Press Release

Yum! Brands Reports Strong Second-Quarter; System Sales Growth of 10%; Same-Store Sales Growth of 5%; GAAP Operating Profit Growth of 5%; Core Operating Profit Growth of 18%

Company Release - 8/1/2019 7:00 AM ET

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Yum! Brands, Inc. (NYSE: YUM) today reported results for the second-quarter ended June 30, 2019. Worldwide system sales excluding foreign currency translation grew 10%, with 7% net-new units and 5% same-store sales growth. Second-quarter GAAP EPS was $0.92, a decrease of (5)%. Second-quarter EPS excluding Special Items was $0.93, an increase of 15%.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20190801005451/en/

GREG CREED COMMENTS

Greg Creed, CEO, said “Second-quarter results maintained early year momentum and helped us to exceed our already high expectations for a strong first half of 2019. I’m especially pleased to report that we delivered 10% system sales growth in the quarter, supported by broad based strength at KFC International and Taco Bell. Our commitment to being a more focused, more franchised, and more efficient growth company positions us well for long-term success. Through the lens of our four growth drivers, we continue to leverage our unprecedented scale and expand our capabilities with the goal of enhancing franchise economics, accelerating growth and maximizing shareholder value.”

SECOND-QUARTER HIGHLIGHTS

  • Worldwide system sales excluding foreign currency translation grew 10%, with KFC, Pizza Hut and Taco Bell each at 10%. Adjusting the prior year base to include Telepizza, system sales growth excluding foreign currency translation would have been 9% worldwide and 4% for the Pizza Hut Division.
  • We opened 312 net units in the quarter. On a year-over-year basis, which takes into account the strategic alliance with Telepizza in the fourth-quarter 2018, net new unit growth was 7%.
  • We repurchased 1.9 million shares totaling $196 million at an average price per share of $104.
  • We reflected the change in fair value of our investment in Grubhub by recording pre-tax investment income of $24 million in the second quarter of 2019 and $25 million in the second quarter of 2018, which resulted in $0.06 in EPS during each respective quarter.
  • Foreign currency translation unfavorably impacted divisional operating profit by $17 million.

 

% Change

 

System Sales
Ex F/X

Same-Store
Sales

Net New Units

GAAP
Operating
Profit

Core
Operating
Profit2

KFC Division

+10

+6

+6

+11

+17

Pizza Hut Division1

+10

+2

+10

+18

+21

Taco Bell Division

+10

+7

+3

+7

+7

Worldwide1

+10

+5

+7

+5

+18

 

Second-Quarter

 

 

Year-to-Date

 

2019

 

 

2018

 

 

% Change

 

 

2019

 

 

2018

 

 

% Change

GAAP EPS

$0.92

 

 

$0.97

 

 

(5)

 

 

$1.75

 

 

$2.25

 

 

(22)

Special Items EPS2

$(0.01)

 

 

$0.15

 

 

NM

 

 

$(0.01)

 

 

$0.54

 

 

NM

EPS Excluding Special Items

$0.93

 

 

$0.82

 

 

+15

 

 

$1.76

 

 

$1.71

 

 

+2

1 Pizza Hut Division and Worldwide system sales ex F/X and net new units include the benefit of our strategic alliance with Telepizza in the fourth-quarter 2018. Same-store sales reflects the inclusion of Telepizza 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

 

2019

2018

Reported

Ex F/X

2019

2018

Reported

Ex F/X

Restaurants

23,118

21,838

+6

N/A

23,118

21,838

+6

N/A

System Sales ($MM)

6,648

6,306

+5

+10

13,195

12,635

+4

+10

Same-Store Sales Growth (%)

+6

+2

NM

NM

+5

+2

NM

NM

Franchise and Property Revenues ($MM)

332

310

+7

+12

655

617

+6

+12

Operating Profit ($MM)

261

235

+11

+17

497

456

+9

+16

Operating Margin (%)

44.7

36.1

8.6

8.5

43.2

34.8

8.4

8.2

 

Second-Quarter (% Change)

Year-to-Date (% Change)

 

International

U.S.

International

U.S.

System Sales Growth Ex F/X

+12

+2

+12

+2

Same-Store Sales Growth

+6

+2

+6

+2

Second-Quarter Highlights

  • KFC Division opened 331 gross new restaurants in 54 countries.
  • Operating margin increased 8.6 percentage points driven by refranchising, same-store sales growth and net new unit growth.
  • Foreign currency translation unfavorably impacted operating profit by $14 million.

