YUM
$89.54
Yum! Brands
($.81)
(.90%)
Earnings Details
1st Quarter March 2020
Wednesday, April 29, 2020 7:00:00 AM
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Summary

Yum! Brands Beats

Yum! Brands (YUM) reported 1st Quarter March 2020 earnings of $0.64 per share on revenue of $1.3 billion. The consensus earnings estimate was $0.64 per share on revenue of $1.3 billion. The Earnings Whisper number was $0.59 per share. Revenue grew 0.7% on a year-over-year basis.

Yum Brands Inc through the three concepts of KFC, Pizza Hut and Taco Bell, develops, operates, franchises and licenses a system of restaurants which prepare, package and sell a menu of competitively priced food items.

Results
Reported Earnings
$0.64
Earnings Whisper
$0.59
Consensus Estimate
$0.64
Reported Revenue
$1.26 Bil
Revenue Estimate
$1.29 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Yum! Brands Reports First-Quarter System Sales Decline of (3)% with a Same-Store Sales Decline of (7)% Offset by 4% Net-New Unit Growth; GAAP Operating Profit Decline of (42)%; Core Operating Profit Decline of (6)%

LOUISVILLE, Ky.--(BUSINESS WIRE)--Yum! Brands, Inc. (NYSE: YUM) today reported results for the first-quarter ended March 31, 2020. Worldwide system sales excluding foreign currency translation declined (3)%, with 4% net-new units and (7)% same-store sales decline. First-quarter GAAP EPS was $0.27, a decrease of (68)%. First-quarter EPS excluding Special Items was $0.64, a decrease of (23)%.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20200429005181/en/

DAVID GIBBS COMMENTS

David Gibbs, CEO, said “First-quarter results reflect two different realities. We began the year with momentum across many of our businesses, however as the quarter progressed we were heavily impacted by the unfortunate spread of COVID-19. Around the world, we took extraordinary measures to protect the health and safety of our employees, customers, franchisees and restaurant team members. We partnered with our franchise operators on our shared mission during this global crisis to provide affordable, convenient food in a safe, low contact environment with drive-thru, curbside carryout, and contactless delivery all enabled by our digital capability. As a result, our restaurants around the world remain largely open for business, serving customers and supporting frontline workers and other essential workers in our communities.

I’m tremendously proud of all those executing across our company and franchise system and am encouraged by the second-quarter sales trends of many of our businesses in Asia and in the U.S. Over the previous three years, we transformed Yum! to be a stronger company for its stakeholders and believe we are well positioned to weather this unprecedented crisis owing to the strength of our system-wide talent, operating capabilities, global best practices, and our healthy balance sheet and liquidity position.”

FIRST-QUARTER HIGHLIGHTS

  • Worldwide system sales excluding foreign currency translation declined (3)%, with KFC at (2)% and Pizza Hut at (9)%, offset by Taco Bell at 4%.
  • We opened 65 net units and acquired 276 Habit Burger Grill units for 4% net unit growth.
  • We recorded $22 million of pre-tax investment expense related to the change in fair value of our investment in Grubhub, which resulted in a negative ($0.06) impact in EPS on the quarter. When coupled with $20 million of pre-tax investment expense recorded in the first-quarter of 2019, which resulted in a negative ($0.05) impact to EPS, our Grubhub investment unfavorably impacted year-over-year EPS growth by ($0.01).
  • Foreign currency translation unfavorably impacted divisional operating profit by $6 million.
 

 

% Change

 

System Sales
Ex F/X

Same-Store Sales

Net-New Units

GAAP Operating
Profit

Core Operating Profit2

KFC Division

(2)

 

(8)

 

+6

 

(5)

 

(3)

Pizza Hut Division

(9)

 

(11)

 

Even

 

(21)

 

(21)

Taco Bell Division

+4

 

+1

 

+4

 

+4

 

+4

Worldwide1

(3)

 

(7)

 

+4

 

(42)

 

(6)

 

 

First-Quarter

 

2020

2019

% Change

GAAP EPS

$0.27

 

$0.83

 

(68)

Special Items EPS2

$(0.37)

 

$0.01

 

NM

EPS Excluding Special Items

$0.64

 

$0.82

 

(23)

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. Ongoing operating profit results from March 18, 2020 through March 31, 2020 are reflected in the consolidated figures. Same-store sales reflects the inclusion of Habit Burger Grill in the prior year base.

