Yum! Brands, Inc. (NYSE: YUM) today reported results for the
second-quarter ended June 30, 2021. Worldwide system sales
excluding foreign currency translation grew 26%, with 23%
same-store sales and 2% unit growth. Second-quarter GAAP EPS was
$1.29, an increase of 91% over the prior year quarter.
Second-quarter EPS excluding Special Items was $1.16, an increase
of 41% over the prior year quarter.
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DAVID GIBBS COMMENTS
David Gibbs, CEO, said “Our strong second-quarter results, led
by record unit development and 23% same-store sales growth are a
testament to our iconic brands, world-class talent, and
best-in-class franchisees. I’m proud that each of our divisions
reported positive same-store sales growth on a 2-year basis, a step
up from first-quarter trends. This sustained momentum was
underpinned by our investments in digital and off-premise and the
agility of our brands to meet the needs of consumers in an
ever-changing environment. I'm thrilled to say that unit
development has accelerated driven by strong unit-level economics.
On the basis of these strong results, we're reinstating our
long-term growth algorithm and revising the unit growth component
of this algorithm from 4% unit growth to between 4% and 5% unit
growth. The resilience of our diversified global business positions
us perfectly to drive growth and maximize value creation for all
our stakeholders for years to come.”
SECOND-QUARTER
HIGHLIGHTS
- Worldwide system sales excluding foreign currency translation
grew 26%, with KFC at 35%, Taco Bell at 24% and Pizza Hut at
10%.
- We reported 2% unit growth year-over-year and record
second-quarter net new unit growth of 603.
- Foreign currency translation favorably impacted divisional
operating profit by $27 million.
% Change
System Sales Ex F/X
Same-Store Sales
Units
GAAP Operating Profit
Core Operating Profit1
KFC Division
+35
+30
+5
+108
+93
Pizza Hut Division
+10
+10
(3)
+18
+14
Taco Bell Division
+24
+21
+2
+29
+29
Worldwide
+26
+23
+2
+89
+53
Second-Quarter
Year-to-Date
2021
2020
% Change
2021
2020
% Change
GAAP EPS
$1.29
$0.67
+91
$2.35
$0.94
+150
Special Items EPS1
$0.13
$(0.15)
NM
$0.13
$(0.52)
NM
EPS Excluding Special Items
$1.16
$0.82
+41
$2.22
$1.46
+52
1 See reconciliation of Non-GAAP
Measurements to GAAP Results within this release for further detail
of Core Operating Profit and Special Items.
All comparisons are versus the same period
a year ago.
System sales growth figures exclude
foreign currency translation ("F/X") and core operating profit
growth figures exclude F/X and Special Items. Special Items are not
allocated to any segment and therefore only impact worldwide GAAP
results. See reconciliation of Non-GAAP Measurements to GAAP
Results within this release for further details.
Digital system sales includes all
transactions where consumers at system restaurants utilize ordering
interaction that is primarily facilitated by automated
technology.
KFC DIVISION
Second-Quarter
Year-to-Date
%/ppts Change
%/ppts Change
2021
2020
Reported
Ex F/X
2021
2020
Reported
Ex F/X
Restaurants
25,720
24,390
+5
N/A
25,720
24,390
+5
N/A
System Sales ($MM)
7,638
5,288
+44
+35
14,911
11,575
+29
+22
Same-Store Sales Growth (%)
+30
(21)
NM
NM
+18
(15)
NM
NM
Franchise and Property Revenues ($MM)
379
251
+52
+42
733
566
+30
+23
Operating Profit ($MM)
318
153
+108
+93
618
377
+64
+54
Operating Margin (%)
46.5
37.4
9.1
9.4
47.3
38.7
8.6
8.8
Second-Quarter (%
Change)
Year-to-Date (%
Change)
International
U.S.
International
U.S.
System Sales Growth Ex F/X
+42
+10
+24
+11
Same-Store Sales Growth
+36
+11
+20
+12
- KFC Division opened 522 gross new restaurants in 62
countries.
- Operating margin increased 9.1 percentage points driven by
same-store sales growth, lower bad debt expense, and unit
growth.
- Foreign currency translation favorably impacted operating
profit by $23 million.
- For the division, same-store sales grew 2% on a 2-year basis,
which includes the impact of about 1% of our stores being
temporarily closed as of the end of the second-quarter 2021.
- For KFC International, same-store sales declined 1% on a 2-year
basis, which includes the impact of about 2% of our stores being
temporarily closed as of the end of the second-quarter 2021.
- For KFC U.S., same-store sales grew 19% on a 2-year basis.
