Press Release

Yum! Brands Reports Solid Third-Quarter; System Sales Growth of 8%; Same-Store Sales Growth of 3%; GAAP Operating Profit Decline of (13)%; Core Operating Profit Growth of 6%

Company Release - 10/30/2019 7:00 AM ET

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Yum! Brands, Inc. (NYSE: YUM) today reported results for the third-quarter ended September 30, 2019. Worldwide system sales excluding foreign currency translation grew 8%, with 7% net-new units and 3% same-store sales growth. Third-quarter GAAP EPS was $0.81, a decrease of (42)%. Third-quarter EPS excluding Special Items was $0.80, a decrease of (23)%.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20191030005346/en/

GREG CREED COMMENTS

Greg Creed, CEO, said “Following a very strong first half of 2019 and in line with our expectations, third-quarter results were consistent with our long-term growth model. We delivered system sales growth of 8%, with same-store sales of 3% and net-new unit growth of 7%, led by continued strong performances at KFC International and Taco Bell. We’re rapidly approaching the end of a truly historic year. 2019 will not only mark the completion of our 3-year transformation of Yum!, but it will also mark the end of my tenure as Yum! CEO. I couldn’t be prouder of the progress that our teams around the world have made to become more focused, more franchised and more efficient; all while accelerating global growth. Today Yum! has a unique and powerful business model backed by a culture that is stronger than ever and by talent that is truly world class. I’m confident that as I retire, David Gibbs is the right leader to leverage our scale and key growth drivers to enhance franchisee economics, champion the customer experience and drive global growth to maximize value for our stakeholders.”

THIRD-QUARTER HIGHLIGHTS

  • Worldwide system sales excluding foreign currency translation grew 8%, with KFC at 8%, Pizza Hut at 7% and Taco Bell at 7%. Adjusting the prior year base to include Telepizza, system sales growth excluding foreign currency translation would have been 6% worldwide and 2% for the Pizza Hut Division.
  • We opened 389 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 1.5 million shares totaling $174 million at an average price per share of $115.
  • We recorded $60 million of pre-tax investment expense related to the change in fair value of our investment in Grubhub, which resulted in a negative ($0.15) impact in EPS. When coupled with $94 million of pre-tax investment income recorded in the third quarter of 2018, which resulted in a $0.22 benefit to EPS, our Grubhub investment unfavorably impacted year-over-year EPS growth by ($0.37).
  • Foreign currency translation unfavorably impacted divisional operating profit by $7 million.

 

% Change

 

System Sales

Ex F/X

 

Same-Store Sales

 

Net-New Units

 

GAAP Operating
Profit

 

Core

Operating Profit2

KFC Division

+8

 

+3

 

+6

 

+9

 

+12

Pizza Hut Division1

+7

 

Even

 

+9

 

(2)

 

(1)

Taco Bell Division

+7

 

+4

 

+4

 

Even

 

Even

Worldwide1

+8

 

+3

 

+7

 

(13)

 

+6

 

 

Third-Quarter

Year-to-Date

 

 

2019

2018

% Change

2019

2018

% Change

GAAP EPS

 

$0.81

$1.40

(42)

$2.57

$3.64

(30)

Special Items EPS2

 

$0.01

$0.36

NM

$0.02

$0.89

NM

EPS Excluding Special Items

 

$0.80

$1.04

(23)

$2.55

$2.75

(7)

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

 

Third-Quarter

Year-to-Date

 

 

 

%/ppts Change

 

 

%/ppts Change

 

2019

2018

Reported

Ex F/X

2019

2018

Reported

Ex F/X

Restaurants

23,435

 

22,104

 

+6

 

N/A

 

23,435

 

22,104

 

+6

 

N/A

System Sales ($MM)

6,968

 

6,555

 

+6

 

+8

 

20,163

 

19,190

 

+5

 

+9

Same-Store Sales Growth (%)

+3

 

+3

 

NM

 

NM

 

+5

 

+2

 

NM

 

NM

Franchise and Property Revenues ($MM)

344

 

320

 

+8

 

+10

 

999

 

937

 

+7

 

+11

Operating Profit ($MM)

270

 

248

 

+9

 

+12

 

767

 

704

 

+9

 

+14

Operating Margin (%)

44.3

 

38.2

 

6.1

 

6.1

 

43.6

 

36.0

 

7.6

 

7.5

 

 

Third-Quarter (% Change)

Year-to-Date (% Change)

 

 

International

U.S.

