UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
Washington, D. C. 20549 |
North Carolina | 13-3951308 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
1441 Gardiner Lane, Louisville, Kentucky | 40213 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (502) 874-8300 | ||
Former name or former address, if changed since last report: N/A |
(c) | Exhibits | |
99.1 | Press Release dated October 9, 2012 from YUM! Brands, Inc. | |
YUM! BRANDS, INC. | ||||
(Registrant) |
Date: | October 9, 2012 | /s/ David E. Russell | ||
Vice President, Corporate Controller | ||||
(Principal Accounting Officer) |
• | Worldwide operating profit grew 18%, prior to foreign currency translation, including 22% in China, 14% at Yum! Restaurants International (YRI) and 13% in the U.S. Worldwide operating profit increased 16%, after foreign currency translation. | |
• | Worldwide restaurant margin increased 1.9 percentage points to 18.9%, including increases of 0.1 percentage points in China, 1.0 percentage point at YRI and 4.6 percentage points in the U.S. Restaurant margin increased 0.6 percentage points in China excluding Little Sheep. | |
• | Worldwide system sales grew 6%, prior to foreign currency translation, including 22% in China, 4% at YRI and 1% in the U.S. | |
○ | Worldwide system sales growth was 8%, excluding the acquisition of Little Sheep and the 2011 divestiture of Long John Silver's and A&W All-American Restaurants, including 19% in China, 5% at YRI and 6% in the U.S. | |
• | Same-store sales grew 6% in China, 2% at YRI and 6% in the U.S. YRI same-store sales were negatively impacted by 1 percentage point due to the timing of Ramadan. | |
• | Strong international development continued with 394 new restaurants opened, including 192 new units in China and 181 new units at YRI; 86% of this development occurred in emerging markets. | |
• | On September 20, 2012, the Company announced an 18% increase in its quarterly dividend, marking the eighth consecutive year the dividend increased at a double-digit percentage rate. | |
Full-year EPS growth forecast raised to at least 13%, or at least $3.24, excluding Special Items. |
Third Quarter | Year-to-Date | |||||
2012 | 2011 | % Change | 2012 | 2011 | % Change | |
EPS Excluding Special Items | $0.99 | $0.83 | 19% | $2.42 | $2.12 | 14% |
Special Items Gain/(Loss)1 | $0.01 | $(0.03) | NM | $0.23 | $(0.13) | NM |
EPS | $1.00 | $0.80 | 25% | $2.65 | $1.99 | 33% |
Third Quarter | Year-to-Date | |||||||
% Change | % Change | |||||||
2012 | 2011 | Reported | Ex F/X | 2012 | 2011 | Reported | Ex F/X | |
System Sales Growth | +23 | +22 | +29 | +25 | ||||
Same-Store Sales Growth (%) | +6 | +19 | NM | NM | +9 | +17 | NM | NM |
Restaurant Margin (%) | 21.4 | 21.3 | 0.1 | Even | 20.0 | 21.7 | (1.7) | (1.7) |
Operating Profit ($MM) | 374 | 301 | +24 | +22 | 812 | 698 | +16 | +13 |
• | China Division system sales increased 22%, prior to foreign currency translation. Same-store sales increased 6%, overlapping strong prior year same-store sales growth of 19%. | |
• | China opened 192 new units and we expect record new-unit development of at least 750 units this year. |
China Units | Q3 2012 | % Change2 |
Traditional Restaurants1 | 4,952 | +18 |
KFC | 4,043 | +16 |
Pizza Hut Casual Dining | 738 | +31 |
• | Restaurant margin increased 0.1 percentage points to 21.4%. Wage rate inflation was 8% and commodity inflation was 2%. |
• | The Little Sheep acquisition had a positive impact of 3 percentage points on system sales growth, a negative impact of 0.5 percentage points on restaurant margin, and a negative impact of 1 percentage point on operating profit growth. |
• | Foreign currency translation positively impacted operating profit by $5 million. |
Third Quarter | Year-to-Date | ||||||||||
% Change | % Change | ||||||||||
