Yum! Brands Reports First-Quarter 2013 EPS Declined 8%, Excluding Special Items; China Division Sales and Profits Declined Significantly
Yum! Brands, Inc. (NYSE: YUM) today reported results for the first
quarter ended March 23, 2013 including EPS of $0.70, excluding Special
Items. Reported EPS was $0.72 for the quarter.
FIRST-QUARTER HIGHLIGHTS
-
China Division sales and profits were significantly impacted by
adverse publicity from the poultry supply situation that occurred in
late December 2012.
-
Worldwide system sales grew 1%, prior to foreign currency translation,
including 4% at Yum! Restaurants International (YRI) and 2% in the
U.S. System sales declined 9% in China.
-
Same-store sales declined 20% in China. Same-store sales grew 1% at
YRI and 2% in the U.S.
-
Total international development was 380 new restaurants; 88% of this
development occurred in emerging markets.
-
Worldwide restaurant margin declined 2.7 percentage points to 15.9%,
including a decline of 7.0 percentage points in China. Restaurant
margin increased 1.4 percentage points at YRI and 2.4 percentage
points in the U.S.
-
Worldwide operating profit declined 14%, prior to foreign currency
translation, including a 41% decline in China. Operating profit grew
19% at YRI and 5% in the U.S.
-
Worldwide effective tax rate, prior to Special Items, decreased to
26.0% from 27.5%. The decrease in the tax rate positively impacted EPS
growth by 2 percentage points.
FULL-YEAR OUTLOOK
Estimated mid-single-digit full-year EPS decline versus prior year,
excluding Special Items, remains unchanged.
|
|
|
First Quarter
|
|
|
2013
|
|
2012
|
|
% Change
|
EPS Excluding Special Items
|
|
$
|
0.70
|
|
$
|
0.76
|
|
(8
|
)%
|
Special Items Gain/(Loss)1
|
|
$
|
0.02
|
|
$
|
0.20
|
|
NM
|
|
EPS
|
|
$
|
0.72
|
|
$
|
0.96
|
|
(24
|
)%
|
1 See Reconciliation of Non-GAAP Measurements to GAAP
Results for further detail of the Special Items. Special Items for
2013 are primarily related to U.S. refranchising gains. Special
Items for 2012 are primarily related to the Little Sheep
acquisition gain, U.S. refranchising gains and Pizza Hut UK
refranchising.
|
|
Note: All comparisons are versus the same period a year ago and
exclude Special Items unless noted.
DAVID NOVAK COMMENTS
David C. Novak, Chairman and CEO, said, “While better than expected, the
first quarter was extremely difficult for Yum! Brands. As anticipated,
intense media attention surrounding poultry supply in China
significantly impacted KFC sales and profit. Earnings per share declined
8% versus prior year, as our China Division operating profit fell 41%.
Operating profit increased 19% at Yum! Restaurants International and 5%
in our U.S. business.
The negative media surrounding poultry supply in China has subsided. We
have taken steps to enhance our industry-leading supply chain practices,
and we're now in the midst of an aggressive quality assurance marketing
campaign. However, our sales recovery has been adversely affected by the
recent news of Avian flu. This news surfaced during the first week of
April and continues to negatively impact same-store sales. We continue
to remind consumers that properly cooked chicken is perfectly safe to
eat. Historically, the sales impact of Avian flu publicity has initially
been dramatic at KFC but relatively short-lived. We will stay the course
with our plans to develop at least 700 new units in China this year to
lay the foundation for future growth. We have complete confidence in a
full sales recovery.
Outside of China, we expect solid, on-target performance for Yum!
Brands. Taco Bell continues to deliver strong results with its
combination of great value, innovation and world-class operations.
Additionally, our emerging market new-unit pipeline is stronger than
ever at Yum! Restaurants International and in India.
There is no doubt 2013 will be a challenging year for our company. With
news of Avian flu, there will obviously be more volatility with our
China sales recovery. However, given better-than-expected first-quarter
performance, our estimated mid-single-digit full-year EPS decline versus
prior year remains unchanged. I'm confident we will end the year with
momentum and restore our track record of consistently delivering
double-digit EPS growth in 2014 and beyond.”
