![]() | NEWS |
Keith Siegner | |
Vice President, Investor Relations, M&A and Treasurer |
• | Worldwide system sales excluding foreign currency translation declined (12)%, with KFC at (18)%, Pizza Hut at (10)% and Taco Bell at (6)%. |
• | We reported 3% year-over-year net unit growth and net units declined (118) during the quarter. |
• | We recorded $84 million of pre-tax investment income related to the change in fair value of our investment in Grubhub, which resulted in a $0.21 benefit to EPS on the second-quarter. As we recorded $24 million of pre-tax investment income in the second-quarter of 2019 for a $0.06 benefit to EPS, our Grubhub investment favorably impacted year-over-year EPS growth by $0.15. |
• | Foreign currency translation unfavorably impacted divisional operating profit by $6 million. |
% Change | |||||
System Sales Ex F/X | Same-Store Sales | Net-New Units | GAAP Operating Profit | Core Operating Profit2 | |
KFC Division | (18) | (21) | +6 | (41) | (40) |
Pizza Hut Division | (10) | (9) | (1) | (9) | (8) |
Taco Bell Division | (6) | (8) | +4 | (3) | (3) |
Worldwide1 | (12) | (15) | +3 | (36) | (25) |
Second-Quarter | Year-to-Date | |||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | |
GAAP EPS | $0.67 | $0.92 | (27) | $0.94 | $1.75 | (46) |
Special Items EPS2 | $(0.15) | $(0.01) | NM | $(0.52) | $(0.01) | NM |
EPS Excluding Special Items | $0.82 | $0.93 | (12) | $1.46 | $1.76 | (17) |
Second-Quarter | Year-to-Date | |||||||
%/ppts Change | %/ppts Change | |||||||
2020 | 2019 | Reported | Ex F/X | 2020 | 2019 | Reported | Ex F/X | |
Restaurants | 24,390 | 23,118 | +6 | N/A | 24,390 | 23,118 | +6 | N/A |
System Sales ($MM) | 5,288 | 6,648 | (20) | (18) | 11,575 | 13,195 | (12) | (10) |
Same-Store Sales Growth (%) | (21) | +6 | NM | NM | (15) | +5 | NM | NM |
Franchise and Property Revenues ($MM) | 251 | 332 | (24) | (22) | 566 | 655 | (14) | (11) |
Operating Profit ($MM) | 153 | 261 | (41) | (40) | 377 | 497 | (24) | (22) |
Operating Margin (%) | 37.4 | 44.7 | (7.3) | (7.8) | 38.7 | 43.2 | (4.5) | (4.8) |
Second-Quarter (% Change) | Year-to-Date (% Change) | |||
International | U.S. | International | U.S. | |
System Sales Growth Ex F/X | (23) | +8 | (12) | +4 |
Same-Store Sales Growth | (27) | +7 | (18) | +2 |
• | KFC Division opened 234 gross new restaurants in 36 countries. |
• | Operating margin decreased 7.3 percentage points driven by lower same-store sales, higher bad debt expense and lower company restaurant margins due to COVID-19, partially offset by net-new unit growth. |
• | Foreign currency translation unfavorably impacted operating profit by $5 million. |
KFC Markets1 | Percent of KFC System Sales2 | System Sales Growth Ex F/X | |
Second-Quarter (% Change) | Year-to-Date (% Change) | ||
China | 27% | (6) | (10) |
United States | 16% | +8 | +4 |
Asia | 12% | (11) | (4) |
Russia, Central & Eastern Europe | 8% | (41) | (19) |
Australia | 7% | (3) | +3 |
United Kingdom | 6% | (58) | (23) |
Western Europe | 6% | (34) | (20) |
Latin America | 5% | (41) | (19) |
Africa | 4% | (58) | (24) |
Middle East / Turkey / North Africa | 4% | (48) | (23) |