2012 | 2011 | Reported | Ex F/X | 2012 | 2011 | Reported | Ex F/X | ||||
Traditional Restaurants1 | 14,200 | 13,750 | +3 | NA | 14,200 | 13,750 | +3 | NA | |||
System Sales Growth | (2) | +4 | +2 | +6 | |||||||
Restaurant Margin (%) | 13.3 | 12.3 | 1.0 | 0.9 | 12.4 | 12.7 | (0.3) | (0.3) | |||
Franchise & License Fees ($MM) | 204 | 211 | (3) | +4 | 596 | 583 | +2 | +6 | |||
Operating Profit ($MM) | 173 | 163 | +7 | +14 | 491 | 467 | +5 | +10 | |||
Operating Margin (%) | 22.5 | 20.8 | 1.7 | 1.6 | 21.9 | 21.5 | 0.4 | 0.4 | |||
1 | During the fourth quarter of 2011, we sold the LJS and A&W brands. As a result, 343 LJS and A&W restaurants have been removed from the 2011 unit balance. LJS and A&W results remain in all other 2011 financial numbers. |
• | YRI Division system sales increased 4%, prior to foreign currency translation. | |
○ | The timing of Ramadan had an estimated negative system sales impact of about 1%; the most sizable impact was in the Middle East franchise business which experienced a negative impact of 7%. | |
○ | The 2011 divestiture of LJS and A&W had a negative impact of 1% on both system sales and operating profit growth. | |
○ | Emerging markets system sales grew 10%, driven by 7% unit growth and 5% same-store sales growth. | |
○ | Developed markets system sales grew 1%. | |
• | YRI opened 181 new units in 46 countries; 93% were opened by our franchise partners. | |
○ | For the quarter, 124 new units were opened in emerging markets. | |
• | Foreign currency translation negatively impacted operating profit by $12 million. |
YRI MARKETS1 | SYSTEM Sales Growth (Ex F/X) | ||
Percent of YRI2 | Third Quarter (%) | Year-to-Date (%) | |
Franchise | |||
Asia (ex Japan) | 16% | +1 | +4 |
Japan | 11% | (3) | Even |
Latin America | 11% | +9 | +9 |
Middle East | 8% | +4 | +11 |
Continental Europe | 7% | +1 | +4 |
Canada | 6% | (3) | (1) |
Combined Company / Franchise | |||
UK | 12% | Even | +4 |
Australia / New Zealand | 12% | +6 | +1 |
Thailand | 2% | +15 | +12 |
Korea | 1% | +11 | +8 |
Key Growth | |||
Africa | 6% | +20 | +16 |
France | 4% | +4 | +9 |
Germany / Netherlands | 2% | +5 | +11 |
Russia | 2% | +45 | +45 |
Third Quarter | Year-to-Date | |||||
2012 | 2011 | % Change | 2012 | 2011 | % Change | |
Same-Store Sales Growth (%) | +6 | (3) | NM | +6 | (2) | NM |
Restaurant Margin (%) | 16.7 | 12.1 | 4.6 | 16.2 | 11.5 | 4.7 |
Franchise and License Fees ($MM) | 189 | 182 | +4 | 555 | 534 | +4 |
Operating Profit ($MM) | 162 | 143 | +13 | 486 | 398 | +22 |
Operating Margin (%) | 20.5 | 16.3 | 4.2 | 20.2 | 15.3 | 4.9 |
• | U.S. Division same-store sales increased 6%, including growth of 7% at Taco Bell, 6% at Pizza Hut and 4% at KFC. |
• | Restaurant margin increased 4.6 percentage points, driven primarily by strong same-store sales growth, as well as refranchising, supply chain efficiencies, and less discounting. |
• | The 2011 divestiture of LJS and A&W negatively impacted franchise and license fees growth by 5 percentage points and operating profit growth by 2 percentage points. |
• | India Division system sales increased 29%, prior to foreign currency translation. The system sales increase was driven by unit growth of 29% and same-store sales growth of 5%. | |
India Units | Q3 2012 | % Change1 |
Traditional Restaurants2 | 495 | +29 |
KFC | 221 | +38 |
Pizza Hut Casual Dining | 170 | +9 |
Pizza Hut Home Service | 101 | +55 |
• | In the U.S., we refranchised 176 units, including 158 KFCs. The KFC refranchising program was completed early in the fourth quarter this year. Currently, our company ownership is 11% in the U.S. Upon the completion of our U.S. refranchising program, total company ownership in the U.S. will be about 10%. |
• | In the third quarter, we repurchased 6.5 million shares for $414 million at an average price of $64. Year-to-date, we repurchased 10.8 million shares for $702 million at an average price of $65. |
