GAAP Operating Profit Decline of (12)%; Core
Operating Profit Decline of (9)%
Yum! Brands, Inc. (NYSE: YUM) today reported results for the
fourth-quarter and year ended December 31, 2020. Fourth-quarter
GAAP EPS was $1.08, a decrease of (32)%. Full-year GAAP EPS was
$2.94, a decrease of (29)%. Fourth-quarter EPS excluding Special
Items was $1.15, an increase of 15%. Full-year EPS excluding
Special Items was $3.62, an increase of 2%.
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DAVID GIBBS & CHRIS TURNER
COMMENTS
David Gibbs, CEO, said “Yum! enters 2021 a stronger company
primed to profitably grow system sales this year and beyond.
Despite the challenges of 2020, our full-year results demonstrated
our resilience and validated the strategies we put in place during
the transformation of Yum!. We intensified our focus on leveraging
our scale and reinforcing our growth model, by accelerating our
investments in digital and technology to enhance the customer
experience and unit economics. In 2020, digital sales hit a record
of $17 billion, about a 45% increase over the prior year and a
testament to our brands’ ability to quickly meet new consumer
needs. I am more confident than ever in the ability of our teams
and franchisees to compete and win in a rapidly changing
world.”
Chris Turner, CFO, said “Q4 results are evidence our brands
remain effectively positioned to win in an off-premise environment
and that our business model is positioned for sustained rapid
growth once we emerge from the pandemic. Overall Q4 system sales
declined 2%, including a 3% headwind of the 53rd week in 2019, with
slightly positive net units year-over-year and a 1% same-store
sales decline. With iconic category-leading brands and a uniquely
diversified global portfolio of over 50,000 restaurants, Yum! is
well positioned to grow and maximize value creation for all our
stakeholders for years to come.”
SUMMARY FINANCIAL TABLE
Fourth-Quarter
Full-Year
2020
2019
% Change
2020
2019
% Change
GAAP EPS
$1.08
$1.58
(32)
$2.94
$4.14
(29)
Special Items EPS1
$(0.07)
$0.58
NM
$(0.68)
$0.59
NM
EPS Excluding Special Items
$1.15
$1.00
+15
$3.62
$3.55
+2
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. See reconciliation of Non-GAAP
Measurements to GAAP Results within this release for further
details. Same-store sales reflects the inclusion of Habit Burger
Grill in the prior year base and is not impacted by the lap of the
53rd week in 2019.
Digital sales includes all transactions
where consumers at system restaurants utilize ordering interaction
that is primarily facilitated by automated technology.
Unless otherwise noted, all results
include the impact of lapping the 53rd week in 2019.
FOURTH-QUARTER
HIGHLIGHTS
- Worldwide system sales decline excluding foreign currency
translation of (2)%, with KFC at (1)%, Taco Bell at (3)%, and Pizza
Hut at (6)%.
- We added 227 net new units for the quarter.
- We repurchased 2.4 million shares totaling $250 million at an
average price per share of $103.
- Foreign currency translation favorably impacted divisional
operating profit by $5 million.
% Change
System Sales Ex
F/X
Same-Store Sales
Net New Units
GAAP Operating
Profit
Core
Operating Profit2
KFC Division
(1)
(2)
+4
(6)
(8)
Pizza Hut Division
(6)
(1)
(6)
(8)
(10)
Taco Bell Division
(3)
+1
+1
(5)
(5)
Worldwide1
(2)
(1)
Even
(12)
(9)
Results Excluding 2019 53rd
Week (% Change)
System Sales Ex
F/X
Core Operating Profit2
KFC Division
+1
(5)
Pizza Hut Division
(3)
(6)
Taco Bell Division
+2
Even
Worldwide1
+1
(5)
FULL-YEAR HIGHLIGHTS
- Worldwide system sales decline excluding foreign currency
translation of (4)%, with Taco Bell flat, KFC at (5)%, and Pizza
Hut at (7)%.
- We added 183 net new units during the year.
- We repurchased 2.4 million shares totaling $250 million at an
average price per share of $103.
- Foreign currency translation unfavorably impacted divisional
operating profit by $9 million.
% Change
System Sales Ex
F/X
Same-Store Sales
Net New Units
GAAP Operating
Profit
Core Operating Profit2
KFC Division
(5)
(9)
+4
(12)
(12)
Pizza Hut Division
(7)
(6)
(6)
(9)
(9)
Taco Bell Division
Even
(1)
+1
+2
+2
Worldwide1
(4)
(6)
Even
(22)
(8)
Results Excluding 2019 53rd
Week (% Change)
System Sales Ex
F/X
Core
Operating Profit2
KFC Division
(5)
(11)
Pizza Hut Division
(6)
(8)
Taco Bell Division
+1
+4
Worldwide1
(3)
(7)
1 Worldwide system sales ex F/X and
net-new units include the benefit of our acquisition of Habit
Burger Grill on March 18, 2020. Same-store sales reflects the
inclusion of Habit Burger Grill in the prior year base and is also
not impacted by the lap of the 53rd week in 2019.
