Yum! Brands, Inc. (NYSE: YUM) today reported results for the
first quarter ended March 19, 2016, including EPS of $0.95
excluding Special Items. On a reported basis, EPS was $0.93 and
operating profit growth was 12%.
This Smart News Release features multimedia.
View the full release here:
http://www.businesswire.com/news/home/20160420006478/en/
Core operating profit growth and core operating margin growth
figures exclude foreign currency translation and Special Items.
FIRST-QUARTER HIGHLIGHTS
- Worldwide system sales increased
5%.
- Worldwide same-store sales increased
2%.
- Worldwide core operating profit
increased 21%.
- EPS excluding Special Items increased
19% to $0.95. Reported EPS increased 14% to $0.93.
- Foreign currency translation negatively
impacted operating profit by $28 million.
- Opened 295 new restaurants worldwide;
72% of international development occurred in emerging markets.
- On track with China separation to be
complete by year end.
% Change
System Sales
Same-StoreSales
Units
CoreOperatingProfit
CoreOperatingMargin
(ppts)
China Division +11 +6
+5 +42
+4.6 KFC Division +5 +1 +2 +4 +0.3
Pizza Hut Division +4 +3 +1 +9 +2.6 Taco Bell Division +3 +1 +3 +4
+1.5 Worldwide +5
+2 +2
+21 +2.9
First
Quarter
2016
2015
%
Change
EPS Excluding Special Items $0.95 $0.80 19% Special Items
Gain/(Loss)1
$(0.02)
$0.01
NM
EPS $0.93
$0.81 14%
1 See Reconciliation of Non-GAAP Measurements to GAAP Results
for further detail of Special Items. Special Items in 2016
primarily relate to charges associated with the agreement reached
in 2015 with KFC U.S. franchisees and costs associated with the
planned separation of our China business.
Effective January 2016, the Company’s India business integrated
its three restaurant brands into our global KFC, Pizza Hut and Taco
Bell Divisions. Prior year figures have been restated to present
comparable results.
Note: All comparisons are versus the same period a year ago and
exclude Special Items unless noted. System sales figures on this
page exclude foreign currency translation.
GREG CREED COMMENTS
Greg Creed, CEO, said “I’m very pleased with our results in the
first quarter, including better-than-expected core operating profit
growth of 21%, driven by 42% growth in our China business. KFC
China had an outstanding Chinese New Year bucket promotion leading
to 12% same-store sales growth for the quarter, underscoring the
power of delivering insight-driven marketing that resonates with
our customers. Companywide, all four of our Divisions posted
positive same-store sales and core operating profit growth. I’m
especially encouraged by the continued turnaround of our Pizza Hut
U.S. business, which delivered 5% same-store sales growth.
While it’s early in the year and there may be bumps in the road,
we’re confident in raising core operating profit growth guidance to
12%, from 10% previously. This is a transformational year for our
company as we remain on track to finalize the separation of our
China business by year end. We look forward to establishing two
powerful, independent, focused growth companies dedicated to
building on our brand strengths and rewarding our
shareholders.”
CHINA
DIVISION
First
Quarter
%/ppts Change
2016
2015
Reported
Ex
F/X
System Sales Growth +6 +11 Same-Store Sales Growth (%) +6 (12) NM
NM Franchise & License Fees ($MM) 25 21 +19 +25 Restaurant
Margin (%) 22.4 18.9 3.5 3.4 Operating Profit ($MM) 256 190 +35 +42
Operating Margin (%) 19.7
15.1 4.6
4.6
- China Division system sales
increased 11%, excluding foreign currency translation.
- Same-store sales increased 6%, with an
increase of 12% at KFC, partially offset by a decline of 12% at
Pizza Hut Casual Dining.
- China Division opened 68 new units
during the quarter.
China Units
Q1 2016 %
Change2 Restaurants1 7,205
+5 KFC 5,019 +3 Pizza Hut Casual Dining 1,596 +17
Home Service 330
+22
1 Total includes East Dawning and Little
Sheep units.
2 Represents year-over-year change.
- Restaurant margin was 22.4%, an
increase of 3.5 percentage points driven by sales leverage at KFC,
productivity initiatives and commodity deflation, partially offset
by labor inflation.
- Foreign currency translation negatively
impacted operating profit by $13 million.