CHINA DIVISION
|
|
|
First Quarter 1
|
|
|
|
|
% Change
|
|
2013
|
|
2012
|
|
Reported
|
|
Ex F/X
|
System Sales Growth
|
|
|
|
|
|
(8
|
)
|
|
(9
|
)
|
Same-Store Sales Growth (%)
|
|
(20
|
)
|
|
+14
|
|
NM
|
|
|
NM
|
|
Restaurant Margin (%)
|
|
16.6
|
|
|
23.6
|
|
(7.0
|
)
|
|
(7.0
|
)
|
Operating Profit ($MM)
|
|
154
|
|
|
256
|
|
(40
|
)
|
|
(41
|
)
|
1 We began consolidating Little Sheep in the second
quarter of 2012. Consolidated operating results of Little Sheep
are included in first quarter 2013 results (with the exception of
same-store sales growth), but not included in first quarter 2012
results.
|
|
-
China Division sales and profits were negatively impacted as a
result of the intense media attention surrounding poultry supply that
occurred in late December 2012.
-
System sales decreased 9%, prior to foreign currency translation.
-
Same-store sales declined 20%, including a 24% decline at KFC and
2% decline at Pizza Hut Casual Dining.
-
New-unit development of 226 restaurants benefited from Chinese New
Year falling late in the quarter this year.
|
China Units
|
|
Q1 2013
|
|
% Change
|
Traditional Restaurants1
|
|
5,480
|
|
+18
|
KFC
|
|
4,387
|
|
+15
|
Pizza Hut Casual Dining
|
|
895
|
|
+35
|
1 Total includes Pizza Hut Home Service and East
Dawning, excludes Little Sheep units
|
|
-
Restaurant margin decreased 7.0 percentage points to 16.6%, primarily
due to sales deleverage.
-
For the quarter, the Little Sheep acquisition had a positive impact of
4 percentage points on system sales growth, a negligible impact on
restaurant margin and a positive impact of 4 percentage points on
operating profit growth.
-
Foreign currency translation positively impacted operating profit by
$2 million.
CURRENT CHINA SALES UPDATE
-
Beginning the first week of April, publicity surrounding Avian flu in
China has had a significant, negative impact on KFC sales.
Historically, the impact of Avian flu publicity has initially been
dramatic at KFC but relatively short-lived. In the past, we reminded
consumers that properly cooked chicken is perfectly safe to eat, and
we continue to do so.
-
Based on our results through the first three weeks of April, we expect
China Division same-store sales to decline about 30% for the month.
-
We are temporarily providing monthly same-store sales releases until
sales have recovered. We will release April same-store sales for our
China Division on May 10, 2013, after market hours.
YUM! RESTAURANTS INTERNATIONAL (YRI) DIVISION
|
|
|
First Quarter
|
|
|
|
|
|
|
% Change
|
|
|
2013
|
|
2012
|
|
Reported
|
|
Ex F/X
|
Traditional Restaurants
|
|
14,569
|
|
14,021
|
|
+4
|
|
NA
|
System Sales Growth
|
|
|
|
|
|
+4
|
|
+4
|
Restaurant Margin (%)
|
|
13.6
|
|
12.2
|
|
1.4
|
|
1.3
|
Franchise & License Fees ($MM)
|
|
225
|
|
199
|
|
+13
|
|
+13
|
Operating Profit ($MM)
|
|
199
|
|
168
|
|
+19
|
|
+19
|
Operating Margin (%)
|
|
29.9
|
|
23.7
|
|
6.2
|
|
6.4
|
-
YRI Division system sales increased 4% driven by new-unit
development and 1% same-store sales growth.
-
Emerging markets system sales grew 10%, driven by 4% same-store
sales growth and 7% unit growth.
-
Developed markets system sales were flat, including a 1% decline
in same-store sales and 1% unit growth.
-
YRI opened 147 new units in 44 countries, including 103 in emerging
markets.
-
Our franchise partners opened 90% of all new units.
-
Restaurant margin increased 1.4 percentage points. This was primarily
driven by the refranchising of our Pizza Hut UK Dine-In business.