KFC Markets1

Percent of KFC System Sales2

System Sales Growth Ex F/X

Second-Quarter

(% Change)

Year-to-Date

(% Change)

China

27%

+12

+12

United States

17%

+2

+2

Asia

12%

+10

+9

Russia & Eastern Europe

8%

+19

+19

Australia

7%

+8

+7

United Kingdom

6%

+17

+18

Latin America

5%

+13

+12

Western Europe

5%

+15

+12

Africa

4%

+14

+13

Middle East / Turkey / North Africa

4%

+8

+7

Canada

2%

+1

(1)

Thailand

2%

+10

+9

India

1%

+22

+24

1 Refer to investors.yum.com under Financial Reports for a list of the countries within each of the markets.

2 Reflects Full Year 2018.

PIZZA HUT DIVISION

 

Second-Quarter

Year-to-Date

 

 

 

%/ppts Change

 

 

%/ppts Change

 

2019

2018

Reported

Ex F/X

2019

2018

Reported

Ex F/X

Restaurants

18,515

16,823

+10

N/A

18,515

16,823

+10

N/A

System Sales ($MM)1

3,098

2,894

+7

+10

6,229

5,926

+5

+8

Same-Store Sales Growth (%)1

+2

(1)

NM

NM

+1

Even

NM

NM

Franchise and Property Revenues ($MM)

143

140

+3

+5

288

289

Even

+2

Operating Profit ($MM)

96

81

+18

+21

193

169

+14

+18

Operating Margin (%)

38.7

34.6

4.1

4.5

39.4

34.8

4.6

5.0

 

Second-Quarter (% Change)

Year-to-Date (% Change)

 

International

U.S.

International

U.S.

System Sales Growth Ex F/X1

+15

+4

+14

+1

Same-Store Sales Growth1

+2

+2

+1

+1

Second-Quarter Highlights

  • Pizza Hut Division opened 221 gross new restaurants in 42 countries.
  • Operating margin increased 4.1 percentage points driven by refranchising, same-store sales growth and lower advertising spend associated with the U.S. Transformation Agreement.
  • Foreign currency translation unfavorably impacted operating profit by $3 million.

Pizza Hut Markets2

Percent of Pizza Hut System Sales3

System Sales Growth Ex F/X 1

Second-Quarter

(% Change)

Year-to-Date

(% Change)

United States

46%

+4

+1

China

17%

+4

+3

Asia

13%

+3

+4

Europe (excluding Spain & Portugal)

9%

+6

+4

Latin America / Spain / Portugal

7%

+92

+88

Middle East / Turkey / North Africa

4%

+7

+7

Canada

2%

+5

+3

India

1%

+9

+10

Africa

<1%

+24

+30

1 System sales ex F/X includes the benefit of our strategic alliance with Telepizza in the fourth-quarter 2018. Same-store sales reflects the inclusion of Telepizza in the prior year base.

2 Refer to investors.yum.com under Financial Reports for a list of the countries within each of the markets.

3 Reflects Full Year 2018. Europe and Latin America adjusted for transfer of reporting responsibility of Spain and Portugal Pizza Hut units from Europe to Latin America as a result of the Telepizza alliance.

TACO BELL DIVISION

 

Second-Quarter

Year-to-Date

 

 

 

%/ppts Change

 

 

%/ppts Change

 

2019

2018

Reported

Ex F/X

2019

2018

Reported

Ex F/X

Restaurants

7,136

6,905

+3

N/A

7,136

6,905

+3

N/A

System Sales ($MM)

2,727

2,489

+10

+10

5,233

4,836

+8

+8

Same-Store Sales Growth (%)

+7

+2

NM

NM

+6

+1

NM

NM

Franchise and Property Revenues ($MM)

158

134

+18

+18

302

262

+15

+15

Operating Profit ($MM)

159

149

+7

+7

297

281

+6

+6

Operating Margin (%)

33.2

30.8

2.4

2.4

32.1

29.7

2.4

2.4

Second-Quarter Highlights

  • Taco Bell Division opened 55 gross new restaurants in 12 countries.
  • Operating margin increased 2.4 percentage points driven by same-store sales growth and refranchising, partially offset by higher restaurant level costs.