Canada | 2% | (4) | (3) |
Thailand | 2% | (15) | (5) |
India | 1% | (74) | (40) |
Second-Quarter | Year-to-Date | |||||||
%/ppts Change | %/ppts Change | |||||||
2020 | 2019 | Reported | Ex F/X | 2020 | 2019 | Reported | Ex F/X | |
Restaurants | 18,326 | 18,515 | (1) | N/A | 18,326 | 18,515 | (1) | N/A |
System Sales ($MM) | 2,753 | 3,098 | (11) | (10) | 5,554 | 6,229 | (11) | (10) |
Same-Store Sales Growth (%) | (9) | +2 | NM | NM | (10) | +1 | NM | NM |
Franchise and Property Revenues ($MM) | 126 | 143 | (12) | (11) | 259 | 288 | (10) | (10) |
Operating Profit ($MM) | 87 | 96 | (9) | (8) | 163 | 193 | (15) | (14) |
Operating Margin (%) | 36.8 | 38.7 | (1.9) | (1.9) | 34.8 | 39.4 | (4.6) | (4.6) |
Second-Quarter (% Change) | Year-to-Date (% Change) | |||
International | U.S. | International | U.S. | |
System Sales Growth Ex F/X | (18) | +1 | (15) | (3) |
Same-Store Sales Growth | (19) | +5 | (17) | (1) |
• | Pizza Hut Division opened 70 gross new restaurants in 14 countries. |
• | Operating margin decreased 1.9 percentage points driven by lower same-store sales, partially offset by U.S. franchise bad debt recoveries. |
• | Foreign currency translation unfavorably impacted operating profit by $1 million. |
• | Pizza Hut U.S. off-premise channel generated 21% same-store sales growth when excluding closed Express units, or 16% same-store sales growth when including closed Express units. |
Pizza Hut Markets1 | Percent of Pizza Hut System Sales2 | System Sales Growth Ex F/X | |
Second-Quarter (% Change) | Year-to-Date (% Change) | ||
United States | 42% | +1 | (3) |
China | 17% | (12) | (25) |
Asia | 13% | +8 | +8 |
Latin America / Spain / Portugal | 11% | (37) | (21) |
Europe (excluding Spain & Portugal) | 9% | (32) | (19) |
Middle East / Turkey / North Africa | 4% | (46) | (25) |
Canada | 2% | +18 | +11 |
India | 1% | (66) | (38) |
Africa | <1% | (38) | (11) |
Second-Quarter | Year-to-Date | |||||||
%/ppts Change | %/ppts Change | |||||||
2020 | 2019 | Reported | Ex F/X | 2020 | 2019 | Reported | Ex F/X | |
Restaurants | 7,400 | 7,136 | +4 | N/A | 7,400 | 7,136 | +4 | N/A |
System Sales ($MM) | 2,564 | 2,727 | (6) | (6) | 5,160 | 5,233 | (1) | (1) |
Same-Store Sales Growth (%) | (8) | +7 | NM | NM | (4) | +6 | NM | NM |
Franchise and Property Revenues ($MM) | 147 | 158 | (7) | (6) | 295 | 302 | (2) | (2) |
Operating Profit ($MM) | 154 | 159 | (3) | (3) | 298 | 297 | Even | Even |
Operating Margin (%) | 34.4 | 33.2 | 1.2 | 1.2 | 33.0 | 32.1 | 0.9 | 0.9 |
• | Taco Bell Division opened 22 gross new restaurants in 4 countries. |
• | Operating margin increased 1.2 percentage points due to lower general and administrative and franchise and property expenses, partially offset by the impact of same-store sales declines. |
• | The Habit Burger Grill Division same-store sales declined 18% during the second-quarter. |
• | The Habit Burger Grill Division opened 2 gross new restaurants in the U.S. |
• | 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. |
• | Digital sales include orders placed on mobile device, Internet and kiosk. |
Analysts are invited to contact: | |
