concept specializing in
made-to-order chargrilled burgers, sandwiches and more. In 2019,
Yum! Brands was named to the Dow Jones Sustainability North America
Index and in 2020, the company ranked among the top 100 Best
Corporate Citizens by 3BL Media.
YUM! Brands, Inc.
Condensed Consolidated Summary
of Results
(amounts in millions, except
per share amounts)
(unaudited)
Quarter ended
% Change
Year to date
% Change
6/30/20
6/30/19
B/(W)
6/30/20
6/30/19
B/(W)
Revenues
Company sales
$
403
$
359
12
$
758
$
692
10
Franchise and property revenues
525
633
(17)
1,121
1,245
(10)
Franchise contributions for advertising
and other services
270
318
(15)
582
627
(7)
Total revenues
1,198
1,310
(9)
2,461
2,564
(4)
Costs and Expenses, Net
Company restaurant expenses
349
286
(22)
647
558
(16)
General and administrative expenses
259
198
(30)
467
409
(14)
Franchise and property expenses
36
38
5
94
81
(17)
Franchise advertising and other services
expense
264
315
16
574
616
7
Refranchising (gain) loss
(8
)
(4
)
82
(21
)
(10
)
NM
Other (income) expense
(2
)
6
NM
150
6
NM
Total costs and expenses, net
898
839
(7)
1,911
1,660
(15)
Operating Profit
300
471
(36)
550
904
(39)
Investment (income) expense, net
(91
)
(25
)
NM
(57
)
(9
)
NM
Other pension (income) expense
2
—
NM
5
3
(57)
Interest expense, net
132
119
(10)
250
234
(7)
Income before income taxes
257
377
(32)
352
676
(48)
Income tax provision
51
88
42
63
125
50
Net Income
$
206
$
289
(29)
$
289
$
551
(48)
Basic
EPS
EPS
$
0.68
$
0.94
(28)
$
0.96
$
1.79
(47)
Average shares outstanding
303
307
1
302
307
2
Diluted
EPS
EPS
$
0.67
$
0.92
(27)
$
0.94
$
1.75
(46)
Average shares outstanding
307
314
2
307
314
2
Dividends declared per common
share
$
0.47
$
0.42
$
0.94
$
0.84
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 to date
% Change
6/30/20
6/30/19
B/(W)
6/30/20
6/30/19
B/(W)
Company sales
$
86
$
135
(36)
$
216
$
260
(17)
Franchise and property revenues
251
332
(24)
566
655
(14)
Franchise contributions for advertising
and other services
72
117
(38)
193
235
(18)
Total revenues
409
584
(30)
975
1,150
(15)
Company restaurant expenses
83
113
26
198
221
10
General and administrative expenses
70
75
6
143
153
6
Franchise and property expenses
29
19
(52)
62
47
(32)
Franchise advertising and other services
expense
70
116
40
190
232
18
Other (income) expense
4
—
NM
5
—
NM
Total costs and expenses, net
256
323
21
598
653
8
Operating Profit
$
153
$
261
(41)
$
377
$
497
(24)
Restaurant margin
2.7
%
15.8
%
(13.1) ppts.
8.1
%
15.0
%
(6.9) ppts.
Operating margin
37.4
%
44.7
%
(7.3) ppts.
38.7
%
43.2
%
(4.5) 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 to date
% Change
6/30/20
6/30/19
B/(W)
6/30/20
6/30/19
B/(W)
Company sales
$
19
$
11
71
$
37
$
22
66
Franchise and property revenues
126
143
(12)
259
288
(10)
Franchise contributions for advertising
and other services
90
92
(1)
174
179
(2)
Total revenues
235
246
(4)
470
489
(4)
Company restaurant expenses
18
10
(66)
37
21
(70)
General and administrative expenses
44
44
(2)
90
91
—
Franchise and property expenses
1
9
89
13
14
6
Franchise advertising and other services
expense
87
89
2
171
172
1
Other (income) expense
(2
)
(2
)
NM
(4
)
(2
)
NM
Total costs and expenses, net
148
150
1
307
296
(3)
Operating Profit
$
87
$
96
(9)
$
163
$
193
(15)
Restaurant margin
4.5
%
1.6
%
2.9 ppts.
