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press release

July 29, 2021, 7:01 a.m. EDT

Yum! Brands Reports Second-Quarter Results; Record 603 Net-New Units; Digital System Sales of Over $5 Billion; Same-Store Sales Growth of 23%; Reinstates Long-Term Growth Algorithm with Raised Unit Guidance

Yum! Brands, Inc. /zigman2/quotes/209029767/composite YUM +0.19% 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.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20210729005361/en/

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 EPS [1] $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.

KFC Markets [1] Percent of KFC System Sales [2] 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
[1] Refer to investors.yum.com/financial-information/financial-reports/ for a list of the countries within each of the markets.
[2] Reflects 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.

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
[1] Refer to investors.yum.com/financial-information/financial-reports/ for a list of the countries within each of the markets.
[2] Reflects 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 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 87⅞71-3172 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.
 
  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.
 
  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.
 
[1] See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further detail of Company restaurant margin %.
 
YUM! Brands, Inc.
 
  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.
 
[1] See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further detail of Company restaurant margin %.
 
YUM! Brands, Inc.
 
  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.
 
[1] See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further detail of Company restaurant margin %.
 
YUM! Brands, Inc.
 
  (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.
 
  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.
 
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.
 
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/

SOURCE: Yum! Brands, Inc.

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

COMTEX_390602008/2456/2021-07-29T07:00:31

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/zigman2/quotes/209029767/composite
US : U.S.: NYSE
$ 126.18
+0.24 +0.19%
Volume: 1.54M
Oct. 26, 2021 4:03p
P/E Ratio
28.95
Dividend Yield
1.59%
Market Cap
$37.23 billion
Rev. per Employee
$148,737
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