- Consistent with prior years, China
Division’s first quarter includes January and February results
only. The first quarter includes Chinese New Year, which is peak
season for the China Division.
- Leap year added an extra day in the
quarter, resulting in an additional $6 million of operating
profit.
KFC
DIVISION
First
Quarter
%/ppts
Change
2016
2015
Reported
Ex
F/X
Restaurants 14,941 14,584 +2 NA System Sales Growth (2) +5
Same-Store Sales Growth (%) +1 +4 NM NM Franchise & License
Fees ($MM) 195 198 (1) +6 Restaurant Margin (%) 14.9 14.5 0.4 0.3
Operating Profit ($MM) 160 166 (4) +4 Operating Margin (%)
25.5 25.0
0.5 0.3
- KFC Division system sales
increased 5%, excluding foreign currency translation.
First Quarter (% Change)
Int’l Emerging Markets
Int’l Developed Markets
U.S. System Sales Growth
(Ex F/X) +8 +5 Even
Same-Store Sales Growth +1
+1 +1
- KFC Division opened 79 new
international restaurants in 32 countries, including 56 units in
emerging markets. 77% of these new units were opened by
franchisees.
- Operating margin increased 0.5
percentage points driven by new-unit development.
- Core operating profit grew 7% in the
quarter excluding the incremental advertising expense associated
with the 2015 agreement reached with KFC U.S. franchisees.
- Foreign currency translation negatively
impacted operating profit by $13 million, as approximately 90% of
division profits are generated outside the U.S.
KFC MARKETS1
Percent of KFCSystem Sales
2
SYSTEM Sales Growth Ex F/X
First Quarter (%) Emerging Markets Asia
(e.g. Malaysia, Indonesia, Philippines) 7% +9 Africa 6% +7 Latin
America (e.g. Mexico, Peru) 6% +6 Middle East / North Africa 6% +3
Russia 5% +27 Thailand 3% +5 Continental Europe (e.g. Poland) 3%
+17 India 1% (1)
Developed Markets U.S. 24% Even
Australia 10% +5 Asia (e.g. Japan, Korea, Taiwan) 9% +6 U.K. 9%
Even Continental Europe (e.g. France, Germany) 7% +9 Canada 3% +5
Latin America (e.g. Puerto Rico)
1% (3)
1 See website www.yum.com/investors for a
list of the countries within each of the markets.
2 Reflects Full Year 2015.
PIZZA HUT
DIVISION
First
Quarter
%/ppts
Change
2016
2015
Reported
Ex
F/X
Restaurants 14,142 14,026 +1 NA System Sales Growth +1 +4
Same-Store Sales Growth (%) +3 Even NM NM Franchise & License
Fees ($MM) 133 128 +3 +6 Restaurant Margin (%) 11.1 11.6 (0.5)
(0.8) Operating Profit ($MM) 87 81 +7 +9 Operating Margin
(%) 32.9 29.8
3.1 2.6
- Pizza Hut Division system sales
increased 4%, excluding foreign currency translation.
First Quarter (% Change)
Int’l Emerging Markets
Int’l Developed Markets
U.S. System Sales Growth
(Ex F/X) +6 +1 +4
Same-Store Sales Growth Even
(1) +5
- Pizza Hut Division opened 63 new
international restaurants in 27 countries, including 30 units in
emerging markets. 87% of these new units were opened by
franchisees.
- Operating margin increased 3.1
percentage points, driven by same-store sales growth and reduced
G&A.
- Foreign currency translation negatively
impacted operating profit by $1 million.
PIZZA HUT MARKETS1
Percent of PizzaHut System
Sales2
SYSTEM Sales Growth Ex F/X
First Quarter (%) Emerging Markets
Latin America (e.g. Mexico, Peru) 7% +10 Asia (e.g. Malaysia,
Indonesia, Philippines) 5% +1 Middle East / North Africa 5% +4
Continental Europe (e.g. Poland) 1% +14 India 1% (6)
Developed Markets U.S. 55% +4 Asia (e.g. Japan, Korea,
Taiwan) 8% (8) U.K. 7% +5 Continental Europe (e.g. France, Germany)
5% +6 Canada 3% +10 Australia 2% (10) Latin America (e.g.
Puerto Rico) 1%
(5)
1 See website www.yum.com/investors for a
list of the countries within each of the markets.
