Press Release

Yum! Brands Reports Solid Fourth-Quarter Results and Completion of Strategic Transformation; System Sales Growth of 10%; Same-Store Sales Growth of 2%; GAAP Operating Profit Decline of (26)%; Core Operating Profit Growth of 14%

Company Release - 2/6/2020 7:00 AM ET

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Yum! Brands, Inc. (NYSE: YUM) today reported results for the fourth-quarter and year ended December 31, 2019. Fourth-quarter GAAP EPS was $1.58, an increase of 51%. Full-year GAAP EPS was $4.14, a decrease of (12)%. Fourth-quarter EPS excluding Special Items was $1.00, an increase of 148%. Full-year EPS excluding Special Items was $3.55, an increase of 12%.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20200206005365/en/

DAVID GIBBS & CHRIS TURNER COMMENTS

David Gibbs, CEO, said “I am proud to announce that we completed our three-year transformation of Yum!, having achieved all of our transformation goals and evolved into a more focused, more franchised and more efficient business. 2019 was a truly historic year for our company. For the full-year, we generated over $50 billion in system sales and ended the year with over 50,000 restaurants thanks to our world-class franchisees. We delivered results consistent with our long-term growth algorithm with same-store sales growth of 3% and net-new unit growth of 4%. We began 2020 by announcing an agreement to add the Habit Burger Grill to the Yum! family. When complete, this deal should enable us to offer an exciting new investment opportunity to our existing franchisees and expand an award-winning, trend-forward brand through the power of Yum!’s unmatched scale. As we move into the next phase of growth for Yum!, we will continue to focus on our four key growth drivers with a collaborative mindset to fuel strong results for years to come.”

Chris Turner, CFO, continued “Fourth-quarter results were a solid end to the year where we met or exceeded each component of our guidance, including full-year 2019 core operating profit growth, which was an increase of 12%, or 11% excluding the 53rd week. I'm especially pleased that we opened over 1,000 net new units in the fourth-quarter alone. We’ve emerged from our transformation a stronger company, and I look forward to accelerating the growth of our iconic brands, championing the customer experience and unlocking further value for our stakeholders.”

SUMMARY FINANCIAL TABLE

 

Fourth-Quarter

Full-Year

 

2019

2018

% Change

2019

2018

% Change

GAAP EPS

$1.58

 

$1.04

 

+51

 

$4.14

 

$4.69

 

(12)

Special Items EPS1

$0.58

 

$0.64

 

NM

 

$0.59

 

$1.52

 

NM

EPS Excluding Special Items

$1.00

 

$0.40

 

+148

 

$3.55

 

$3.17

 

+12

1See Reconciliation of Non-GAAP Measurements to GAAP Results within this release for further detail of 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.

Unless otherwise noted, all results include a 53rd week in 2019.

See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further details.

FOURTH-QUARTER HIGHLIGHTS

 

Worldwide system sales excluding foreign currency translation grew 10%, with Taco Bell at 13%, KFC at 11% and Pizza Hut at 7%.

 

We opened 1,029 net units for 4% net unit growth.

 

We repurchased 3.2 million shares totaling $333 million at an average price per share of $103.

 

We recorded $21 million of pre-tax investment expense related to the change in fair value of our investment in Grubhub, which resulted in a negative ($0.05) impact to EPS on the quarter.

 

Foreign currency translation unfavorably impacted divisional operating profit by $3 million.

 

% Change

 

System Sales

Ex F/X

Same-Store Sales

Net New Units

GAAP

Operating Profit

Core

Operating Profit

KFC Division

+11

 

+3

 

+7

 

+11

 

+12

Pizza Hut Division1

+7

 

(2)

 

+1

 

(1)

 

(1)

Taco Bell Division

+13

 

+4

 

+4

 

+18

 

+18

Worldwide1

+10

 

+2

 

+4

 

(26)

 

+14

 

Results Excluding 53rd Week % Change

 

System Sales

Ex F/X

Core

Operating Profit

KFC Division

+8

 

+9

Pizza Hut Division1

+4

 

(4)

Taco Bell Division

+7

 

+11

Worldwide1

+7

 

+9

FULL-YEAR HIGHLIGHTS

 

Worldwide system sales excluding foreign currency translation grew 9%, with KFC at 10%, Taco Bell at 9% and Pizza Hut at 8%.