KFC Markets1
Percent of KFC System
Sales2
System Sales Growth Ex
F/X
Second-Quarter (%
Change)
Year-to-Date (%
Change)
China
27%
+14
+19
United States
18%
+10
+11
Asia
12%
+11
+5
Russia, Central & Eastern Europe
7%
+101
+40
Australia
7%
+23
+17
United Kingdom
6%
+248
+80
Western Europe
5%
+65
+28
Latin America
5%
+81
+29
Africa
4%
+186
+55
Middle East / Turkey / North Africa
4%
+118
+49
Canada
2%
+15
+13
Thailand
2%
Even
(10)
India
1%
+221
+61
1Refer to
investors.yum.com/financial-information/financial-reports/ for a
list of the countries within each of the markets.
2Reflects Full Year 2020.
PIZZA HUT DIVISION
Second-Quarter
Year-to-Date
%/ppts Change
%/ppts Change
2021
2020
Reported
Ex F/X
2021
2020
Reported
Ex F/X
Restaurants
17,809
18,326
(3)
N/A
17,809
18,326
(3)
N/A
System Sales ($MM)
3,143
2,753
+14
+10
6,239
5,554
+12
+9
Same-Store Sales Growth (%)
+10
(9)
NM
NM
+11
(10)
NM
NM
Franchise and Property Revenues ($MM)
147
126
+16
+12
288
259
+11
+8
Operating Profit ($MM)
103
87
+18
+14
205
163
+25
+21
Operating Margin (%)
41.3
36.8
4.5
4.0
41.0
34.8
6.2
5.8
Second-Quarter (%
Change)
Year-to-Date (%
Change)
International
U.S.
International
U.S.
System Sales Growth Ex F/X
+19
Even
+13
+4
Same-Store Sales Growth
+16
+4
+12
+10
- Pizza Hut Division opened 210 gross new restaurants in 36
countries.
- Operating margin increased 4.5 percentage points driven by
same-store sales growth.
- Foreign currency translation favorably impacted operating
profit by $4 million.
- For the division, same-store sales grew 1% on a 2-year basis,
which includes the impact of about 2% of our stores being
temporarily closed as of the end of the second-quarter 2021.
- For Pizza Hut International, same-store sales declined 6% on a
2-year basis, which includes the impact of about 2% of our stores
being temporarily closed as of the end of the second-quarter
2021.
- For Pizza Hut U.S., same-store sales grew 9% on a 2-year basis,
which includes the impact of about 1% of our stores being
temporarily closed as of the end of the second-quarter 2021.
Pizza Hut Markets1
Percent of Pizza Hut System
Sales2
System Sales Growth Ex
F/X
Second-Quarter (%
Change)
Year-to-Date (%
Change)
United States
45%
Even
+4
China
15%
+16
+33
Asia
15%
+2
+1
Latin America / Spain / Portugal
10%
+36
+11
Europe (excluding Spain &
Portugal)
8%
+26
(3)
Middle East / Turkey / North Africa
3%
+57
+13
Canada
3%
+12
+15
India
1%
+163
+51
Africa
<1%
+157
+60
1Refer to
investors.yum.com/financial-information/financial-reports/ for a
list of the countries within each of the markets.
2Reflects Full Year 2020.
TACO BELL DIVISION
Second-Quarter
Year-to-Date
%/ppts Change
%/ppts Change
2021
2020
Reported
Ex F/X
2021
2020
Reported
Ex F/X
Restaurants
7,567
7,400
+2
N/A
7,567
7,400
+2
N/A
System Sales ($MM)
3,189
2,564
+24
+24
6,069
5,160
+18
+17
Same-Store Sales Growth (%)
+21
(8)
NM
NM
+15
(4)
NM
NM
Franchise and Property Revenues ($MM)
179
147
+22
+21
341
295
+16
+15
Operating Profit ($MM)
198
154
+29
+29
376
298
+26
+26
Operating Margin (%)
37.2
34.4
2.8
2.8
36.8
33.0
3.8
3.8
- Taco Bell Division opened 91 gross new restaurants in 18
countries.
- Operating margin increased 2.8 percentage points due to
same-store sales growth offset by higher restaurant costs.
- For the division, same-store sales grew 12% on a 2-year
basis.
HABIT BURGER GRILL
DIVISION
- The Habit Burger Grill Division opened 4 gross new restaurants
in the U.S and Cambodia.
- During the quarter, The Habit Burger Grill Division same-store
sales grew 31%.
- For the year-to-date, The Habit Burger Grill Division
same-store sales grew 22%.