2 See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further detail of Core Operating Profit and Special Items.

All comparisons are versus the same period a year ago.

System sales growth figures exclude foreign currency translation ("F/X") and core operating profit growth figures exclude F/X and Special Items. Special Items are not allocated to any segment and therefore only impact worldwide GAAP results. See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further details.

KFC DIVISION

 

First-Quarter

 

 

 

%/ppts Change

 

2020

2019

Reported

Ex F/X

Restaurants

24,304

22,886

+6

N/A

System Sales ($MM)

6,287

6,547

(4)

(2)

Same-Store Sales Growth (%)

(8)

+5

NM

NM

Franchise and Property Revenues ($MM)

315

323

(2)

Even

Operating Profit ($MM)

224

236

(5)

(3)

Operating Margin (%)

39.7

41.7

(2.0)

(2.1)

 

 

First-Quarter (% Change)

 

International

U.S.

System Sales Growth Ex F/X

(2)

Even

Same-Store Sales Growth

(9)

(3)

 
  • KFC Division opened 333 gross new restaurants in 44 countries.
  • Operating margin decreased 2 percentage points driven by lower same-store sales and higher bad debt expense, partially offset by net new unit growth.
  • Foreign currency translation unfavorably impacted operating profit by $5 million.
 

KFC Markets1

Percent of KFC
System Sales
2

System Sales Growth
Ex F/X

First-Quarter
(% Change)

China

27%

(15)

United States

16%

Asia

12%

+4

Russia, Central & Eastern Europe

8%

+6

Australia

7%

+9

United Kingdom

6%

+14

Western Europe

6%

(5)

Latin America

5%

+5

Africa

4%

+11

Middle East / Turkey / North Africa

4%

+3

Canada

2%

(3)

Thailand

2%

+6

India

1%

(2)

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

2Reflects Full Year 2019.

 

PIZZA HUT DIVISION

 

First-Quarter

 

 

 

%/ppts Change

 

2020

2019

Reported

Ex F/X

Restaurants

18,533

18,466

Even

N/A

System Sales ($MM)

2,801

3,131

(11)

(9)

Same-Store Sales Growth (%)

(11)

Even

NM

NM

Franchise and Property Revenues ($MM)

133

145

(9)

(8)

Operating Profit ($MM)

76

97

(21)

(21)

Operating Margin (%)

32.7

40.1

(7.4)

(7.3)

 

 

First-Quarter (% Change)

 

International

U.S.

System Sales Growth Ex F/X

(11)

(7)

Same-Store Sales Growth

(14)

(7)

 
  • Pizza Hut Division opened 127 gross new restaurants in 33 countries.
  • Operating margin decreased 7.4 percentage points driven by lower same-store sales and higher bad debt expense.
  • Foreign currency translation unfavorably impacted operating profit by $1 million.

Pizza Hut Markets1

Percent of Pizza Hut
System Sales2

System Sales Growth
Ex F/X

First-Quarter
(% Change)

United States

42%

(7)

China

17%

(38)

Asia

13%

+8

Latin America / Spain / Portugal

11%

(5)

Europe (excluding Spain & Portugal)

9%

(5)

Middle East / Turkey / North Africa

4%

(5)

Canada

2%

+5

India

1%

(6)

Africa

<1%

+16

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

2Reflects Full Year 2019.