0.8
%
2.7
%
(1.9) ppts.
Operating margin
36.8
%
38.7
%
(1.9) ppts.
34.8
%
39.4
%
(4.6) 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 to date
% Change
6/30/20
6/30/19
B/(W)
6/30/20
6/30/19
B/(W)
Company sales
$
194
$
213
(9)
$
392
$
410
(4)
Franchise and property revenues
147
158
(7)
295
302
(2)
Franchise contributions for advertising
and other services
108
109
(2)
215
213
—
Total revenues
449
480
(7)
902
925
(3)
Company restaurant expenses
147
163
10
300
316
5
General and administrative expenses
37
41
10
75
84
11
Franchise and property expenses
5
8
38
16
17
5
Franchise advertising and other services
expense
107
110
3
213
212
(1)
Other (income) expense
(1
)
(1
)
NM
—
(1
)
NM
Total costs and expenses, net
295
321
8
604
628
4
Operating Profit
$
154
$
159
(3)
$
298
$
297
—
Restaurant margin
24.5
%
23.6
%
0.9 ppts.
23.5
%
22.8
%
0.7 ppts.
Operating margin
34.4
%
33.2
%
1.2 ppts.
33.0
%
32.1
%
0.9 ppts.
See accompanying notes.
Percentages may not recompute due to
rounding.
YUM! Brands, Inc.
Condensed Consolidated Balance
Sheets
(amounts in millions)
(unaudited) 6/30/20
12/31/19
ASSETS
Current Assets
Cash and cash equivalents
$
1,243
$
605
Accounts and notes receivable, less
allowance: $101 in 2020 and $72 in 2019
530
584
Prepaid expenses and other current
assets
625
338
Total Current Assets
2,398
1,527
Property, plant and equipment, net of
accumulated depreciation of $1,167 in 2020 and $1,136 in 2019
1,265
1,170
Goodwill
602
530
Intangible assets, net
344
244
Other assets
1,313
1,313
Deferred income taxes
499
447
Total Assets
$
6,421
$
5,231
LIABILITIES AND SHAREHOLDERS'
DEFICIT
Current Liabilities
Accounts payable and other current
liabilities
$
908
$
960
Income taxes payable
133
150
Short-term borrowings
434
431
Total Current Liabilities
1,475
1,541
Long-term debt
11,252
10,131
Other liabilities and deferred credits
1,802
1,575
Total Liabilities
14,529
13,247
Shareholders' Deficit
Common Stock, no par value, 750 shares
authorized; 301 shares issued in 2020 and 300 issued in 2019
11
—
Accumulated deficit
(7,631
)
(7,628
)
Accumulated other comprehensive loss
(488
)
(388
)
Total Shareholders' Deficit
(8,108
)
(8,016
)
Total Liabilities and Shareholders'
Deficit
$
6,421
$
5,231
See accompanying notes.
YUM! Brands, Inc.
Condensed Consolidated
Statements of Cash Flows
(amounts in millions)
(unaudited)
Year to date
6/30/20
6/30/19
Cash Flows - Operating
Activities
Net Income
$
289
$
551
Depreciation and amortization
53
54
Impairment and closure (income)
expenses
146
1
Refranchising (gain) loss
(21
)
(10
)
Investment (income) expense, net
(57
)
(9
)
Contributions to defined benefit pension
plans
(1
)
(11
)
Deferred income taxes
(20
)
—
Share-based compensation expense
29
31
Changes in accounts and notes
receivable
4
7
Changes in prepaid expenses and other
current assets
(26
)
(24
)
Changes in accounts payable and other
current liabilities
(76
)
(171
)
Changes in income taxes payable
(49
)
(36
)
Other, net
91
78
Net Cash Provided by Operating
Activities
362
461
Cash Flows - Investing
Activities
Capital spending
(67
)
(76
)
Acquisition of The Habit Restaurants,
Inc.