- For the division, same-store sales grew 7% on a 2-year basis,
which includes the impact of about 1% of stores that were
temporarily closed as of the end of the second-quarter 2021.
OTHER ITEMS
- Same-store sales growth on a 2-year basis is calculated using
the geometric method as follows: (1 + Q2 2020 reported same-store
sales growth) * (1 + Q2 2021 reported same-store sales growth) -
1.
- On April 1, we issued $1.1 billion of YUM Senior Unsecured
Notes with a coupon of 4.625% due in 2032. The proceeds from this
transaction were used to redeem $1.05 billion of 5.25% Subsidiary
Senior Unsecured Notes (due in 2026), including the applicable call
premium.
- On June 30, we issued a redemption notice for our $350 million
3.75% YUM Senior Unsecured Notes, which were scheduled to mature on
November 1, 2021. The notes will be redeemed on August 2, 2021 at
par.
- Disclosures pertaining to outstanding debt in our Restricted
Group capital structure will be provided at the time of the filing
of the second-quarter Form 10-Q.
CONFERENCE CALL
Yum! Brands, Inc. will host a conference call to review the
company's financial performance and strategies at 8:15 a.m. Eastern
Time July 29, 2021. The number is 877/871-3172 for U.S. callers,
412/902-6603 for international callers, conference ID 5033749.
The call will be available for playback beginning at 10:00 a.m.
Eastern Time July 29, 2021 through August 5, 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 10158416.
The webcast and the playback can be accessed by visiting Yum!
Brands' website, investors.yum.com/events-and-presentations and
selecting “Q2 2021 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 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
51,000 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.
Condensed Consolidated Summary
of Results
(amounts in millions, except
per share amounts)
(unaudited)
Quarter ended
% Change
Year to date
% Change
6/30/21
6/30/20
B/(W)
6/30/21
6/30/20
B/(W)
Revenues
Company sales
$
520
$
403
29
$
996
$
758
31
Franchise and property revenues
706
525
35
1,364
1,121
22
Franchise contributions for advertising
and other services
376
270
39
728
582
25
Total revenues
1,602
1,198
34
3,088
2,461
26
Costs and Expenses, Net
Company restaurant expenses
417
349
(20)
809
647
(25)
General and administrative expenses
230
259
12
436
467
7
Franchise and property expenses
27
36
25
50
94
48
Franchise advertising and other services
expense
372
264
(41)
715
574
(25)
Refranchising (gain) loss
(7
)
(8
)
(18)
(22
)
(21
)
2
Other (income) expense
(4
)
(2
)
NM
(10
)
150
NM
Total costs and expenses, net
1,035
898
(15)
1,978
1,911
(4)
Operating Profit
567
300
89
1,110
550
102
Investment (income) expense, net
(1
)
(91
)
(99)
(1
)
(57
)
(99)
Other pension (income) expense
2
2
23
5
5
7
Interest expense, net
159
132
(21)
290
250
(17)
Income before income taxes
407
257
58
816
352
132
Income tax provision
16
51
68
99
63
(58)
Net Income
$
391
$
206
89
$
717
$
289
148
Basic
EPS
EPS
$
1.31
$
0.68
92
$
2.39
$
0.96
150
Average shares outstanding
298
303
1
299
302
1
Diluted
EPS
EPS
$
1.29
$
0.67
91
$
2.35
$
0.94
150
Average shares outstanding
304
307
1
304
307
1
Dividends declared per common
share
$
0.50
$
0.47
$
1.00
$
0.94
See accompanying notes.
Percentages may not recompute due to
rounding.
YUM! Brands, Inc.
KFC DIVISION Operating
Results
(amounts in millions)
(unaudited)
Quarter ended
% Change
Year to date
% Change
6/30/21
6/30/20
B/(W)
6/30/21
6/30/20
B/(W)
Company sales
$
147
$
86
70
$
280
$
216
29
Franchise and property revenues
379
251
52
733
566
30
Franchise contributions for advertising
and other services
156
72
115
294
193
52
Total revenues
682
409
67
1,307
975
34
Company restaurant expenses
118
83
(41)
229
198
(16)
General and administrative expenses
80
70
(13)
153
143
(6)
Franchise and property expenses
15
29
46
29
62
53
Franchise advertising and other services
expense
151
70
(117)
284
190
(50)
Other (income) expense
—
4
NM
(6
)
5
NM
Total costs and expenses, net
364
256
(42)
689
598
(15)
Operating Profit
$
318
$
153
108
$
618
$
377
64
Company restaurant margin %1
19.2
%
2.7
%
16.5 ppts.
18.0
%
8.1
%
9.9 ppts.