2 Reflects Full Year 2015.
TACO BELL
DIVISION
First
Quarter
%/ppts
Change
2016
2015
Reported
Ex
F/X
Restaurants 6,437 6,235 +3 NA System Sales Growth +3 +3 Same-Store
Sales Growth (%) +1 +6 NM NM Franchise & License Fees ($MM) 101
96 +6 +6 Restaurant Margin (%) 21.0 19.5 1.5 1.5 Operating Profit
($MM) 119 114 +4 +4 Operating Margin (%)
28.0 26.5
1.5 1.5
- Taco Bell Division system sales
increased 3%, driven by 1% same-store sales growth and 3% unit
growth.
- Taco Bell Division opened 49 new
restaurants; 90% of these new units were opened by
franchisees.
- Restaurant margin was 21.0%, an
increase of 1.5 percentage points driven by favorable U.S.
commodities and prior-year pricing actions, partially offset by
labor inflation.
- Operating margin increased 1.5
percentage points driven by new-unit development and same-store
sales growth, partially offset by increased G&A primarily
related to higher legal costs.
SPECIAL ITEMS / SHARE REPURCHASE
UPDATE
- During the first quarter of 2015, we
reached an agreement with our KFC U.S. franchisees that gave us
brand marketing control, as well as an accelerated path to expanded
menu offerings, improved assets and an enhanced customer
experience. In connection with this agreement, we recognized a
Special Items charge of $9 million during the quarter, primarily
related to the funding of investments for new back-of-house
equipment for franchisees.
- During the quarter, we incurred a
Special Items charge of $9 million for costs related to the planned
separation of our China business.
- Year-to-date through April 19, 2016, we
repurchased 13.3 million shares totaling $925 million at an average
price of $70. Since we announced our intention to separate the
China business, we have repurchased 24.7 million shares totaling
$1.8 billion at an average price of $71. This is part of our
previously announced plan to return $6.2 billion of capital to
shareholders prior to the separation of our China business.
CONFERENCE CALL
Yum! Brands, Inc. will host a conference call to review the
Company’s financial performance and strategies at 9:15 a.m. Eastern
Time Thursday, April 21, 2016. The number is 877/815-2029 for U.S.
callers and 706/645-9271 for international callers, conference ID
67267109.
The call will be available for playback beginning at 12:30 p.m.
Eastern Time Thursday, April 21, 2016 through midnight Wednesday,
May 18, 2016. To access the playback, dial 855/859-2056 in the U.S.
and 404/537-3406 internationally, conference ID 67267109.
The webcast and the playback can be accessed via the internet by
visiting Yum! Brands’ website, www.yum.com/investors and selecting “Q1 2016
Earnings Conference Call” under “Events & Presentations.”
ADDITIONAL INFORMATION
ONLINE
Quarter end dates for each division, restaurant-count details
and definitions of terms are available online at www.yum.com/investors.
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,”
“will,” “should,” “forecast,” “outlook” or similar terminology.
These statements are based on current estimates and assumptions
made by us in light of our experience and perception of historical
trends, current conditions and expected future developments, as
well as other factors that we believe are appropriate and
reasonable under the circumstances, but there can be no assurance
that such estimates and assumptions will prove to be correct.
Forward-looking statements reflect our current expectations,
estimates or projections concerning future results or events,
including, without limitation, statements regarding the intended
capital return to shareholders as well as the related borrowing
required to fund such capital return, the planned separation of the
Yum! Brands and Yum! China businesses, the timing of any such
separation, the future earnings and performance as well as capital
structure of Yum! Brands, Inc. or any of its businesses, including
the Yum! Brands and Yum! China businesses on a standalone basis if
the separation is completed. Forward-looking statements are not
guarantees of performance and are inherently subject to known and
unknown risks, uncertainties and assumptions that are difficult to
predict and could cause our actual results to differ materially
from those indicated by those statements. We cannot assure you that
any of our expectations, estimates or projections will be achieved.