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.

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 August 1, 2019. The number is 877/815-2029 for U.S. callers and 706/645-9271 for international callers, conference ID 3973379.

The call will be available for playback beginning at 11:00 a.m. Eastern Time August 1, 2019 through September 6, 2019. To access the playback, dial 855/859-2056 in the U.S. and 404/537-3406 internationally, conference ID 3973379.

The webcast and the playback can be accessed via the website by visiting Yum! Brands' website, investors.yum.com/events-and-presentations and selecting “Q2 2019 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: food safety and food borne-illness issues; health concerns arising from outbreaks of viruses or other diseases; the success of our franchisees and licensees; the success of our transformation initiatives, including our refranchising strategy; 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 success of our development strategy in emerging markets; changes in commodity, labor and other operating costs; 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; changes in consumer discretionary spending and general economic conditions; competition within the retail food industry; 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 48,000 restaurants in more than 145 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. Worldwide, the Yum! Brands system opens over eight new restaurants per day on average, making it a leader in global retail development. In 2018, Yum! Brands was named to the Dow Jones Sustainability North America Index and ranked among the top 100 Best Corporate Citizens by Corporate Responsibility Magazine. In 2019, Yum! Brands was named to the Bloomberg Gender-Equality Index for the second consecutive year.

 
 

YUM! Brands, Inc.
Condensed Consolidated Summary of Results
(amounts in millions, except per share amounts)
(unaudited)

 

 

Quarter ended

 

% Change

 

Year to date

 

% Change

 

6/30/19

 

6/30/18

 

B/(W)

 

6/30/19

 

6/30/18

 

B/(W)

Revenues

 

 

 

 

 

 

 

 

 

 

 

Company sales

$

 

359

 

 

$

 

512

 

 

(30

)

 

$

 

692

 

 

$

 

1,024

 

 

(32

)

Franchise and property revenues

 

633

 

 

 

584

 

 

8

 

 

 

1,245

 

 

 

1,168

 

 

7

 

Franchise contributions for advertising and other services

 

318

 

 

 

272

 

 

17

 

 

 

627

 

 

 

547

 

 

15

 

Total revenues

 

1,310

 

 

 

1,368

 

 

(4

)

 

 

2,564

 

 

 

2,739

 

 

(6

)

 

 

 

 

 

 

 

 

 

 

 

 

Costs and Expenses, Net

 

 

 

 

 

 

 

 

 

 

 

Company restaurant expenses

 

286

 

 

 

421

 

 

32

 

 

 

558

 

 

 

859

 

 

35

 

General and administrative expenses

 

198

 

 

 

208

 

 

5

 

 

 

409

 

 

 

427

 

 

4

 

Franchise and property expenses

 

38

 

 

 

40

 

 

9

 

 

 

81

 

 

 

87

 

 

8

 

Franchise advertising and other services expense

 

315

 

 

 

274

 

 

(15

)

 

 

616

 

 

 

546

 

 

(13

)

Refranchising (gain) loss

 

(4

)

 

 

(29

)

 

(85

)

 

 

(10

)

 

 

(185

)

 

(95

)

Other (income) expense

 

6

 

 

 

5

 

 

NM

 

 

 

6

 

 

 

3

 

 

NM

 

Total costs and expenses, net

 

839

 

 

 

919

 

 

9

 

 

 

1,660

 

 

 

1,737

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Profit

 

471

 

 

 

449

 

 

5

 

 

 

904

 

 

 

1,002

 

 

(10

)

Investment (income) expense, net

 

(25

)

 

 

(23

)

 

11

 

 

 

(9

)

 

 

(89

)

 

(89

)

Other pension (income) expense

 

 

 

3

 

 

71

 

 

 

3

 

 

 

6

 

 

41

 

Interest expense, net

 

119

 

 

 

112

 

 

(5

)

 

 

234

 

 

 

219

 

 

(7

)

Income before income taxes

 

377

 

 

 

357

 

 

6

 

 

 

676

 

 

 

866

 

 

(22

)

Income tax provision

 

88

 

 

 

36

 

 

NM

 

 

 

125

 

 

 

112

 

 

(12

)

Net Income

$

 

289

 

 

$

 

321

 

 

(10

)

 

$

 

551

 

 

$

 

754

 

 

(27

)

 

 

 

 

 

 

 

 

 

 

 

 

Effective tax rate

 

23.3

%

 

 

9.9

%

 

(13.4) ppts.