Keith Siegner, Vice President, Investor Relations, M&A and Treasurer at 888/298-6986 | |
Members of the media are invited to contact: | |
Virginia Ferguson, Senior Director, Public Relations, at 502/874-8200 |
Quarter ended | % Change | Year to date | % Change | ||||||||||||||||
6/30/20 | 6/30/19 | B/(W) | 6/30/20 | 6/30/19 | B/(W) | ||||||||||||||
Revenues | |||||||||||||||||||
Company sales | $ | 403 | $ | 359 | 12 | $ | 758 | $ | 692 | 10 | |||||||||
Franchise and property revenues | 525 | 633 | (17) | 1,121 | 1,245 | (10) | |||||||||||||
Franchise contributions for advertising and other services | 270 | 318 | (15) | 582 | 627 | (7) | |||||||||||||
Total revenues | 1,198 | 1,310 | (9) | 2,461 | 2,564 | (4) | |||||||||||||
Costs and Expenses, Net | |||||||||||||||||||
Company restaurant expenses | 349 | 286 | (22) | 647 | 558 | (16) | |||||||||||||
General and administrative expenses | 259 | 198 | (30) | 467 | 409 | (14) | |||||||||||||
Franchise and property expenses | 36 | 38 | 5 | 94 | 81 | (17) | |||||||||||||
Franchise advertising and other services expense | 264 | 315 | 16 | 574 | 616 | 7 | |||||||||||||
Refranchising (gain) loss | (8 | ) | (4 | ) | 82 | (21 | ) | (10 | ) | NM | |||||||||
Other (income) expense | (2 | ) | 6 | NM | 150 | 6 | NM | ||||||||||||
Total costs and expenses, net | 898 | 839 | (7) | 1,911 | 1,660 | (15) | |||||||||||||
Operating Profit | 300 | 471 | (36) | 550 | 904 | (39) | |||||||||||||
Investment (income) expense, net | (91 | ) | (25 | ) | NM | (57 | ) | (9 | ) | NM | |||||||||
Other pension (income) expense | 2 | — | NM | 5 | 3 | (57) | |||||||||||||
Interest expense, net | 132 | 119 | (10) | 250 | 234 | (7) | |||||||||||||
Income before income taxes | 257 | 377 | (32) | 352 | 676 | (48) | |||||||||||||
Income tax provision | 51 | 88 | 42 | 63 | 125 | 50 | |||||||||||||
Net Income | $ | 206 | $ | 289 | (29) | $ | 289 | $ | 551 | (48) | |||||||||
Basic EPS | |||||||||||||||||||
EPS | $ | 0.68 | $ | 0.94 | (28) | $ | 0.96 | $ | 1.79 | (47) | |||||||||
Average shares outstanding | 303 | 307 | 1 | 302 | 307 | 2 | |||||||||||||
Diluted EPS | |||||||||||||||||||
EPS | $ | 0.67 | $ | 0.92 | (27) | $ | 0.94 | $ | 1.75 | (46) | |||||||||
Average shares outstanding | 307 | 314 | 2 | 307 | 314 | 2 | |||||||||||||
Dividends declared per common share | $ | 0.47 | $ | 0.42 | $ | 0.94 | $ | 0.84 |
Quarter ended | % Change | Year to date | % Change | ||||||||||||||||
6/30/20 | 6/30/19 | B/(W) | 6/30/20 | 6/30/19 | B/(W) | ||||||||||||||
Company sales | $ | 86 | $ | 135 | (36) | $ | 216 | $ | 260 | (17) | |||||||||
Franchise and property revenues | 251 | 332 | (24) | 566 | 655 | (14) | |||||||||||||
Franchise contributions for advertising and other services | 72 | 117 | (38) | 193 | 235 | (18) | |||||||||||||
Total revenues | 409 | 584 | (30) | 975 | 1,150 | (15) | |||||||||||||
Company restaurant expenses | 83 | 113 | 26 | 198 | 221 | 10 | |||||||||||||
General and administrative expenses | 70 | 75 | 6 | 143 | 153 | 6 | |||||||||||||
Franchise and property expenses | 29 | 19 | (52) | 62 | 47 | (32) | |||||||||||||