2See reconciliation of Non-GAAP
Measurements to GAAP Results within this release for further detail
of Core Operating Profit and Special Items.
KFC DIVISION
Fourth-Quarter
Full-Year
%/ppts Change
%/ppts Change
2020
2019
Reported
Ex F/X
2020
2019
Reported
Ex F/X
Restaurants
25,000
24,104
+4
NA
25,000
24,104
+4
NA
System Sales ($MM)
7,805
7,737
+1
(1)
26,289
27,900
(6)
(5)
Same-Store Sales Growth (%)1
(2)
+3
NM
NM
(9)
+4
NM
NM
Franchise & Property Revenues
($MM)
389
391
(1)
(2)
1,295
1,390
(7)
(6)
Operating Profit ($MM)
267
285
(6)
(8)
922
1,052
(12)
(12)
Operating Margin (%)
37.6
39.0
(1.4)
(1.5)
40.6
42.2
(1.6)
(1.8)
Fourth-Quarter (%
Change)
Full-Year (% Change)
International
U.S.
International
U.S.
System Sales Growth Ex F/X
(2)
+2
(7)
+4
Same-Store Sales Growth1
(4)
+8
(11)
+5
- KFC Division opened 587 gross new restaurants during the
quarter.
- For the year, KFC Division opened 1,512 gross new restaurants
in 88 countries.
- Operating margin decreased 1.4 percentage points for the
quarter driven by higher general and administrative expenses and
negative franchise same-store sales, partially offset by higher
restaurant profits in Company stores and the impact of net unit
development.
- For the year, operating margin decreased 1.6 percentage points
driven by same-store sales declines, partially offset by the impact
of net unit development.
- For the quarter, the 53rd week lap negatively impacted system
sales growth by 2 percentage points and core operating profit
growth by 3 percentage points. For the year, the 53rd week lap did
not impact the system sales growth percentage and negatively
impacted core operating profit growth by 1 percentage point.
- Foreign currency translation favorably impacted operating
profit by $4 million for the quarter and unfavorably impacted
operating profit by $9 million for the year.
KFC Markets2
Percent of KFC System
Sales3
System Sales Growth Ex
F/X
Fourth-Quarter (%
Change)
Full-Year (%
Change)
China
27%
+3
(5)
United States
18%
+2
+4
Asia
12%
(7)
(5)
Russia, Central & Eastern Europe
7%
(8)
(12)
Australia
7%
+5
+5
United Kingdom
6%
+14
(2)
Western Europe
5%
(10)
(12)
Latin America
5%
(3)
(15)
Africa
4%
(18)
(16)
Middle East / Turkey / North Africa
4%
(2)
(13)
Canada
2%
(4)
(1)
Thailand
2%
(9)
(7)
India
1%
(12)
(32)
1Same-store sales growth is not impacted
by the lap of the 53rd week in 2019.
2Refer to investors.yum.com under
Financial Reports for a list of the countries within each of the
markets.
3Reflects Full Year 2020.
PIZZA HUT DIVISION
Fourth-Quarter
Full-Year
%/ppts Change
%/ppts Change
2020
2019
Reported
Ex F/X
2020
2019
Reported
Ex F/X
Restaurants
17,639
18,703
(6)
NA
17,639
18,703
(6)
NA
System Sales ($MM)
3,407
3,579
(5)
(6)
11,955
12,900
(7)
(7)
Same-Store Sales Growth (%)1
(1)
(2)
NM
NM
(6)
Even
NM
NM
Franchise & Property Revenues
($MM)
159
166
(5)
(6)
552
597
(8)
(8)
Operating Profit ($MM)
83
90
(8)
(10)
335
369
(9)
(9)
Operating Margin (%)
28.7
30.2
(1.5)
(1.8)
33.5
35.9
(2.4)
(2.5)
Fourth-Quarter (%
Change)
Full-Year (% Change)
International
U.S.
International
U.S.
System Sales Growth Ex F/X
(7)
(6)
(11)
(2)
Same-Store Sales Growth1
(7)
+8
(13)
+3
- Pizza Hut Division opened 337 gross new restaurants and closed
540 restaurants during the quarter.
- For the year, Pizza Hut Division opened 682 gross new
restaurants in 58 countries and closed 1,745 restaurants.
- Operating margin decreased 1.5 percentage points for the
quarter driven by higher general and administrative expenses,
International same-store sales declines, and net new unit declines,
partially offset by U.S. franchise bad debt recoveries.
- For the year, operating margin decreased 2.4 percentage points
driven by International same-store sales declines and higher
general and administrative expenses, partially offset by U.S.
franchise bad debt recoveries.