 

 

18.5

%

 

 

12.9

%

 

(5.6) ppts.

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

 

 

 

 

 

 

 

 

 

 

EPS

$

 

0.94

 

 

$

 

0.99

 

 

(5

)

 

$

 

1.79

 

 

$

 

2.30

 

 

(22

)

Average shares outstanding

 

307

 

 

 

324

 

 

5

 

 

 

307

 

 

 

328

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

 

 

 

 

EPS

$

 

0.92

 

 

$

 

0.97

 

 

(5

)

 

$

 

1.75

 

 

$

 

2.25

 

 

(22

)

Average shares outstanding

 

314

 

 

 

331

 

 

5

 

 

 

314

 

 

 

336

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

$

 

0.42

 

 

$

 

0.36

 

 

 

 

$

 

0.84

 

 

$

 

0.72

 

 

 

 

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

 

6/30/19

 

6/30/18

 

B/(W)

 

6/30/19

 

6/30/18

 

B/(W)

 

 

 

 

 

 

 

 

 

 

 

 

Company sales

$

 

135

 

 

$

 

241

 

 

(44

)

 

$

 

260

 

 

$

 

486

 

 

(47

)

Franchise and property revenues

 

332

 

 

 

310

 

 

7

 

 

 

655

 

 

 

617

 

 

6

 

Franchise contributions for advertising and other services

 

117

 

 

 

100

 

 

18

 

 

 

235

 

 

 

206

 

 

14

 

Total revenues

 

584

 

 

 

651

 

 

(10

)

 

 

1,150

 

 

 

1,309

 

 

(12

)

 

 

 

 

 

 

 

 

 

 

 

 

Company restaurant expenses

 

113

 

 

 

210

 

 

46

 

 

 

221

 

 

 

430

 

 

49

 

General and administrative expenses

 

75

 

 

 

81

 

 

6

 

 

 

153

 

 

 

166

 

 

7

 

Franchise and property expenses

 

19

 

 

 

25

 

 

25

 

 

 

47

 

 

 

54

 

 

13

 

Franchise advertising and other services expense

 

116

 

 

 

101

 

 

(15

)

 

 

232

 

 

 

205

 

 

(13

)

Other (income) expense

 

 

 

(1

)

 

NM

 

 

 

 

 

(2

)

 

NM

 

Total costs and expenses, net

 

323

 

 

 

416

 

 

22

 

 

 

653

 

 

 

853

 

 

23

 

Operating Profit

$

 

261

 

 

$

 

235

 

 

11

 

 

$

 

497

 

 

$

 

456

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

Restaurant margin

 

15.8

%

 

 

12.5

%

 

3.3 ppts.

 

 

15.0

%

 

 

11.5

%

 

3.5 ppts.

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

44.7

%

 

 

36.1

%

 

8.6 ppts.

 

 

43.2

%

 

 

34.8

%

 

8.4 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

 

6/30/19

 

6/30/18

 

B/(W)

 

6/30/19

 

6/30/18

 

B/(W)

 

 

 

 

 

 

 

 

 

 

 

 

Company sales

$

 

11

 

 

$

 

18

 

 

(38

)

 

$

 

22

 

 

$

 

42

 

 

(47

)

Franchise and property revenues

 

143

 

 

 

140

 

 

3

 

 

 

288

 

 

 

289

 

 

Franchise contributions for advertising and other services

 

92

 

 

 

75

 

 

21

 

 

 

179

 

 

 

153

 

 

17

 

Total revenues

 

246

 

 

 

233

 

 

6

 

 

 

489

 

 

 

484

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

Company restaurant expenses

 

10

 

 

 

19

 

 

40

 

 

 

21

 

 

 

43

 

 

49

 

General and administrative expenses

 

44

 

 

 

46

 

 

6

 

 

 

91

 

 

 

96

 

 

6

 

Franchise and property expenses

 

9

 

 

 

8

 

 

 

 

14

 

 

 

19

 

 

30

 

Franchise advertising and other services expense

 

89

 

 

 

77

 

 

(16

)

 

 

172

 

 

 

155

 

 

(11

)

Other (income) expense

 

(2

)

 

 

2

 

 

NM

 

 

 

(2

)

 

 

2

 

 

NM

 

Total costs and expenses, net

 

150

 

 

 

152

 

 

1

 

 

 

296

 

 

 

315

 

 

6

 

Operating Profit

$

 

96

 

 

$

 

81

 

 

18

 

 

$

 

193

 

 

$

 

169

 

 

14

 

 

 

 

 

 

 

 

 

 

 

 

 

Restaurant margin

 

1.6

%

 

 

(2.4

)%

 

4.0 ppts.