Operating margin
46.5
%
37.4
%
9.1 ppts.
47.3
%
38.7
%
8.6 ppts.
See accompanying notes.
Percentages may not recompute due to
rounding.
1See reconciliation of Non-GAAP
Measurements to GAAP Results within this release for further detail
of Company restaurant margin %.
YUM! Brands, Inc.
PIZZA HUT DIVISION Operating
Results
(amounts in millions)
(unaudited)
Quarter ended
% Change
Year to date
% Change
6/30/21
6/30/20
B/(W)
6/30/21
6/30/20
B/(W)
Company sales
$
12
$
19
(34)
$
26
$
37
(29)
Franchise and property revenues
147
126
16
288
259
11
Franchise contributions for advertising
and other services
90
90
—
186
174
7
Total revenues
249
235
6
500
470
6
Company restaurant expenses
11
18
36
24
37
34
General and administrative expenses
43
44
6
83
90
9
Franchise and property expenses
5
1
(389)
7
13
48
Franchise advertising and other services
expense
91
87
(5)
185
171
(8)
Other (income) expense
(4
)
(2
)
NM
(4
)
(4
)
NM
Total costs and expenses, net
146
148
2
295
307
4
Operating Profit
$
103
$
87
18
$
205
$
163
25
Company restaurant margin %1
8.0
%
4.5
%
3.5 ppts.
7.3
%
0.8
%
6.5 ppts.
Operating margin
41.3
%
36.8
%
4.5 ppts.
41.0
%
34.8
%
6.2 ppts.
See accompanying notes.
Percentages may not recompute due to
rounding.
1See reconciliation of Non-GAAP
Measurements to GAAP Results within this release for further detail
of Company restaurant margin %.
YUM! Brands, Inc.
TACO BELL DIVISION Operating
Results
(amounts in millions)
(unaudited)
Quarter ended
% Change
Year to date
% Change
6/30/21
6/30/20
B/(W)
6/30/21
6/30/20
B/(W)
Company sales
$
223
$
194
16
$
431
$
392
10
Franchise and property revenues
179
147
22
341
295
16
Franchise contributions for advertising
and other services
130
108
21
248
215
15
Total revenues
532
449
19
1,020
902
13
Company restaurant expenses
165
147
(13)
323
300
(8)
General and administrative expenses
33
37
10
64
75
14
Franchise and property expenses
7
5
(34)
14
16
14
Franchise advertising and other services
expense
130
107
(21)
246
213
(15)
Other (income) expense
(1
)
(1
)
NM
(3
)
—
NM
Total costs and expenses, net
334
295
(14)
644
604
(7)
Operating Profit
$
198
$
154
29
$
376
$
298
26
Company restaurant margin %1
25.9
%
24.5
%
1.4 ppts.
25.0
%
23.5
%
1.5 ppts.
Operating margin
37.2
%
34.4
%
2.8 ppts.
36.8
%
33.0
%
3.8 ppts.
See accompanying notes.
Percentages may not recompute due to
rounding.
1See reconciliation of Non-GAAP
Measurements to GAAP Results within this release for further detail
of Company restaurant margin %.
YUM! Brands, Inc.
Condensed Consolidated Balance
Sheets
(amounts in millions)
(unaudited) 6/30/21
12/31/20
ASSETS
Current Assets
Cash and cash equivalents
$
552
$
730
Accounts and notes receivable, less
allowance: $34 in 2021 and $45 in 2020
525
534
Prepaid expenses and other current
assets
437
425
Total Current Assets
1,514
1,689
Property, plant and equipment, net of
accumulated depreciation of $1,279 in 2021 and $1,230 in 2020
1,211
1,235
Goodwill
597
597
Intangible assets, net
352
343
Other assets
1,408
1,435
Deferred income taxes
567
553
Total Assets
$
5,649
$
5,852
LIABILITIES AND SHAREHOLDERS'
DEFICIT
Current Liabilities
Accounts payable and other current
liabilities
$
1,142
$
1,189
Income taxes payable
16
33
Short-term borrowings
400
453
Total Current Liabilities
1,558
1,675
Long-term debt
10,258
10,272
Other liabilities and deferred credits
1,726
1,796
Total Liabilities
13,542
13,743
Shareholders' Deficit
Common Stock, no par value, 750 shares
authorized; 296 shares issued in 2021 and 300 issued in 2020
—
—
Accumulated deficit
(7,569
)
(7,480
)
Accumulated other comprehensive loss
(324
)
(411
)
Total Shareholders' Deficit
(7,893
)
(7,891
)
Total Liabilities and Shareholders'
Deficit
$
5,649
$
5,852
See accompanying notes.
