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 |
Securities registered pursuant to Section 12(b) of the Act | ||||
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
Common Stock, no par value | YUM | New York Stock Exchange |
(c) | Exhibits | |
99.1 |
YUM! BRANDS, INC. | ||||
(Registrant) |
Date: | August 1, 2019 | /s/ David E. Russell | ||
Sr. Vice President, Finance and Corporate Controller | ||||
(Principal Accounting Officer) |
![]() | NEWS |
Keith Siegner | |
Vice President, Investor Relations, Corporate Strategy and Treasurer |
● | Worldwide system sales excluding foreign currency translation grew 10%, with KFC, Pizza Hut and Taco Bell each at 10%. Adjusting the prior year base to include Telepizza, system sales growth excluding foreign currency translation would have been 9% worldwide and 4% for the Pizza Hut Division. | |
● | We opened 312 net units in the quarter. On a year-over-year basis, which takes into account the strategic alliance with Telepizza in the fourth-quarter 2018, net new unit growth was 7%. | |
● | We repurchased 1.9 million shares totaling $196 million at an average price per share of $104. | |
● | We reflected the change in fair value of our investment in Grubhub by recording pre-tax investment income of $24 million in the second quarter of 2019 and $25 million in the second quarter of 2018, which resulted in $0.06 in EPS during each respective quarter. | |
● | Foreign currency translation unfavorably impacted divisional operating profit by $17 million. |
% Change | |||||
System Sales Ex F/X | Same-Store Sales | Net New Units | GAAP Operating Profit | Core Operating Profit2 | |
KFC Division | +10 | +6 | +6 | +11 | +17 |
Pizza Hut Division1 | +10 | +2 | +10 | +18 | +21 |
Taco Bell Division | +10 | +7 | +3 | +7 | +7 |
Worldwide1 | +10 | +5 | +7 | +5 | +18 |
Second-Quarter | Year-to-Date | |||||
2019 | 2018 | % Change | 2019 | 2018 | % Change | |
GAAP EPS | $0.92 | $0.97 | (5) | $1.75 | $2.25 | (22) |
Special Items EPS2 | $(0.01) | $0.15 | NM | $(0.01) | $0.54 | NM |
EPS Excluding Special Items | $0.93 | $0.82 | +15 | $1.76 | $1.71 | +2 |
Second-Quarter | Year-to-Date | |||||||
%/ppts Change | %/ppts Change | |||||||
2019 | 2018 | Reported | Ex F/X | 2019 | 2018 | Reported | Ex F/X | |
Restaurants | 23,118 | 21,838 | +6 | N/A | 23,118 | 21,838 | +6 | N/A |
System Sales ($MM) | 6,648 | 6,306 | +5 | +10 | 13,195 | 12,635 | +4 | +10 |
Same-Store Sales Growth (%) | +6 | +2 | NM | NM | +5 | +2 | NM | NM |
Franchise and Property Revenues ($MM) | 332 | 310 | +7 | +12 | 655 | 617 | +6 | +12 |
Operating Profit ($MM) | 261 | 235 | +11 | +17 | 497 | 456 | +9 | +16 |
Operating Margin (%) | 44.7 | 36.1 | 8.6 | 8.5 | 43.2 | 34.8 | 8.4 | 8.2 |
Second-Quarter (% Change) | Year-to-Date (% Change) | |||
International | U.S. | International | U.S. | |
System Sales Growth Ex F/X | +12 | +2 | +12 | +2 |
Same-Store Sales Growth | +6 | +2 | +6 | +2 |
● | KFC Division opened 331 gross new restaurants in 54 countries. |
● | Operating margin increased 8.6 percentage points driven by refranchising, same-store sales growth and net new unit growth. |
● | Foreign currency translation unfavorably impacted operating profit by $14 million. |
KFC Markets1 | Percent of KFC System Sales2 | System Sales Growth Ex F/X | |
Second-Quarter (% Change) | Year-to-Date (% Change) | ||
China | 27% | +12 | +12 |
United States | 17% | +2 | +2 |
Asia | 12% | +10 | +9 |
Russia & Eastern Europe | 8% | +19 | +19 |
Australia | 7% | +8 | +7 |
United Kingdom | 6% | +17 | +18 |
Latin America | 5% | +13 | +12 |
Western Europe | 5% | +15 | +12 |