 

We opened 2,040 net units for 4% net unit growth.

 

We repurchased 7.8 million shares totaling $810 million at an average price per share of $104.

 

We recorded $77 million of pre-tax investment expense related to the change in fair value of our investment in Grubhub, which resulted in a negative ($0.19) impact to EPS on the year.

 

Foreign currency translation unfavorably impacted divisional operating profit by $46 million.

 

% Change

 

System Sales

Ex F/X

Same-Store Sales

Net New Units

GAAP

Operating Profit

Core

Operating Profit

KFC Division

+10

 

+4

 

+7

 

+10

 

+14

Pizza Hut Division

+8

 

Even

 

+1

 

+6

 

+8

Taco Bell Division

+9

 

+5

 

+4

 

+8

 

+8

Worldwide1

+9

 

+3

 

+4

 

(16)

 

+12

 

Results Excluding 53rd Week % Change

 

System Sales

Ex F/X

Core

Operating Profit

KFC Division

+9

 

+13

Pizza Hut Division1

+7

 

+7

Taco Bell Division

+8

 

+6

Worldwide1

+8

 

+11

1Pizza Hut Division and Worldwide system sales include the benefit of the increase in units at the end of the fourth-quarter 2018 related to our strategic alliance with Telepizza. Same-store sales and net-new unit growth reflects the inclusion of Telepizza in the prior year base.

 KFC DIVISION

 

Fourth-Quarter

Full-Year

 

 

 

 

%/ppts Change

 

 

%/ppts Change

 

2019

2018

Reported

Ex F/X

2019

2018

Reported

Ex F/X

Restaurants

 

24,104

 

22,621

 

+7

 

NA

 

24,104

 

22,621

 

+7

 

NA

System Sales ($MM)

 

7,737

 

7,049

 

+10

 

+11

 

27,900

 

26,239

 

+6

 

+10

Same-Store Sales Growth (%)

 

+3

 

+3

 

NM

 

NM

 

+4

 

+2

 

NM

 

NM

Franchise & Property Revenues ($MM)

 

391

 

357

 

+9

 

+10

 

1,390

 

1,294

 

+7

 

+11

Operating Profit ($MM)

 

285

 

255

 

+11

 

+12

 

1,052

 

959

 

+10

 

+14

Operating Margin (%)

 

39.0

 

37.2

 

1.8

 

1.8

 

42.2

 

36.3

 

5.9

 

5.8

 

Fourth Quarter (% Change)

Year-to-Date (% Change)

 

International

U.S.

International

U.S.

System Sales Growth Ex F/X

+12

+6

+11

+3

Same-Store Sales Growth

+4

+1

+5

+1

 

KFC Division opened 814 gross new restaurants during the quarter.

 

 

○ For the year, KFC Division opened 1,928 gross new restaurants in 99 countries.

 

Operating margin increased 1.8 percentage points for the quarter and 5.9 percentage points for the year driven by refranchising, same-store sales growth and net new unit growth, offset by higher G&A.

 

The 53rd week provided a benefit of 3 percentage points to both system sales growth and core operating profit growth for the quarter. For the year, the 53rd week provided a benefit of 1 percentage point to both system sales growth and core operating profit growth.

 

Foreign currency translation unfavorably impacted operating profit by $3 million for the quarter and $39 for the year.

KFC Markets1

Percent of KFC

System Sales2

System Sales Growth Ex F/X

Fourth-Quarter

(% Change)

Year-to-Date
(% Change)

China

27%

+10

+11

United States

16%

+6

+3

Asia

12%

+8

+8

Russia, Central & Eastern Europe

8%

+19

+19

Australia

7%

+15

+10

United Kingdom

6%

+11

+13

Western Europe

6%

+15

+13

Latin America

5%

+11

+12

Africa

4%

+14

+12

Middle East / Turkey / North Africa

4%

+13

+9

Canada

2%

+6

+1

Thailand

2%

(1)

+4

India

1%

+23

+22

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

2Reflects Full Year 2019.