• | In an effort to reduce our ongoing volatility and administration expense in connection with the Company's U.S. pension obligation, on October 9, 2012, the Company began notifying certain former employees of a limited opportunity to voluntarily elect an early payout of their pension benefits to be funded from existing pension assets. As a result of this program, we anticipate recording a pre-tax non-cash charge between $25 million and $75 million in the fourth quarter of 2012 within Special Items. The amount of this charge will depend on the actual number of participants electing the lump sum payment option. |
Analysts are invited to contact | |
Tim Jerzyk, Senior Vice President Investor Relations, at 888/298-6986 | |
Steve Schmitt, Senior Director Investor Relations, at 888/298-6986 | |
Members of the media are invited to contact | |
Amy Sherwood, Vice President Public Relations, at 502/874-8200 |
Quarter | % Change | Year to Date | % Change | ||||||||||||||||
9/8/12 | 9/3/11 | B/(W) | 9/8/12 | 9/3/11 | B/(W) | ||||||||||||||
Company sales | $ | 3,142 | $ | 2,854 | 10 | $ | 8,248 | $ | 7,336 | 12 | |||||||||
Franchise and license fees and income | 427 | 420 | 2 | 1,232 | 1,179 | 5 | |||||||||||||
Total revenues | 3,569 | 3,274 | 9 | 9,480 | 8,515 | 11 | |||||||||||||
Company restaurant expenses, net | |||||||||||||||||||
Food and paper | 1,029 | 970 | (6) | 2,712 | 2,424 | (12) | |||||||||||||
Payroll and employee benefits | 650 | 600 | (8) | 1,786 | 1,609 | (11) | |||||||||||||
Occupancy and other operating expenses | 864 | 790 | (9) | 2,288 | 2,063 | (11) | |||||||||||||
Company restaurant expenses | 2,543 | 2,360 | (8) | 6,786 | 6,096 | (11) | |||||||||||||
General and administrative expenses | 332 | 310 | (7) | 950 | 873 | (9) | |||||||||||||
Franchise and license expenses | 32 | 41 | 25 | 84 | 104 | 20 | |||||||||||||
Closures and impairment (income) expenses | 4 | 25 | 83 | 9 | 113 | 92 | |||||||||||||
Refranchising (gain) loss | (2 | ) | 66 | NM | (41 | ) | 69 | NM | |||||||||||
Other (income) expense | (11 | ) | (16 | ) | (34) | (97 | ) | (48 | ) | NM | |||||||||
Total costs and expenses, net | 2,898 | 2,786 | (4) | 7,691 | 7,207 | (7) | |||||||||||||
Operating Profit | 671 | 488 | 38 | 1,789 | 1,308 | 37 | |||||||||||||
Interest expense, net | 32 | 32 | (7) | 107 | 110 | 2 | |||||||||||||
Income before income taxes | 639 | 456 | 40 | 1,682 | 1,198 | 40 | |||||||||||||
Income tax provision | 161 | 67 | NM | 410 | 220 | (86) | |||||||||||||
Net income - including noncontrolling interests | 478 | 389 | 23 | 1,272 | 978 | 30 | |||||||||||||
Net income - noncontrolling interests | 7 | 6 | (21) | 12 | 15 | 20 | |||||||||||||
Net income - YUM! Brands, Inc. | $ | 471 | $ | 383 | 23 | $ | 1,260 | $ | 963 | 31 | |||||||||
Effective tax rate | 25.1 | % | 14.6 | % | (10.5 ppts.) | 24.4 | % | 18.4 | % | (6.0 ppts.) | |||||||||
Effective tax rate before special items | 25.1 | % | 25.1 | % | - | 25.6 | % | 23.3 | % | (2.3 ppts.) | |||||||||
Basic EPS Data | |||||||||||||||||||
EPS | $ | 1.02 | $ | 0.82 | 25 | $ | 2.72 | $ | 2.05 | 33 | |||||||||
Average shares outstanding | 460 | 469 | 2 | 463 | 471 | 2 | |||||||||||||
Diluted EPS Data | |||||||||||||||||||
EPS | $ | 1.00 | $ | 0.80 | 25 | $ | 2.65 | $ | 1.99 | 33 | |||||||||
Average shares outstanding | 472 | 481 | 2 | 476 | 483 | 2 | |||||||||||||
Dividends declared per common share | $ | — | $ | — | $ | 0.57 | $ | 0.50 |
Quarter | % Change | Year to Date | % Change | ||||||||||||||||
9/8/12 | 9/3/11 | B/(W) | 9/8/12 | 9/3/11 | B/(W) | ||||||||||||||
Company sales | $ | 1,958 | $ | 1,577 | 24 | $ | 4,692 | $ | 3,634 | 29 | |||||||||
Franchise and license fees and income | 30 | 23 | 32 | 70 | 52 | 36 | |||||||||||||
Total revenues | 1,988 | 1,600 | 24 | 4,762 | 3,686 | 29 | |||||||||||||