International

U.S.

System Sales Growth Ex F/X

 

+10

(1)

+11

+1

Same-Store Sales Growth

 

+4

(1)

+5

+1

Third-Quarter Highlights

  • KFC Division opened 411 gross new restaurants in 52 countries.
  • Operating margin increased 6.1 percentage points driven by refranchising, net-new unit growth and same-store sales growth.
  • Foreign currency translation unfavorably impacted operating profit by $6 million.

KFC Markets1

Percent of KFC
System Sales
2

System Sales Growth Ex F/X

Third-Quarter

(% Change)

Year-to-Date

(% Change)

China

27%

 

+10

 

+11

United States

17%

 

(1)

 

+1

Asia

12%

 

+7

 

+8

Russia, Central & Eastern Europe

8%

 

+20

 

+19

Australia

7%

 

+10

 

+8

United Kingdom

6%

 

+6

 

+14

Latin America

5%

 

+16

 

+13

Western Europe

5%

 

+14

 

+13

Africa

4%

 

+8

 

+12

Middle East / Turkey / North Africa

4%

 

+8

 

+8

Canada

2%

 

(2)

 

(1)

Thailand

2%

 

(2)

 

+5

India

1%

 

+19

 

+22

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

2Reflects Full Year 2018.

PIZZA HUT DIVISION

 

Third-Quarter

Year-to-Date

 

 

 

%/ppts Change

 

 

%/ppts Change

 

2019

2018

Reported

Ex F/X

2019

2018

Reported

Ex F/X

Restaurants

18,532

 

16,930

 

+9

 

N/A

 

18,532

 

16,930

 

+9

 

N/A

System Sales ($MM)1

3,092

 

2,929

 

+6

 

+7

 

9,321

 

8,855

 

+5

 

+8

Same-Store Sales Growth (%)1

Even

 

(1)

 

NM

 

NM

 

+1

 

(1)

 

NM

 

NM

Franchise and Property Revenues ($MM)

143

 

143

 

(1)

 

+1

 

431

 

432

 

Even

 

+2

Operating Profit ($MM)

86

 

88

 

(2)

 

(1)

 

279

 

257

 

+8

 

+11

Operating Margin (%)

36.0

 

38.7

 

(2.7)

 

(2.6)

 

38.2

 

36.1

 

2.1

 

2.4

 

 

Third-Quarter (% Change)

Year-to-Date (% Change)

 

 

International

U.S.

International

U.S.

System Sales Growth Ex F/X1

 

+14

(2)

+14

Even

Same-Store Sales Growth1

 

+1

(3)

+1

Even

Third-Quarter Highlights

  • Pizza Hut Division opened 205 gross new restaurants in 43 countries.
  • Operating margin decreased 2.7 percentage points driven by higher provisions for past due receivables and related higher G&A, partially offset by lower advertising spend associated with the U.S. Transformation Agreement.
  • Foreign currency translation unfavorably impacted operating profit by $1 million.

Pizza Hut Markets2

Percent of Pizza Hut
System Sales3

System Sales Growth Ex F/X 1

 

Third-Quarter

(% Change)

Year-to-Date

(% Change)

United States

46%

 

(2)

 

Even

China

17%

 

+3

 

+3

Asia

13%

 

+4

 

+4

Europe (excluding Spain & Portugal)

9%

 

+3

 

+4

Latin America / Spain / Portugal

7%

 

+86

 

+86

Middle East / Turkey / North Africa

4%

 

+5

 

+6

Canada

2%

 

+8

 

+4

India

1%

 

+2

 

+7

Africa

<1%

 

+33

 

+31

1System 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.