 

TACO BELL DIVISION

 

First-Quarter

 

 

 

%/ppts Change

 

2020

2019

Reported

Ex F/X

Restaurants

7,398

7,105

+4

N/A

System Sales ($MM)

2,596

2,506

+4

+4

Same-Store Sales Growth (%)

+1

+4

NM

NM

Franchise and Property Revenues ($MM)

148

144

+3

+3

Operating Profit ($MM)

144

138

+4

+4

Operating Margin (%)

31.7

31.0

0.7

0.7

 
  • Taco Bell Division opened 55 gross new restaurants in 9 countries.
  • Operating margin increased 0.7 percentage points driven by lower G&A and same-store sales growth.

OTHER ITEMS

  • Disclosures pertaining to outstanding debt in our Restricted Group capital structure will be provided at the time of the filing of the first-quarter Form 10-Q.
  • On March 18, 2020 we acquired The Habit Restaurants, Inc. (“Habit”) for total cash consideration of $408 million, net of cash acquired. We have reflected the ongoing results of Habit’s operations from March 18, 2020 through March 31, 2020 in our financial statements for the quarter ended March 31, 2020. These ongoing results had an insignificant impact on our Core Operating Profit and EPS before Special Items. Additionally, we have included the system sales of Habit for the period from March 18, 2020 through March 31, 2020 in our consolidated system sales and reflected the Habit’s same-store sales results for this same period in our consolidated same-store sales results for the quarter ended March 31, 2020. Neither our consolidated system sales growth nor our same-store sales results were significantly impacted by the inclusion of Habit.
    • For the first-quarter and for informational purposes only, Habit had a same-store sales decline of 9% for the period January 1, 2020 through March 31, 2020.
  • 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, we have recorded an after-tax impairment charge related to the goodwill arising from the preliminary purchase price allocation associated with our Habit acquisition of $107 million. We have reflected this impairment as a Special Item, resulting in a Special Item EPS charge of approximately $0.35.
  • On March 24, 2020, we borrowed $525 million under the Revolving Facility as a precautionary measure in order to preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 pandemic. This borrowing, together with $425 million borrowed under the Revolving Facility on March 18, 2020 to fund amounts associated with the acquisition of Habit, resulted in an aggregate of $950 million outstanding under the Revolving Facility as of March 31, 2020.
  • On March 24, 2020, we announced a suspension of our previously announced share repurchase program, pursuant to which the Board of Directors authorized repurchases up to $2 billion of common stock through June 30, 2021.
  • On April 1, 2020, subsequent to the end of our first-quarter, we issued $600 million of Senior Unsecured Notes. Proceeds from the Notes offering will be used to pay the fees and expenses of the offering and for general corporate purposes.

CONFERENCE CALL

Yum! Brands, Inc. will host a conference call to review the company's financial performance and strategies at 8:15 a.m. Eastern Time April 29, 2020. The number is 888/317-6003 for U.S. callers, 412/317-6061 for international callers, conference ID 0307795.

The call will be available for playback beginning at 10:00 a.m. Eastern Time April 29, 2020 through May 6, 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 10142465.

The webcast and the playback can be accessed via the website by visiting Yum! Brands' website, investors.yum.com/events-and-presentations and selecting “Q1 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. Worldwide, the Yum! Brands system opens over nine new restaurants per day on average, making it a leader in global retail development. In 2019, Yum! Brands was named to the Dow Jones Sustainability North America Index and ranked among the top 100 Best Corporate Citizens by Corporate Responsibility Magazine.

 

YUM! Brands, Inc.

Condensed Consolidated Summary of Results

(amounts in millions, except per share amounts)

(unaudited)

 

 

Quarter ended

 

% Change

 

3/31/20

 

3/31/19

 

B/(W)

Revenues

 

 

 

 

 

Company sales

$

355

 

 

$

333

 

 

7

Franchise and property revenues

596

 

 

612

 

 

(3)

Franchise contributions for advertising and other services

312

 

 

309

 

 

1

Total revenues

1,263

 

 

1,254

 

 

1

 

 

 

 

 

 

Costs and Expenses, Net

 

 

 

 

 

Company restaurant expenses

298

 

 

272

 

 

(9)

General and administrative expenses

208

 

 

211

 

 

1

Franchise and property expenses

58

 

 

43

 

 

(35)