Africa | 4% | +14 | +13 |
Middle East / Turkey / North Africa | 4% | +8 | +7 |
Canada | 2% | +1 | (1) |
Thailand | 2% | +10 | +9 |
India | 1% | +22 | +24 |
Second-Quarter | Year-to-Date | |||||||
%/ppts Change | %/ppts Change | |||||||
2019 | 2018 | Reported | Ex F/X | 2019 | 2018 | Reported | Ex F/X | |
Restaurants | 18,515 | 16,823 | +10 | N/A | 18,515 | 16,823 | +10 | N/A |
System Sales ($MM)1 | 3,098 | 2,894 | +7 | +10 | 6,229 | 5,926 | +5 | +8 |
Same-Store Sales Growth (%)1 | +2 | (1) | NM | NM | +1 | Even | NM | NM |
Franchise and Property Revenues ($MM) | 143 | 140 | +3 | +5 | 288 | 289 | Even | +2 |
Operating Profit ($MM) | 96 | 81 | +18 | +21 | 193 | 169 | +14 | +18 |
Operating Margin (%) | 38.7 | 34.6 | 4.1 | 4.5 | 39.4 | 34.8 | 4.6 | 5.0 |
Second-Quarter (% Change) | Year-to-Date (% Change) | |||
International | U.S. | International | U.S. | |
System Sales Growth Ex F/X1 | +15 | +4 | +14 | +1 |
Same-Store Sales Growth1 | +2 | +2 | +1 | +1 |
● | Pizza Hut Division opened 221 gross new restaurants in 42 countries. |
● | Operating margin increased 4.1 percentage points driven by refranchising, same-store sales growth and lower advertising spend associated with the U.S. Transformation Agreement. |
● | Foreign currency translation unfavorably impacted operating profit by $3 million. |
Pizza Hut Markets2 | Percent of Pizza Hut System Sales3 | System Sales Growth Ex F/X 1 | |
Second-Quarter (% Change) | Year-to-Date (% Change) | ||
United States | 46% | +4 | +1 |
China | 17% | +4 | +3 |
Asia | 13% | +3 | +4 |
Europe (excluding Spain & Portugal) | 9% | +6 | +4 |
Latin America / Spain / Portugal | 7% | +92 | +88 |
Middle East / Turkey / North Africa | 4% | +7 | +7 |
Canada | 2% | +5 | +3 |
India | 1% | +9 | +10 |
Africa | <1% | +24 | +30 |
Second-Quarter | Year-to-Date | |||||||
%/ppts Change | %/ppts Change | |||||||
2019 | 2018 | Reported | Ex F/X | 2019 | 2018 | Reported | Ex F/X | |
Restaurants | 7,136 | 6,905 | +3 | N/A | 7,136 | 6,905 | +3 | N/A |
System Sales ($MM) | 2,727 | 2,489 | +10 | +10 | 5,233 | 4,836 | +8 | +8 |
Same-Store Sales Growth (%) | +7 | +2 | NM | NM | +6 | +1 | NM | NM |
Franchise and Property Revenues ($MM) | 158 | 134 | +18 | +18 | 302 | 262 | +15 | +15 |
Operating Profit ($MM) | 159 | 149 | +7 | +7 | 297 | 281 | +6 | +6 |
Operating Margin (%) | 33.2 | 30.8 | 2.4 | 2.4 | 32.1 | 29.7 | 2.4 | 2.4 |
● | Taco Bell Division opened 55 gross new restaurants in 12 countries. |
● | Operating margin increased 2.4 percentage points driven by same-store sales growth and refranchising, partially offset by higher restaurant level costs. |
● | 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. |
Analysts are invited to contact: | |
Keith Siegner, Vice President, Investor Relations, Corporate Strategy and Treasurer at 888/298-6986 | |
Members of the media are invited to contact: | |
Virginia Ferguson, Senior Director, Public Relations, at 502/874-8200 |
Quarter ended | % Change | Year to date | % Change | ||||||||||||||||
6/30/19 | 6/30/18 | B/(W) | 6/30/19 | 6/30/18 | B/(W) | ||||||||||||||
Revenues | |||||||||||||||||||
Company sales | $ | 359 | $ | 512 | (30) | $ | 692 | $ | 1,024 | (32) | |||||||||
Franchise and property revenues | 633 | 584 | 8 | 1,245 | 1,168 | 7 | |||||||||||||
Franchise contributions for advertising and other services | 318 | 272 | 17 | 627 | 547 | 15 | |||||||||||||
Total revenues | 1,310 | 1,368 | (4) | 2,564 | 2,739 | (6) | |||||||||||||
Costs and Expenses, Net | |||||||||||||||||||
Company restaurant expenses | 286 | 421 | 32 | 558 | 859 | 35 | |||||||||||||