PIZZA HUT DIVISION

 

Fourth-Quarter

Full-Year

 

 

 

 

%/ppts Change

 

 

%/ppts Change

 

2019

2018

Reported

Ex F/X

2019

2018

Reported

Ex F/X

Restaurants

 

18,703

 

18,431

 

+1

 

NA

 

18,703

 

18,431

 

+1

 

NA

System Sales ($MM)1

 

3,579

 

3,357

 

+7

 

+7

 

12,900

 

12,212

 

+6

 

+8

Same-Store Sales Growth (%)1

 

(2)

 

Even

 

NM

 

NM

 

Even

 

Even

 

NM

 

NM

Franchise & Property Revenues ($MM)

 

166

 

166

 

Even

 

+1

 

597

 

598

 

Even

 

+1

Operating Profit ($MM)

 

90

 

91

 

(1)

 

(1)

 

369

 

348

 

+6

 

+8

Operating Margin (%)

 

30.2

 

33.1

 

(2.9)

 

(2.8)

 

35.9

 

35.3

 

0.6

 

0.9

 

Fourth Quarter (% Change)

Year-to-Date (% Change)

 

International

U.S.

International

U.S.

System Sales Growth Ex F/X1

+13

+1

+14

+1

Same-Store Sales Growth1

Even

(4)

+1

(1)

 

Pizza Hut Division opened 431 gross new restaurants during the quarter.

 

 

○ For the year, Pizza Hut Division opened 1,029 gross new restaurants in 73 countries.

 

Operating margin decreased 2.9 percentage points for the quarter driven by higher G&A and higher provisions for past due receivables, partially offset by lower advertising spend. For the year, operating margin increased 0.6 percentage points driven by refranchising and lower advertising spend, partially offset by higher provisions for past due receivables.

 

The 53rd week provided a benefit of 3 percentage points to both system sales growth and core operating profit growth for the quarter. For the year, the 53rd week provided a benefit of 1 percentage point to both system sales growth and core operating profit growth.

 

Foreign currency translation had no impact on operating profit for the quarter and unfavorably impacted operating profit by $7 million for the year.

Pizza Hut Markets2

Percent of Pizza Hut

System Sales3

System Sales Growth Ex F/X

Fourth-Quarter
(% Change)

Year-to-Date
(% Change)

United States

42%

+1

+1

China

17%

+1

+3

Asia

13%

+4

+4

Latin America / Spain / Portugal

11%

+79

+84

Europe (excluding Spain & Portugal)

9%

+3

+4

Middle East / Turkey / North Africa

4%

+5

+6

Canada

2%

+10

+6

India

1%

+8

+8

Africa

<1%

+15

+26

1Pizza Hut Division and Worldwide system sales include the benefit of the increase in units at the end of the fourth-quarter 2018 related to our strategic alliance with Telepizza. Same-store sales and net-new unit growth 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 2019. Europe and Latin America system sales reflects the 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

 

Fourth-Quarter

Full-Year

 

 

 

 

 

 

%/ppts Change

 

 

 

 

 

%/ppts Change

 

2019

 

2018

 

Reported

 

Ex F/X

2019

 

2018

 

Reported

 

Ex F/X

Restaurants

 

7,363

 

7,072

 

+4

 

NA

 

7,363

 

7,072

 

+4

 

NA

System Sales ($MM)

 

3,779

 

3,346

 

+13

 

+13

 

11,784

 

10,786

 

+9

 

+9

Same-Store Sales Growth (%)

 

+4

 

+6

 

NM

 

NM

 

+5

 

+4

 

NM

 

NM

Franchise & Property Revenues ($MM)

 

213

 

186

 

+14

 

+14

 

673

 

590

 

+14

 

+14

Operating Profit ($MM)

 

225

 

191

 

+18

 

+18

 

683

 

633

 

+8

 

+8

Operating Margin (%)

 

33.7

 

31.9

 

1.8

 

1.8

 

32.8

 

30.8

 

2.0

 

2.0

 

Taco Bell Division opened 191 gross new restaurants during the quarter.

 

 

○ For the year, Taco Bell Division opened 375 gross new restaurants in 22 countries.

 

The 53rd week provided a benefit of 6 percentage points to system sales growth and 7 percentage points to core operating profit growth for the quarter. For the year, the 53rd week provided a benefit of 1 percentage point to system sales growth and 2 percentage points to core operating profit growth.

 

Operating margin increased 1.8 percentage points for the quarter and 2.0 percentage points for the year 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 2019 Form 10-K.

 

On January 6, 2020, we announced our definitive agreement pursuant to which Yum! Brands will acquire all of the issued and outstanding common shares of The Habit Burger Grill for $14 per share in cash or a total of approximately $375 million. The transaction is subject to approval by The Habit Burger Grill’s stockholders and other customary closing conditions. The transaction is expected to be completed by the end of the second-quarter of 2020.

