Press Release

GAAP Operating Profit Decline of (2)%; Core Operating Profit Growth of 7%;
System Sales Growth of 1% with 2% Net Unit Growth Offset by a Same-Store Sales Decline of (2)%

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Yum! Brands, Inc. (NYSE: YUM) today reported results for the third-quarter ended September 30, 2020. Worldwide system sales excluding foreign currency translation grew 1%, with 2% net-new unit growth and a (2)% same-store sales decline. Third-quarter GAAP EPS was $0.92, an increase of 14% over the prior year quarter. Third-quarter EPS excluding Special Items was $1.01, an increase of 27% over the prior year quarter.

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DAVID GIBBS COMMENTS

David Gibbs, CEO, said “Third-quarter results were encouraging, demonstrating the resilience of the Yum! portfolio as Yum! generated year-over-year core operating profit growth, continued to reopen temporarily closed restaurants and achieved global same-store sales growth of approximately flat, in aggregate, for our open store base. For the second consecutive quarter, digital sales increased by more than $1 billion over the prior year and set a single quarter record of $4 billion. These results are a testament to the hard work and collaboration across our four brands, and I want to thank our entire global system for exceptional execution of our Recipe for Growth and Good strategy this quarter. Our employees, franchisees and restaurant team members continued to adapt to this year's ever-changing environment while also accelerating progress on our digital and technology journey. Importantly, our balance sheet and liquidity position are strong and franchisee health improved. I’m confident that by continuing to leverage our unmatched scale and champion the technology-centric customer experience, we will drive global growth, enhance unit-level economics and maximize long-term value for all of our stakeholders.”

THIRD-QUARTER HIGHLIGHTS

• Worldwide system sales excluding foreign currency translation grew 1%, with Taco Bell at 5%, offset by KFC at (1)% and Pizza Hut at (4)%.
• We reported 2% net unit growth year-over-year and a unit decline of (267) during the quarter.
• We recorded $8 million of pre-tax investment income related to the change in fair value of our investment in Grubhub, which resulted in a $0.02 benefit to EPS on the third-quarter. Our Grubhub investment favorably impacted year-over-year EPS growth by $0.17, as we lapped a $60 million of pre-tax investment expense in the third-quarter of 2019 for a ($0.15) impact to EPS. We disposed our Grubhub investment during the third-quarter for $206 million.
• Foreign currency translation unfavorably impacted divisional operating profit by $2 million.

KFC DIVISION

• KFC Division opened 358 gross new restaurants in 45 countries.
• Operating margin increased 2.9 percentage points driven by International franchise bad debt recoveries.
• Foreign currency translation unfavorably impacted operating profit by $2 million.

PIZZA HUT DIVISION

• Pizza Hut Division opened 148 gross new restaurants in 32 countries.
• Operating margin increased 0.7 percentage points driven by U.S. franchise bad debt recoveries, offset by International same-store sales declines.
• Foreign currency translation had no material impact on operating profit.
• Pizza Hut U.S. off-premise channel generated 21% same-store sales growth when excluding closed Express units, or 17% same-store sales growth when including closed Express units.

TACO BELL DIVISION

• Taco Bell Division opened 45 gross new restaurants in 9 countries.
• Operating margin increased 4.3 percentage points due to lower general and administrative expenses, same-store sales growth and higher company restaurant margins.

HABIT BURGER GRILL DIVISION

• The Habit Burger Grill Division same-store sales declined 3% during the third-quarter.
• The Habit Burger Grill Division opened 5 gross new restaurants in the U.S and China.

OTHER ITEMS

• We refinanced our 5.00% coupon rate Senior Subsidiary Restricted Group Notes due in 2024 with newly issued 10.5-year Yum! Brands, Inc. holding company notes with a coupon rate of 3.625%.
• 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.

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 29, 2020. The number is 877/871-3172 for U.S. callers, 412/902-6603 for international callers, conference ID 1665220.

The call will be available for playback beginning at 10:00 a.m. Eastern Time October 29, 2020 through November 5, 2020. To access the playback, dial 877/344-7529 in the U.S., 855/669-9658 in Canada, and 412/317-0088 internationally, conference ID 10148172.

The webcast and the playback can be accessed by visiting Yum! Brands' website, investors.yum.com/events-and-presentations and selecting “Q3 2020 Yum! Brands, Inc. Earnings Call.”