Franchise advertising and other services expense

310

 

 

301

 

 

(3)

Refranchising (gain) loss

(13

)

 

(6

)

 

NM

Other (income) expense

152

 

 

 

 

NM

Total costs and expenses, net

1,013

 

 

821

 

 

(23)

 

 

 

 

 

 

Operating Profit

250

 

 

433

 

 

(42)

Investment (income) expense, net

34

 

 

16

 

 

NM

Other pension (income) expense

3

 

 

3

 

 

7

Interest expense, net

118

 

 

115

 

 

(3)

Income before income taxes

95

 

 

299

 

 

(68)

Income tax provision

12

 

 

37

 

 

68

Net Income

$

83

 

 

$

262

 

 

(68)

 

 

 

 

 

 

Basic EPS

 

 

 

 

 

EPS

$

0.28

 

 

$

0.85

 

 

(68)

Average shares outstanding

302

 

 

308

 

 

2

 

 

 

 

 

 

Diluted EPS

 

 

 

 

 

EPS

$

0.27

 

 

$

0.83

 

 

(68)

Average shares outstanding

307

 

 

315

 

 

2

 

 

 

 

 

 

Dividends declared per common share

$

0.47

 

 

$

0.42

 

 

 

 

See accompanying notes.

Percentages may not recompute due to rounding.

 

 

 

YUM! Brands, Inc.

KFC DIVISION Operating Results

(amounts in millions)

(unaudited)

 

 

Quarter ended

 

% Change

 

3/31/20

 

3/31/19

 

B/(W)

 

 

 

 

 

 

Company sales

$

130

 

 

$

125

 

 

3

Franchise and property revenues

315

 

 

323

 

 

(2)

Franchise contributions for advertising and other services

121

 

 

118

 

 

3

Total revenues

566

 

 

566

 

 

 

 

 

 

 

 

Company restaurant expenses

115

 

 

108

 

 

(6)

General and administrative expenses

73

 

 

78

 

 

7

Franchise and property expenses

33

 

 

28

 

 

(19)

Franchise advertising and other services expense

120

 

 

116

 

 

(4)

Other (income) expense

1

 

 

 

 

NM

Total costs and expenses, net

342

 

 

330

 

 

(3)

Operating Profit

$

224

 

 

$

236

 

 

(5)

 

 

 

 

 

 

Restaurant margin

11.7

%

 

14.1

%

 

(2.4) ppts.

 

 

 

 

 

 

Operating margin

39.7

%

 

41.7

%

 

(2.0) 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

 

3/31/20

 

3/31/19

 

B/(W)

 

 

 

 

 

 

Company sales

$

18

 

 

$

11

 

 

61

Franchise and property revenues

133

 

 

145

 

 

(9)

Franchise contributions for advertising and other services

84

 

 

87

 

 

(4)

Total revenues

235

 

 

243

 

 

(4)

 

 

 

 

 

 

Company restaurant expenses

19

 

 

11

 

 

(73)

General and administrative expenses

46

 

 

47

 

 

2

Franchise and property expenses

12

 

 

5

 

 

NM

Franchise advertising and other services expense

84

 

 

83

 

 

Other (income) expense

(2

)

 

 

 

NM

Total costs and expenses, net

159

 

 

146

 

 

(8)

Operating Profit

$

76

 

 

$

97

 

 

(21)

 

 

 

 

 

 

Restaurant margin

(3.0

)%

 

3.9

%

 

(6.9) ppts.

 

 

 

 

 

 

Operating margin

32.7

%

 

40.1

%

 

(7.4) 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

 

3/31/20

 

3/31/19

 

B/(W)

 

 

 

 

 

 

Company sales

$

198

 

 

$

197

 

 

1

Franchise and property revenues

148

 

 

144

 

 

3

Franchise contributions for advertising and other services

107

 

 

104

 

 

3

Total revenues

453

 

 

445

 

 

2

 

 

 

 

 

 

Company restaurant expenses

153

 

 

153

 

 

General and administrative expenses

38

 

 

43

 

 

12

Franchise and property expenses

11

 

 

9

 

 

(26)

Franchise advertising and other services expense

106

 

 

102

 

 

(5)

Other (income) expense

1

 

 

 

 

NM

Total costs and expenses, net

309

 

 

307

 

 

(1)

Operating Profit

$

144

 

 

$

138

 

 

4

 

 

 

 

 

 

Restaurant margin

22.4

%

 

22.0

%

 

0.4 ppts.