General and administrative expenses | 198 | 208 | 5 | 409 | 427 | 4 | |||||||||||||
Franchise and property expenses | 38 | 40 | 9 | 81 | 87 | 8 | |||||||||||||
Franchise advertising and other services expense | 315 | 274 | (15) | 616 | 546 | (13) | |||||||||||||
Refranchising (gain) loss | (4 | ) | (29 | ) | (85) | (10 | ) | (185 | ) | (95) | |||||||||
Other (income) expense | 6 | 5 | NM | 6 | 3 | NM | |||||||||||||
Total costs and expenses, net | 839 | 919 | 9 | 1,660 | 1,737 | 4 | |||||||||||||
Operating Profit | 471 | 449 | 5 | 904 | 1,002 | (10) | |||||||||||||
Investment (income) expense, net | (25 | ) | (23 | ) | 11 | (9 | ) | (89 | ) | (89) | |||||||||
Other pension (income) expense | — | 3 | 71 | 3 | 6 | 41 | |||||||||||||
Interest expense, net | 119 | 112 | (5) | 234 | 219 | (7) | |||||||||||||
Income before income taxes | 377 | 357 | 6 | 676 | 866 | (22) | |||||||||||||
Income tax provision | 88 | 36 | NM | 125 | 112 | (12) | |||||||||||||
Net Income | $ | 289 | $ | 321 | (10) | $ | 551 | $ | 754 | (27) | |||||||||
Effective tax rate | 23.3 | % | 9.9 | % | (13.4) ppts. | 18.5 | % | 12.9 | % | (5.6) ppts. | |||||||||
Basic EPS | |||||||||||||||||||
EPS | $ | 0.94 | $ | 0.99 | (5) | $ | 1.79 | $ | 2.30 | (22) | |||||||||
Average shares outstanding | 307 | 324 | 5 | 307 | 328 | 6 | |||||||||||||
Diluted EPS | |||||||||||||||||||
EPS | $ | 0.92 | $ | 0.97 | (5) | $ | 1.75 | $ | 2.25 | (22) | |||||||||
Average shares outstanding | 314 | 331 | 5 | 314 | 336 | 6 | |||||||||||||
Dividends declared per common share | $ | 0.42 | $ | 0.36 | $ | 0.84 | $ | 0.72 |
Quarter ended | % Change | Year to date | % Change | ||||||||||||||||
6/30/19 | 6/30/18 | B/(W) | 6/30/19 | 6/30/18 | B/(W) | ||||||||||||||
Company sales | $ | 135 | $ | 241 | (44) | $ | 260 | $ | 486 | (47) | |||||||||
Franchise and property revenues | 332 | 310 | 7 | 655 | 617 | 6 | |||||||||||||
Franchise contributions for advertising and other services | 117 | 100 | 18 | 235 | 206 | 14 | |||||||||||||
Total revenues | 584 | 651 | (10) | 1,150 | 1,309 | (12) | |||||||||||||
Company restaurant expenses | 113 | 210 | 46 | 221 | 430 | 49 | |||||||||||||
General and administrative expenses | 75 | 81 | 6 | 153 | 166 | 7 | |||||||||||||
Franchise and property expenses | 19 | 25 | 25 | 47 | 54 | 13 | |||||||||||||
Franchise advertising and other services expense | 116 | 101 | (15) | 232 | 205 | (13) | |||||||||||||
Other (income) expense | — | (1 | ) | NM | — | (2 | ) | NM | |||||||||||
Total costs and expenses, net | 323 | 416 | 22 | 653 | 853 | 23 | |||||||||||||
Operating Profit | $ | 261 | $ | 235 | 11 | $ | 497 | $ | 456 | 9 | |||||||||
Restaurant margin | 15.8 | % | 12.5 | % | 3.3 ppts. | 15.0 | % | 11.5 | % | 3.5 ppts. | |||||||||
Operating margin | 44.7 | % | 36.1 | % | 8.6 ppts. | 43.2 | % | 34.8 | % | 8.4 ppts. |
Quarter ended | % Change | Year to date | % Change | ||||||||||||||||
6/30/19 | 6/30/18 | B/(W) | 6/30/19 | 6/30/18 | B/(W) | ||||||||||||||
Company sales | $ | 11 | $ | 18 | (38) | $ | 22 | $ | 42 | (47) | |||||||||
Franchise and property revenues | 143 | 140 | 3 | 288 | 289 | — | |||||||||||||
Franchise contributions for advertising and other services | 92 | 75 | 21 | 179 | 153 | 17 | |||||||||||||
Total revenues | 246 | 233 | 6 | 489 | 484 | 1 | |||||||||||||
Company restaurant expenses | 10 | 19 | 40 | 21 | 43 | 49 | |||||||||||||
General and administrative expenses | 44 | 46 | 6 | 91 | 96 | 6 | |||||||||||||
Franchise and property expenses | 9 | 8 | — | 14 | 19 | 30 | |||||||||||||
Franchise advertising and other services expense | 89 | 77 | (16) | 172 | 155 | (11) | |||||||||||||