ADDITIONAL INFORMATION ONLINE

Quarter end dates for each division, restaurant count details, definitions of terms and Restricted Group financial information are available at investors.yum.com. Reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures are included within this release.

FORWARD-LOOKING STATEMENTS

This announcement may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the fact that they do not relate strictly to historical or current facts and by the use of forward-looking words such as “expect,” “expectation,” “believe,” “anticipate,” “may,” “could,” “intend,” “belief,” “plan,” “estimate,” “target,” “predict,” “likely,” “seek,” “project,” “model,” “ongoing,” “will,” “should,” “forecast,” “outlook” or similar terminology. These statements are based on and reflect our current expectations, estimates, assumptions and/or projections, our perception of historical trends and current conditions, as well as other factors that we believe are appropriate and reasonable under the circumstances. Forward-looking statements are neither predictions nor guarantees of future events, circumstances or performance and are inherently subject to known and unknown risks, uncertainties and assumptions that could cause our actual results to differ materially from those indicated by those statements. There can be no assurance that our expectations, estimates, assumptions and/or projections, including with respect to the future earnings and performance or capital structure of Yum! Brands, will prove to be correct or that any of our expectations, estimates or projections will be achieved.

Numerous factors could cause our actual results and events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: the severity and duration of the COVID-19 pandemic, food safety and food borne-illness issues; health concerns arising from outbreaks of a significant health epidemic; the success of our franchisees and licensees; our significant exposure to the Chinese market; changes in economic and political conditions in countries and territories outside of the U.S. where we operate; our ability to protect the integrity and security of individually identifiable data of our customers and employees; our ability to successfully implement technology initiatives; our increasing dependence on digital commerce platforms and information technology systems; the impact of social media; our ability to secure and maintain distribution and adequate supply to our restaurants; the loss of key personnel, or labor shortages or difficulty finding qualified employees; the success of our development strategy in emerging markets; changes in commodity, labor and other operating costs; harm or dilution to our brands caused by franchisee and third party activity; pending or future litigation and legal claims or proceedings; changes in or noncompliance with government regulations, including labor standards and anti-bribery or anti-corruption laws; tax matters, including changes in tax laws or disagreements with taxing authorities; consumer preferences and perceptions of our brands; failure to protect our service marks or other intellectual property; changes in consumer discretionary spending and general economic conditions; competition within the retail food industry; not realizing the anticipated benefits from past or potential future acquisitions, investments or other strategic transactions, and risks relating to our significant amount of indebtedness. In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial could affect the accuracy of any such forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

The forward-looking statements included in this announcement are only made as of the date of this announcement and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances. You should consult our filings with the Securities and Exchange Commission (including the information set forth under the captions “Risk Factors” and “Forward-Looking Statements” in our most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q) for additional detail about factors that could affect our financial and other results.

Yum! Brands, Inc., based in Louisville, Kentucky, has over 50,000 restaurants in more than 150 countries and territories primarily operating the company’s brands – KFC, Pizza Hut and Taco Bell – global leaders of the chicken, pizza and Mexican-style food categories. The Company’s family of brands also includes The Habit Burger Grill, a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more. In 2019, Yum! Brands was named to the Dow Jones Sustainability North America Index and in 2020, the company ranked among the top 100 Best Corporate Citizens by 3BL Media.

Reconciliation of Non-GAAP Measurements to GAAP Results
(amounts in millions, except per share amounts)
(unaudited)

In addition to the results provided in accordance with Generally Accepted Accounting Principles in the United States of America ("GAAP"), the Company provides the following non-GAAP measurements.

• Diluted Earnings Per Share ("EPS") excluding Special Items (as defined below);

• Effective Tax Rate excluding Special Items;

• Core Operating Profit. Core Operating Profit excludes Special Items and FX and we use Core Operating Profit for the purposes of evaluating performance internally.

These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of these non-GAAP measurements provide additional information to investors to facilitate the comparison of past and present operations.

Special Items are not included in any of our Division segment results as the Company does not believe they are indicative of our ongoing operations due to their size and/or nature. Our chief operating decision maker does not consider the impact of Special Items when assessing segment performance. The Special Items are described in (a) - (i) 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.

The above tables reconcile segment information, which is based on management responsibility, with our Condensed Consolidated Summary of Results. Corporate and unallocated expenses comprise items that are not allocated to segments for performance reporting purposes.

The Corporate and Unallocated column in the above tables includes, among other amounts, all amounts that we have deemed Special Items. See Reconciliation of Non-GAAP Measurements to GAAP Results.