 

 

2.7

%

 

 

(1.0

)%

 

3.7 ppts.

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

38.7

%

 

 

34.6

%

 

4.1 ppts.

 

 

39.4

%

 

 

34.8

%

 

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

 

6/30/19

 

6/30/18

 

B/(W)

 

6/30/19

 

6/30/18

 

B/(W)

 

 

 

 

 

 

 

 

 

 

 

 

Company sales

$

 

213

 

 

$

 

253

 

 

(16

)

 

$

 

410

 

 

$

 

496

 

 

(17

)

Franchise and property revenues

 

158

 

 

 

134

 

 

18

 

 

 

302

 

 

 

262

 

 

15

 

Franchise contributions for advertising and other services

 

109

 

 

 

97

 

 

13

 

 

 

213

 

 

 

188

 

 

14

 

Total revenues

 

480

 

 

 

484

 

 

(1

)

 

 

925

 

 

 

946

 

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

 

Company restaurant expenses

 

163

 

 

 

193

 

 

16

 

 

 

316

 

 

 

387

 

 

18

 

General and administrative expenses

 

41

 

 

 

41

 

 

 

 

84

 

 

 

81

 

 

(4

)

Franchise and property expenses

 

8

 

 

 

6

 

 

(30

)

 

 

17

 

 

 

12

 

 

(41

)

Franchise advertising and other services expense

 

110

 

 

 

96

 

 

(14

)

 

 

212

 

 

 

186

 

 

(14

)

Other (income) expense

 

(1

)

 

 

(1

)

 

NM

 

 

 

(1

)

 

 

(1

)

 

NM

 

Total costs and expenses, net

 

321

 

 

 

335

 

 

4

 

 

 

628

 

 

 

665

 

 

6

 

Operating Profit

$

 

159

 

 

$

 

149

 

 

7

 

 

$

 

297

 

 

$

 

281

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

Restaurant margin

 

23.6

%

 

 

24.1

%

 

(0.5) ppts.

 

 

22.8

%

 

 

21.9

%

 

0.9 ppts.

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

33.2

%

 

 

30.8

%

 

2.4 ppts.

 

 

32.1

%

 

 

29.7

%

 

2.4 ppts.

 

See accompanying notes.
Percentages may not recompute due to rounding.

YUM! Brands, Inc.
Condensed Consolidated Balance Sheets
(amounts in millions)

 

 (unaudited)

 

 

6/30/19

 

12/31/18

ASSETS

 

 

 

Current Assets

 

 

 

Cash and cash equivalents

$

252

 

 

$

292

 

Accounts and notes receivable, less allowance: $45 in 2019 and $31 in 2018

535

 

 

561

 

Prepaid expenses and other current assets

335

 

 

354

 

Total Current Assets

1,122

 

 

1,207

 

 

 

 

 

Property, plant and equipment, net of accumulated depreciation of $1,135 in 2019 and $1,116 in 2018

1,193

 

 

1,237

 

Goodwill

526

 

 

525

 

Intangible assets, net

243

 

 

242

 

Other assets

1,378

 

 

724

 

Deferred income taxes

212

 

 

195

 

Total Assets

$

4,674

 

 

$

4,130

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' DEFICIT

 

 

 

Current Liabilities

 

 

 

Accounts payable and other current liabilities

$

798

 

 

$

911

 

Income taxes payable

63

 

 

69

 

Short-term borrowings

325

 

 

321

 

Total Current Liabilities

1,186

 

 

1,301

 

 

 

 

 

Long-term debt

9,869

 

 

9,751

 

Other liabilities and deferred credits

1,613

 

 

1,004

 

Total Liabilities

12,668

 

 

12,056

 

 

 

 

 

Shareholders' Deficit

 

 

 

Common Stock, no par value, 750 shares authorized; 304 shares issued in 2019 and 306 issued in 2018

 

 

 

Accumulated deficit

(7,614

)

 

(7,592

)

Accumulated other comprehensive loss

(380

)

 

(334

)

Total Shareholders' Deficit

(7,994

)

 

(7,926

)

Total Liabilities and Shareholders' Deficit

$

4,674

 

 

$

4,130

 

   
     

See accompanying notes.