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. Numerous factors could
cause our actual results and events to differ materially from those
expressed or implied by forward-looking statements, including,
without limitation: whether we are able to return capital to
shareholders at the times and in the amounts currently anticipated,
if at all, as well as the corresponding costs of borrowing to fund
such capital return as well as other costs; whether the separation
of the Yum! Brands and Yum! China businesses is completed, as
expected or at all, and the timing of any such separation; whether
the operational and strategic benefits of the separation can be
achieved; whether the costs and expenses of the separation can be
controlled within expectations, including potential tax costs; as
well as other risks. 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. 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 Annual Report or Form 10-K) for
additional detail about factors that could affect our financial and
other results. Reconciliation of non-GAAP financial measures to the
most directly comparable GAAP measures are included on our website
at www.yum.com/investors.
Yum! Brands, Inc., based in Louisville, Kentucky, has nearly
43,000 restaurants in more than 130 countries and territories. Yum!
is ranked #228 on the Fortune 500 List with revenues of over $13
billion in 2015 and is one of the Aon Hewitt Top Companies for
Leaders in North America. The Company’s restaurant brands - KFC,
Pizza Hut and Taco Bell - are the global leaders of the chicken,
pizza and Mexican-style food categories. Worldwide, the Yum! Brands
system opens over six new restaurants per day on average, making it
a leader in global retail development.
YUM! Brands, Inc.
Condensed Consolidated Summary of
Results
(amounts in millions, except per share
amounts)
(unaudited)
Quarter ended % Change 3/19/16 3/21/15 B/(W)
Company sales $ 2,165 $ 2,179 (1) Franchise and license fees
and income 454 443 3 Total revenues 2,619
2,622 — Company restaurant expenses Food and paper
649 688 6 Payroll and employee benefits 486 493 2 Occupancy and
other operating expenses 597 616 3 Company restaurant
expenses 1,732 1,797 4 General and administrative expenses
286 295 3 Franchise and license expenses 48 34 (36) Closures and
impairment (income) expenses 3 3 3 Refranchising (gain) loss (7 )
(10 ) (33) Other (income) expense (7 ) (3 ) NM Total costs and
expenses, net 2,055 2,116 3 Operating Profit
564 506 12 Interest expense, net 37 34 (9) Income
before income taxes 527 472 12 Income tax provision 132 111
(19) Net income - including noncontrolling interests 395 361
9 Net income (loss) - noncontrolling interests 4 (1 ) NM Net
income - YUM! Brands, Inc. $ 391 $ 362 8
Effective tax
rate
25.0 % 23.4 % (1.6 ppts.)
Basic EPS
Data
EPS $ 0.94 $ 0.83 14 Average shares outstanding 416
438 5
Diluted EPS
Data
EPS $ 0.93 $ 0.81 14 Average shares outstanding 422
446 5 Dividends declared per common share $
0.46 $ —
See accompanying notes.
Percentages may not recompute due to rounding.
YUM! Brands, Inc.
CHINA DIVISION Operating
Results
(amounts in millions)
(unaudited)
Quarter ended % Change 3/19/16 3/21/15 B/(W)
Company sales $ 1,278 $ 1,235 3 Franchise and license fees
and income 25 21 19 Total revenues 1,303 1,256
4 Company restaurant expenses Food and paper 385 392
2 Payroll and employee benefits 245 244 (1) Occupancy and other
operating expenses 362 366 1 Company restaurant
expenses 992 1,002 1 General and administrative expenses 66 68 3
Franchise and license expenses 4 4 6 Closures and impairment
(income) expenses — 2 80 Other (income) expense (15 ) (10 ) 62
Total costs and expenses, net
1,047 1,066 2 Operating Profit $ 256 $ 190
35 Company sales 100.0 % 100.0 % Food and paper 30.1
31.8 1.7 ppts. Payroll and employee benefits 19.2 19.7 0.5 ppts.
Occupancy and other operating expenses 28.3 29.6 1.3
ppts. Restaurant margin 22.4 % 18.9 % 3.5 ppts. Operating
margin 19.7 % 15.1 % 4.6 ppts.
See accompanying notes.
Percentages may not recompute due to rounding.
YUM! Brands, Inc.
KFC DIVISION Operating Results
(amounts in millions)
(unaudited)
Quarter ended % Change 3/19/16 3/21/15 B/(W)
Company sales $ 430 $ 464 (7) Franchise and license fees and
income 195 198 (1) Total revenues 625 662
(5) Company restaurant expenses Food and paper 145
161 10 Payroll and employee benefits 103 107 4 Occupancy and other
operating expenses 118 129 8 Company restaurant
expenses 366 397 8 General and administrative expenses 76 82 6
Franchise and license expenses 21 17 (23) Closures and impairment
(income) expenses 2 — NM Other (income) expense — —
(80)
Total costs and expenses, net
465 496 6 Operating Profit $ 160 $ 166
(4) Company sales 100.0 % 100.0 % Food and paper 33.7 34.6
0.9 ppts. Payroll and employee benefits 23.9 23.1 (0.8 ppts.)