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 Thursday, February 6, 2020. The number is 877/815-2029 for U.S. callers and 706/645-9271 for international callers, conference ID 8453308.

The call will be available for playback beginning at 11:15 a.m. Eastern Time Thursday, February 6, 2020 through Friday, March 27, 2020.To access the playback, dial 855/859-2056 in the U.S. and 404/537-3406 internationally, conference ID 8453308.

The webcast and the playback can be accessed via the website by visiting Yum! Brands' website, investors.yum.com/events-and-presentationsand selecting “Q4 2019 Earnings Conference 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 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. Worldwide, the Yum! Brands system opens over nine new restaurants per day on average, making it a leader in global retail development. In 2019, 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.

 

YUM! Brands, Inc.

Consolidated Summary of Results

(amounts in millions, except per share amounts)

(unaudited)

 

 

Quarter ended

 

% Change

B/(W)

 

Year ended

 

% Change

B/(W)

 

12/31/19

 

12/31/18

 

 

12/31/19

 

12/31/18

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

Company sales

$

490

 

 

$

477

 

 

3

 

$

1,546

 

 

$

2,000

 

 

(23)

Franchise and property revenues

770

 

 

709

 

 

9

 

2,660

 

 

2,482

 

 

7

Franchise contributions for advertising and other services

434

 

 

372

 

 

16

 

1,391

 

 

1,206

 

 

15

Total revenues

1,694

 

 

1,558

 

 

9

 

5,597

 

 

5,688

 

 

(2)

 

 

 

 

 

 

 

 

 

 

 

 

Costs and Expenses, Net

 

 

 

 

 

 

 

 

 

 

 

Company restaurant expenses

385

 

 

376

 

 

(3)

 

1,235

 

 

1,634

 

 

24

General and administrative expenses

300

 

 

264

 

 

(13)

 

917

 

 

895

 

 

(2)

Franchise and property expenses

56

 

 

61

 

 

8

 

180

 

 

188

 

 

4

Franchise advertising and other services expense

427

 

 

374

 

 

(14)

 

1,368

 

 

1,208

 

 

(13)

Refranchising (gain) loss

(19

)

 

(255

)

 

(92)

 

(37

)

 

(540

)

 

(93)

Other (income) expense

(1

)

 

(3

)

 

NM

 

4

 

 

7

 

 

NM

Total costs and expenses, net

1,148

 

 

817

 

 

(40)

 

3,667

 

 

3,392

 

 

(8)

 

 

 

 

 

 

 

 

 

 

 

 

Operating Profit

546

 

 

741

 

 

(26)

 

1,930

 

 

2,296

 

 

(16)

Investment (income) expense, net

17

 

 

176

 

 

90

 

67

 

 

(9

)

 

NM

Other pension (income) expense

 

 

4

 

 

NM

 

4

 

 

14

 

 

71

Interest expense, net

132

 

 

122

 

 

(8)

 

486

 

 

452

 

 

(8)

Income before income taxes

397

 

 

439

 

 

(10)

 

1,373

 

 

1,839

 

 

(25)

Income tax (benefit) provision

(91

)

 

105

 

 

NM

 

79

 

 

297

 

 

74

Net income

$

488

 

 

$

334

 

 

46

 

$

1,294

 

 

$

1,542

 

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

 

 

 

 

 

 

 

 

 

 

EPS

$

1.61

 

 

$

1.07

 

 

51

 

$

4.23

 

 

$

4.80

 

 

(12)

Average shares outstanding

303

 

 

313

 

 

3

 

306

 

 

322

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

 

 

 

 

EPS

$

1.58

 

 

$

1.04

 

 

51

 

$

4.14

 

 

$

4.69

 

 

(12)

Average shares outstanding

309

 

 

320

 

 

3

 

313

 

 

329

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

$

0.42

 

 

$

0.36

 

 

 

 

$

1.68

 

 

$

1.44

 

 

 

See accompanying notes.

Percentages may not recompute due to rounding.

 

YUM! Brands, Inc.