Other (income) expense | (2 | ) | 2 | NM | (2 | ) | 2 | NM | |||||||||||
Total costs and expenses, net | 150 | 152 | 1 | 296 | 315 | 6 | |||||||||||||
Operating Profit | $ | 96 | $ | 81 | 18 | $ | 193 | $ | 169 | 14 | |||||||||
Restaurant margin | 1.6 | % | (2.4 | )% | 4.0 ppts. | 2.7 | % | (1.0 | )% | 3.7 ppts. | |||||||||
Operating margin | 38.7 | % | 34.6 | % | 4.1 ppts. | 39.4 | % | 34.8 | % | 4.6 ppts. |
Quarter ended | % Change | Year to date | % Change | ||||||||||||||||
6/30/19 | 6/30/18 | B/(W) | 6/30/19 | 6/30/18 | B/(W) | ||||||||||||||
Company sales | $ | 213 | $ | 253 | (16) | $ | 410 | $ | 496 | (17) | |||||||||
Franchise and property revenues | 158 | 134 | 18 | 302 | 262 | 15 | |||||||||||||
Franchise contributions for advertising and other services | 109 | 97 | 13 | 213 | 188 | 14 | |||||||||||||
Total revenues | 480 | 484 | (1) | 925 | 946 | (2) | |||||||||||||
Company restaurant expenses | 163 | 193 | 16 | 316 | 387 | 18 | |||||||||||||
General and administrative expenses | 41 | 41 | — | 84 | 81 | (4) | |||||||||||||
Franchise and property expenses | 8 | 6 | (30) | 17 | 12 | (41) | |||||||||||||
Franchise advertising and other services expense | 110 | 96 | (14) | 212 | 186 | (14) | |||||||||||||
Other (income) expense | (1 | ) | (1 | ) | NM | (1 | ) | (1 | ) | NM | |||||||||
Total costs and expenses, net | 321 | 335 | 4 | 628 | 665 | 6 | |||||||||||||
Operating Profit | $ | 159 | $ | 149 | 7 | $ | 297 | $ | 281 | 6 | |||||||||
Restaurant margin | 23.6 | % | 24.1 | % | (0.5) ppts. | 22.8 | % | 21.9 | % | 0.9 ppts. | |||||||||
Operating margin | 33.2 | % | 30.8 | % | 2.4 ppts. | 32.1 | % | 29.7 | % | 2.4 ppts. |
(unaudited) 6/30/19 | 12/31/18 | ||||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 252 | $ | 292 | |||
Accounts and notes receivable, less allowance: $45 in 2019 and $31 in 2018 | 535 | 561 | |||||
Prepaid expenses and other current assets | 335 | 354 | |||||
Total Current Assets | 1,122 | 1,207 | |||||
Property, plant and equipment, net of accumulated depreciation of $1,135 in 2019 | |||||||
and $1,116 in 2018 | 1,193 | 1,237 | |||||
Goodwill | 526 | 525 | |||||
Intangible assets, net | 243 | 242 | |||||
Other assets | 1,378 | 724 | |||||
Deferred income taxes | 212 | 195 | |||||
Total Assets | $ | 4,674 | $ | 4,130 | |||
LIABILITIES AND SHAREHOLDERS' DEFICIT | |||||||
Current Liabilities | |||||||
Accounts payable and other current liabilities | $ | 798 | $ | 911 | |||
Income taxes payable | 63 | 69 | |||||
Short-term borrowings | 325 | 321 | |||||
Total Current Liabilities | 1,186 | 1,301 | |||||
Long-term debt | 9,869 | 9,751 | |||||
Other liabilities and deferred credits | 1,613 | 1,004 | |||||
Total Liabilities | 12,668 | 12,056 | |||||
Shareholders' Deficit | |||||||
Common Stock, no par value, 750 shares authorized; 304 shares issued in 2019 and 306 issued in 2018 | — | — | |||||
Accumulated deficit | (7,614 | ) | (7,592 | ) | |||
Accumulated other comprehensive loss | (380 | ) | (334 | ) | |||
Total Shareholders' Deficit | (7,994 | ) | (7,926 | ) | |||
Total Liabilities and Shareholders' Deficit | $ | 4,674 | $ | 4,130 |
Year to date | |||||||
6/30/19 | 6/30/18 | ||||||
Cash Flows - Operating Activities | |||||||
Net Income | $ | 551 | $ | 754 | |||
Depreciation and amortization | 54 | 71 | |||||
Refranchising (gain) loss | (10 | ) | (185 | ) | |||
Investment (income) expense, net | (9 | ) | (89 | ) | |||
Contributions to defined benefit pension plans | (11 | ) | (5 | ) | |||
Deferred income taxes | — | (23 | ) | ||||
Share-based compensation expense | 31 | 27 | |||||