Occupancy and other operating expenses 27.5 27.8 0.3
ppts. Restaurant margin 14.9 % 14.5 % 0.4 ppts. Operating
margin 25.5 % 25.0 % 0.5 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 3/19/16 3/21/15 B/(W)
Company sales $ 132 $ 144 (8) Franchise and license fees and
income 133 128 3 Total revenues 265 272
(3) Company restaurant expenses Food and paper 36 40 9
Payroll and employee benefits 41 44 7 Occupancy and other operating
expenses 40 43 6 Company restaurant expenses 117 127
7 General and administrative expenses 50 57 14 Franchise and
license expenses 10 9 (13) Closures and impairment (income)
expenses 1 — NM Other (income) expense — (2 ) NM
Total costs and expenses, net
178 191 7 Operating Profit $ 87 $ 81 7
Company sales 100.0 % 100.0 % Food and paper 27.4 27.8 0.4
ppts. Payroll and employee benefits 31.1 30.8 (0.3 ppts.) Occupancy
and other operating expenses 30.4 29.8 (0.6 ppts.)
Restaurant margin 11.1 % 11.6 % (0.5 ppts.) Operating margin
32.9 % 29.8 % 3.1 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 3/19/16 3/21/15 B/(W)
Company sales $ 325 $ 336 (3) Franchise and license fees and
income 101 96 6 Total revenues 426 432
(1) Company restaurant expenses Food and paper 83 95 12
Payroll and employee benefits 97 98 1 Occupancy and other operating
expenses 77 78 1 Company restaurant expenses 257 271
5 General and administrative expenses 46 44 (6) Franchise and
license expenses 4 2 (24) Closures and impairment (income) expenses
— 1 99 Other (income) expense — — (25)
Total costs and expenses, net
307 318 3 Operating Profit $ 119 $ 114
4 Company sales 100.0 % 100.0 % Food and paper 25.5 28.2 2.7
ppts. Payroll and employee benefits 29.7 29.1 (0.6 ppts.) Occupancy
and other operating expenses 23.8 23.2 (0.6 ppts.)
Restaurant margin 21.0 % 19.5 % 1.5 ppts. Operating margin
28.0 % 26.5 % 1.5 ppts.
See accompanying notes.
Percentages may not recompute due to rounding.
YUM! Brands, Inc.
Condensed Consolidated Balance
Sheets
(amounts in millions)
(unaudited) 3/19/16 12/26/15
ASSETS Current
Assets Cash and cash equivalents $ 934 $ 737
Accounts and notes receivable, less allowance: $20 in 2016 and $16
in 2015 418 377 Inventories 210 229 Prepaid expenses and other
current assets 279
241
Advertising cooperative assets, restricted 122 103
Total Current Assets 1,963
1,687
Property, plant and equipment, net of
accumulated depreciation and amortization of $3,682 in 2016 and
$3,643 in 2015
4,111 4,189 Goodwill 644 656 Intangible assets, net 265 271
Investments in unconsolidated affiliates 36 61 Other assets 500
521
Deferred income taxes 702 676
Total Assets $
8,221 $
8,061
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current Liabilities Accounts payable and other current
liabilities $ 2,055 $ 1,985 Income taxes payable 150 77 Short-term
borrowings 2,321
922
Advertising cooperative liabilities 122 103
Total
Current Liabilities 4,648
3,087
Long-term debt 2,510 3,040 Other liabilities and deferred
credits 846
959
Total Liabilities 8,004 7,086
Redeemable noncontrolling interest 7 6
Shareholders’ Equity
Common stock, no par value, 750 shares authorized; 407 shares and
420 shares issued in 2016 and 2015, respectively 2 — Retained
earnings 454 1,150 Accumulated other comprehensive income (loss)
(300 ) (239 )
Total Shareholders’ Equity - YUM!
Brands, Inc.