KFC DIVISION Operating Results

(amounts in millions)

(unaudited)

 

 

Quarter ended

 

% Change

B/(W)

 

Year ended

 

% Change

B/(W)

 

12/31/19

 

12/31/18

 

 

12/31/19

 

12/31/18

 

 

 

 

 

 

 

 

 

 

 

 

 

Company sales

$

176

 

 

$

187

 

 

(6)

 

$

571

 

 

$

894

 

 

(36)

Franchise and property revenues

391

 

 

357

 

 

9

 

1,390

 

 

1,294

 

 

7

Franchise contributions for advertising and other services

165

 

 

142

 

 

16

 

530

 

 

456

 

 

16

Total revenues

732

 

 

686

 

 

7

 

2,491

 

 

2,644

 

 

(6)

 

 

 

 

 

 

 

 

 

 

 

 

Company restaurant expenses

150

 

 

158

 

 

5

 

484

 

 

775

 

 

38

General and administrative expenses

113

 

 

103

 

 

(10)

 

346

 

 

350

 

 

1

Franchise and property expenses

19

 

 

29

 

 

35

 

89

 

 

107

 

 

17

Franchise advertising and other services expenses

162

 

 

140

 

 

(15)

 

520

 

 

452

 

 

(15)

Other (income) expense

3

 

 

1

 

 

NM

 

 

 

1

 

 

NM

Total costs and expenses, net

447

 

 

431

 

 

(4)

 

1,439

 

 

1,685

 

 

15

Operating Profit

$

285

 

 

$

255

 

 

11

 

$

1,052

 

 

$

959

 

 

10

 

 

 

 

 

 

 

 

 

 

 

 

Restaurant margin

15.3

%

 

15.6

%

 

(0.3) ppts.

 

15.3

%

 

13.3

%

 

2.0 ppts.

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

39.0

%

 

37.2

%

 

1.8 ppts.

 

42.2

%

 

36.3

%

 

5.9 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

B/(W)

 

Year ended

 

% Change

B/(W)

 

12/31/19

 

12/31/18

 

 

12/31/19

 

12/31/18

 

 

 

 

 

 

 

 

 

 

 

 

 

Company sales

$

19

 

 

$

14

 

 

32

 

$

54

 

 

$

69

 

 

(23)

Franchise and property revenues

166

 

 

166

 

 

Even

 

597

 

 

598

 

 

Even

Franchise contributions for advertising and other services

112

 

 

95

 

 

18

 

376

 

 

321

 

 

17

Total revenues

297

 

 

275

 

 

8

 

1,027

 

 

988

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

Company restaurant expenses

17

 

 

13

 

 

(31)

 

51

 

 

69

 

 

26

General and administrative expenses

64

 

 

56

 

 

(14)

 

202

 

 

197

 

 

(2)

Franchise and property expenses

16

 

 

17

 

 

3

 

39

 

 

45

 

 

12

Franchise advertising and other services expenses

109

 

 

99

 

 

(11)

 

367

 

 

328

 

 

(12)

Other (income) expense

1

 

 

(1

)

 

NM

 

(1

)

 

1

 

 

NM

Total costs and expenses, net

207

 

 

184

 

 

(13)

 

658

 

 

640

 

 

(3)

Operating Profit

$

90

 

 

$

91

 

 

(1)

 

$

369

 

 

$

348

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

Restaurant margin

6.1

%

 

4.7

%

 

1.4 ppts.

 

4.2

%

 

(0.1

)%

 

4.3 ppts.

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

30.2

%

 

33.1

%

 

(2.9) ppts.

 

35.9

%

 

35.3

%

 

0.6 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

B/(W)

 

Year ended

 

% Change

B/(W)

 

12/31/19

 

12/31/18

 

 

12/31/19

 

12/31/18

 

 

 

 

 

 

 

 

 

 

 

 

 

Company sales

$

295

 

 

$

276

 

 

7

 

$

921

 

 

$

1,037

 

 

(11)

Franchise and property revenues

213

 

 

186

 

 

14

 

673

 

 

590

 

 

14

Franchise contributions for advertising and other services

157

 

 

135

 

 

16

 

485

 

 

429

 

 

13

Total revenues

665

 

 

597

 

 

11

 

2,079

 

 

2,056

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

Company restaurant expenses

218

 

 

206

 

 

(6)

 

700

 

 

793

 

 

12

General and administrative expenses

57

 

 

56

 

 

(2)

 

181

 

 

177

 

 

(2)

Franchise and property expenses

12

 

 

11

 

 

(11)

 

38

 

 

28

 

 

(33)

Franchise advertising and other services expenses

156

 

 

135

 

 

(15)

 

481

 

 

428

 

 

(12)

Other (income) expense

(3

)

 

(2

)

 

NM

 

(4

)

 

(3

)

 

NM

Total costs and expenses, net

440

 

 

406

 

 

(8)

 

1,396

 

 

1,423

 

 

2

Operating Profit

$

225

 

 

$

191

 

 

18

 

$

683

 

 

$

633

 

 

8

 

 

 

 

 

 

 

 

 

 

 

 

Restaurant margin

25.9

%

 

25.2

%

 

0.7 ppts.