Franchise advertising and other services expense | 70 | 116 | 40 | 190 | 232 | 18 | |||||||||||||
Other (income) expense | 4 | — | NM | 5 | — | NM | |||||||||||||
Total costs and expenses, net | 256 | 323 | 21 | 598 | 653 | 8 | |||||||||||||
Operating Profit | $ | 153 | $ | 261 | (41) | $ | 377 | $ | 497 | (24) | |||||||||
Restaurant margin | 2.7 | % | 15.8 | % | (13.1) ppts. | 8.1 | % | 15.0 | % | (6.9) ppts. | |||||||||
Operating margin | 37.4 | % | 44.7 | % | (7.3) ppts. | 38.7 | % | 43.2 | % | (4.5) ppts. |
Quarter ended | % Change | Year to date | % Change | ||||||||||||||||
6/30/20 | 6/30/19 | B/(W) | 6/30/20 | 6/30/19 | B/(W) | ||||||||||||||
Company sales | $ | 19 | $ | 11 | 71 | $ | 37 | $ | 22 | 66 | |||||||||
Franchise and property revenues | 126 | 143 | (12) | 259 | 288 | (10) | |||||||||||||
Franchise contributions for advertising and other services | 90 | 92 | (1) | 174 | 179 | (2) | |||||||||||||
Total revenues | 235 | 246 | (4) | 470 | 489 | (4) | |||||||||||||
Company restaurant expenses | 18 | 10 | (66) | 37 | 21 | (70) | |||||||||||||
General and administrative expenses | 44 | 44 | (2) | 90 | 91 | — | |||||||||||||
Franchise and property expenses | 1 | 9 | 89 | 13 | 14 | 6 | |||||||||||||
Franchise advertising and other services expense | 87 | 89 | 2 | 171 | 172 | 1 | |||||||||||||
Other (income) expense | (2 | ) | (2 | ) | NM | (4 | ) | (2 | ) | NM | |||||||||
Total costs and expenses, net | 148 | 150 | 1 | 307 | 296 | (3) | |||||||||||||
Operating Profit | $ | 87 | $ | 96 | (9) | $ | 163 | $ | 193 | (15) | |||||||||
Restaurant margin | 4.5 | % | 1.6 | % | 2.9 ppts. | 0.8 | % | 2.7 | % | (1.9) ppts. | |||||||||
Operating margin | 36.8 | % | 38.7 | % | (1.9) ppts. | 34.8 | % | 39.4 | % | (4.6) ppts. |
Quarter ended | % Change | Year to date | % Change | ||||||||||||||||
6/30/20 | 6/30/19 | B/(W) | 6/30/20 | 6/30/19 | B/(W) | ||||||||||||||
Company sales | $ | 194 | $ | 213 | (9) | $ | 392 | $ | 410 | (4) | |||||||||
Franchise and property revenues | 147 | 158 | (7) | 295 | 302 | (2) | |||||||||||||
Franchise contributions for advertising and other services | 108 | 109 | (2) | 215 | 213 | — | |||||||||||||
Total revenues | 449 | 480 | (7) | 902 | 925 | (3) | |||||||||||||
Company restaurant expenses | 147 | 163 | 10 | 300 | 316 | 5 | |||||||||||||
General and administrative expenses | 37 | 41 | 10 | 75 | 84 | 11 | |||||||||||||
Franchise and property expenses | 5 | 8 | 38 | 16 | 17 | 5 | |||||||||||||
Franchise advertising and other services expense | 107 | 110 | 3 | 213 | 212 | (1) | |||||||||||||
Other (income) expense | (1 | ) | (1 | ) | NM | — | (1 | ) | NM | ||||||||||
Total costs and expenses, net | 295 | 321 | 8 | 604 | 628 | 4 | |||||||||||||
Operating Profit | $ | 154 | $ | 159 | (3) | $ | 298 | $ | 297 | — | |||||||||
Restaurant margin | 24.5 | % | 23.6 | % | 0.9 ppts. | 23.5 | % | 22.8 | % | 0.7 ppts. | |||||||||
Operating margin | 34.4 | % | 33.2 | % | 1.2 ppts. | 33.0 | % | 32.1 | % | 0.9 ppts. |
(unaudited) 6/30/20 | 12/31/19 | ||||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 1,243 | $ | 605 | |||