Changes in accounts and notes receivable | 7 | (15 | ) | ||||
Changes in prepaid expenses and other current assets | (24 | ) | 4 | ||||
Changes in accounts payable and other current liabilities | (171 | ) | (160 | ) | |||
Changes in income taxes payable | (36 | ) | (15 | ) | |||
Other, net | 79 | 17 | |||||
Net Cash Provided by Operating Activities | 461 | 381 | |||||
Cash Flows - Investing Activities | |||||||
Capital spending | (76 | ) | (85 | ) | |||
Investment in Grubhub Inc. common stock | — | (200 | ) | ||||
Proceeds from refranchising of restaurants | 25 | 252 | |||||
Other, net | (1 | ) | (9 | ) | |||
Net Cash Used in Investing Activities | (52 | ) | (42 | ) | |||
Cash Flows - Financing Activities | |||||||
Proceeds from long-term debt | — | 106 | |||||
Repayments of long-term debt | (40 | ) | (449 | ) | |||
Revolving credit facilities, three months or less, net | 157 | 202 | |||||
Short-term borrowings by original maturity | |||||||
More than three months - proceeds | 48 | 51 | |||||
More than three months - payments | (44 | ) | (43 | ) | |||
Three months or less, net | — | — | |||||
Repurchase shares of Common Stock | (305 | ) | (1,168 | ) | |||
Dividends paid on Common Stock | (257 | ) | (236 | ) | |||
Other, net | (51 | ) | (42 | ) | |||
Net Cash Used in Financing Activities | (492 | ) | (1,579 | ) | |||
Effect of Exchange Rate on Cash and Cash Equivalents | (2 | ) | (19 | ) | |||
Net Decrease in Cash and Cash Equivalents, Restricted Cash and Restricted Cash Equivalents | (85 | ) | (1,259 | ) | |||
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - Beginning of Period | 474 | 1,668 | |||||
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - End of Period | $ | 389 | $ | 409 | |||
• | System sales and System sales excluding the impacts of foreign currency translation ("FX"). System sales include the results of all restaurants regardless of ownership, including Company-owned and franchise restaurants. Sales at franchise restaurants typically generate ongoing franchise and license fees for the Company at a rate of 3% to 6% of sales. Franchise restaurant sales are not included in Company sales on the Condensed Consolidated Statements of Income; however, the franchise and license fees are included in the Company’s revenues. We believe System sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates our primary revenue drivers, Company and franchise same-store sales as well as net unit growth. |
• | 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. |
Quarter ended | Year to date | |||||||||||||||
6/30/19 | 6/30/18 | 6/30/19 | 6/30/18 | |||||||||||||
Detail of Special Items | ||||||||||||||||
Refranchising gain (loss)(b) | $ | 4 | $ | 29 | $ | 10 | $ | 185 | ||||||||
Other Special Items Expense(c) | (9 | ) | — | (11 | ) | (3 | ) | |||||||||
Special Items Income (Expense) - Operating Profit | (5 | ) | 29 | (1 | ) | 182 | ||||||||||
Interest expense, net(c) | (2 | ) | — | (2 | ) | — | ||||||||||
Special Items Income (Expense) before Income Taxes | (7 | ) | 29 | (3 | ) | 182 | ||||||||||
Tax Benefit (Expense) on Special Items(d) | 3 | (18 | ) | 2 | (37 | ) | ||||||||||
Tax Benefit - U.S. Tax Act(e) | — | 40 | — | 34 | ||||||||||||
Special Items Income (Expense), net of tax | (4 | ) | 51 | (1 | ) | 179 | ||||||||||
Average diluted shares outstanding | 314 | 331 | 314 | 336 | ||||||||||||
Special Items diluted EPS | $ | (0.01 | ) | $ | 0.15 | $ | (0.01 | ) | $ | 0.54 | ||||||
Reconciliation of GAAP Operating Profit to Core Operating Profit | ||||||||||||||||
Consolidated | ||||||||||||||||