YUM! Brands, Inc.
Condensed Consolidated
Statements of Cash Flows
(amounts in millions)
(unaudited)
Quarter ended
6/30/21
6/30/20
Cash Flows - Operating
Activities
Net Income
$
717
$
289
Depreciation and amortization
78
53
Impairment and closure expense
1
146
Refranchising (gain) loss
(22
)
(21
)
Investment (income) expense, net
(1
)
(57
)
Contributions to defined benefit pension
plans
(3
)
(1
)
Deferred income taxes
(41
)
(20
)
Share-based compensation expense
38
29
Changes in accounts and notes
receivable
25
4
Changes in prepaid expenses and other
current assets
(11
)
(26
)
Changes in accounts payable and other
current liabilities
(95
)
(76
)
Changes in income taxes payable
(25
)
(49
)
Other, net
112
91
Net Cash Provided by Operating
Activities
773
362
Cash Flows - Investing
Activities
Capital spending
(84
)
(67
)
Acquisition of The Habit Restaurants,
Inc.
—
(408
)
Proceeds from refranchising of
restaurants
43
3
Other, net
33
—
Net Cash Used in Financing
Activities
(8
)
(472
)
Cash Flows - Financing
Activities
Proceeds from long-term debt
1,900
600
Repayments of long-term debt
(2,002
)
(41
)
Revolving credit facilities, three months
or less, net
—
575
Short-term borrowings by original
maturity
More than three months - proceeds
—
85
More than three months - payments
—
(90
)
Three months or less, net
—
—
Repurchase shares of Common Stock
(530
)
—
Dividends paid on Common Stock
(299
)
(283
)
Debt issuance costs
(18
)
(7
)
Other, net
(17
)
(31
)
Net Cash Provided by (Used in)
Financing Activities
(966
)
808
Effect of Exchange Rate on Cash and
Cash Equivalents
11
(18
)
Net Increase (Decrease) in Cash, Cash
Equivalents, Restricted Cash and Restricted Cash
Equivalents
(190
)
680
Cash, Cash Equivalents, Restricted Cash
and Restricted Cash Equivalents - Beginning of Period
1,024
768
Cash, Cash Equivalents, Restricted Cash
and Restricted Cash Equivalents - End of Period
$
834
$
1,448
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. Core Operating Profit excludes Special
Items and FX and we use Core Operating Profit for the purposes of
evaluating performance internally;
- Company restaurant profit and Company restaurant margin as a
percentage of sales (as defined below).
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) - (h) in the accompanying notes.
Company restaurant profit is defined as Company sales less
Company restaurant expenses, both of which appear on the face of
our Condensed Consolidated Statements of Income. Company restaurant
expenses include those expenses incurred directly by our
Company-owned restaurants in generating Company sales, including
cost of food and paper, cost of restaurant-level labor, rent,
depreciation and amortization of restaurant-level assets and
advertising expenses incurred by and on behalf of that Company
restaurant. Company restaurant margin as a percentage of sales
("Company restaurant margin %") is defined as Company restaurant
profit divided by Company sales. We use Company restaurant profit
for the purposes of internally evaluating the performance of our
Company-owned restaurants and we believe Company restaurant profit
provides useful information to investors as to the profitability of
our Company-owned restaurants. In calculating Company restaurant
profit, the Company excludes revenues and expenses directly
associated with our franchise operations as well as
non-restaurant-level costs included in General and administrative
expenses, some of which may support Company-owned restaurant
operations. The Company also excludes restaurant-level asset
impairment and closures expenses, which have historically not been
significant, from the determination of Company restaurant profit as
such expenses are not believed to be indicative of ongoing
operations. Company restaurant profit and Company restaurant margin
% as presented may not be comparable to other similarly titled
measures of other companies in the industry.
Certain non-GAAP measurements are presented excluding the impact
of FX. These amounts are derived by translating current year
results at prior year average exchange rates. We believe the
elimination of the FX impact provides better year-to-year
comparability without the distortion of foreign currency
fluctuations.