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

3Reflects 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

 

Third-Quarter

Year-to-Date

 

 

 

%/ppts Change

 

 

%/ppts Change

 

2019

2018

Reported

Ex F/X

2019

2018

Reported

Ex F/X

Restaurants

7,191

 

6,942

 

+4

 

N/A

 

7,191

 

6,942

 

+4

 

N/A

System Sales ($MM)

2,772

 

2,604

 

+6

 

+7

 

8,005

 

7,440

 

+8

 

+8

Same-Store Sales Growth (%)

+4

 

+5

 

NM

 

NM

 

+5

 

+3

 

NM

 

NM

Franchise and Property Revenues ($MM)

158

 

142

 

+11

 

+11

 

460

 

404

 

+14

 

+14

Operating Profit ($MM)

161

 

161

 

Even

 

Even

 

458

 

442

 

+4

 

+4

Operating Margin (%)

32.9

 

31.5

 

1.4

 

1.4

 

32.4

 

30.3

 

2.1

 

2.1

Third-Quarter Highlights

  • Taco Bell Division opened 67 gross new restaurants in 13 countries.
  • Operating margin increased 1.4 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 third-quarter Form 10-Q.
  • Our GAAP Effective Tax Rate and Effective Tax Rate excluding Special Items were positively impacted due to the reversal of a reserve of approximately $20 million we previously recorded in the fourth-quarter of 2018. The reversal related to the favorable resolution in the third-quarter of 2019 of a dispute concerning the income tax rate to be applied to our 2018 income in a foreign market.
  • During the third-quarter of 2019 Yum! Brands, Inc. issued $800 million of Senior Unsecured Notes. Proceeds were used to repay $250 million of existing Senior Unsecured Notes, repay amounts outstanding on the Revolving Facility and for general corporate purposes.

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 October 30, 2019. The number is 877/815-2029 for U.S. callers and 706/645-9271 for international callers, conference ID 4491299.

The call will be available for playback beginning at 11:00 a.m. Eastern Time October 30, 2019 through December 6, 2019. To access the playback, dial 855/859-2056 in the U.S. and 404/537-3406 internationally, conference ID 4491299.

The webcast and the playback can be accessed via the website by visiting Yum! Brands' website, investors.yum.com/events-and-presentations and selecting “Q3 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 49,000 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

 

 

9/30/19

 

9/30/18

 

B/(W)

 

9/30/19

 

9/30/18

 

B/(W)

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Company sales

 

$

364

 

 

$

499

 

 

(27)

 

$

1,056

 

 

$

1,523

 

 

(31)

Franchise and property revenues

 

645

 

 

605

 

 

7

 

1,890

 

 

1,773

 

 

7

Franchise contributions for advertising and other services

 

330

 

 

287

 

 

15

 

957

 

 

834

 

 

15

Total revenues

 

1,339

 

 

1,391

 

 

(4)

 

3,903

 

 

4,130

 

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and Expenses, Net

 

 

 

 

 

 

 

 

 

 

 

 

Company restaurant expenses

 

292

 

 

399

 

 

27

 

850

 

 

1,258

 

 

32

General and administrative expenses

 

208

 

 

204

 

 

(2)

 

617

 

 

631

 

 

2

Franchise and property expenses

 

43

 

 

40

 

 

(9)

 

124

 

 

127

 

 

2

Franchise advertising and other services expense

 

325

 

 

288

 

 

(13)

 

941

 

 

834

 

 

(13)

Refranchising (gain) loss

 

(8

)

 

(100

)

 

(92)

 

(18

)

 

(285

)

 

(94)

Other (income) expense

 

(1

)

 

7

 

 

NM

 

5

 

 

10

 

 

NM

Total costs and expenses, net

 

859

 

 

838

 

 

(3)

 

2,519

 

 

2,575

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Profit

 

480

 

 

553

 

 

(13)

 

1,384

 

 

1,555

 

 

(11)

Investment (income) expense, net

 

59

 

 

(96

)

 

NM

 

50

 

 

(185

)

 

NM

Other pension (income) expense

 

1

 

 

4

 

 

79

 

4

 

 

10

 

 

56

Interest expense, net

 

120

 

 

111

 

 

(9)

 

354

 

 

330

 

 

(8)

Income before income taxes

 

300

 

 

534

 

 

(44)

 

976

 

 

1,400

 

 

(30)

Income tax provision

 

45

 

 

80

 

 

44

 

170

 

 

192

 

 

12

Net Income

 

$

255

 

 

$

454

 

 

(44)

 

$

806

 

 

$

1,208

 

 

(33)

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

 

 

 

 

 

 

 

 

 

 

 

EPS

 

$

0.83

 

 

$

1.43

 