GAAP Operating Profit | $ | 471 | $ | 449 | $ | 904 | $ | 1,002 | ||||||||
Special Items Income (Expense) | (5 | ) | 29 | (1 | ) | 182 | ||||||||||
Foreign Currency Impact on Divisional Operating Profit | (17 | ) | N/A | (36 | ) | N/A | ||||||||||
Core Operating Profit | $ | 493 | $ | 420 | $ | 941 | $ | 820 | ||||||||
KFC Division | ||||||||||||||||
GAAP Operating Profit | $ | 261 | $ | 235 | $ | 497 | $ | 456 | ||||||||
Foreign Currency Impact on Divisional Operating Profit | (14 | ) | N/A | (30 | ) | N/A | ||||||||||
Core Operating Profit | $ | 275 | $ | 235 | $ | 527 | $ | 456 | ||||||||
Quarter ended | Year to date | |||||||||||||||
6/30/19 | 6/30/18 | 6/30/19 | 6/30/18 | |||||||||||||
Pizza Hut Division | ||||||||||||||||
GAAP Operating Profit | $ | 96 | $ | 81 | $ | 193 | $ | 169 | ||||||||
Foreign Currency Impact on Divisional Operating Profit | (3 | ) | N/A | (6 | ) | N/A | ||||||||||
Core Operating Profit | $ | 99 | $ | 81 | $ | 199 | $ | 169 | ||||||||
Taco Bell Division | ||||||||||||||||
GAAP Operating Profit | $ | 159 | $ | 149 | $ | 297 | $ | 281 | ||||||||
Foreign Currency Impact on Divisional Operating Profit | — | N/A | — | N/A | ||||||||||||
Core Operating Profit | $ | 159 | $ | 149 | $ | 297 | $ | 281 | ||||||||
Reconciliation of Diluted EPS to Diluted EPS excluding Special Items | ||||||||||||||||
Diluted EPS | $ | 0.92 | $ | 0.97 | $ | 1.75 | $ | 2.25 | ||||||||
Special Items Diluted EPS | (0.01 | ) | 0.15 | (0.01 | ) | 0.54 | ||||||||||
Diluted EPS excluding Special Items | $ | 0.93 | $ | 0.82 | $ | 1.76 | $ | 1.71 | ||||||||
Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items | ||||||||||||||||
GAAP Effective Tax Rate | 23.3 | % | 9.9 | % | 18.5 | % | 12.9 | % | ||||||||
Impact on Tax Rate as a result of Special Items | (0.4 | )% | (7.5 | )% | (0.2 | )% | (2.9 | )% | ||||||||
Effective Tax Rate excluding Special Items | 23.7 | % | 17.4 | % | 18.7 | % | 15.8 | % | ||||||||
Reconciliation of Company sales to System sales | ||||||||||||||||
Consolidated | ||||||||||||||||
GAAP Company sales | $ | 359 | $ | 512 | $ | 692 | $ | 1,024 | ||||||||
Franchise sales | 12,114 | 11,177 | 23,965 | 22,373 | ||||||||||||
System sales | 12,473 | 11,689 | 24,657 | 23,397 | ||||||||||||
Foreign Currency Impact on System sales | (410 | ) | N/A | (901 | ) | N/A | ||||||||||
System sales, excluding FX | $ | 12,883 | $ | 11,689 | $ | 25,558 | $ | 23,397 | ||||||||
KFC Division | ||||||||||||||||
GAAP Company sales | $ | 135 | $ | 241 | $ | 260 | $ | 486 | ||||||||
Franchise sales | 6,513 | 6,065 | 12,935 | 12,149 | ||||||||||||
System sales | 6,648 | 6,306 | 13,195 | 12,635 | ||||||||||||
Foreign Currency Impact on System sales | (317 | ) | N/A | (700 | ) | N/A | ||||||||||
System sales, excluding FX | $ | 6,965 | $ | 6,306 | $ | 13,895 | $ | 12,635 | ||||||||
Pizza Hut Division | ||||||||||||||||
GAAP Company sales | $ | 11 | $ | 18 | $ | 22 | $ | 42 | ||||||||
Franchise sales | 3,087 | 2,876 | 6,207 | 5,884 | ||||||||||||
System sales | 3,098 | 2,894 | 6,229 | 5,926 | ||||||||||||
Foreign Currency Impact on System sales | (89 | ) | N/A | (192 | ) | N/A | ||||||||||
System sales, excluding FX | $ | 3,187 | $ | 2,894 | $ | 6,421 | $ | 5,926 | ||||||||
Taco Bell Division | ||||||||||||||||
GAAP Company sales | $ | 213 | $ | 253 | $ | 410 | $ | 496 | ||||||||
Franchise sales | 2,514 | 2,236 | 4,823 | 4,340 | ||||||||||||
System sales | 2,727 | 2,489 | 5,233 | 4,836 | ||||||||||||
Foreign Currency Impact on System sales | (4 | ) | N/A | (9 | ) | N/A | ||||||||||
System sales, excluding FX | $ | 2,731 | $ | 2,489 | $ | 5,242 | $ | 4,836 | ||||||||