-
Operating profit growth benefited 8 percentage points from a major
franchise ownership change, which added transfer and renewal fees, and
from changes to a pension plan. Additionally, the refranchising of the
Pizza Hut UK Dine-In business late last year was accretive to
operating profit growth by 3 percentage points.
-
Foreign currency translation had a negligible impact on operating
profit growth.
YRI MARKETS1 |
|
|
|
SYSTEM Sales Growth
Ex F/X
|
|
Percent of YRI2 |
|
|
Franchise
|
|
|
|
|
|
Asia (ex Japan)
|
|
16
|
%
|
|
+2
|
|
Japan
|
|
10
|
%
|
|
(6
|
)
|
Latin America
|
|
11
|
%
|
|
+4
|
|
Middle East
|
|
8
|
%
|
|
+5
|
|
Continental Europe
|
|
7
|
%
|
|
+2
|
|
Canada
|
|
6
|
%
|
|
(1
|
)
|
|
|
|
|
|
|
Combined Company / Franchise
|
|
|
|
|
|
UK
|
|
12
|
%
|
|
Flat
|
|
Australia / New Zealand
|
|
11
|
%
|
|
+6
|
|
Thailand
|
|
2
|
%
|
|
+20
|
|
Korea
|
|
2
|
%
|
|
+11
|
|
|
|
|
|
|
|
Key Growth
|
|
|
|
|
|
Africa
|
|
7
|
%
|
|
+18
|
|
France
|
|
4
|
%
|
|
+6
|
|
Germany / Netherlands
|
|
2
|
%
|
|
+16
|
|
Russia
|
|
2
|
%
|
|
+45
|
|
1 See website www.yum.com
under tab "Investors" for a list of the countries within each of
the YRI markets
|
2 Percentage of Total YRI System Sales for Full Year
2012
|
|
|
U.S. DIVISION
|
|
|
First Quarter
|
|
|
2013
|
|
2012
|
|
% Change
|
Same-Store Sales Growth (%)
|
|
+2
|
|
+5
|
|
NM
|
Restaurant Margin (%)
|
|
16.8
|
|
14.4
|
|
2.4
|
Franchise and License Fees ($MM)
|
|
190
|
|
178
|
|
+7
|
Operating Profit ($MM)
|
|
165
|
|
158
|
|
+5
|
Operating Margin (%)
|
|
23.7
|
|
19.7
|
|
4.0
|
|
-
U.S. Division same-store sales increased 2%, including growth
of 6% at Taco Bell. Same-store sales declined 1% at Pizza Hut and 1%
at KFC.
-
Restaurant margin increased 2.4 percentage points, driven primarily by
refranchising and sales leverage at Taco Bell.
-
Operating profit growth was adversely impacted by 2 percentage points
due to refranchising.
INDIA DIVISION
-
India Division system sales increased 16%, prior to foreign
currency translation. The system sales increase was driven by unit
growth of 26%, partially offset by a 3% decline in same-store sales.
|
India Units
|
|
Q1 2013
|
|
% Change
|
Traditional Restaurants1 |
|
595
|
|
+26
|
KFC
|
|
282
|
|
+36
|
Pizza Hut Casual Dining
|
|
180
|
|
+8
|
Pizza Hut Home Service
|
|
130
|
|
+37
|
1 Total includes 3 Taco Bell units
|
|
OWNERSHIP / SPECIAL ITEMS UPDATE
-
In the U.S., we refranchised 85 Taco Bell units for proceeds of $81
million. We recorded pre-tax U.S. refranchising gains of $17 million
in Special Items.
OTHER ITEMS UPDATE
-
Through April 22, 2013, we repurchased 1.7 million shares at an
average price of $65 totaling $112 million.
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
Wednesday, April 24, 2013. The number is 877/815-2029 for U.S. callers
and 706/645-9271 for international callers.
The call will be available for playback beginning at noon Eastern Time
Wednesday, April 24, through midnight Wednesday, May 8, 2013. To
access the playback, dial 855/859-2056 in the United States and
404/537-3406 internationally. The playback pass code is 34472493.