   
 

YUM! Brands, Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in millions)
(unaudited)

 

Year to date

 

6/30/19

 

6/30/18

Cash Flows - Operating Activities

 

 

 

Net Income

$

551

 

 

$

754

 

Depreciation and amortization

54

 

 

71

 

Refranchising (gain) loss

(10

)

 

(185

)

Investment (income) expense, net

(9

)

 

(89

)

Contributions to defined benefit pension plans

(11

)

 

(5

)

Deferred income taxes

 

 

(23

)

Share-based compensation expense

31

 

 

27

 

Changes in accounts and notes receivable

7

 

 

(15

)

Changes in prepaid expenses and other current assets

(24

)

 

4

 

Changes in accounts payable and other current liabilities

(171

)

 

(160

)

Changes in income taxes payable

(36

)

 

(15

)

Other, net

79

 

 

17

 

Net Cash Provided by Operating Activities

461

 

 

381

 

 

 

 

 

Cash Flows - Investing Activities

 

 

 

Capital spending

(76

)

 

(85

)

Investment in Grubhub Inc. common stock

 

 

(200

)

Proceeds from refranchising of restaurants

25

 

 

252

 

Other, net

(1

)

 

(9

)

Net Cash Used in Investing Activities

(52

)

 

(42

)

 

 

 

 

Cash Flows - Financing Activities

 

 

 

Proceeds from long-term debt

 

 

106

 

Repayments of long-term debt

(40

)

 

(449

)

Revolving credit facilities, three months or less, net

157

 

 

202

 

Short-term borrowings by original maturity

 

 

 

More than three months - proceeds

48

 

 

51

 

More than three months - payments

(44

)

 

(43

)

Three months or less, net

 

 

 

Repurchase shares of Common Stock

(305

)

 

(1,168

)

Dividends paid on Common Stock

(257

)

 

(236

)

Other, net

(51

)

 

(42

)

Net Cash Used in Financing Activities

(492

)

 

(1,579

)

Effect of Exchange Rate on Cash and Cash Equivalents

(2

)

 

(19

)

Net Decrease in Cash and Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

(85

)

 

(1,259

)

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - Beginning of Period

474

 

 

1,668

 

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - End of Period

$

389

 

 

$

409

 

 

 

 

 

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.

  • System sales and System sales excluding the impacts of foreign currency translation ("FX"). System sales include the results of all restaurants regardless of ownership, including Company-owned and franchise restaurants. Sales at franchise restaurants typically generate ongoing franchise and license fees for the Company at a rate of 3% to 6% of sales. Franchise restaurant sales are not included in Company sales on the Condensed Consolidated Statements of Income; however, the franchise and license fees are included in the Company’s revenues. We believe System sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates our primary revenue drivers, Company and franchise same-store sales as well as net unit growth.
  • 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) and (e) 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

 

 

6/30/19

 

6/30/18

 

6/30/19

 

6/30/18

Detail of Special Items

 

 

 

 

 

 

 

 

Refranchising gain (loss)(b)

 

$

 

 

4

 

 

$

 

 

29

 

 

$

 

 

10

 

 

$

 

 

185

 

Other Special Items Expense(c)

 

 

(9

)

 

 

 

 

(11

)

 

 

(3

)

Special Items Income (Expense) - Operating Profit

 

 

(5

)

 

 

29

 

 

 

(1

)

 

 

182

 

Interest expense, net(c)

 

 

(2

)

 

 

 

 

(2

)

 

 

Special Items Income (Expense) before Income Taxes

 

 

(7

)

 

 

29

 

 

 

(3

)

 

 

182

 

Tax Benefit (Expense) on Special Items(d)

 

 

3

 

 

 

(18

)

 

 

2

 

 

 

(37

)

Tax Benefit - U.S. Tax Act(e)

 

 

 

 

40

 

 

 

 

 

34

 

Special Items Income (Expense), net of tax

 

 

(4

)

 

 

51

 

 

 

(1

)

 

 

179

 

Average diluted shares outstanding

 