156 911 Noncontrolling interests 54 58
Total Shareholders’ Equity
210 969
Total Liabilities, Redeemable
Noncontrolling Interest and Shareholders’ Equity
$ 8,221 $ 8,061
See accompanying notes.
YUM! Brands, Inc.
Condensed Consolidated Statements of
Cash Flows
(amounts in millions)
(unaudited)
Quarter ended
3/19/16 3/21/15
Cash Flows - Operating
Activities Net income - including noncontrolling interests $
395 $ 361 Depreciation and amortization 136 139 Closures and
impairment (income) expenses 3 3 Refranchising (gain) loss (7 ) (10
) Contributions to defined benefit pension plans (2 ) (76 )
Deferred income taxes (25 ) (29 ) Equity income from investments in
unconsolidated affiliates (16 ) (9 ) Excess tax benefit from
share-based compensation (11 ) (19 ) Share-based compensation
expense 13 15 Changes in accounts and notes receivable 33 3 Changes
in inventories 17 21 Changes in prepaid expenses and other current
assets
—
(27 ) Changes in accounts payable and other current liabilities 66
113 Changes in income taxes payable 95 51 Other, net
(38
) (20 )
Net Cash Provided by Operating Activities 659
516
Cash Flows - Investing Activities Capital
spending (160 ) (227 ) Changes in short-term investments, net (51 )
(24 ) Proceeds from refranchising of restaurants 9 22 Other, net 1
33
Net Cash Used in Investing Activities (201
) (196 )
Cash Flows - Financing Activities Repayments
of long-term debt (2 ) (3 ) Short-term borrowings by original
maturity More than three months - proceeds 1,400 — More than three
months - payments
—
— Three months or less, net — — Revolving credit facilities, three
months or less, net (524 ) 53 Repurchase shares of Common Stock
(925 ) (124 ) Excess tax benefit from share-based compensation 11
19 Employee stock option proceeds 1 10 Dividends paid on Common
Stock (192 ) (178 ) Other, net (12 ) (23 )
Net Cash Used in
Financing Activities (243 ) (246 )
Effect of Exchange Rate
on Cash and Cash Equivalents (18 ) 23
Net Increase in
Cash and Cash Equivalents 197 97
Cash and Cash Equivalents -
Beginning of Period 737 578
Cash and Cash
Equivalents - End of Period $ 934 $ 675
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 U.S.
Generally Accepted Accounting Principles (“GAAP”) throughout this
document, the Company has provided non-GAAP measurements which
present operating results in 2016 and 2015 on a basis before
Special Items. Included in Special Items are gains/(losses)
associated with the costs associated with the planned spin-off of
the China business and YUM recapitalization, costs associated with
the KFC U.S. Acceleration Agreement and certain refranchising
initiatives. These amounts are described in (c), (d) and (e) in the
accompanying notes.
The Company uses earnings before Special Items as a key
performance measure of results of operations for the purpose of
evaluating performance internally and Special Items are not
included in any of our segment results. This non-GAAP measurement
is not intended to replace the presentation of our financial
results in accordance with GAAP. Rather, the Company believes that
the presentation of earnings before Special Items provides
additional information to investors to facilitate the comparison of
past and present operations, excluding items in the quarters ended
March 19, 2016 and March 21, 2015 that the Company does
not believe are indicative of our ongoing operations due to their
size and/or nature.
Quarter ended 3/19/16
3/21/15
Detail of Special Items Costs associated with the
planned spin-off of the China business and YUM recapitalization(c)
$ (9 ) $ — Costs associated with KFC U.S. Acceleration
Agreement(d) (9 ) (2 ) Refranchising initiatives(e) 3 7
Total Special Items Income (Expense) (15 ) 5 Tax Benefit
(Expense) on Special Items 4 (2 ) Special Items Income
(Expense), net of tax $ (11 ) $ 3 Average diluted
shares outstanding 422 446 Special Items diluted EPS
$ (0.02 ) $ 0.01
Reconciliation of
Operating Profit Before Special Items to Reported Operating
Profit Operating Profit Before Special Items $ 579 $ 501
Special Items Income (Expense) (15 ) 5 Reported Operating
Profit $ 564 $ 506
Reconciliation of
EPS Before Special Items to Reported EPS Diluted EPS Before
Special Items $ 0.95 $ 0.80 Special Items EPS (0.02 ) 0.01
Reported EPS $ 0.93 $ 0.81
Reconciliation of Effective Tax Rate Before Special Items to
Reported Effective Tax Rate Effective Tax Rate Before Special
Items 25.0 % 23.3 % Impact on Tax Rate as a result of Special Items
— % 0.1 % Reported Effective Tax Rate 25.0 % 23.4 %
YUM! Brands, Inc.