The webcast and the playback can be accessed via the internet by
visiting Yum! Brands' Web site, www.yum.com/investors
and selecting “Q1 2013 Earnings Conference Call” under “Investment
Events.” A podcast will be available within 24 hours.
ADDITIONAL INFORMATION ONLINE
Quarter end dates for each division, restaurant-count details and
definitions of terms are available online at www.yum.com
under “Investors.”
This announcement, any related announcements and the related webcast 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 can be identified by the fact
that they do not relate strictly to historical or current facts. Our
forward-looking statements are subject to risks and uncertainties, which
may cause actual results to differ materially from those projected.
Factors that can cause our actual results to differ materially include,
but are not limited to: food safety and food borne-illness issues;
economic conditions, consumer preferences, adverse publicity, tax rates,
the regulatory environment, increased competition and other risks in
China, where a significant and growing portion of our restaurants are
located; economic and political conditions in the other countries where
we operate; the success of our international development strategy;
commodity, labor and other operating costs; our ability to secure and
maintain distribution and adequate supply to our restaurants; the
continued viability and success of our franchise and license operators;
publicity that may impact our business and/or industry; pending or
future litigation and legal claims or proceedings; the impact or threat
of any widespread illness or outbreaks of viruses or other diseases;
consumer preferences and perceptions of our brands; the success of our
refranchising strategy; significant changes in global economic
conditions, including consumer spending, consumer confidence and
unemployment; new and changing government regulations; our effective tax
rates and disagreements with taxing authorities; our ability to protect
the integrity and security of individually identifiable data of our
customers and employees; competition within the retail food industry,
including with respect to price and quality of food products, new
product development, advertising levels and promotional initiatives,
customer service, reputation, restaurant location, and attractiveness
and maintenance of properties; and risks associated with the Little
Sheep business. 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 on Form 10-K) for additional detail about factors that could
affect our financial and other results. Forward-looking statements are
based on current expectations and assumptions and currently available
data and are neither predictions nor guarantees of future events or
performance. You should not place undue reliance on forward-looking
statements, which speak only as of the date hereof. We are not
undertaking to update any of these statements.
Yum! Brands, Inc., based in Louisville, Kentucky, is the world's largest
restaurant company in terms of system restaurants with over 39,000
restaurants in more than 130 countries and territories. Yum! was ranked
#213 on the Fortune 500 List for 2011 and had revenues of over $13
billion in 2012. The Company's restaurant brands - KFC, Pizza Hut and
Taco Bell - are the global leaders of the chicken, pizza and
Mexican-style food categories. Outside the United States, the Yum!
Brands system opened over five new restaurants per day, making it a
leader in international retail development.
|
|
|
|
YUM! Brands, Inc. Condensed Consolidated Summary of
Results (amounts in millions, except per share amounts) (unaudited)
|
|
|
|
Quarter ended
|
|
% Change
|
|
|
3/23/13
|
|
3/24/12
|
|
B/(W)
|
|
|
|
|
|
|
|
Company sales
|
|
$
|
2,099
|
|
|
$
|
2,344
|
|
|
(10
|
)
|
Franchise and license fees and income
|
|
436
|
|
|
399
|
|
|
9
|
|
Total revenues
|
|
2,535
|
|
|
2,743
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
Company restaurant expenses, net
|
|
|
|
|
|
|
Food and paper
|
|
680
|
|
|
767
|
|
|
11
|
|
Payroll and employee benefits
|
|
490
|
|
|
513
|
|
|
5
|
|
Occupancy and other operating expenses
|
|
596
|
|
|
624
|
|
|
4
|
|
Company restaurant expenses
|
|
1,766
|
|
|
1,904
|
|
|
7
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
273
|
|
|
272
|
|
|
—
|
|
Franchise and license expenses
|
|
30
|
|
|
26
|
|
|
(16
|
)
|
Closures and impairment (income) expenses
|
|
4
|
|
|
1
|
|
|
NM
|
|
Refranchising (gain) loss
|
|
(17
|
)
|
|
(26
|
)
|
|
(35
|
)
|
Other (income) expense
|
|
(8
|
)
|
|
(79
|
)
|
|
(90
|
)
|
Total costs and expenses, net
|
|
2,048
|
|
|
2,098
|
|
|
2
|
|
|
|
|
|
|
|
|
Operating Profit
|
|
487
|
|
|
645
|
|
|
(25
|
)
|
Interest expense, net
|
|
31
|
|
|
37
|
|
|
16
|
|
Income before income taxes
|
|
456
|
|
|
608
|
|
|
(25
|
)
|
Income tax provision
|
|
120
|
|
|
147
|
|
|
18
|
|
Net income - including noncontrolling interests
|
|
336
|
|
|
461
|
|
|
(27
|
)
|
Net income (loss) - noncontrolling interests
|
|
(1
|
)
|
|
3
|
|
|
NM
|
|
Net income - YUM! Brands, Inc.