 

 

 

 

 

 

Operating margin

31.7

%

 

31.0

%

 

0.7 ppts.

 

See accompanying notes.

Percentages may not recompute due to rounding.

 

YUM! Brands, Inc.

Condensed Consolidated Balance Sheets

(amounts in millions)

 

 

(unaudited)

3/31/20

 

12/31/19

ASSETS

 

 

 

Current Assets

 

 

 

Cash and cash equivalents

$

1,154

 

 

$

605

 

Accounts and notes receivable, less allowance: $101 in 2020 and $72 in 2019

511

 

 

584

 

Prepaid expenses and other current assets

326

 

 

338

 

Total Current Assets

1,991

 

 

1,527

 

 

 

 

 

Property, plant and equipment, net of accumulated depreciation of $1,114 in 2020 and $1,136 in 2019

1,252

 

 

1,170

 

Goodwill

596

 

 

530

 

Intangible assets, net

347

 

 

244

 

Other assets

1,398

 

 

1,313

 

Deferred income taxes

501

 

 

447

 

Total Assets

$

6,085

 

 

$

5,231

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' DEFICIT

 

 

 

Current Liabilities

 

 

 

Accounts payable and other current liabilities

$

928

 

 

$

960

 

Income taxes payable

125

 

 

150

 

Short-term borrowings

447

 

 

431

 

Total Current Liabilities

1,500

 

 

1,541

 

 

 

 

 

Long-term debt

11,059

 

 

10,131

 

Other liabilities and deferred credits

1,755

 

 

1,575

 

Total Liabilities

14,314

 

 

13,247

 

 

 

 

 

Shareholders' Deficit

 

 

 

Common Stock, no par value, 750 shares authorized; 301 shares issued in 2020 and 300 issued in 2019

15

 

 

 

Accumulated deficit

(7,695

)

 

(7,628

)

Accumulated other comprehensive loss

(549

)

 

(388

)

Total Shareholders' Deficit

(8,229

)

 

(8,016

)

Total Liabilities and Shareholders' Deficit

$

6,085

 

 

$

5,231

 

 

See accompanying notes.

 

YUM! Brands, Inc.

Condensed Consolidated Statements of Cash Flows

(amounts in millions)

(unaudited)

 

 

Quarter ended

 

3/31/20

 

3/31/19

Cash Flows - Operating Activities

 

 

 

Net Income

$

83

 

 

$

262

 

Depreciation and amortization

27

 

 

26

 

Impairment and closure (income) expenses

140

 

 

 

Refranchising (gain) loss

(13

)

 

(6

)

Investment (income) expense, net

34

 

 

16

 

Contributions to defined benefit pension plans

(1

)

 

(9

)

Deferred income taxes

(31

)

 

(1

)

Share-based compensation expense

18

 

 

17

 

Changes in accounts and notes receivable

25

 

 

14

 

Changes in prepaid expenses and other current assets

(17

)

 

(13

)

Changes in accounts payable and other current liabilities

(51

)

 

(50

)

Changes in income taxes payable

(11

)

 

(5

)

Other, net

35

 

 

49

 

Net Cash Provided by Operating Activities

238

 

 

300

 

 

 

 

 

Cash Flows - Investing Activities

 

 

 

Capital spending

(35

)

 

(44

)

Acquisition of The Habit Restaurants, Inc.