- For the quarter, the 53rd week lap negatively impacted system
sales growth by 3 percentage points and core operating profit
growth by 4 percentage points. For the year, the 53rd week lap
negatively impacted both system sales growth and core operating
profit growth by 1 percentage point.
- Foreign currency translation favorably impacted operating
profit by $1 million for the quarter and had less than $1 million
impact on operating profit for the year.
- For the quarter, Pizza Hut U.S. off-premise channel generated
21% same-store sales growth when excluding closed Express units, or
18% same-store sales growth when including closed Express
units.
Pizza Hut Markets2
Percent of Pizza Hut System
Sales3
System Sales Growth Ex
F/X
Fourth-Quarter (%
Change)
Full-Year (%
Change)
United States
45%
(6)
(2)
China
15%
(3)
(15)
Asia
15%
+1
+5
Latin America / Spain / Portugal
10%
(14)
(20)
Europe (excluding Spain &
Portugal)
8%
(22)
(17)
Middle East / Turkey / North Africa
3%
(8)
(18)
Canada
3%
+6
+11
India
1%
(14)
(30)
Africa
<1%
(14)
(9)
1Same-store sales growth is not impacted
by the lap of the 53rd week in 2019.
2Refer to investors.yum.com under
Financial Reports for a list of the countries within each of the
markets.
3Reflects Full Year 2020.
TACO BELL DIVISION
Fourth-Quarter
Full-Year
%/ppts Change
%/ppts Change
2020
2019
Reported
Ex F/X
2020
2019
Reported
Ex F/X
Restaurants
7,427
7,363
+1
NA
7,427
7,363
+1
NA
System Sales ($MM)
3,671
3,779
(3)
(3)
11,745
11,784
Even
Even
Same-Store Sales Growth (%)1
+1
+4
NM
NM
(1)
+5
NM
NM
Franchise & Property Revenues
($MM)
202
213
(5)
(5)
662
673
(2)
(2)
Operating Profit ($MM)
212
225
(5)
(5)
696
683
+2
+2
Operating Margin (%)
33.8
33.7
0.1
0.1
34.3
32.8
1.5
1.5
1Same-store sales growth is not impacted
by the lap of the 53rd week in 2019.
- Taco Bell Division opened 93 gross new restaurants during the
quarter.
- For the year, Taco Bell Division opened 215 gross new
restaurants in 21 countries.
- Operating margin increased 0.1 percentage points for the
quarter and 1.5 percentage points for the year primarily driven by
lower general and administrative expenses and higher company
restaurant margins.
- For the quarter, the 53rd week lap negatively impacted system
sales growth and core operating profit growth by 5 percentage
points. For the year, the 53rd week lap negatively impacted system
sales growth by 1 percentage point and core operating profit growth
by 2 percentage points.
HABIT BURGER GRILL
DIVISION
- During the quarter, The Habit Burger Grill Division same-store
sales declined 5%.
- For the year, The Habit Burger Grill Division same-store sales
declined 11%.
- During the quarter, The Habit Burger Grill Division opened 7
gross new restaurants.
- For the year, The Habit Burger Grill Division opened 14 gross
new restaurants in the U.S., China and Cambodia.
OTHER ITEMS
- Disclosures pertaining to outstanding debt in our Restricted
Group capital structure will be provided at the time of the filing
of the 2020 Form 10-K.
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 4, 2021. The number is 877/815-2029 in the
U.S., 1-877-504-2267 in Canada and 1-412-902-6603 for international
callers, conference ID 4879193.
The call will be available for playback beginning at 10:00 a.m.
Eastern Time February 4, 2021 through February 11, 2021. To access
the playback, dial 877/344-7529 in the U.S., 855/669-9658 in
Canada, and 412/317-0088 internationally, conference ID
10151194.
The webcast and the playback can be accessed via the website by
visiting Yum! Brands' website,
investors.yum.com/events-and-presentations and selecting “Q4 2020
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: 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 personal information of our
customers and employees; our ability to successfully implement
technology initiatives; our increasing dependence on multiple
digital commerce platforms; 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. Yum! Brands
was included on the 2021 Bloomberg Gender-Equality Index and in
2020, Yum! Brands was named to the Dow Jones Sustainability Index
North America and was ranked among the top 100 Best Corporate
Citizens by 3BL Media.