Company restaurant expenses, net | |||||||||||||||||||
Food and paper | 662 | 568 | (17) | 1,611 | 1,274 | (27) | |||||||||||||
Payroll and employee benefits | 334 | 242 | (38) | 815 | 556 | (47) | |||||||||||||
Occupancy and other operating expenses | 543 | 431 | (26) | 1,325 | 1,015 | (30) | |||||||||||||
1,539 | 1,241 | (24) | 3,751 | 2,845 | (32) | ||||||||||||||
General and administrative expenses | 84 | 67 | (24) | 213 | 171 | (25) | |||||||||||||
Franchise and license expenses | 3 | 2 | (97) | 6 | 3 | NM | |||||||||||||
Closures and impairment (income) expenses | 1 | — | NM | 4 | 3 | (41) | |||||||||||||
Other (income) expense | (13 | ) | (11 | ) | 19 | (24 | ) | (34 | ) | (28) | |||||||||
1,614 | 1,299 | (24) | 3,950 | 2,988 | (32) | ||||||||||||||
Operating Profit | $ | 374 | $ | 301 | 24 | $ | 812 | $ | 698 | 16 | |||||||||
Company sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||
Food and paper | 33.9 | 36.0 | 2.1 ppts. | 34.4 | 35.1 | 0.7 ppts. | |||||||||||||
Payroll and employee benefits | 17.0 | 15.3 | (1.7 ppts.) | 17.4 | 15.3 | (2.1 ppts.) | |||||||||||||
Occupancy and other operating expenses | 27.7 | 27.4 | (0.3 ppts.) | 28.2 | 27.9 | (0.3 ppts.) | |||||||||||||
Restaurant margin | 21.4 | % | 21.3 | % | 0.1 ppts. | 20.0 | % | 21.7 | % | (1.7 ppts.) | |||||||||
Operating margin | 18.8 | % | 18.9 | % | (0.1 ppts.) | 17.1 | % | 18.9 | % | (1.8 ppts.) |
Quarter | % Change | Year to Date | % Change | ||||||||||||||||
9/8/12 | 9/3/11 | B/(W) | 9/8/12 | 9/3/11 | B/(W) | ||||||||||||||
Company sales | $ | 565 | $ | 568 | (1) | $ | 1,651 | $ | 1,584 | 4 | |||||||||
Franchise and license fees and income | 204 | 211 | (3) | 596 | 583 | 2 | |||||||||||||
Total revenues | 769 | 779 | (1) | 2,247 | 2,167 | 4 | |||||||||||||
Company restaurant expenses, net | |||||||||||||||||||
Food and paper | 185 | 181 | (2) | 541 | 498 | (9) | |||||||||||||
Payroll and employee benefits | 140 | 150 | 7 | 415 | 413 | — | |||||||||||||
Occupancy and other operating expenses | 165 | 166 | 1 | 490 | 472 | (4) | |||||||||||||
490 | 497 | 2 | 1,446 | 1,383 | (4) | ||||||||||||||
General and administrative expenses | 91 | 96 | 4 | 275 | 263 | (4) | |||||||||||||
Franchise and license expenses | 13 | 14 | 16 | 34 | 36 | 8 | |||||||||||||
Closures and impairment (income) expenses | 2 | 9 | 78 | 2 | 18 | 87 | |||||||||||||
Other (income) expense | — | — | — | (1 | ) | — | NM | ||||||||||||
596 | 616 | 3 | 1,756 | 1,700 | (3) | ||||||||||||||
Operating Profit | $ | 173 | $ | 163 | 7 | $ | 491 | $ | 467 | 5 | |||||||||
Company sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||
Food and paper | 32.7 | 31.9 | (0.8 ppts.) | 32.8 | 31.4 | (1.4 ppts.) | |||||||||||||
Payroll and employee benefits | 24.7 | 26.4 | 1.7 ppts. | 25.1 | 26.1 | 1.0 ppts. | |||||||||||||
Occupancy and other operating expenses | 29.3 | 29.4 | 0.1 ppts. | 29.7 | 29.8 | 0.1 ppts. | |||||||||||||
Restaurant margin | 13.3 | % | 12.3 | % | 1.0 ppts. | 12.4 | % | 12.7 | % | (0.3 ppts.) | |||||||||
Operating margin | 22.5 | % | 20.8 | % | 1.7 ppts. | 21.9 | % | 21.5 | % | 0.4 ppts. |
Quarter | % Change | Year to Date | % Change | ||||||||||||||||
9/8/12 | 9/3/11 | B/(W) | 9/8/12 | 9/3/11 | B/(W) | ||||||||||||||
Company sales | $ | 598 | $ | 691 | (13) | $ | 1,850 | $ | 2,075 | (11) | |||||||||
Franchise and license fees and income | 189 | 182 | 4 | 555 | 534 | 4 | |||||||||||||
Total revenues | 787 | 873 | (10) | 2,405 | 2,609 | (8) | |||||||||||||
Company restaurant expenses, net | |||||||||||||||||||
Food and paper | 173 | 213 | 19 | 537 | 634 | 15 | |||||||||||||
Payroll and employee benefits | 174 | 206 | 15 | 549 | 635 | 14 | |||||||||||||
Occupancy and other operating expenses | 151 | 188 | 19 | 464 | 567 | 18 | |||||||||||||
498 | 607 | 18 | 1,550 | 1,836 | 16 | ||||||||||||||