(408

)

 

 

Proceeds from refranchising of restaurants

2

 

 

14

 

Other, net

 

 

(4

)

Net Cash Used in Investing Activities

(441

)

 

(34

)

 

 

 

 

Cash Flows - Financing Activities

 

 

 

Proceeds from long-term debt

 

 

 

Repayments of long-term debt

(20

)

 

(20

)

Revolving credit facilities, three months or less, net

950

 

 

 

Short-term borrowings by original maturity

 

 

 

More than three months - proceeds

66

 

 

58

 

More than three months - payments

(44

)

 

(41

)

Three months or less, net

 

 

 

Repurchase shares of Common Stock

 

 

(109

)

Dividends paid on Common Stock

(141

)

 

(129

)

Other, net

(13

)

 

(37

)

Net Cash Provided by (Used in) Financing Activities

798

 

 

(278

)

Effect of Exchange Rate on Cash and Cash Equivalents

(53

)

 

12

 

Net Increase in Cash and Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

542

 

 

 

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

768

 

 

474

 

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

$

1,310

 

 

$

474

 

 

 

 

 

See accompanying notes.

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

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

  • Diluted Earnings Per Share ("EPS") excluding Special Items (as defined below);
  • Effective Tax Rate excluding Special Items;
  • Core Operating Profit. Core Operating Profit excludes Special Items and FX and we use Core Operating Profit for the purposes of evaluating performance internally.

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

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

Certain non-GAAP measurements are presented excluding the impact of FX. These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the FX impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.

 

 

Quarter ended

 

 

3/31/20

 

3/31/19

Detail of Special Items

 

 

 

 

Refranchising gain (loss)(b)

 

$

3

 

 

$

6

 

Costs associated with acquisition and integration of Habit Burger Grill(c)

 

(6

)

 

 

Impairment of Habit Burger Grill goodwill(d)

 

(139

)

 

 

Other Special Items Expense

 

(3

)

 

(2

)

Special Items Income (Expense) - Operating Profit

 

(145

)

 

4

 

Tax Benefit (Expense) on Special Items(e)

 

33

 

 

(1

)

Special Items Income (Expense), net of tax

 

$

(112

)

 

$

3

 

Average diluted shares outstanding

 

307

 

 

315

 

Special Items diluted EPS

 

$

(0.37

)

 

$

0.01

 

 

 

 

 

 

Reconciliation of GAAP Operating Profit to Core Operating Profit

 

 

 

 

 

 

 

 

 

Consolidated

 

 

 

 

GAAP Operating Profit

 

$

250

 

 

$

433

 

Special Items Income (Expense)

 

(145

)

 

4

 

Foreign Currency Impact on Divisional Operating Profit

 

(6

)

 

 

N/A

 

Core Operating Profit

 

$

401

 

 

$

429

 

 

 

 

 

 

KFC Division

 

 

 

 

GAAP Operating Profit

 

$

224

 

 

$

236

 

Foreign Currency Impact on Divisional Operating Profit

 

(5

)

 

 

N/A

 

Core Operating Profit

 

$

229

 

 

$

236

 

 

 

 

 

 

 

 

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

(amounts in millions, except per share amounts)

(unaudited)

 

 

 

Quarter ended

 

 

3/31/20

 

3/31/19

Pizza Hut Division

 

 

 

 

GAAP Operating Profit

 

$

76

 

 

$

97

 

Foreign Currency Impact on Divisional Operating Profit

 

(1

)

 

 

N/A

 

Core Operating Profit

 

$

77

 

 

$

97

 

 

 

 

 

 

Taco Bell Division

 

 

 

 

GAAP Operating Profit

 

$

144

 

 

$

138

 

Foreign Currency Impact on Divisional Operating Profit

 

 

 

 

N/A

 

Core Operating Profit

 

$

144

 

 

$

138

 

 

 

 

 

 

Reconciliation of Diluted EPS to Diluted EPS excluding Special Items

 

 

 

 

Diluted EPS

 

$

0.27

 

 

$

0.83

 

Special Items Diluted EPS

 

(0.37

)

 

0.01

 

Diluted EPS excluding Special Items

 

$

0.64

 

 

$

0.82

 

 

 

 

 

 

Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items

 

 

 

 

GAAP Effective Tax Rate

 

12.5

%

 

12.3

%

Impact on Tax Rate as a result of Special Items

 

(6.2

)%

 

0.1

%

Effective Tax Rate excluding Special Items

 

18.7

%

 

12.2

%

 

 

 

 

 

 

YUM! Brands, Inc.