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)
12/31/20
12/31/19
12/31/20
12/31/19
Revenues
Company sales
$
566
$
490
15
$
1,810
$
1,546
17
Franchise and property revenues
750
770
(3)
2,510
2,660
(6)
Franchise contributions for advertising
and other services
427
434
(1)
1,332
1,391
(4)
Total revenues
1,743
1,694
3
5,652
5,597
1
Costs and Expenses, Net
Company restaurant expenses
460
385
(19)
1,506
1,235
(22)
General and administrative expenses
340
300
(13)
1,064
917
(16)
Franchise and property expenses
38
56
32
145
180
20
Franchise advertising and other services
expense
427
427
—
1,314
1,368
4
Refranchising (gain) loss
(4)
(19)
(80)
(34)
(37)
(9)
Other (income) expense
—
(1)
NM
154
4
NM
Total costs and expenses, net
1,261
1,148
(10)
4,149
3,667
(13)
Operating Profit
482
546
(12)
1,503
1,930
(22)
Investment (income) expense, net
(7)
17
NM
(74)
67
NM
Other pension (income) expense
5
—
NM
14
4
NM
Interest expense, net
132
132
—
543
486
(12)
Income before income taxes
352
397
(12)
1,020
1,373
(26)
Income tax (benefit) provision
20
(91)
NM
116
79
(48)
Net income
$
332
$
488
(32)
$
904
$
1,294
(30)
Basic
EPS
EPS
$
1.10
$
1.61
(32)
$
2.99
$
4.23
(29)
Average shares outstanding
302
303
—
302
306
1
Diluted
EPS
EPS
$
1.08
$
1.58
(32)
$
2.94
$
4.14
(29)
Average shares outstanding
307
309
1
307
313
2
Dividends declared per common
share
$
0.47
$
0.42
$
1.88
$
1.68
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)
12/31/20
12/31/19
12/31/20
12/31/19
Company sales
$
160
$
176
(9)
$
506
$
571
(11)
Franchise and property revenues
389
391
(1)
1,295
1,390
(7)
Franchise contributions for advertising
and other services
162
165
(2)
471
530
(11)
Total revenues
711
732
(3)
2,272
2,491
(9)
Company restaurant expenses
132
150
12
439
484
9
General and administrative expenses
122
113
(7)
346
346
—
Franchise and property expenses
22
19
(11)
91
89
(2)
Franchise advertising and other services
expenses
164
162
(1)
465
520
11
Other (income) expense
4
3
NM
9
—
NM
Total costs and expenses, net
444
447
1
1,350
1,439
6
Operating Profit
$
267
$
285
(6)
$
922
$
1,052
(12)
Restaurant margin
17.5
%
15.3
%
2.2 ppts.
13.2
%
15.3
%
(2.1) ppts.
Operating margin
37.6
%
39.0
%
(1.4) ppts.
40.6
%
42.2
%
(1.6) 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 B/(W)
Year ended
% Change B/(W)
12/31/20
12/31/19
12/31/20
12/31/19
Company sales
$
19
$
19
5
$
76
$
54
42
Franchise and property revenues
159
166
(5)
552
597
(8)
Franchise contributions for advertising
and other services
111
112
(1)
374
376
(1)
Total revenues
289
297
(3)
1,002
1,027
(2)
Company restaurant expenses
18
17
(1)
73
51
(41)
General and administrative expenses
74
64
(16)
215
202
(7)
Franchise and property expenses
6
16
61
17
39
56
Franchise advertising and other services
expenses
109
109
—
365
367
—
Other (income) expense
(1)
1
NM
(3)
(1)
NM
Total costs and expenses, net
206
207
1
667
658
(1)
Operating Profit
$
83
$
90
(8)
$
335
$
369
(9)
Restaurant margin
10.0
%
6.1
%
3.9 ppts.
5.1
%
4.2
%
0.9 ppts.
Operating margin
28.7
%
30.2
%
(1.5) ppts.
33.5
%
35.9
%
(2.4) 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)
12/31/20
12/31/19
12/31/20
12/31/19
Company sales
$
272
$
295
(8)
$
882
$
921
(4)
Franchise and property revenues
202
213
(5)
662
673
(2)
Franchise contributions for advertising
and other services
154
157
(1)
487
485
—
Total revenues
628
665
(6)
2,031
2,079
(2)
Company restaurant expenses
199
218
9
657
700
6
General and administrative expenses
50
57
14
158
181
13
Franchise and property expenses
9
12
28
33
38
16
Franchise advertising and other services
expenses
154
156
1
484
481
(1)
Other (income) expense
4
(3)
NM
3
(4)
NM
Total costs and expenses, net
416
440
6
1,335
1,396
4
Operating Profit
$
212
$
225
(5)
$
696
$
683
2
Restaurant margin
26.6
%
25.9
%
0.7 ppts.
25.5
%
24.0
%
1.5 ppts.
Operating margin
33.8
%
33.7
%
0.1 ppts.
34.3
%
32.8
%
1.5 ppts.
See accompanying notes.
Percentages may not recompute due to
rounding.
YUM! Brands, Inc.