General and administrative expenses | 110 | 99 | (11) | 322 | 302 | (7) | |||||||||||||
Franchise and license expenses | 16 | 25 | 38 | 44 | 66 | 33 | |||||||||||||
Closures and impairment (income) expenses | 1 | — | NM | 3 | 10 | 70 | |||||||||||||
Other (income) expense | — | (1 | ) | NM | — | (3 | ) | NM | |||||||||||
625 | 730 | 14 | 1,919 | 2,211 | 13 | ||||||||||||||
Operating Profit | $ | 162 | $ | 143 | 13 | $ | 486 | $ | 398 | 22 | |||||||||
Company sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||
Food and paper | 28.9 | 30.9 | 2.0 ppts. | 29.0 | 30.6 | 1.6 ppts. | |||||||||||||
Payroll and employee benefits | 29.2 | 29.9 | 0.7 ppts. | 29.7 | 30.6 | 0.9 ppts. | |||||||||||||
Occupancy and other operating expenses | 25.2 | 27.1 | 1.9 ppts. | 25.1 | 27.3 | 2.2 ppts. | |||||||||||||
16.7 | % | 12.1 | % | 4.6 ppts. | 16.2 | % | 11.5 | % | 4.7 ppts. | ||||||||||
Operating margin | 20.5 | % | 16.3 | % | 4.2 ppts. | 20.2 | % | 15.3 | % | 4.9 ppts. |
(unaudited) | |||||||
9/8/12 | 12/31/11 | ||||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 942 | $ | 1,198 | |||
Accounts and notes receivable, less allowance: $19 in 2012 and $22 in 2011 | 302 | 286 | |||||
Inventories | 291 | 273 | |||||
Prepaid expenses and other current assets | 323 | 338 | |||||
Deferred income taxes | 108 | 112 | |||||
Advertising cooperative assets, restricted | 113 | 114 | |||||
Total Current Assets | 2,079 | 2,321 | |||||
Property, plant and equipment, net of accumulated depreciation and amortization of $3,219 in | |||||||
2012 and $3,225 in 2011 | 4,119 | 4,042 | |||||
Goodwill | 1,006 | 681 | |||||
Intangible assets, net | 713 | 299 | |||||
Investments in unconsolidated affiliates | 58 | 167 | |||||
Restricted cash | — | 300 | |||||
Other assets | 528 | 475 | |||||
Deferred income taxes | 471 | 549 | |||||
Total Assets | $ | 8,974 | $ | 8,834 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current Liabilities | |||||||
Accounts payable and other current liabilities | $ | 1,828 | $ | 1,874 | |||
Income taxes payable | 98 | 142 | |||||
Short-term borrowings | 18 | 320 | |||||
Advertising cooperative liabilities | 113 | 114 | |||||
Total Current Liabilities | 2,057 | 2,450 | |||||
Long-term debt | 3,003 | 2,997 | |||||
Other liabilities and deferred credits | 1,575 | 1,471 | |||||
Total Liabilities | 6,635 | 6,918 | |||||
Redeemable noncontrolling interest | 45 | — | |||||
Shareholders' Equity | |||||||
Common stock, no par value, 750 shares authorized; 452 shares and 460 shares issued in 2012 and 2011, respectively | — | 18 | |||||
Retained earnings | 2,450 | 2,052 | |||||
Accumulated other comprehensive income (loss) | (253 | ) | (247 | ) | |||
Total Shareholders' Equity - YUM! Brands, Inc. | 2,197 | 1,823 | |||||
Noncontrolling interests | 97 | 93 | |||||
Total Shareholders' Equity | 2,294 | 1,916 | |||||
Total Liabilities, Redeemable Noncontrolling Interest and Shareholders' Equity | $ | 8,974 | $ | 8,834 |
Year to Date | |||||||
9/8/2012 | 9/3/2011 | ||||||
Cash Flows - Operating Activities | |||||||
Net income - including noncontrolling interests | $ | 1,272 | $ | 978 | |||
Depreciation and amortization | 429 | 426 | |||||
Closures and impairment (income) expenses | 9 | 113 | |||||
Refranchising (gain) loss | (41 | ) | 69 | ||||
Contributions to defined benefit pension plans | (46 | ) | (12 | ) | |||
Gain upon acquisition of Little Sheep | (74 | ) | — | ||||
Deferred income taxes | 86 | (72 | ) | ||||
Equity income from investments in unconsolidated affiliates | (38 | ) | (40 | ) | |||
Distributions of income received from unconsolidated affiliates | 38 | 37 | |||||
Excess tax benefit from share-based compensation | (52 | ) | (33 | ) | |||
Share-based compensation expense | 35 | 40 | |||||
Changes in accounts and notes receivable | 7 | (19 | ) | ||||
Changes in inventories | 27 | 9 | |||||