 

314

 

 

 

331

 

 

 

314

 

 

 

336

 

Special Items diluted EPS

 

$

 

 

(0.01

)

 

$

 

 

0.15

 

 

$

 

 

(0.01

)

 

$

 

 

0.54

 

 

 

 

 

 

 

 

 

 

Reconciliation of GAAP Operating Profit to Core Operating Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

 

 

 

 

 

 

GAAP Operating Profit

 

$

 

 

471

 

 

$

 

 

449

 

 

$

 

 

904

 

 

$

 

 

1,002

 

Special Items Income (Expense)

 

 

(5

)

 

 

29

 

 

 

(1

)

 

 

182

 

Foreign Currency Impact on Divisional Operating Profit

 

 

(17

)

 

 

N/A

 

 

 

(36

)

 

 

N/A

 

Core Operating Profit

 

$

 

 

493

 

 

$

 

 

420

 

 

$

 

 

941

 

 

$

 

 

820

 

 

 

 

 

 

 

 

 

 

KFC Division

 

 

 

 

 

 

 

 

GAAP Operating Profit

 

$

 

 

261

 

 

$

 

 

235

 

 

$

 

 

497

 

 

$

 

 

456

 

Foreign Currency Impact on Divisional Operating Profit

 

 

(14

)

 

 

N/A

 

 

 

(30

)

 

 

N/A

 

Core Operating Profit

 

$

 

 

275

 

 

$

 

 

235

 

 

$

 

 

527

 

 

$

 

 

456

 

 

 

 

 

 

 

 

 

 

Reconciliation of Non-GAAP Measurements to GAAP Results (Continued)

(amounts in millions, except per share amounts)

(unaudited)

 

 

Quarter ended

 

Year to date

 

 

6/30/19

 

6/30/18

 

6/30/19

 

6/30/18

Pizza Hut Division

 

 

 

 

 

 

 

 

GAAP Operating Profit

 

$

96

 

 

$

81

 

 

$

193

 

 

$

169

 

Foreign Currency Impact on Divisional Operating Profit

 

(3

)

 

N/A

 

 

(6

)

 

N/A

 

Core Operating Profit

 

$

99

 

 

$

81

 

 

$

199

 

 

$

169

 

 

 

 

 

 

 

 

 

 

Taco Bell Division

 

 

 

 

 

 

 

 

GAAP Operating Profit

 

$

159

 

 

$

149

 

 

$

297

 

 

$

281

 

Foreign Currency Impact on Divisional Operating Profit

 

 

 

N/A

 

 

 

 

N/A

 

Core Operating Profit

 

$

159

 

 

$

149

 

 

$

297

 

 

$

281

 

 

 

 

 

 

 

 

 

 

Reconciliation of Diluted EPS to Diluted EPS excluding Special Items

 

 

 

 

 

 

 

 

Diluted EPS

 

$

0.92

 

 

$

0.97

 

 

$

1.75

 

 

$

2.25

 

Special Items Diluted EPS

 

(0.01

)

 

0.15

 

 

(0.01

)

 

0.54

 

Diluted EPS excluding Special Items

 

$

0.93

 

 

$

0.82

 

 

$

1.76

 

 

$

1.71

 

 

 

 

 

 

 

 

 

 

Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items

 

 

 

 

 

 

 

 

GAAP Effective Tax Rate

 

23.3

%

 

9.9

%

 

18.5

%

 

12.9

%

Impact on Tax Rate as a result of Special Items

 

(0.4

)%

 

(7.5

)%

 

(0.2

)%

 

(2.9

)%

Effective Tax Rate excluding Special Items

 

23.7

%

 

17.4

%

 

18.7

%

 

15.8

%

 

 

 

 

 

 

 

 

 

Reconciliation of Company sales to System sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

 

 

 

 

 

 

GAAP Company sales

 

$

359

 

 

$

512

 

 

$

692

 

 

$

1,024

 

Franchise sales

 

12,114

 

 

11,177

 

 

23,965

 

 

22,373

 

System sales

 

12,473

 

 

11,689

 

 

24,657

 

 

23,397

 

Foreign Currency Impact on System sales

 

(410

)

 

N/A

 

 

(901

)

 

N/A

 

System sales, excluding FX

 

$

12,883

 

 

$

11,689

 

 

$

25,558

 

 

$

23,397