Consolidated Balance
Sheets
(amounts in millions)
(unaudited)
12/31/20
12/31/19
ASSETS
Current Assets
Cash and cash equivalents
$
730
$
605
Accounts and notes receivable, less
allowance: $45 in 2020 and $72 in 2019
534
584
Prepaid expenses and other current
assets
425
338
Total Current Assets
1,689
1,527
Property, plant and equipment, net of
accumulated depreciation of $1,230 in 2020
1,235
1,170
and $1,136 in 2019
Goodwill
597
530
Intangible assets, net
343
244
Other assets
1,435
1,313
Deferred income taxes
553
447
Total Assets
$
5,852
$
5,231
LIABILITIES AND SHAREHOLDERS'
DEFICIT
Current Liabilities
Accounts payable and other current
liabilities
$
1,189
$
960
Income taxes payable
33
150
Short-term borrowings
453
431
Total Current Liabilities
1,675
1,541
Long-term debt
10,272
10,131
Other liabilities and deferred credits
1,796
1,575
Total Liabilities
13,743
13,247
Shareholders' Deficit
Common Stock, no par value, 750 shares
authorized; 300 shares issued in 2020 and 2019
—
—
Accumulated deficit
(7,480
)
(7,628
)
Accumulated other comprehensive loss
(411
)
(388
)
Total Shareholders' Deficit
(7,891
)
(8,016
)
Total Liabilities and Shareholders'
Deficit
$
5,852
$
5,231
See accompanying notes.
YUM! Brands, Inc.
Consolidated Statements of
Cash Flows
(amounts in millions)
(unaudited)
Year ended
12/31/20
12/31/19
Cash Flows - Operating
Activities
Net income
$
904
$
1,294
Depreciation and amortization
146
112
Impairment and closure expense
172
5
Refranchising (gain) loss
(34
)
(37
)
Investment (income) expense, net
(74
)
67
Contributions to defined benefit pension
plans
(6
)
(15
)
Deferred income taxes
(65
)
(232
)
Share-based compensation expense
97
59
Changes in accounts and notes
receivable
62
(56
)
Changes in prepaid expenses and other
current assets
8
(8
)
Changes in accounts payable and other
current liabilities
128
(36
)
Changes in income taxes payable
(110
)
23
Other, net
77
139
Net Cash Provided by Operating
Activities
1,305
1,315
Cash Flows - Investing
Activities
Capital spending
(160
)
(196
)
Acquisition of The Habit Restaurants,
Inc., net of cash acquired
(408
)
—
Proceeds from sale of investment in
Grubhub, Inc. common stock
206
—
Proceeds from refranchising of
restaurants
19
110
Other, net
8
(2
)
Net Cash Used in Investing
Activities
(335
)
(88
)
Cash Flows - Financing
Activities
Proceeds from long-term debt
1,650
800
Repayments of long-term debt
(1,517
)
(331
)
Revolving credit facilities, three months
or less, net
—
—
Short-term borrowings, by original
maturity
More than three months - proceeds
95
130
More than three months - payments
(100
)
(126
)
Three months or less, net
—
—
Repurchase shares of Common Stock
(239
)
(815
)
Dividends paid on Common Stock
(566
)
(511
)
Debt issuance costs
(20
)
(10
)
Other, net
(41
)
(75
)
Net Cash Used in Financing
Activities
(738
)
(938
)
Effect of Exchange Rate on Cash and
Cash Equivalents
24
5
Net Increase in Cash, Cash Equivalents,
Restricted Cash and Restricted Cash Equivalents
256
294
Cash, Cash Equivalents, Restricted Cash
and Restricted Cash Equivalents - Beginning of Year
768
474
Cash, Cash Equivalents, Restricted Cash
and Restricted Cash Equivalents - End of Year
$
1,024
$
768
See accompanying notes.
Reconciliation of Non-GAAP Measurements to
GAAP Results (amounts in millions, except per share amounts)
(unaudited)
In addition to the results provided in accordance with Generally
Accepted Accounting Principles in the United States of America
("GAAP"), the Company provides the following non-GAAP
measurements.
- Diluted Earnings Per Share ("EPS") excluding Special Items (as
defined below);
- Effective Tax Rate excluding Special Items;
- Core Operating Profit and Core Operating Profit excluding the
impact of the 53rd week in 2019. 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) - (k) 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 to further enhance the comparability given the
53rd week that was part of our fiscal calendar in 2019.
Quarter ended
Year ended
12/31/20
12/31/19
12/31/20
12/31/19
Detail of Special Items
Refranchising gain (loss)(a)
$
—
$
(6
)
$
8
$
12
Costs associated with acquisition and
integration of Habit Burger Grill(b)
—
(1
)
(9
)
(1
)
Impairment of Habit Burger Grill
goodwill(c)
—
—
(144
)
—
Unlocking Opportunity Initiative
contribution(d)
—
—
(50
)
—
COVID-19 relief contribution(e)
(25
)
—
(25
)
—
Charges associated with resource
optimization(f)
(4
)
—
(36
)
—
Costs associated with Pizza Hut U.S.