• | Any impact from changes in FX rates (i.e. FX rates were assumed not to change from those in place when we determined the 2019 Adjusted EPS Target in 2016) |
• | Any Special Items; and |
• | The impact of the 53rd week in 2019 for our U.S. businesses and certain international subsidiaries that report on a period calendar; |
Reconciliation of Non-GAAP Amounts - 2019 Adjusted EPS Target | ||
2019 Diluted EPS with no forecasted impact of Special Items or Grubhub mark-to-market | At least $3.73 | |
Foreign Currency Impact | 0.08 | |
Impact of 53rd Week | (0.06 | ) |
Year-to-Date Special Items Expense through June 30, 2019 | 0.01 | |
Year-to-Date Grubhub mark-to-market through June 30, 2019 | (0.01 | ) |
2019 Adjusted EPS Target | At least $3.75 |
Quarter Ended 6/30/2019 | KFC | Pizza Hut | Taco Bell | Corporate and Unallocated | Consolidated | ||||||||||||||
Total revenues | $ | 584 | $ | 246 | $ | 480 | $ | — | $ | 1,310 | |||||||||
Company restaurant expenses | 113 | 10 | 163 | — | 286 | ||||||||||||||
General and administrative expenses | 75 | 44 | 41 | 38 | 198 | ||||||||||||||
Franchise and property expenses | 19 | 9 | 8 | 2 | 38 | ||||||||||||||
Franchise advertising and other services expense | 116 | 89 | 110 | — | 315 | ||||||||||||||
Refranchising (gain) loss | — | — | — | (4 | ) | (4 | ) | ||||||||||||
Other (income) expense | — | (2 | ) | (1 | ) | 9 | 6 | ||||||||||||
Total costs and expenses, net | 323 | 150 | 321 | 45 | 839 | ||||||||||||||
Operating Profit | $ | 261 | $ | 96 | $ | 159 | $ | (45 | ) | $ | 471 |
Quarter Ended 6/30/2018 | KFC | Pizza Hut | Taco Bell | Corporate and Unallocated | Consolidated | ||||||||||||||
Total revenues | $ | 651 | $ | 233 | $ | 484 | $ | — | $ | 1,368 | |||||||||
Company restaurant expenses | 210 | 19 | 193 | (1 | ) | 421 | |||||||||||||
General and administrative expenses | 81 | 46 | 41 | 40 | 208 | ||||||||||||||
Franchise and property expenses | 25 | 8 | 6 | 1 | 40 | ||||||||||||||
Franchise advertising and other services expense | 101 | 77 | 96 | — | 274 | ||||||||||||||
Refranchising (gain) loss | — | — | — | (29 | ) | (29 | ) | ||||||||||||
Other (income) expense | (1 | ) | 2 | (1 | ) | 5 | 5 | ||||||||||||
Total costs and expenses, net | 416 | 152 | 335 | 16 | 919 | ||||||||||||||
Operating Profit | $ | 235 | $ | 81 | $ | 149 | $ | (16 | ) | $ | 449 |
Year to Date 6/30/2019 | KFC | Pizza Hut | Taco Bell | Corporate and Unallocated | Consolidated | ||||||||||||||
Total revenues | $ | 1,150 | $ | 489 | $ | 925 | $ | — | $ | 2,564 | |||||||||
Company restaurant expenses | 221 | 21 | 316 | — | 558 | ||||||||||||||
General and administrative expenses | 153 | 91 | 84 | 81 | 409 | ||||||||||||||
Franchise and property expenses | 47 | 14 | 17 | 3 | 81 | ||||||||||||||
Franchise advertising and other services expense | 232 | 172 | 212 | — | 616 | ||||||||||||||
Refranchising (gain) loss | — | — | — | (10 | ) | (10 | ) | ||||||||||||
Other (income) expense | — | (2 | ) | (1 | ) | 9 | 6 | ||||||||||||
Total costs and expenses, net | 653 | 296 | 628 | 83 | 1,660 | ||||||||||||||
Operating Profit | $ | 497 | $ | 193 | $ | 297 | $ | (83 | ) | $ | 904 |
Year to Date 6/30/2018 | KFC | Pizza Hut | Taco Bell | Corporate and Unallocated | Consolidated | ||||||||||||||
Total revenues | $ | 1,309 | $ | 484 | $ | 946 | $ | — | $ | 2,739 | |||||||||
Company restaurant expenses | 430 | 43 | 387 | (1 | ) | 859 | |||||||||||||
General and administrative expenses | 166 | 96 | 81 | 84 | 427 | ||||||||||||||
Franchise and property expenses | 54 | 19 | 12 | 2 | 87 | ||||||||||||||