Changes in prepaid expenses and other current assets | (14 | ) | (29 | ) | |||
Changes in accounts payable and other current liabilities | 28 | 142 | |||||
Changes in income taxes payable | 86 | 55 | |||||
Other, net | 66 | 39 | |||||
Net Cash Provided by Operating Activities | 1,818 | 1,703 | |||||
Cash Flows - Investing Activities | |||||||
Capital spending | (678 | ) | (553 | ) | |||
Proceeds from refranchising of restaurants | 187 | 119 | |||||
Acquisitions | (542 | ) | (1 | ) | |||
Changes in restricted cash | 300 | (300 | ) | ||||
Other, net | (14 | ) | (5 | ) | |||
Net Cash Used in Investing Activities | (747 | ) | (740 | ) | |||
Cash Flows - Financing Activities | |||||||
Proceeds from long-term debt | — | 349 | |||||
Repayments of long-term debt | (280 | ) | (662 | ) | |||
Short-term borrowings, three months or less, net | 2 | — | |||||
Revolving credit facilities, three months or less, net | 10 | — | |||||
Repurchase shares of Common Stock | (688 | ) | (562 | ) | |||
Excess tax benefit from share-based compensation | 52 | 33 | |||||
Employee stock option proceeds | 27 | 30 | |||||
Dividends paid on Common Stock | (393 | ) | (350 | ) | |||
Other, net | (52 | ) | (33 | ) | |||
Net Cash Used in Financing Activities | (1,322 | ) | (1,195 | ) | |||
Effect of Exchange Rate on Cash and Cash Equivalents | (5 | ) | 42 | ||||
Net Decrease in Cash and Cash Equivalents | (256 | ) | (190 | ) | |||
Cash and Cash Equivalents - Beginning of Year | 1,198 | 1,426 | |||||
Cash and Cash Equivalents - End of Year | $ | 942 | $ | 1,236 |
Quarter | Year to Date | ||||||||||||||
9/8/12 | 9/3/11 | 9/8/12 | 9/3/11 | ||||||||||||
Detail of Special Items | |||||||||||||||
U.S. Refranchising gain (loss)(d) | $ | (1 | ) | $ | 4 | $ | 53 | $ | (3 | ) | |||||
Gain upon acquisition of Little Sheep(e) | — | — | 74 | — | |||||||||||
Loss associated with the planned refranchising of the Pizza Hut UK dine-in business(f) | (1 | ) | (76 | ) | (24 | ) | (76 | ) | |||||||
Losses and other costs relating to the LJS and A&W divestitures(g) | — | (17 | ) | — | (86 | ) | |||||||||
Other Special Items | 5 | 1 | 15 | 6 | |||||||||||
Total Special Items Income (Expense) | 3 | (88 | ) | 118 | (159 | ) | |||||||||
Tax Benefit (Expense) on Special Items | — | 70 | (9 | ) | 96 | ||||||||||
Special Items Income (Expense), net of tax | $ | 3 | $ | (18 | ) | $ | 109 | $ | (63 | ) | |||||
Average diluted shares outstanding | 472 | 481 | 476 | 483 | |||||||||||
Special Items diluted EPS | $ | 0.01 | $ | (0.03 | ) | $ | 0.23 | $ | 0.13 | ||||||
Reconciliation of Operating Profit Before Special Items to Reported Operating Profit | |||||||||||||||
Operating Profit Before Special Items | $ | 668 | $ | 576 | $ | 1,671 | $ | 1,467 | |||||||
Special Items Income (Expense) | 3 | (88 | ) | 118 | (159 | ) | |||||||||
Reported Operating Profit | $ | 671 | $ | 488 | $ | 1,789 | $ | 1,308 | |||||||
Reconciliation of EPS Before Special Items to Reported EPS | |||||||||||||||
Diluted EPS Before Special Items | $ | 0.99 | $ | 0.83 | $ | 2.42 | $ | 2.12 | |||||||
Special Items EPS | 0.01 | (0.03 | ) | 0.23 | (0.13 | ) | |||||||||
Reported EPS | $ | 1.00 | $ | 0.80 | $ | 2.65 | $ | 1.99 | |||||||
Reconciliation of Effective Tax Rate Before Special Items to Reported Effective Tax Rate | |||||||||||||||
Effective Tax Rate Before Special Items | 25.1 | % | 25.1 | % | 25.6 | % | 23.3 | % | |||||||
Impact on Tax Rate as a result of Special Items | — | % | (10.5 | )% | (1.2 | )% | (4.9 | )% | |||||||
Reported Effective Tax Rate | 25.1 | % | 14.6 | % | 24.4 | % | 18.4 | % |
Quarter Ended 9/8/12 | China | YRI | United States | India | Corporate and Unallocated | Consolidated | |||||||||||||||||
Total revenues | $ | 1,988 | $ | 769 | $ | 787 | $ | 25 | $ | — | $ | 3,569 | |||||||||||
Company restaurant expenses | 1,539 | 490 | 498 | 19 | (3 | ) | 2,543 | ||||||||||||||||