(408
)
—
Proceeds from refranchising of
restaurants
3
25
Other, net
—
(1
)
Net Cash Used in Investing
Activities
(472
)
(52
)
Cash Flows - Financing
Activities
Proceeds from long-term debt
600
—
Repayments of long-term debt
(41
)
(40
)
Revolving credit facilities, three months
or less, net
575
157
Short-term borrowings by original
maturity
More than three months - proceeds
85
48
More than three months - payments
(90
)
(44
)
Three months or less, net
—
—
Repurchase shares of Common Stock
—
(305
)
Dividends paid on Common Stock
(283
)
(257
)
Debt issuance costs
(7
)
—
Other, net
(31
)
(51
)
Net Cash Provided by (Used in)
Financing Activities
808
(492
)
Effect of Exchange Rate on Cash and
Cash Equivalents
(18
)
(2
)
Net Increase (Decrease) in Cash and
Cash Equivalents, Restricted Cash and Restricted Cash
Equivalents
680
(85
)
Cash, Cash Equivalents, Restricted Cash
and Restricted Cash Equivalents - Beginning of Period
768
474
Cash, Cash Equivalents, Restricted Cash
and Restricted Cash Equivalents - End of Period
$
1,448
$
389
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 Generally
Accepted Accounting Principles in the United States of America
("GAAP"), the Company provides the following non-GAAP
measurements.
- Diluted Earnings Per Share ("EPS") excluding Special Items (as
defined below);
- Effective Tax Rate excluding Special Items;
- Core Operating Profit. Core Operating Profit excludes Special
Items and FX and we use Core Operating Profit for the purposes of
evaluating performance internally.
These non-GAAP measurements are not intended to replace the
presentation of our financial results in accordance with GAAP.
Rather, the Company believes that the presentation of these
non-GAAP measurements provide additional information to investors
to facilitate the comparison of past and present operations.
Special Items are not included in any of our Division segment
results as the Company does not believe they are indicative of our
ongoing operations due to their size and/or nature. Our chief
operating decision maker does not consider the impact of Special
Items when assessing segment performance. The Special Items are
described in (b), (c), (d), (e), (f) and (g) in the accompanying
notes.
Certain non-GAAP measurements are presented excluding the impact
of FX. These amounts are derived by translating current year
results at prior year average exchange rates. We believe the
elimination of the FX impact provides better year-to-year
comparability without the distortion of foreign currency
fluctuations.
Quarter ended
Year to date
6/30/20
6/30/19
6/30/20
6/30/19
Detail of Special Items
Refranchising gain (loss)(b)
$
3
$
4
$
6
$
10
Costs associated with acquisition and
integration of Habit Burger Grill(c)
(3
)
—
(9
)
—
Impairment of Habit Burger Grill
goodwill(d)
—
—
(139
)
—
Unlocking Opportunity Initiative
contribution(e)
(50
)
—
(50
)
—
Other Special Items Expense(f)
(4
)
(9
)
(7
)
(11
)
Special Items Income (Expense) - Operating
Profit
(54
)
(5
)
(199
)
(1
)
Interest expense, net(f)
—
(2
)
—
(2
)
Special Items Income (Expense) before
Income Taxes
(54
)
(7
)
(199
)
(3
)
Tax Benefit (Expense) on Special
Items(g)
7
3
40
2
Special Items Income (Expense), net of
tax
$
(47
)
$
(4
)
$
(159
)
$
(1
)
Average diluted shares outstanding
307
314
307
314
Special Items diluted EPS
$
(0.15
)
$
(0.01
)
$
(0.52
)
$
(0.01
)
Reconciliation of GAAP Operating Profit
to Core Operating Profit
Consolidated
GAAP Operating Profit
$
300
$
471
$
550
$
904
Special Items Income (Expense)
(54
)
(5
)
(199
)
(1
)
Foreign Currency Impact on Divisional
Operating Profit
(6
)
N/A
(12
)
N/A
Core Operating Profit
$
360
$
476
$
761
$
905
KFC
Division
GAAP Operating Profit
$
153
$
261
$
377
$
497
Foreign Currency Impact on Divisional
Operating Profit
(5
)
N/A
(10
)
N/A
Core Operating Profit
$
158
$
261
$
387
$
497
Reconciliation of Non-GAAP Measurements to
GAAP Results (Continued) (amounts in millions, except per
share amounts) (unaudited)
Quarter ended