Accounts and notes receivable, less allowance: $101 in 2020 and $72 in 2019 | 530 | 584 | |||||
Prepaid expenses and other current assets | 625 | 338 | |||||
Total Current Assets | 2,398 | 1,527 | |||||
Property, plant and equipment, net of accumulated depreciation of $1,167 in 2020 | |||||||
and $1,136 in 2019 | 1,265 | 1,170 | |||||
Goodwill | 602 | 530 | |||||
Intangible assets, net | 344 | 244 | |||||
Other assets | 1,313 | 1,313 | |||||
Deferred income taxes | 499 | 447 | |||||
Total Assets | $ | 6,421 | $ | 5,231 | |||
LIABILITIES AND SHAREHOLDERS' DEFICIT | |||||||
Current Liabilities | |||||||
Accounts payable and other current liabilities | $ | 908 | $ | 960 | |||
Income taxes payable | 133 | 150 | |||||
Short-term borrowings | 434 | 431 | |||||
Total Current Liabilities | 1,475 | 1,541 | |||||
Long-term debt | 11,252 | 10,131 | |||||
Other liabilities and deferred credits | 1,802 | 1,575 | |||||
Total Liabilities | 14,529 | 13,247 | |||||
Shareholders' Deficit | |||||||
Common Stock, no par value, 750 shares authorized; 301 shares issued in 2020 and 300 issued in 2019 | 11 | — | |||||
Accumulated deficit | (7,631 | ) | (7,628 | ) | |||
Accumulated other comprehensive loss | (488 | ) | (388 | ) | |||
Total Shareholders' Deficit | (8,108 | ) | (8,016 | ) | |||
Total Liabilities and Shareholders' Deficit | $ | 6,421 | $ | 5,231 |
Year to date | |||||||
6/30/20 | 6/30/19 | ||||||
Cash Flows - Operating Activities | |||||||
Net Income | $ | 289 | $ | 551 | |||
Depreciation and amortization | 53 | 54 | |||||
Impairment and closure (income) expenses | 146 | 1 | |||||
Refranchising (gain) loss | (21 | ) | (10 | ) | |||
Investment (income) expense, net | (57 | ) | (9 | ) | |||
Contributions to defined benefit pension plans | (1 | ) | (11 | ) | |||
Deferred income taxes | (20 | ) | — | ||||
Share-based compensation expense | 29 | 31 | |||||
Changes in accounts and notes receivable | 4 | 7 | |||||
Changes in prepaid expenses and other current assets | (26 | ) | (24 | ) | |||
Changes in accounts payable and other current liabilities | (76 | ) | (171 | ) | |||
Changes in income taxes payable | (49 | ) | (36 | ) | |||
Other, net | 91 | 78 | |||||
Net Cash Provided by Operating Activities | 362 | 461 | |||||
Cash Flows - Investing Activities | |||||||
Capital spending | (67 | ) | (76 | ) | |||
Acquisition of The Habit Restaurants, Inc. | (408 | ) | — | ||||
Proceeds from refranchising of restaurants | 3 | 25 | |||||
Other, net | — | (1 | ) | ||||
Net Cash Used in Investing Activities | (472 | ) | (52 | ) | |||
Cash Flows - Financing Activities | |||||||
Proceeds from long-term debt | 600 | — | |||||
Repayments of long-term debt | (41 | ) | (40 | ) | |||
Revolving credit facilities, three months or less, net | 575 | 157 | |||||
Short-term borrowings by original maturity | |||||||
More than three months - proceeds | 85 | 48 | |||||
More than three months - payments | (90 | ) | (44 | ) | |||
Three months or less, net | — | — | |||||
Repurchase shares of Common Stock | — | (305 | ) | ||||
Dividends paid on Common Stock | (283 | ) | (257 | ) | |||
Debt issuance costs | (7 | ) | — | ||||