General and administrative expenses | 84 | 91 | 110 | 6 | 41 | 332 | |||||||||||||||||
Franchise and license expenses | 3 | 13 | 16 | — | — | 32 | |||||||||||||||||
Closures and impairment (income) expenses | 1 | 2 | 1 | — | — | 4 | |||||||||||||||||
Refranchising (gain) loss | — | — | — | — | (2 | ) | (2 | ) | |||||||||||||||
Other (income) expense | (13 | ) | — | — | — | 2 | (11 | ) | |||||||||||||||
1,614 | 596 | 625 | 25 | 38 | 2,898 | ||||||||||||||||||
Operating Profit (loss) | $ | 374 | $ | 173 | $ | 162 | $ | — | $ | (38 | ) | $ | 671 |
Quarter Ended 9/3/11 | China | YRI | United States | India | Corporate and Unallocated | Consolidated | |||||||||||||||||
Total revenues | $ | 1,600 | $ | 779 | $ | 873 | $ | 22 | $ | — | $ | 3,274 | |||||||||||
Company restaurant expenses | 1,241 | 497 | 607 | 17 | (2 | ) | 2,360 | ||||||||||||||||
General and administrative expenses | 67 | 96 | 99 | 5 | 43 | 310 | |||||||||||||||||
Franchise and license expenses | 2 | 14 | 25 | — | — | 41 | |||||||||||||||||
Closures and impairment (income) expenses | — | 9 | — | — | 16 | 25 | |||||||||||||||||
Refranchising (gain) loss | — | — | — | — | 66 | 66 | |||||||||||||||||
Other (income) expense | (11 | ) | — | (1 | ) | — | (4 | ) | (16 | ) | |||||||||||||
1,299 | 616 | 730 | 22 | 119 | 2,786 | ||||||||||||||||||
Operating Profit (loss) | $ | 301 | $ | 163 | $ | 143 | $ | — | $ | (119 | ) | $ | 488 |
Year to Date Ended 9/8/12 | China | YRI | United States | India | Corporate and Unallocated | Consolidated | |||||||||||||||||
Total revenues | $ | 4,762 | $ | 2,247 | $ | 2,405 | $ | 66 | $ | — | $ | 9,480 | |||||||||||
Company restaurant expenses | 3,751 | 1,446 | 1,550 | 51 | (12 | ) | 6,786 | ||||||||||||||||
General and administrative expenses | 213 | 275 | 322 | 16 | 124 | 950 | |||||||||||||||||
Franchise and license expenses | 6 | 34 | 44 | — | — | 84 | |||||||||||||||||
Closures and impairment (income) expenses | 4 | 2 | 3 | — | — | 9 | |||||||||||||||||
Refranchising (gain) loss | — | — | — | — | (41 | ) | (41 | ) | |||||||||||||||
Other (income) expense | (24 | ) | (1 | ) | — | — | (72 | ) | (97 | ) | |||||||||||||
3,950 | 1,756 | 1,919 | 67 | (1 | ) | 7,691 | |||||||||||||||||
Operating Profit (loss) | $ | 812 | $ | 491 | $ | 486 | $ | (1 | ) | $ | 1 | $ | 1,789 |
Year to Date Ended 9/3/11 | China | YRI | United States | India | Corporate and Unallocated | Consolidated | |||||||||||||||||
Total revenues | $ | 3,686 | $ | 2,167 | $ | 2,609 | $ | 53 | $ | — | $ | 8,515 | |||||||||||
Company restaurant expenses | 2,845 | 1,383 | 1,836 | 40 | (8 | ) | 6,096 | ||||||||||||||||
General and administrative expenses | 171 | 263 | 302 | 14 | 123 | 873 | |||||||||||||||||
Franchise and license expenses | 3 | 36 | 66 | — | (1 | ) | 104 | ||||||||||||||||
Closures and impairment (income) expenses | 3 | 18 | 10 | — | 82 | 113 | |||||||||||||||||
Refranchising (gain) loss | — | — | — | — | 69 | 69 | |||||||||||||||||
Other (income) expense | (34 | ) | — | (3 | ) | — | (11 | ) | (48 | ) | |||||||||||||
2,988 | 1,700 | 2,211 | 54 | 254 | 7,207 | ||||||||||||||||||
Operating Profit (loss) | $ | 698 | $ | 467 | $ | 398 | $ | (1 | ) | $ | (254 | ) | $ | 1,308 |
(a) | Amounts presented as of and for the quarter and year to date ended September 8, 2012 are preliminary. |
(b) | Other (income) expense for the China Division primarily consists of equity income from investments in unconsolidated affiliates. The year to date ended September 8, 2012 also includes costs related to the acquisition of Little Sheep Group Limited ("Little Sheep") (see note (e) for further explanation). |