Transformation Agreement(g)
(2
)
(8
)
(5
)
(13
)
Other Special Items Expense(h)
(3
)
—
(6
)
(9
)
Special Items Expense - Operating
Profit
(34
)
(15
)
(267
)
(11
)
Charges associated with resource
optimization - Other Pension Expense(f)
(1
)
—
(2
)
—
Interest expense, net(h)(i)
—
—
(34
)
(2
)
Special Items Expense before Income
Taxes
(35
)
(15
)
(303
)
(13
)
Tax Benefit (Expense) on Special
Items(j)
8
(32
)
65
(30
)
Tax Benefit - Intra-entity transfer of
intellectual property(k)
3
226
28
226
Special Items Income (Expense), net of
tax
$
(24
)
$
179
$
(210
)
$
183
Average diluted shares outstanding
307
309
307
313
Special Items diluted EPS
$
(0.07
)
$
0.58
$
(0.68
)
$
0.59
Quarter ended
Year ended
12/31/20
12/31/19
12/31/20
12/31/19
Reconciliation of GAAP Operating Profit
to Core Operating Profit and Core Operating Profit, excluding 53rd
Week
Consolidated
GAAP Operating Profit
$
482
$
546
$
1,503
$
1,930
Special Items Expense
(34
)
(15
)
(267
)
(11
)
Foreign Currency Impact on Divisional
Operating Profit
5
N/A
(9
)
N/A
Core Operating Profit
$
511
$
561
$
1,779
$
1,941
Impact of 53rd Week
N/A
24
N/A
24
Core Operating Profit, excluding 53rd
Week
$
511
$
537
$
1,779
$
1,917
KFC
Division
GAAP Operating Profit
$
267
$
285
$
922
$
1,052
Foreign Currency Impact on Divisional
Operating Profit
4
N/A
(9
)
N/A
Core Operating Profit
$
263
$
285
$
931
$
1,052
Impact of 53rd Week
N/A
8
N/A
8
Core Operating Profit, excluding 53rd
Week
$
263
$
277
$
931
$
1,044
Pizza Hut
Division
GAAP Operating Profit
$
83
$
90
$
335
$
369
Foreign Currency Impact on Divisional
Operating Profit
1
N/A
—
N/A
Core Operating Profit
$
82
$
90
$
335
$
369
Impact of 53rd Week
N/A
3
N/A
3
Core Operating Profit, excluding 53rd
Week
$
82
$
87
$
335
$
366
Taco Bell
Division
GAAP Operating Profit
$
212
$
225
$
696
$
683
Foreign Currency Impact on Divisional
Operating Profit
—
N/A
—
N/A
Core Operating Profit
$
212
$
225
$
696
$
683
Impact of 53rd Week
N/A
13
N/A
13
Core Operating Profit, excluding 53rd
Week
$
212
$
212
$
696
$
670
Habit Burger Grill
Division
GAAP Operating Profit
$
(7
)
N/A
$
(22
)
N/A
Foreign Currency Impact on Divisional
Operating Profit
—
N/A
—
N/A
Core Operating Profit
$
(7
)
N/A
$
(22
)
N/A
Reconciliation of Diluted EPS to
Diluted EPS excluding Special Items
Diluted EPS
$
1.08
$
1.58
$
2.94
$
4.14
Special Items Diluted EPS
(0.07
)
0.58
(0.68
)
0.59
Diluted EPS excluding Special Items
$
1.15
$
1.00
$
3.62
$
3.55
Reconciliation of GAAP Effective Tax
Rate to Effective Tax Rate excluding Special Items
GAAP Effective Tax Rate
5.8
%
(23.0
)
%
11.4
%
5.7
%
Impact on Tax Rate as a result of Special
Items
(2.5
)
%
(48.0
)
%
(4.5
)
%
(14.1
)
%
Effective Tax Rate excluding Special
Items
8.3
%
25.0
%
15.9
%
19.8
%
YUM! Brands, Inc.
Segment Results
(amounts in millions)
(unaudited)
Quarter Ended 12/31/20
KFC
Pizza Hut
Taco Bell
Habit Burger
Corporate and Unallocated
Consolidated
Total revenues
$
711
$
289
$
628
$
115
$
—
$
1,743
Company restaurant expenses
132
18
199
111
—
460
General and administrative expenses
122
74
50
11
83
340
Franchise and property expenses
22
6
9
—
1
38
Franchise advertising and other services
expense
164
109
154
—
—
427
Refranchising (gain) loss
—
—
—
—
(4
)
(4
)
Other (income) expense
4
(1
)
4
—
(7
)
—
Total costs and expenses, net
444
206
416
122
73
1,261
Operating Profit
$
267
$
83
$
212
$
(7
)
$
(73
)
$
482
Quarter Ended 12/31/19
KFC
Pizza Hut
Taco Bell
Corporate and Unallocated
Consolidated
Total revenues
$
732
$
297
$
665
$
—
$
1,694
Company restaurant expenses
150
17
218
—
385
General and administrative expenses
113
64
57
66
300
Franchise and property expenses
19
16
12
9
56
Franchise advertising and other services
expense
162
109
156
—
427
Refranchising (gain) loss
—
—
—
(19
)
(19
)
Other (income) expense
3
1
(3
)
(2
)
(1
)
Total costs and expenses, net
447
207
440
54
1,148
Operating Profit
$
285
$
90
$
225
$
(54
)
$
546
The above tables reconcile segment information, which is based
on management responsibility, with our Consolidated Summary of
Results. Corporate and unallocated expenses comprise items that are
not allocated to segments for performance reporting purposes.