 

24.0

%

 

23.5

%

 

0.5 ppts.

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

33.7

%

 

31.9

%

 

1.8 ppts.

 

32.8

%

 

30.8

%

 

0 ppts.

See accompanying notes.

Percentages may not recompute due to rounding.

YUM! Brands, Inc.

Consolidated Balance Sheets

(amounts in millions)

(unaudited)

 

 

12/31/2019

 

12/31/2018

ASSETS

 

 

 

Current Assets

 

 

 

Cash and cash equivalents

$

605

 

 

$

292

 

Accounts and notes receivable, less allowance: $72 in 2019 and $31 in 2018

584

 

 

561

 

Prepaid expenses and other current assets

338

 

 

354

 

Total Current Assets

1,527

 

 

1,207

 

 

 

 

 

Property, plant and equipment, net of accumulated depreciation of $1,136 in 2019

1,170

 

 

1,237

 

and $1,116 in 2018

 

 

 

Goodwill

530

 

 

525

 

Intangible assets, net

244

 

 

242

 

Other assets

1,313

 

 

724

 

Deferred income taxes

447

 

 

195

 

Total Assets

$

5,231

 

 

$

4,130

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' DEFICIT

 

 

 

Current Liabilities

 

 

 

Accounts payable and other current liabilities

$

960

 

 

$

911

 

Income taxes payable

150

 

 

69

 

Short-term borrowings

431

 

 

321

 

Total Current Liabilities

1,541

 

 

1,301

 

 

 

 

 

Long-term debt

10,131

 

 

9,751

 

Other liabilities and deferred credits

1,575

 

 

1,004

 

Total Liabilities

13,247

 

 

12,056

 

 

 

 

 

Shareholders' Deficit

 

 

 

Common stock, no par value, 750 shares authorized; 300 shares and 306 shares issued in 2019 and 2018, respectively

 

 

 

Accumulated deficit

(7,628

)

 

(7,592

)

Accumulated other comprehensive loss

(388

)

 

(334

)

Total Shareholders' Deficit

(8,016

)

 

(7,926

)

Total Liabilities and Shareholders' Deficit

$

5,231

 

 

$

4,130

 

See accompanying notes.

 

YUM! Brands, Inc.

Consolidated Statements of Cash Flows

(amounts in millions)

(unaudited)

 

 

Year ended

 

12/31/19

 

12/31/18

Cash Flows - Operating Activities

 

 

 

Net income

$

1,294

 

 

$

1,542

 

Depreciation and amortization

112

 

 

137

 

Refranchising (gain) loss

(37

)

 

(540

)

Investment (income) expense, net

67

 

 

(9

)

Contributions to defined benefit pension plans

(15

)

 

(16

)

Deferred income taxes

(232

)

 

(11

)

Share-based compensation expense

59

 

 

50

 

Changes in accounts and notes receivable

(56

)

 

(66

)

Changes in prepaid expenses and other current assets

(8

)

 

 

Changes in accounts payable and other current liabilities

(36

)

 

(68

)

Changes in income taxes payable

23

 

 

65

 

Other, net

144

 

 

92

 

Net Cash Provided by Operating Activities

1,315

 

 

1,176

 

 

 

 

 

Cash Flows - Investing Activities

 

 

 

Capital spending

(196

)

 

(234

)

QuikOrder acquisition, net of cash acquired

 

 

(66

)

Investment in Grubhub Inc. common stock

 

 

(200

)

Proceeds from refranchising of restaurants

110

 

 

825

 

Other, net

(2

)

 

(12

)

Net Cash Provided by (Used in) Investing Activities

(88

)

 

313

 

 

 

 

 

Cash Flows - Financing Activities

 

 

 