(c) | Beginning the first quarter of 2012, our India Division is being reported as a standalone reporting segment separate from YRI as a result of changes to our management reporting structure. While our consolidated results are not impacted, our historical segment information has been restated to be consistent with the current period presentation. This new segment also includes the franchise businesses in the neighboring countries of Bangladesh, Mauritius, Nepal and Sri Lanka. |
(d) | As part of our plan to transform our U.S. business we took certain measures ("the U.S. business transformation measures") in 2012 and 2011 which includes the continuation of our U.S. refranchising, potentially reducing our Company ownership in the U.S. to 10% or slightly less, including a reduction of Taco Bell Company ownership to 16%. During the year to date ended September 8, 2012, we recorded gains of $53 million related to refranchising in the U.S., primarily at Taco Bell. We have traditionally not allocated refranchising (gains) losses for segment reporting purposes. Additionally, U.S. refranchising (gains) losses have been reflected as Special Items for certain performance measures (see accompanying reconciliation to reported results). |
(e) | On February 1, 2012 we acquired an additional 66% interest in Little Sheep for $540 million, net of cash acquired of $44 million, increasing our ownership to 93%. The acquisition was driven by our strategy to build leading brands across China in every significant category. Prior to our acquisition of this additional interest, our 27% interest in Little Sheep was accounted for under the equity method of accounting. As a result of the acquisition we obtained voting control of Little Sheep, and thus we began consolidating Little Sheep upon acquisition. As required by GAAP, we remeasured our previously held 27% ownership in Little Sheep, which had a recorded value of $107 million at the date of acquisition, at fair value and recognized a non-cash gain of $74 million. This gain, which resulted in no related income tax expense, was recorded in Other (income) expense on our Condensed Consolidated Statement of Income during the quarter ended March 24, 2012, was not allocated for segment reporting purposes and is reflected as a Special Item for certain performance measures (see accompanying reconciliation to reported results). |
(f) | In 2011, we decided to sell our remaining company-owned Pizza Hut UK dine-in restaurants. Based on bids we received from prospective buyers, we recorded a non cash pre-tax impairment charge of $20 million to Refranchising (gain) loss to adjust the carrying amount of the asset group to its fair value in the quarter ended March 24, 2012. We had previously recorded a $74 million non cash pre-tax impairment charge to Refranchising (gain) loss to reduce the carrying amount of the asset group to its then estimated fair value upon our initial decision to sell the Pizza Hut dine-in business in the quarter ended September 3, 2011. These charges were not allocated for segment reporting purposes and were reflected as Special Items for certain performance measures (see accompanying reconciliation to reported results). |
(g) | During the fourth quarter of 2011 we sold the Long John Silver's and A&W All American Food Restaurants brands to key franchise leaders and strategic investors in separate transactions. During the quarter and year to date ended September 3, 2011, we recognized $17 million and $86 million, respectively, of pre-tax losses and other costs primarily in Closures and impairment (income) expenses as a result of our decision to sell these businesses. Additionally, during the quarter ended September 3, 2011, we recognized $53 million of tax benefits primarily related to tax losses associated with the sales. These amounts were not allocated for segment reporting purposes and were reflected as Special Items for certain performance measures (see accompanying reconciliation to reported results). |