Franchise advertising and other services expense | 205 | 155 | 186 | — | 546 | ||||||||||||||
Refranchising (gain) loss | — | — | — | (185 | ) | (185 | ) | ||||||||||||
Other (income) expense | (2 | ) | 2 | (1 | ) | 4 | 3 | ||||||||||||
Total costs and expenses, net | 853 | 315 | 665 | (96 | ) | 1,737 | |||||||||||||
Operating Profit | $ | 456 | $ | 169 | $ | 281 | $ | 96 | $ | 1,002 |
(a) | Amounts presented as of and for the quarters and years to date ended June 30, 2019 and 2018 are preliminary. |
(b) | In connection with our previously announced plans to have at least 98% franchise restaurant ownership by the end of 2018, we recorded net refranchising gains during the quarters ended June 30, 2019 and 2018 of $4 million and $29 million, respectively, that have been reflected as Special Items. During the years to date ended June 30, 2019 and 2018, we recorded net refranchising gains of $10 million and $185 million, respectively, that have been reflected as Special Items. |
(c) | During the quarter ended June 30, 2019 we recorded charges of $8 million and $2 million to Other (income) expense and Interest expense, net, respectively, related to cash payments in excess of our recorded liability to settle contingent consideration associated with our acquisition of the KFC Turkey and Pizza Hut Turkey businesses in 2013. Consistent with prior adjustments to the recorded contingent consideration we have reflected this as a Special Item. |
(d) | Tax Expense on Special Items was determined based upon the impact of the nature, as well as the jurisdiction of the respective individual components within Special Items. Additionally, during the quarter ended June 30, 2018, we recorded a $19 million increase to our Income tax provision for the correction of an error associated with the tax recorded on a prior year divestiture, the effects of which were previously recorded as a Special Item. |
(e) | During the quarter and year to date ended June 30, 2018, we recorded $32 million and $16 million decreases, respectively, related to our provisional tax expense recorded in the fourth quarter of 2017 associated with the Tax Cuts and Jobs Act of 2017 ("Tax Act") that was reported as a Special Item. We also recorded Special Items tax benefits of $8 million and $18 million, respectively, in the quarter and year to date ended June 30, 2018 related to 2018 U.S. foreign tax credits that became realizable directly as a result of the impact of deemed repatriation tax expense associated with the Tax Act. |
(f) | Effective January 1, 2019, we adopted the new lease accounting standard. As a result, we are now required to recognize right-of-use assets and lease liabilities upon lease commencement for operating leases based on the present value of lease payments over the lease term. Under our historical accounting, operating leases were not recognized on the balance sheet. Prior results have not been restated for the impact of this accounting change. Upon adoption we recognized right-of-use assets for leases in place at January 1, 2019 of $690 million, which are presented within Other Assets in our Condensed Consolidated Balance Sheets. Also upon adoption we recognized lease liabilities of $83 million and $661 million within Accounts payable and other current liabilities and Other liabilities and deferred credits, respectively, in our Condensed Consolidated Balance Sheets. The impact of the new operating lease accounting on our results of operations and cash flows is not expected to be significant. |
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