Segment Results

(amounts in millions)

(unaudited)

 

Quarter Ended 3/31/2020

KFC

 

Pizza Hut

 

Taco Bell

 

Habit
Burger

 

Corporate
and
Unallocated

 

Consolidated

Total revenues

$

566

 

 

$

235

 

 

$

453

 

 

$

9

 

 

$

 

 

$

1,263

 

 

 

 

 

 

 

 

 

 

 

 

 

Company restaurant expenses

115

 

 

19

 

 

153

 

 

10

 

 

1

 

 

298

 

General and administrative expenses

73

 

 

46

 

 

38

 

 

1

 

 

50

 

 

208

 

Franchise and property expenses

33

 

 

12

 

 

11

 

 

 

 

2

 

 

58

 

Franchise advertising and other services expense

120

 

 

84

 

 

106

 

 

 

 

 

 

310

 

Refranchising (gain) loss

 

 

 

 

 

 

 

 

(13

)

 

(13

)

Other (income) expense

1

 

 

(2

)

 

1

 

 

 

 

152

 

 

152

 

Total costs and expenses, net

342

 

 

159

 

 

309

 

 

11

 

 

192

 

 

1,013

 

Operating Profit (Loss)

$

224

 

 

$

76

 

 

$

144

 

 

$

(2

)

 

$

(192

)

 

$

250

 

Quarter Ended 3/31/2019

KFC

 

Pizza Hut

 

Taco Bell

 

Corporate
and
Unallocated

 

Consolidated

 

 

  

Total revenues

$

566

 

 

$

243

 

 

$

445

 

 

$

 

 

$

1,254

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Company restaurant expenses

108

 

 

11

 

 

153

 

 

 

 

272

 

 

 

  

General and administrative expenses

78

 

 

47

 

 

43

 

 

43

 

 

211

 

 

 

  

Franchise and property expenses

28

 

 

5

 

 

9

 

 

1

 

 

43

 

 

 

  

Franchise advertising and other services expense

116

 

 

83

 

 

102

 

 

 

 

301

 

 

 

  

Refranchising (gain) loss

 

 

 

 

 

 

(6

)

 

(6

)

 

 

  

Other (income) expense

 

 

 

 

 

 

 

 

 

 

 

  

Total costs and expenses, net

330

 

 

146

 

 

307

 

 

38

 

 

821

 

 

 

  

Operating Profit (Loss)

$

236

 

 

$

97

 

 

$

138

 

 

$

(38

)

 

$

433

 

 

 

  
 

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)

 

(a)

Amounts presented as of and for the quarters ended March 31, 2020 and 2019 are preliminary.

 

 

(b)

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 ended March 31, 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 March 31, 2020 and 2019, we recorded net refranchising gains of $3 million and $6 million, respectively, that have been reflected as Special Items.

 

 

 

 Additionally, during the quarter ended March 31, 2020 we recorded refranchising gains of $10 million that have not been reflected as Special Items. These gains relate to the refranchising of restaurants in 2020 that were not part of our aforementioned plans to achieve 98% franchise ownership.

 

 

(c)

During the quarter ended March 31, 2020, we recorded Special Item charges of $6 million related to the acquisition and integration of The Habit Restaurants, Inc. ("Habit").

 

 

(d)

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. We have reflected the ongoing results of Habit's operations from March 18, 2020 through March 31, 2020 in our financial statements for the quarter ended March 31, 2020. 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, we recorded a goodwill impairment charge of $139 million to Other (income) expense, which has been reflected as a Special Item. We have also reflected the tax benefit of this impairment charge of $32 million as a Special Item.

 

 

(e)

Tax 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.

 

Category: Earnings

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

 

Source: Yum! Brands, Inc.