Other, net | (31 | ) | (51 | ) | |||
Net Cash Provided by (Used in) Financing Activities | 808 | (492 | ) | ||||
Effect of Exchange Rate on Cash and Cash Equivalents | (18 | ) | (2 | ) | |||
Net Increase (Decrease) in Cash and Cash Equivalents, Restricted Cash and Restricted Cash Equivalents | 680 | (85 | ) | ||||
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - Beginning of Period | 768 | 474 | |||||
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - End of Period | $ | 1,448 | $ | 389 | |||
• | 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 | |||||||||||||||
6/30/20 | 6/30/19 | 6/30/20 | 6/30/19 | |||||||||||||
Detail of Special Items | ||||||||||||||||
Refranchising gain (loss)(b) | $ | 3 | $ | 4 | $ | 6 | $ | 10 | ||||||||
Costs associated with acquisition and integration of Habit Burger Grill(c) | (3 | ) | — | (9 | ) | — | ||||||||||
Impairment of Habit Burger Grill goodwill(d) | — | — | (139 | ) | — | |||||||||||
Unlocking Opportunity Initiative contribution(e) | (50 | ) | — | (50 | ) | — | ||||||||||
Other Special Items Expense(f) | (4 | ) | (9 | ) | (7 | ) | (11 | ) | ||||||||
Special Items Income (Expense) - Operating Profit | (54 | ) | (5 | ) | (199 | ) | (1 | ) | ||||||||
Interest expense, net(f) | — | (2 | ) | — | (2 | ) | ||||||||||
Special Items Income (Expense) before Income Taxes | (54 | ) | (7 | ) | (199 | ) | (3 | ) | ||||||||
Tax Benefit (Expense) on Special Items(g) | 7 | 3 | 40 | 2 | ||||||||||||
Special Items Income (Expense), net of tax | $ | (47 | ) | $ | (4 | ) | $ | (159 | ) | $ | (1 | ) | ||||
Average diluted shares outstanding | 307 | 314 | 307 | 314 | ||||||||||||
Special Items diluted EPS | $ | (0.15 | ) | $ | (0.01 | ) | $ | (0.52 | ) | $ | (0.01 | ) | ||||
Reconciliation of GAAP Operating Profit to Core Operating Profit | ||||||||||||||||
Consolidated | ||||||||||||||||
GAAP Operating Profit | $ | 300 | $ | 471 | $ | 550 | $ | 904 | ||||||||
Special Items Income (Expense) | (54 | ) | (5 | ) | (199 | ) | (1 | ) | ||||||||
Foreign Currency Impact on Divisional Operating Profit | (6 | ) | N/A | (12 | ) | N/A | ||||||||||
Core Operating Profit | $ | 360 | $ | 476 | $ | 761 | $ | 905 | ||||||||
KFC Division | ||||||||||||||||
GAAP Operating Profit | $ | 153 | $ | 261 | $ | 377 | $ | 497 | ||||||||
Foreign Currency Impact on Divisional Operating Profit | (5 | ) | N/A | (10 | ) | N/A | ||||||||||
Core Operating Profit | $ | 158 | $ | 261 | $ | 387 | $ | 497 | ||||||||
Quarter ended | Year to date | |||||||||||||||
6/30/20 | 6/30/19 | 6/30/20 | 6/30/19 | |||||||||||||
Pizza Hut Division | ||||||||||||||||
GAAP Operating Profit | $ | 87 | $ | 96 | $ | 163 | $ | 193 | ||||||||
Foreign Currency Impact on Divisional Operating Profit | (1 | ) | N/A | (2 | ) | N/A | ||||||||||
Core Operating Profit | $ | 88 | $ | 96 | $ | 165 | $ | 193 | ||||||||
Taco Bell Division | ||||||||||||||||
GAAP Operating Profit | $ | 154 | $ | 159 | $ | 298 | $ | 297 | ||||||||
Foreign Currency Impact on Divisional Operating Profit | — | N/A | — | N/A | ||||||||||||
Core Operating Profit | $ | 154 | $ | 159 | $ | 298 | $ | 297 | ||||||||
Habit Burger Grill Division | ||||||||||||||||