 

(42)

 

$

2.63

 

 

$

3.72

 

 

(29)

Average shares outstanding

 

306

 

 

318

 

 

4

 

307

 

 

325

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

 

 

 

 

 

EPS

 

$

0.81

 

 

$

1.40

 

 

(42)

 

$

2.57

 

 

$

3.64

 

 

(30)

Average shares outstanding

 

313

 

 

325

 

 

4

 

314

 

 

332

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.42

 

 

$

0.36

 

 

 

 

$

1.26

 

 

$

1.08

 

 

 

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

 

 

9/30/19

 

9/30/18

 

B/(W)

 

9/30/19

 

9/30/18

 

B/(W)

 

 

 

 

 

 

 

 

 

 

 

 

 

Company sales

 

$

135

 

 

$

221

 

 

(39)

 

$

395

 

 

$

707

 

 

(44)

Franchise and property revenues

 

344

 

 

320

 

 

8

 

999

 

 

937

 

 

7

Franchise contributions for advertising and other services

 

130

 

 

108

 

 

21

 

365

 

 

314

 

 

16

Total revenues

 

609

 

 

649

 

 

(6)

 

1,759

 

 

1,958

 

 

(10)

 

 

 

 

 

 

 

 

 

 

 

 

 

Company restaurant expenses

 

113

 

 

187

 

 

40

 

334

 

 

617

 

 

46

General and administrative expenses

 

80

 

 

81

 

 

2

 

233

 

 

247

 

 

6

Franchise and property expenses

 

23

 

 

24

 

 

4

 

70

 

 

78

 

 

10

Franchise advertising and other services expense

 

126

 

 

107

 

 

(19)

 

358

 

 

312

 

 

(15)

Other (income) expense

 

(3

)

 

2

 

 

NM

 

(3

)

 

 

 

NM

Total costs and expenses, net

 

339

 

 

401

 

 

15

 

992

 

 

1,254

 

 

21

Operating Profit

 

$

270

 

 

$

248

 

 

9

 

$

767

 

 

$

704

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

Restaurant margin

 

16.1

%

 

15.4

%

 

0.7 ppts.

 

15.3

%

 

12.7

%

 

2.6 ppts.

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

44.3

%

 

38.2

%

 

6.1 ppts.

 

43.6

%

 

36.0

%

 

7.6 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

 

 

9/30/19

 

9/30/18

 

B/(W)

 

9/30/19

 

9/30/18

 

B/(W)

 

 

 

 

 

 

 

 

 

 

 

 

 

Company sales

 

$

13

 

 

$

13

 

 

(1)

 

$

35

 

 

$

55

 

 

(37)

Franchise and property revenues

 

143

 

 

143

 

 

(1)

 

431

 

 

432

 

 

Even

Franchise contributions for advertising and other services

 

85

 

 

73

 

 

17

 

264

 

 

226

 

 

17

Total revenues

 

241

 

 

229

 

 

5

 

730

 

 

713

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

Company restaurant expenses

 

13

 

 

13

 

 

7

 

34

 

 

56

 

 

39

General and administrative expenses

 

47

 

 

45

 

 

(5)

 

138

 

 

141

 

 

2

Franchise and property expenses

 

9

 

 

9

 

 

(13)

 

23

 

 

28

 

 

17

Franchise advertising and other services expense

 

86

 

 

74

 

 

(14)

 

258

 

 

229

 

 

(12)

Other (income) expense

 

 

 

 

 

NM

 

(2

)

 

2

 

 

NM

Total costs and expenses, net

 

155

 

 

141

 

 

(10)

 

451

 

 

456

 

 

1

Operating Profit

 

$

86

 

 

$

88

 

 

(2)

 

$

279

 

 

$

257

 

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

Restaurant margin

 

4.0

%

 

(2.2

)%

 

6.2 ppts.

 

3.2

%

 

(1.3

)%

 

4.5 ppts.

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

36.0

%

 

38.7

%

 

(2.7) ppts.