Quarter ended
Year to date
6/30/21
6/30/20
6/30/21
6/30/20
Detail of Special Items
Refranchising gain (loss)(a)
$
2
$
3
$
4
$
6
Costs associated with acquisition and
integration of Habit Burger Grill(b)
—
(3
)
—
(9
)
Impairment of Habit Burger Grill
goodwill(c)
—
—
—
(139
)
Unlocking Opportunity Initiative
contribution(d)
—
(50
)
—
(50
)
Charges associated with resource
optimization(e)
(2
)
—
(3
)
—
Other Special Items Income (Expense)
—
(4
)
1
(7
)
Special Items Income (Expense) - Operating
Profit
—
(54
)
2
(199
)
Charges associated with resource
optimization - Other pension (expense) income(e)
1
—
1
—
Interest expense, net(f)
(34
)
—
(34
)
—
Special Items Income (Expense) before
Income Taxes
(33
)
(54
)
(31
)
(199
)
Tax Benefit on Special Items(g)
8
7
7
40
Tax Benefit - Intra-entity transfer of
intellectual property(h)
64
—
64
—
Special Items Income (Expense), net of
tax
$
39
$
(47
)
$
40
$
(159
)
Average diluted shares outstanding
304
307
304
307
Special Items diluted EPS
$
0.13
$
(0.15
)
$
0.13
$
(0.52
)
Reconciliation of GAAP Operating Profit
to Core Operating Profit
Consolidated
GAAP Operating Profit
$
567
$
300
$
1,110
$
550
Special Items Income (Expense)
—
(54
)
2
(199
)
Foreign Currency Impact on Divisional
Operating Profit
27
N/A
43
N/A
Core Operating Profit
$
540
$
354
$
1,065
$
749
KFC
Division
GAAP Operating Profit
$
318
$
153
$
618
$
377
Foreign Currency Impact on Divisional
Operating Profit
23
N/A
36
N/A
Core Operating Profit
$
295
$
153
$
582
$
377
Pizza Hut
Division
GAAP Operating Profit
$
103
$
87
$
205
$
163
Foreign Currency Impact on Divisional
Operating Profit
4
N/A
7
N/A
Core Operating Profit
$
99
$
87
$
198
$
163
Taco Bell
Division
GAAP Operating Profit
$
198
$
154
$
376
$
298
Foreign Currency Impact on Divisional
Operating Profit
—
N/A
—
N/A
Core Operating Profit
$
198
$
154
$
376
$
298
Habit Burger Grill
Division
GAAP Operating Profit (Loss)
$
5
$
(6
)
$
5
$
(8
)
Foreign Currency Impact on Divisional
Operating Profit
—
N/A
—
N/A
Core Operating Profit
$
5
$
(6
)
$
5
$
(8
)
Reconciliation of Diluted EPS to
Diluted EPS excluding Special Items
Diluted EPS
$
1.29
$
0.67
$
2.35
$
0.94
Special Items Diluted EPS
0.13
(0.15
)
0.13
(0.52
)
Diluted EPS excluding Special Items
$
1.16
$
0.82
$
2.22
$
1.46
Reconciliation of GAAP Effective Tax
Rate to Effective Tax Rate excluding Special Items
GAAP Effective Tax Rate
4.0
%
19.8
%
12.1
%
17.8
%
Impact on Tax Rate as a result of Special
Items
(16.0
)%
1.0
%
(8.0
)%
(0.9
)%
Effective Tax Rate excluding Special
Items
20.0
%
18.8
%
20.1
%
18.7
%
Reconciliation of
GAAP Operating Profit to Company Restaurant Profit
Quarter ended 6/30/2021
KFC Division
Pizza Hut Division
Taco Bell Division
Habit Burger Grill Division
Unallocated
Total
GAAP Operating Profit (Loss)
$
318
$
103
$
198
$
5
$
(57
)
$
567
Less:
Franchise and property revenues
379
147
179
1
—
706
Franchise contributions for advertising
and other services
156
90
130
—
—
376
Add:
General and administrative expenses
80
43
33
11
63
230
Franchise and property expenses
15
5
7
—
—
27
Franchise advertising and other services
expense
151
91
130
—
—
372
Refranchising (gain) loss
—
—
—
—
(7
)
(7
)
Other (income) expense
—
(4
)
(1
)
—
1
(4
)
Company restaurant profit
$
29
$
1
$
58
$
15
$
—
$
103
Company sales
$
147
$
12
$
223
$
138
$
—
$
520
Company restaurant margin %
19.2
%
8.0
%
25.9
%
11.6
%
—
%
19.8
%
Quarter ended 6/30/2020
KFC Division
Pizza Hut Division
Taco Bell Division
Habit Burger Grill Division