Year to date
6/30/20
6/30/19
6/30/20
6/30/19
Pizza Hut
Division
GAAP Operating Profit
$
87
$
96
$
163
$
193
Foreign Currency Impact on Divisional
Operating Profit
(1
)
N/A
(2
)
N/A
Core Operating Profit
$
88
$
96
$
165
$
193
Taco Bell
Division
GAAP Operating Profit
$
154
$
159
$
298
$
297
Foreign Currency Impact on Divisional
Operating Profit
—
N/A
—
N/A
Core Operating Profit
$
154
$
159
$
298
$
297
Habit Burger Grill
Division
GAAP Operating Profit
$
(6
)
N/A
$
(8
)
N/A
Foreign Currency Impact on Divisional
Operating Profit
—
N/A
—
N/A
Core Operating Profit
$
(6
)
N/A
$
(8
)
N/A
Reconciliation of Diluted EPS to
Diluted EPS excluding Special Items
Diluted EPS
$
0.67
$
0.92
$
0.94
$
1.75
Special Items Diluted EPS
(0.15
)
(0.01
)
(0.52
)
(0.01
)
Diluted EPS excluding Special Items
$
0.82
$
0.93
$
1.46
$
1.76
Reconciliation of GAAP Effective Tax
Rate to Effective Tax Rate excluding Special Items
GAAP Effective Tax Rate
19.8
%
23.3
%
17.8
%
18.5
%
Impact on Tax Rate as a result of Special
Items
1.0
%
(0.4
)%
(0.9
)%
(0.2
)%
Effective Tax Rate excluding Special
Items
18.8
%
23.7
%
18.7
%
18.7
%
YUM! Brands, Inc. Segment Results
(amounts in millions) (unaudited)
Quarter Ended 6/30/2020
KFC
Pizza Hut
Taco Bell
Habit Burger
Corporate and Unallocated
Consolidated
Total revenues
$
409
$
235
$
449
$
105
$
—
$
1,198
Company restaurant expenses
83
18
147
101
—
349
General and administrative expenses
70
44
37
10
98
259
Franchise and property expenses
29
1
5
—
1
36
Franchise advertising and other services
expense
70
87
107
—
—
264
Refranchising (gain) loss
—
—
—
—
(8
)
(8
)
Other (income) expense
4
(2
)
(1
)
—
(3
)
(2
)
Total costs and expenses, net
256
148
295
111
88
898
Operating Profit (Loss)
$
153
$
87
$
154
$
(6
)
$
(88
)
$
300
Quarter Ended 6/30/2019
KFC
Pizza Hut
Taco Bell
Corporate and Unallocated
Consolidated
Total revenues
$
584
$
246
$
480
$
—
$
1,310
Company restaurant expenses
113
10
163
—
286
General and administrative expenses
75
44
41
38
198
Franchise and property expenses
19
9
8
2
38
Franchise advertising and other services
expense
116
89
110
—
315
Refranchising (gain) loss
—
—
—
(4
)
(4
)
Other (income) expense
—
(2
)
(1
)
9
6
Total costs and expenses, net
323
150
321
45
839
Operating Profit (Loss)
$
261
$
96
$
159
$
(45
)
$
471
The above tables reconcile segment information, which is based
on management responsibility, with our Condensed 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 to Date 6/30/2020
KFC
Pizza Hut
Taco Bell
Habit Burger
Corporate and Unallocated
Consolidated
Total revenues
$
975
$
470
$
902
$
114
$
—
$
2,461
Company restaurant expenses
198
37
300
111
1
647
General and administrative expenses
143
90
75
11
148
467
Franchise and property expenses
62
13
16
—
3
94
Franchise advertising and other services
expense
190
171
213
—
—
574
Refranchising (gain) loss
—
—
—
—
(21
)
(21
)
Other (income) expense
5
(4
)
—
—
149
150
Total costs and expenses, net
598
307
604
122
280
1,911
Operating Profit
$
377
$
163
$
298
$
(8
)
$
(280
)
$
550
Year to Date 6/30/2019
KFC
Pizza Hut
Taco Bell
Corporate and Unallocated
Consolidated
Total revenues
$
1,150
$
489
$
925
$
—
$
2,564
Company restaurant expenses
221
21
316
—
558
General and administrative expenses
153
91
84
81
409
Franchise and property expenses
47
14
17
3
81
Franchise advertising and other services
expense
232
172
212
—
616
Refranchising (gain) loss
—
—
—
(10
)
(10
)
Other (income) expense
—
(2
)
(1
)
9
6
Total costs and expenses, net
653
296
628
83
1,660
Operating Profit
$
497
$
193
$
297
$
(83
)
$
904
The above tables reconcile segment information, which is based
on management responsibility, with our Condensed 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 Condensed Consolidated Summary
of Results, Condensed Consolidated Balance Sheets and
Condensed Consolidated Statements of Cash Flows (amounts in
millions) (unaudited)
(a)
Amounts presented as of and for the
quarters and years to date ended June 30, 2020 and 2019 are
preliminary.