Segment Results
(amounts in millions)
(unaudited)
Quarter Ended 3/19/16 China KFC Pizza Hut Taco Bell
Corporate
and
Unallocated
Consolidated Total revenues $ 1,303 $ 625 $ 265
$ 426 $ — $ 2,619 Company
restaurant expenses 992 366 117 257 — 1,732 General and
administrative expenses 66 76 50 46 48 286 Franchise and license
expenses 4 21 10 4 9 48 Closures and impairment (income) expenses —
2 1 — — 3 Refranchising (gain) loss — — — — (7 ) (7 ) Other
(income) expense (15 ) — — — 8 (7 )
1,047 465 178 307 58 2,055
Operating Profit (loss) $ 256 $ 160 $ 87
$ 119 $ (58 ) $ 564
Quarter Ended 3/21/15
China KFC Pizza Hut Taco Bell
Corporate
and
Unallocated
Consolidated Total revenues $ 1,256 $ 662 $ 272
$ 432 $ — $ 2,622 Company
restaurant expenses 1,002 397 127 271 — 1,797 General and
administrative expenses 68 82 57 44 44 295 Franchise and license
expenses 4 17 9 2 2 34 Closures and impairment (income) expenses 2
— — 1 — 3 Refranchising (gain) loss — — — — (10 ) (10 ) Other
(income) expense (10 ) — (2 ) — 9 (3 ) 1,066
496 191 318 45 2,116
Operating Profit (loss) $ 190 $ 166 $ 81 $ 114
$ (45 ) $ 506
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 Sheetsand
Condensed Consolidated Statements of Cash Flows(amounts in
millions)(unaudited)
(a)
Amounts presented as of and for the quarter ended March 19, 2016
are preliminary. (b) Other (income) expense for the China
Division primarily consists of equity (income) loss from
investments in unconsolidated affiliates. (c)
In October, 2015 we announced our intent
to separate YUM’s China business from YUM into an independent,
publicly-traded company by the end of 2016. This
transaction, which is expected to be a tax-free spin-off of our
China business, will create two powerful, independent, focused
growth companies with distinct strategies, financial profiles and
investment characteristics. Additionally, we plan to
optimize the capital structure of YUM! Brands through the issuance
of new debt that will allow us to return significant capital to
shareholders. During the quarter ended March 19, 2016 we incurred
costs of $9 million related to these initiatives.
(d) During the first quarter of 2015, we reached an
agreement with our KFC U.S. franchisees that gave us brand
marketing control as well as an accelerated path to improved assets
and customer experience. In connection with this agreement we
recognized Special Item charges for the quarter ended March 19,
2016 of $9 million, primarily related to the funding of investments
for new back-of-house equipment for franchisees. (e)
We have historically recorded
refranchising gains and losses in the U.S. as Special Items due to
the scope of our refranchising program and the volatility in
associated gains and losses. Beginning in 2016, we are
also including all international refranchising gains and losses,
excluding China, in Special Items. The inclusion in
Special Items of these additional international refranchising gains
and losses is the result of the anticipated size and volatility of
refranchising initiatives outside the U.S. that will take place in
connection with our previously announced plans to have 96%
franchise ownership by the end of 2017. During the
quarters ended March 19, 2016 and March 21, 2015 we recorded
refranchising gains of $3 million and $7 million, respectively,
that have been reflected as Special Items.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160420006478/en/
Yum! Brands, Inc.Analysts are invited to contact:Steve Schmitt,
888-298-6986Vice President, Investor Relations & Corporate
StrategyorElizabeth Grenfell, 888-298-6986Director, Investor
RelationsorMembers of the media are invited to contact:Virginia
Ferguson, 502-874-8200Director, Public Relations
Yum Brands (NYSE:YUM)
Historical Stock Chart
From Apr 2024 to May 2024
Yum Brands (NYSE:YUM)
Historical Stock Chart
From May 2023 to May 2024