Unallocated
Total
GAAP Operating Profit (Loss)
$
153
$
87
$
154
$
(6
)
$
(88
)
$
300
Less:
Franchise and property revenues
251
126
147
1
—
525
Franchise contributions for advertising
and other services
72
90
108
—
—
270
Add:
General and administrative expenses
70
44
37
10
98
259
Franchise and property expenses
29
1
5
—
1
36
Franchise advertising and other services
expense
70
87
107
—
—
264
Refranchising (gain) loss
—
—
—
—
(8
)
(8
)
Other (income) expense
4
(2
)
(1
)
—
(3
)
(2
)
Company restaurant profit
$
3
$
1
$
47
$
3
$
—
$
54
Company sales
$
86
$
19
$
194
$
104
$
—
$
403
Company restaurant margin %
2.7
%
4.5
%
24.5
%
3.0
%
—
%
13.4
%
Year to date 6/30/2021
KFC Division
Pizza Hut Division
Taco Bell Division
Habit Burger Grill Division
Unallocated
Total
GAAP Operating Profit (Loss)
$
618
$
205
$
376
$
5
$
(94
)
$
1,110
Less:
Franchise and property revenues
733
288
341
2
—
1,364
Franchise contributions for advertising
and other services
294
186
248
—
—
728
Add:
General and administrative expenses
153
83
64
23
113
436
Franchise and property expenses
29
7
14
—
—
50
Franchise advertising and other services
expense
284
185
246
—
—
715
Refranchising (gain) loss
—
—
—
—
(22
)
(22
)
Other (income) expense
(6
)
(4
)
(3
)
—
3
(10
)
Company restaurant profit
$
51
$
2
$
108
$
26
$
—
$
187
Company sales
$
280
$
26
$
431
$
259
$
—
$
996
Company restaurant margin %
18.0
%
7.3
%
25.0
%
10.3
%
—
%
18.7
%
Year to date 6/30/2020
KFC Division
Pizza Hut Division
Taco Bell Division
Habit Burger Grill Division
Unallocated
Total
GAAP Operating Profit (Loss)
$
377
$
163
$
298
$
(8
)
$
(280
)
$
550
Less:
Franchise and property revenues
566
259
295
1
—
1,121
Franchise contributions for advertising
and other services
193
174
215
—
—
582
Add:
General and administrative expenses
143
90
75
11
148
467
Franchise and property expenses
62
13
16
—
3
94
Franchise advertising and other services
expense
190
171
213
—
—
574
Refranchising (gain) loss
—
—
—
—
(21
)
(21
)
Other (income) expense
5
(4
)
—
—
149
150
Company restaurant profit
$
18
$
—
$
92
$
2
$
(1
)
$
111
Company sales
$
216
$
37
$
392
$
113
$
—
$
758
Company restaurant margin %
8.1
%
0.8
%
23.5
%
2.1
%
—
%
14.7
%
YUM! Brands, Inc.
Segment Results
(amounts in millions)
(unaudited)
Quarter Ended 6/30/2021
KFC
Pizza Hut
Taco Bell
Habit Burger Grill
Corporate and Unallocated
Consolidated
Total revenues
$
682
$
249
$
532
$
139
$
—
$
1,602
Company restaurant expenses
118
11
165
123
—
417
General and administrative expenses
80
43
33
11
63
230
Franchise and property expenses
15
5
7
—
—
27
Franchise advertising and other services
expense
151
91
130
—
—
372
Refranchising (gain) loss
—
—
—
—
(7
)
(7
)
Other (income) expense
—
(4
)
(1
)
—
1
(4
)
Total costs and expenses, net
364
146
334
134
57
1,035
Operating Profit (Loss)
$
318
$
103
$
198
$
5
$
(57
)
$
567
Quarter Ended 6/30/2020
KFC
Pizza Hut
Taco Bell
Habit Burger Grill
Corporate and Unallocated
Consolidated
Total revenues
$
409
$
235
$
449
$
105
$
—
$
1,198
Company restaurant expenses
83
18
147
101
—
349
General and administrative expenses
70
44
37
10
98
259
Franchise and property expenses
29
1
5
—
1
36
Franchise advertising and other services
expense
70
87
107
—
—
264
Refranchising (gain) loss
—
—
—
—
(8)
(8)
Other (income) expense
4
(2)
(1)
—
(3)
(2)
Total costs and expenses, net
256
148
295
111
88
898
Operating Profit (Loss)
$
153
$
87
$
154
$
(6)
$
(88)
$
300
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.
YUM! Brands, Inc.