(b)
We have reflected as Special Items those
refranchising gains and losses that were recorded in connection
with our previously announced plans to have at least 98% franchise
restaurant ownership by the end of 2018. As such, refranchising
gains and losses recorded during the quarters and years to date
ended June 30, 2020 and 2019 as Special Items primarily include
true-ups to refranchising gains and losses recorded prior to
December 31, 2018.
During the quarters ended June 30, 2020
and 2019, we recorded net refranchising gains of $3 million and $4
million, respectively, that have been reflected as Special
Items.
During the years to date ended June 30,
2020 and 2019, we recorded net refranchising gains of $6 million
and $10 million, respectively, that have been reflected as Special
Items.
Additionally, during the quarter and year
to date ended June 30, 2020 we recorded refranchising gains of $5
million and $15 million, respectively, that have not been reflected
as Special Items. These gains relate to the refranchising of
restaurants in 2020 that were not part of our aforementioned plans
to achieve 98% franchise ownership.
(c)
During the quarter and year to date ended
June 30, 2020, we recorded Special Item charges of $3 million and
$9 million, respectively, related to the acquisition and
integration of The Habit Restaurants, Inc. ("Habit").
(d)
On March 18, 2020 we acquired all of the
issued and outstanding common shares of Habit for total cash
consideration of $408 million, net of cash acquired. During the
first-quarter of 2020 the operation of substantially all Habit
restaurants was impacted by government recommendations and mandates
arising from containment and mitigation measures related to the
COVID-19 global pandemic. As a result of the impacts of the
COVID-19 pandemic on Habit’s results through March 31, 2020 as well
as general market conditions, we recorded a goodwill impairment
charge of $139 million to Other (income) expense, which has been
reflected as a Special Item. We have also reflected the tax benefit
of this impairment charge of $32 million as a Special Item.
(e)
On June 24, 2020, the Yum! Brands, Inc.
Board of Directors approved the establishment of the Company’s new
global “Unlocking Opportunity Initiative” including a $100 million
investment over the next five years to fight inequality by
unlocking opportunities for employees, restaurant team members and
communities. The Company recorded a Special Item charge of $50
million in the quarter ended June 30, 2020 related to a
contribution made to the Yum Foundation as part of these efforts
and investment.
(f)
During the quarter ended June 30, 2019 we
recorded charges of $8 million and $2 million to Other (income)
expense and Interest expense, net, respectively, related to cash
payments in excess of our recorded liability to settle contingent
consideration associated with our acquisition of the KFC Turkey and
Pizza Hut Turkey businesses in 2013. Consistent with prior
adjustments to the recorded contingent consideration we have
reflected this as a Special Item.
(g)
Tax Expense on Special Items was
determined based upon the impact of the nature, as well as the
jurisdiction of the respective individual components within Special
Items.
Category: Earnings
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200730005180/en/
Analysts are invited to contact: Keith Siegner, Vice President,
Investor Relations, M&A and Treasurer at 888/298-6986
Members of the media are invited to contact: Virginia Ferguson,
Senior Director, Public Relations, at 502/874-8200
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