 

38.2

%

 

36.1

%

 

2.1 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

 

 

9/30/19

 

9/30/18

 

B/(W)

 

9/30/19

 

9/30/18

 

B/(W)

 

 

 

 

 

 

 

 

 

 

 

 

 

Company sales

 

$

 216

 

 

$

265

 

 

(18)

 

$

626

 

 

$

761

 

 

(18)

Franchise and property revenues

 

158

 

 

142

 

 

11

 

460

 

 

404

 

 

14

Franchise contributions for advertising and other services

 

115

 

 

106

 

 

8

 

328

 

 

294

 

 

11

Total revenues

 

489

 

 

513

 

 

(5)

 

1,414

 

 

1,459

 

 

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

Company restaurant expenses

 

166

 

 

200

 

 

17

 

482

 

 

587

 

 

18

General and administrative expenses

 

40

 

 

40

 

 

 

124

 

 

121

 

 

(3)

Franchise and property expenses

 

9

 

 

5

 

 

(59)

 

26

 

 

17

 

 

(47)

Franchise advertising and other services expense

 

113

 

 

107

 

 

(7)

 

325

 

 

293

 

 

(11)

Other (income) expense

 

 

 

 

 

NM

 

(1

)

 

(1

)

 

NM

Total costs and expenses, net

 

328

 

 

352

 

 

7

 

956

 

 

1,017

 

 

6

Operating Profit

 

$

161

 

 

$

161

 

 

Even

 

$

458

 

 

$

442

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

Restaurant margin

 

23.6

%

 

24.7

%

 

(1.1) ppts.

 

23.1

%

 

22.9

%

 

0.2 ppts.

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

32.9

%

 

31.5

%

 

1.4 ppts.

 

32.4

%

 

30.3

%

 

2.1 ppts.

See accompanying notes.

Percentages may not recompute due to rounding.

YUM! Brands, Inc.

Condensed Consolidated Balance Sheets

(amounts in millions)

 

 

(unaudited)

9/30/19

 

12/31/18

ASSETS

 

 

 

 

Current Assets

 

 

 

 

Cash and cash equivalents

 

$

691

 

 

$

292

 

Accounts and notes receivable, less allowance: $57 in 2019 and $31 in 2018

 

527

 

 

561

 

Prepaid expenses and other current assets

 

330

 

 

354

 

Total Current Assets

 

1,548

 

 

1,207

 

 

 

 

 

 

Property, plant and equipment, net of accumulated depreciation of $1,128 in 2019 and $1,116 in 2018

 

1,151

 

 

1,237

 

Goodwill

 

521

 

 

525

 

Intangible assets, net

 

243

 

 

242

 

Other assets

 

1,316

 

 

724

 

Deferred income taxes

 

224

 

 

195

 

Total Assets

 

$

5,003

 

 

$

4,130

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' DEFICIT

 

 

 

 

Current Liabilities

 

 

 

 

Accounts payable and other current liabilities

 

$

870

 

 

$

911

 

Income taxes payable

 

33

 

 

69

 

Short-term borrowings

 

84

 

 

321

 

Total Current Liabilities

 

987

 

 

1,301

 

 

 

 

 

 

Long-term debt

 

10,491

 

 

9,751

 

Other liabilities and deferred credits

 

1,622

 

 

1,004

 

Total Liabilities

 

13,100

 

 

12,056

 

 

 

 

 

 

Shareholders' Deficit

 

 

 

 

Common Stock, no par value, 750 shares authorized; 303 shares issued in 2019 and 306 issued in 2018

 

 

 

 

Accumulated deficit

 

(7,669

)

 

(7,592

)

Accumulated other comprehensive loss

 

(428

)

 

(334

)

Total Shareholders' Deficit

 

(8,097

)

 

(7,926

)

Total Liabilities and Shareholders' Deficit

 

$

5,003

 

 

$

4,130

 

See accompanying notes.

YUM! Brands, Inc.