Segment Results
(amounts in millions)
(unaudited)
Year to Date 6/30/2021
KFC
Pizza Hut
Taco Bell
Habit Burger Grill
Corporate and Unallocated
Consolidated
Total revenues
$
1,307
$
500
$
1,020
$
261
$
—
$
3,088
Company restaurant expenses
229
24
323
233
—
809
General and administrative expenses
153
83
64
23
113
436
Franchise and property expenses
29
7
14
—
—
50
Franchise advertising and other services
expense
284
185
246
—
—
715
Refranchising (gain) loss
—
—
—
—
(22
)
(22
)
Other (income) expense
(6
)
(4
)
(3
)
—
3
(10
)
Total costs and expenses, net
689
295
644
256
94
1,978
Operating Profit (Loss)
$
618
$
205
$
376
$
5
$
(94
)
$
1,110
Year to Date 6/30/2020
KFC
Pizza Hut
Taco Bell
Habit Burger Grill
Corporate and Unallocated
Consolidated
Total revenues
$
975
$
470
$
902
114
$
—
$
2,461
Company restaurant expenses
198
37
300
111
1
647
General and administrative expenses
143
90
75
11
148
467
Franchise and property expenses
62
13
16
—
3
94
Franchise advertising and other services
expense
190
171
213
—
—
574
Refranchising (gain) loss
—
—
—
—
(21
)
(21
)
Other (income) expense
5
(4
)
—
—
149
150
Total costs and expenses, net
598
307
604
122
280
1,911
Operating Profit
$
377
$
163
$
298
$
(8
)
$
(280
)
$
550
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.
Notes to the Condensed Consolidated Summary
of Results, Condensed Consolidated Balance Sheets and
Condensed Consolidated Statements of Cash Flows (amounts in
millions) (unaudited)
Amounts presented as of and for the
quarters and years to date ended June 30, 2021 and 2020 are
preliminary.
(a)
Due to their size and volatility, 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 the quarters and years to date ended June 30, 2021 and 2020
as Special Items directly relate to refranchising actions initiated
prior to December 31, 2018.
During the quarters ended June 30, 2021
and 2020, we recorded net refranchising gains of $2 million and $3
million, respectively, that have been reflected as Special Items.
During the years to date ended June 30, 2021 and 2020, we recorded
net refranchising gains of $4 million and $6 million, respectively,
that have been reflected as Special Items.
Additionally, we recorded net
refranchising gains of $5 million during both quarters ended June
30, 2021 and 2020, that have not been reflected as Special Items.
During the years to date ended June 30, 2021 and 2020, we recorded
net refranchising gains of $18 million and $15 million,
respectively, that have not been reflected as Special Items. These
gains relate to refranchising of restaurants in 2021 and 2020 that
were not part of our aforementioned plans to achieve 98% franchise
ownership and that we believe are now more indicative of our
expected ongoing refranchising activity.
(b)
During the quarter and year to date ended
June 30, 2020, we recorded Special Item charges of $3 million and
$9 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, which has been reflected as a Special Item.
We reflected the tax benefit of this impairment charge of $32
million as a Special Item.
(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 contributed $50 million in the quarter
ended June 30, 2020 to Yum! Brands Foundation, Inc. (a stand-alone,
not-for-profit organization that is not consolidated in the
Company's results) as part of these efforts and investment. As a
result of the size and specific nature of this contribution, we
have reflected the associated expense as a Special Item.
(e)
During the quarter ended June 30, 2021, we
recorded a charge of $2 million to General and administrative
expenses and a credit of $1 million to Other pension (income)
expense related to a resource optimization program initiated in the
third quarter of 2020. This program is 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.
(f)
During the quarter ended June 30, 2021,
certain subsidiaries of the Company redeemed $1,050 million
aggregate principal amount of 5.25% Subsidiary Senior Unsecured
Notes due in 2026 (the "2026 Notes"). The redemption amount was
equal to 102.625% of the $1,050 million aggregate principal amount
redeemed, reflecting a $28 million "call premium". We recognized
the call premium and the write-off of $6 million of unamortized
debt issuance costs associated with the 2026 Notes within Interest
expense, net and we reflected the charges as Special Items due to
their collective size and the fact that the amounts are not
indicative of our ongoing interest expense.
(g)
Tax Benefit 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.
(h)
During the quarter ended June 30, 2021,
the United Kingdom ("UK") Finance Act 2021 was enacted resulting in
an increase in the UK corporate income tax rate from 19% to 25%. As
a result, in the quarter ended June 30, 2021, we remeasured the
deferred tax assets originally recorded as a Special Item as part
of a fourth quarter 2019 intercompany restructuring of intellectual
property rights into the UK, which resulted in the recognition of
an additional $64 million deferred tax benefit as a Special
Item.
Category: Earnings
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210729005361/en/
Analysts are invited to contact: Jodi Dyer, Vice President,
Investor Relations and CFO, Digital & Technology at
888/298-6986
Members of the media are invited to contact: Virginia Ferguson,
Vice President, Public Relations, at 502/874-8200
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