The Corporate and Unallocated column in the above tables
includes, among other amounts, all amounts that we have deemed
Special Items. See Reconciliation of Non-GAAP Measurements to GAAP
Results.
YUM! Brands, Inc.
Segment Results
(amounts in millions)
(unaudited)
Year Ended 12/31/20
KFC
Pizza Hut
Taco Bell
Habit Burger
Corporate and Unallocated
Consolidated
Total revenues
$
2,272
$
1,002
$
2,031
$
347
$
—
$
5,652
Company restaurant expenses
439
73
657
337
—
1,506
General and administrative expenses
346
215
158
33
312
1,064
Franchise and property expenses
91
17
33
—
4
145
Franchise advertising and other services
expense
465
365
484
—
—
1,314
Refranchising (gain) loss
—
—
—
—
(34)
(34)
Other (income) expense
9
(3)
3
(1)
146
154
Total costs and expenses, net
1,350
667
1,335
369
428
4,149
Operating Profit
$
922
$
335
$
696
$
(22)
$
(428)
$
1,503
Year Ended 12/31/19
KFC
Pizza Hut
Taco Bell
Corporate and Unallocated
Consolidated
Total revenues
$
2,491
$
1,027
$
2,079
$
—
$
5,597
Company restaurant expenses
484
51
700
—
1,235
General and administrative expenses
346
202
181
188
917
Franchise and property expenses
89
39
38
14
180
Franchise advertising and other services
expense
520
367
481
—
1,368
Refranchising (gain) loss
—
—
—
(37)
(37)
Other (income) expense
—
(1)
(4)
9
4
Total costs and expenses, net
1,439
658
1,396
174
3,667
Operating Profit
$
1,052
$
369
$
683
$
(174)
$
1,930
The above tables reconcile segment information, which is based
on management responsibility, with our Consolidated Summary of
Results. Corporate and unallocated expenses comprise items that are
not allocated to segments for performance reporting purposes.
The Corporate and Unallocated column in the above tables
includes, among other amounts, all amounts that we have deemed
Special Items. See Reconciliation of Non-GAAP Measurements to GAAP
Results.
Notes to the Consolidated Summary of
Results, Consolidated Balance Sheets and Consolidated Statements of
Cash Flows (amounts in millions) (unaudited)
Amounts presented as of and for the
quarter and year ended December 31, 2020 are preliminary.
(a)
We have reflected as Special Items those
refranchising gains and losses that were recorded in connection
with our previously announced plans to have at least 98% franchise
restaurant ownership by the end of 2018. As such, refranchising
gains and losses recorded during 2020 and 2019 as Special Items
primarily include true-ups to refranchising gains and losses
recorded prior to December 31, 2018.
During the quarters ended December 31,
2020 and 2019, we recorded net refranchising losses of less than $1
million and $6 million, respectively, that have been reflected as
Special Items. During the years ended December 31, 2020 and 2019,
we recorded net refranchising gains of $8 million and $12 million,
respectively, that have been reflected as Special Items.
Additionally, during the quarters ended
December 31, 2020 and 2019, we recorded net refranchising gains of
$4 million and $25 million, respectively, that have not been
reflected as Special Items. During the years ended December 31,
2020 and 2019, we recorded net refranchising gains of $26 million
and $25 million, respectively, that have not been reflected as
Special Items. These net gains relate to the refranchising of
restaurants that were not part of our aforementioned plans to
achieve 98% franchise ownership.
(b)
During the years ended December 31, 2020
and 2019, we recorded Special Item charges of $9 million and $1
million, respectively, related to the acquisition and integration
of The Habit Restaurants, Inc. ("Habit").
(c)
On March 18, 2020 we acquired all of the
issued and outstanding common shares of Habit for total cash
consideration of $408 million, net of cash acquired. During the
first-quarter of 2020 the operation of substantially all Habit
restaurants was impacted by government recommendations and mandates
arising from containment and mitigation measures related to the
COVID-19 global pandemic. As a result of the impacts of the
COVID-19 pandemic on Habit’s results through March 31, 2020 as well
as general market conditions, during the quarter ended March 31,
2020 we recorded a goodwill impairment charge of $139 million to
Other (income) expense. As we continued to refine our preliminary
purchase price allocation for Habit in the quarter ended September
30, 2020 the impairment charge was adjusted upward by $5 million.