Condensed Consolidated Statements of Cash Flows

(amounts in millions)

(unaudited)

 

 

Year to date

 

 

9/30/19

 

9/30/18

Cash Flows - Operating Activities

 

 

 

 

Net Income

 

$

806

 

 

$

1,208

 

Depreciation and amortization

 

84

 

 

103

 

Refranchising (gain) loss

 

(18

)

 

(285

)

Investment (income) expense, net

 

50

 

 

(185

)

Contributions to defined benefit pension plans

 

(13

)

 

(9

)

Deferred income taxes

 

(10

)

 

32

 

Share-based compensation expense

 

45

 

 

36

 

Changes in accounts and notes receivable

 

(4

)

 

(35

)

Changes in prepaid expenses and other current assets

 

(9

)

 

10

 

Changes in accounts payable and other current liabilities

 

(96

)

 

(81

)

Changes in income taxes payable

 

(64

)

 

(47

)

Other, net

 

112

 

 

49

 

Net Cash Provided by Operating Activities

 

883

 

 

796

 

 

 

 

 

 

Cash Flows - Investing Activities

 

 

 

 

Capital spending

 

(109

)

 

(147

)

Investment in Grubhub Inc. common stock

 

 

 

(200

)

Proceeds from refranchising of restaurants

 

55

 

 

445

 

Other, net

 

 

 

(9

)

Net Cash Provided by (Used in) Investing Activities

 

(54

)

 

89

 

 

 

 

 

 

Cash Flows - Financing Activities

 

 

 

 

Proceeds from long-term debt

 

800

 

 

106

 

Repayments of long-term debt

 

(311

)

 

(462

)

Revolving credit facilities, three months or less, net

 

 

 

273

 

Short-term borrowings by original maturity

 

 

 

 

More than three months - proceeds

 

80

 

 

59

 

More than three months - payments

 

(70

)

 

(59

)

Three months or less, net

 

 

 

 

Repurchase shares of Common Stock

 

(472

)

 

(1,684

)

Dividends paid on Common Stock

 

(385

)

 

(349

)

Debt issuance costs

 

(9

)

 

 

Other, net

 

(73

)

 

(45

)

Net Cash Used in Financing Activities

 

(440

)

 

(2,161

)

Effect of Exchange Rate on Cash and Cash Equivalents

 

(27

)

 

(55

)

Net Increase (Decrease) in Cash and Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

 

362

 

 

(1,331

)

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

 

$

836

 

 

$

337

 

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

 

 

9/30/19

 

9/30/18

 

9/30/19

 

9/30/18

Detail of Special Items

 

 

 

 

 

 

 

 

Refranchising gain (loss)(b)

 

$

8

 

 

$

100

 

 

$

18

 

 

$

285

 

Other Special Items Expense(c)

 

(3

)

 

 

 

(14

)

 

(3

)

Special Items Income - Operating Profit

 

5

 

 

100

 

 

4

 

 

282

 

Interest expense, net(c)

 

 

 

 

 

(2

)

 

 

Special Items Income before Income Taxes

 

5

 

 

100

 

 

2

 

 

282

 

Tax Benefit (Expense) on Special Items(d)

 

 

 

(12

)

 

2

 

 

(49

)

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

 

 

 

28

 

 

 

 

62

 

Special Items Income, net of tax

 

5

 

 

116

 

 

4

 

 

295

 

Average diluted shares outstanding

 

313

 

 

325

 

 

314

 

 

332

 

Special Items diluted EPS

 

$

0.01

 

 

$

0.36

 

 

$

0.02

 

 

$

0.89

 

 

 

 

 

 

 

 

 

 

Reconciliation of GAAP Operating Profit to Core Operating Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

 

 

 

 

 

 

GAAP Operating Profit

 

$

480

 

 

$

553

 

 

$

1,384

 

 

$

1,555

 

Special Items Income

 

5

 

 

100

 

 

4

 

 

282

 

Foreign Currency Impact on Divisional Operating Profit

 

(7

)

 

 

N/A

 

 

(43

)

 

 

N/A

 

Core Operating Profit

 

$

482

 

 

$

453

 

 

$

1,423

 

 

$

1,273

 

 

 

 

 

 

 

 

 

 

KFC Division

 

 

 

 

 

 

 

 

GAAP Operating Profit

 

$

270

 

 

$

248

 

 

$

767

 

 

$

704

 

Foreign Currency Impact on Divisional Operating Profit

 

(6

)

 

 

N/A

 

 

(36

)

 

 

N/A

 

Core Operating Profit

 

$

276

 

 

$

248

 

 

$

803

 

 

$

704

 

 

 

 

 

 

 

 

 

 

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

(amounts in millions, except per share amounts)

(unaudited)

 

 

Quarter ended

 

Year to date

 

 

9/30/19

 

9/30/18

 

9/30/19

 

9/30/18

Pizza Hut Division