|
|
$
|
337
|
|
|
$
|
458
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
Effective tax rate
|
|
26.4
|
%
|
|
24.1
|
%
|
|
(2.3 ppts.)
|
|
|
|
|
|
|
|
Effective tax rate before special items
|
|
26.0
|
%
|
|
27.5
|
%
|
|
1.5 ppts.
|
|
|
|
|
|
|
|
Basic EPS Data
|
|
|
|
|
|
|
EPS
|
|
$
|
0.74
|
|
|
$
|
0.99
|
|
|
(25
|
)
|
Average shares outstanding
|
|
455
|
|
|
465
|
|
|
2
|
|
|
|
|
|
|
|
|
Diluted EPS Data
|
|
|
|
|
|
|
EPS
|
|
$
|
0.72
|
|
|
$
|
0.96
|
|
|
(24
|
)
|
Average shares outstanding
|
|
465
|
|
|
478
|
|
|
3
|
|
|
|
|
|
|
|
|
Dividends declared per common share
|
|
$
|
0.335
|
|
|
$
|
0.285
|
|
|
18
|
|
|
See accompanying notes.
|
|
Percentages may not recompute due to rounding.
|
|
|
|
|
|
YUM! Brands, Inc. CHINA DIVISION Operating Results (amounts
in millions) (unaudited)
|
|
|
|
Quarter ended
|
|
% Change
|
|
|
3/23/13
|
|
3/24/12
|
|
B/(W)
|
|
|
|
|
|
|
|
Company sales
|
|
$
|
1,133
|
|
|
$
|
1,199
|
|
|
(6
|
)
|
Franchise and license fees and income
|
|
18
|
|
|
19
|
|
|
(4
|
)
|
Total revenues
|
|
1,151
|
|
|
1,218
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
Company restaurant expenses, net
|
|
|
|
|
|
|
Food and paper
|
|
375
|
|
|
413
|
|
|
9
|
|
Payroll and employee benefits
|
|
231
|
|
|
188
|
|
|
(23
|
)
|
Occupancy and other operating expenses
|
|
339
|
|
|
316
|
|
|
(7
|
)
|
|
|
945
|
|
|
917
|
|
|
(3
|
)
|
General and administrative expenses
|
|
55
|
|
|
48
|
|
|
(16
|
)
|
Franchise and license expenses
|
|
2
|
|
|
1
|
|
|
(51
|
)
|
Closures and impairment (income) expenses
|
|
2
|
|
|
1
|
|
|
NM
|
|
Other (income) expense
|
|
(7
|
)
|
|
(5
|
)
|
|
47
|
|
|
|
997
|
|
|
962
|
|
|
(4
|
)
|
Operating Profit
|
|
$
|
154
|
|
|
$
|
256
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
Company sales
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
Food and paper
|
|
33.1
|
|
|
34.4
|
|
|
1.3 ppts.
|
Payroll and employee benefits
|
|
20.4
|
|
|
15.7
|
|
|
(4.7 ppts.)
|
Occupancy and other operating expenses
|
|
29.9
|
|
|
26.3
|
|
|
(3.6 ppts.)
|
Restaurant margin
|
|
16.6
|
%
|
|
23.6
|
%
|
|
(7.0 ppts.)
|
|
|
|
|
|
|
|
Operating margin
|
|
13.4
|
%
|
|
21.0
|
%
|
|
(7.6 ppts.)