These impairment charges have been reflected as Special Items. We
have also reflected the tax benefit of these impairment charges,
which totaled $33 million for the year ended December 31, 2020 as
Special Items.
(d)
On June 24, 2020, the Yum! Brands, Inc.
Board of Directors approved the establishment of the Company’s new
global “Unlocking Opportunity Initiative” including a $100 million
investment over the next five years to fight inequality by
unlocking opportunities for employees, restaurant team members and
communities. The Company recorded a Special Item charge of $50
million in the quarter ended June 30, 2020 related to a
contribution made to Yum! Brands Foundation, Inc. as part of these
efforts and investment.
(e)
During the quarter ended December 31,
2020, we recorded a Special Item charge of $25 million related to a
contribution made to Yum! Brands Foundation, Inc. expected to fund
past and anticipated payments for COVID relief provided to
restaurant-level employees within the YUM system.
(f)
During the quarter ended December 31,
2020, we recorded charges of $4 million and $1 million to General
and administrative expenses and Other pension (income) expense,
respectively, associated with a voluntary early retirement program
offered to our U.S. based employees and a worldwide severance
program. During the year ended December 31, 2020, we recorded
charges of $36 million and $2 million to General and administrative
expenses and Other pension (income) expense, respectively,
associated with these programs. These programs were part of our
efforts to optimize our resources, reallocating them toward
critical areas of the business that will drive future growth. These
critical areas include accelerating our digital, technology and
innovation capabilities to deliver a modern, world-class team
member and customer experience and improve unit economics. These
charges have been reflected as Special Items.
(g)
In May 2017, we reached an agreement with
our Pizza Hut U.S. franchisees that will improve brand marketing
alignment, accelerate enhancements in operations and technology and
that included a permanent commitment to incremental advertising as
well as digital and technology contributions by franchisees. In
connection with this agreement, we recognized Special Item charges
of $2 million and $8 million for the quarters ended December 31,
2020 and 2019, respectively. During the years ended December 31,
2020 and 2019, we recognized Special Item charges of $5 million and
$13 million, respectively. The majority of these costs were
recorded within Franchise and property expenses.
(h)
During the second quarter of 2019, we
recorded charges of $8 million and $2 million to Other (income)
expense and Interest expense, net, respectively, related to cash
payments in excess of our recorded liability to settle contingent
consideration associated with our acquisition of the KFC Turkey and
Pizza Hut Turkey businesses in 2013. Consistent with prior
adjustments to the recorded contingent consideration we have
reflected this as a Special Item.
(i)
During the quarter ended September 30,
2020, KFC Holding Co., Pizza Hut Holdings, LLC and Taco Bell of
America, LLC, each of which a wholly-owned subsidiary of the
Company, issued a notice of redemption for $1,050 million aggregate
principal amount of 5.00% Subsidiary Senior Unsecured Notes due in
2024 (the "2024 Notes"). The redemption amount included a $26
million call premium plus accrued and unpaid interest to the date
of redemption of October 9, 2020. We recorded the call premium, $6
million of unamortized debt issuance costs associated with the 2024
Notes and $2 million of accrued and unpaid interest associated with
the period of time from prepayment of the 2024 Notes with the
Trustee on September 25, 2020 to their redemption date within
Interest expense, net and reflected the charges as Special
Items.
(j)
Tax Benefit (Expense) on Special Items was
determined based upon the impact of the nature, as well as the
jurisdiction of the respective individual components within Special
Items. Additionally, we increased our Income tax provision by $34
million in the fourth quarter of 2019 to record a reserve against
the tax recorded on a prior year divestiture, the effects of which
were previously recorded as a Special Item.
(k)
In the fourth quarter of 2019, we
completed intra-entity transfers of certain intellectual property
rights. As a result of the transfer of certain of these rights,
largely to subsidiaries in the United Kingdom (UK), we received a
step-up in tax basis to current fair value under applicable tax
law. To the extent this step-up in tax basis will be amortizable
against future taxable income, we recognized one-time deferred tax
benefits of $3 million and $226 million as a Special Item in the
quarters ended December 31, 2020 and December 31, 2019,
respectively. During the quarter ended September 30, 2020, the UK
Finance Act 2020 was enacted resulting in an increase in the UK
corporate tax rate from 17% to 19%. As a result, in the quarter
ended September 30, 2020 we remeasured the related deferred tax
asset originally recorded in the fourth quarter of 2019. This
remeasurement resulted in the recognition of an additional $25
million deferred tax benefit as a Special Item in the quarter ended
September 30, 2020.
Category: Earnings
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210204005586/en/
Analysts are invited to contact: Keith Siegner, Vice President,
Investor Relations, M&A, and Treasurer, at 888/298-6986 Members
of the media are invited to contact: Virginia Ferguson, Senior
Director, Public Relations, at 502/874-8200
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