Proceeds from long-term debt

800

 

 

1,556

 

Repayments of long-term debt

(331

)

 

(1,264

)

Revolving credit facilities, three months or less, net

 

 

 

Short-term borrowings, by original maturity

 

 

 

More than three months - proceeds

130

 

 

59

 

More than three months - payments

(126

)

 

(59

)

Three months or less, net

 

 

 

Repurchase shares of Common Stock

(815

)

 

(2,390

)

Dividends paid on Common Stock

(511

)

 

(462

)

Debt issuance costs

(10

)

 

(13

)

Other, net

(75

)

 

(47

)

Net Cash Used in Financing Activities

(938

)

 

(2,620

)

Effect of Exchange Rate on Cash and Cash Equivalents

5

 

 

(63

)

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

294

 

 

(1,194

)

 

 

 

 

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

474

 

 

1,668

 

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

$

768

 

 

$

474

 

 

 

 

 

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, System sales excluding the impacts of foreign currency translation ("FX") and, in 2019, System sales excluding FX and the impact of 53rd week for our U.S. subsidiaries and certain international subsidiaries that operate on a weekly periodic calendar. 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 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 all of our significant 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 and, in 2019, Core Operating Profit excluding the impact of the 53rd week. 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.

For 2019 we provided Core Operating Profit excluding the impact of the 53rd week and System sales excluding the impact of the 53rd week to further enhance the comparability given the 53rd week that was part of our fiscal calendar in 2019.

 

Quarter ended

 

Year ended

 

12/31/19

 

12/31/18

 

12/31/19

 

12/31/18

Detail of Special Items

 

 

 

 

 

 

 

Refranchising gain (loss)(b)

$

(6

)

 

$

255

 

 

$

12

 

 

$

540

 

Costs associated with Pizza Hut U.S. Transformation Agreement(c)

(8

)

 

(3

)

 

(13

)

 

(6

)

Other Special Items Expense(d)

(1

)

 

(4

)

 

(10

)

 

(4

)

Special Items Income (Expense) - Operating Profit

(15

)

 

248

 

 

(11

)

 

530

 

Interest expense, net(d)

 

 

 

 

(2

)

 

 

Special Items Income (Expense) before Income Taxes

(15

)

 

248

 

 

(13

)

 

530

 

Tax Expense on Special Items(e)

(32

)

 

(47

)

 

(30

)

 

(96

)

Tax Benefit - Intra-entity transfer of intellectual property(f)

226

 

 

 

 

226

 

 

 

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

 

 

4

 

 

 

 

66

 

Special Items Income, net of tax

$

179

 

 

$

205

 

 

$

183

 

 

$

500

 

Average diluted shares outstanding

309

 

 

320

 

 

313

 

 

329

 

Special Items diluted EPS

$

0.58

 

 

$

0.64

 

 

$

0.59

 

 

$

1.52

 

 

 

 

 

 

 

 

 

Reconciliation of GAAP Operating Profit to Core Operating Profit and Core Operating Profit, excluding 53rd Week

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

 

 

 

 

 

GAAP Operating Profit

$

546

 

 

$

741

 

 

$

1,930

 

 

$

2,296

 

Special Items Income (Expense)

(15

)

 

248

 

 

(11

)

 

530

 

Foreign Currency Impact on Divisional Operating Profit

(3

)

 

N/A

 

(46

)

 

N/A

Core Operating Profit

$

564

 

 

$

493

 

 

$

1,987

 

 

$

1,766

 

Impact of 53rd Week

24

 

 

N/A

 

24

 

 

N/A

Core Operating Profit, excluding 53rd Week

$

540

 

 

$

493

 

 

$

1,963

 

 

$

1,766

 

 

 

 

 

 

 

 

 

 

Quarter ended

 

Year ended

 

12/31/19

 

12/31/18

 

12/31/19

 

12/31/18

KFC Division

 

 

 

 

 

 

 

GAAP Operating Profit

$

285

 

 

$

255

 

 

$

1,052

 

 

$

959

 

Foreign Currency Impact on Divisional Operating Profit

(3

)

 

N/A

 

(39

)

 

N/A

Core Operating Profit

$

288

 

 

$

255

 

 

$

1,091

 

 

$

959

 

Impact of 53rd Week

8

 

 

N/A

 

8

 

 

N/A

Core Operating Profit, excluding 53rd Week

$

280