GAAP Operating Profit | $ | (6 | ) | N/A | $ | (8 | ) | N/A | ||||||||
Foreign Currency Impact on Divisional Operating Profit | — | N/A | — | N/A | ||||||||||||
Core Operating Profit | $ | (6 | ) | N/A | $ | (8 | ) | N/A | ||||||||
Reconciliation of Diluted EPS to Diluted EPS excluding Special Items | ||||||||||||||||
Diluted EPS | $ | 0.67 | $ | 0.92 | $ | 0.94 | $ | 1.75 | ||||||||
Special Items Diluted EPS | (0.15 | ) | (0.01 | ) | (0.52 | ) | (0.01 | ) | ||||||||
Diluted EPS excluding Special Items | $ | 0.82 | $ | 0.93 | $ | 1.46 | $ | 1.76 | ||||||||
Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items | ||||||||||||||||
GAAP Effective Tax Rate | 19.8 | % | 23.3 | % | 17.8 | % | 18.5 | % | ||||||||
Impact on Tax Rate as a result of Special Items | 1.0 | % | (0.4 | )% | (0.9 | )% | (0.2 | )% | ||||||||
Effective Tax Rate excluding Special Items | 18.8 | % | 23.7 | % | 18.7 | % | 18.7 | % | ||||||||
Quarter Ended 6/30/2020 | KFC | Pizza Hut | Taco Bell | Habit Burger | 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 |
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 (Loss) | $ | 261 | $ | 96 | $ | 159 | $ | (45 | ) | $ | 471 |
Year to Date 6/30/2020 | KFC | Pizza Hut | Taco Bell | Habit Burger | 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 |
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 |
(a) | Amounts presented as of and for the quarters and years to date ended June 30, 2020 and 2019 are preliminary. |
(b) | We have reflected as Special Items those refranchising gains and losses that were recorded in connection with our previously announced plans to have at least 98% franchise restaurant ownership by the end of 2018. As such, refranchising gains and losses recorded during the quarters and years to date ended June 30, 2020 and 2019 as Special Items primarily include true-ups to refranchising gains and losses recorded prior to December 31, 2018. |
(c) | 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"). |
(d) | On March 18, 2020 we acquired all of the issued and outstanding common shares of Habit for total cash consideration of $408 million, net of cash acquired. During the first-quarter of 2020 the operation of substantially all Habit restaurants was impacted by government recommendations and mandates arising from containment and mitigation measures related to the COVID-19 global pandemic. As a result of the impacts of the COVID-19 pandemic on Habit’s results through March 31, 2020 as well as general market conditions, we recorded a goodwill impairment charge of $139 million to Other (income) expense, which has been reflected as a Special Item. We have also reflected the tax benefit of this impairment charge of $32 million as a Special Item. |
(e) | 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 recorded a Special Item charge of $50 million in the quarter ended June 30, 2020 related to a contribution made to the Yum Foundation as part of these efforts and investment. |
(f) | 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. |
(g) | 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. |