|
|
See accompanying notes.
|
|
Percentages may not recompute due to rounding.
|
|
|
|
|
|
YUM! Brands, Inc. YUM! RESTAURANTS INTERNATIONAL
DIVISION Operating Results (amounts in millions) (unaudited)
|
|
|
|
Quarter ended
|
|
% Change
|
|
|
3/23/13
|
|
3/24/12
|
|
B/(W)
|
|
|
|
|
|
|
|
Company sales
|
|
$
|
444
|
|
|
$
|
509
|
|
|
(13
|
)
|
Franchise and license fees and income
|
|
225
|
|
|
199
|
|
|
13
|
|
Total revenues
|
|
669
|
|
|
708
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
Company restaurant expenses, net
|
|
|
|
|
|
|
Food and paper
|
|
153
|
|
|
167
|
|
|
8
|
|
Payroll and employee benefits
|
|
105
|
|
|
130
|
|
|
19
|
|
Occupancy and other operating expenses
|
|
126
|
|
|
150
|
|
|
17
|
|
|
|
384
|
|
|
447
|
|
|
14
|
|
General and administrative expenses
|
|
74
|
|
|
82
|
|
|
11
|
|
Franchise and license expenses
|
|
12
|
|
|
10
|
|
|
(9
|
)
|
Closures and impairment (income) expenses
|
|
—
|
|
|
1
|
|
|
45
|
|
Other (income) expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
470
|
|
|
540
|
|
|
13
|
|
Operating Profit
|
|
$
|
199
|
|
|
$
|
168
|
|
|
19
|
|
|
|
|
|
|
|
|
Company sales
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
Food and paper
|
|
34.5
|
|
|
32.8
|
|
|
(1.7 ppts.)
|
Payroll and employee benefits
|
|
23.6
|
|
|
25.5
|
|
|
1.9 ppts.
|
Occupancy and other operating expenses
|
|
28.3
|
|
|
29.5
|
|
|
1.2 ppts.
|
Restaurant margin
|
|
13.6
|
%
|
|
12.2
|
%
|
|
1.4 ppts.
|
|
|
|
|
|
|
|
Operating margin
|
|
29.9
|
%
|
|
23.7
|
%
|
|
6.2 ppts.
|
|
See accompanying notes.
|
|
Percentages may not recompute due to rounding.
|
|
|
|
|
|
YUM! Brands, Inc. UNITED STATES DIVISION Operating
Results (amounts in millions) (unaudited)
|
|
|
|
Quarter ended
|
|
% Change
|
|
|
3/23/13
|
|
3/24/12
|
|
B/(W)
|
|
|
|
|
|
|
|
Company sales
|
|
$
|
505
|
|
|
$
|
622
|
|
|
(19
|
)
|
Franchise and license fees and income
|
|
190
|
|
|
178
|
|
|
7
|
|
Total revenues
|
|
695
|
|
|
800
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
Company restaurant expenses, net
|
|
|
|
|
|
|
Food and paper
|
|
145
|
|
|
182
|
|
|
21
|
|
Payroll and employee benefits
|
|
151
|
|
|
193
|
|
|
22
|
|
Occupancy and other operating expenses
|
|
124
|
|
|
157
|
|
|
21
|
|
|
|
420
|
|
|
532
|
|
|
21
|
|
General and administrative expenses
|
|
94
|
|
|
96
|
|
|
3
|
|
Franchise and license expenses
|
|
16
|
|
|
15
|
|
|
(18
|
)
|
Closures and impairment (income) expenses
|
|
1
|
|
|
(1
|
)
|
|
NM
|
|
Other (income) expense
|
|
(1
|
)
|
|
—
|
|
|
NM
|
|
|
|
530
|
|
|
642
|
|
|
18
|
|
Operating Profit
|
|
$
|
165
|
|
|
$
|
158
|
|
|
5
|
|
|
|
|
|
|
|
|
Company sales
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
Food and paper
|
|
28.6
|
|
|
29.2
|
|
|
0.6 ppts.
|
Payroll and employee benefits
|
|
29.9
|
|
|
31.1
|
|
|
1.2 ppts.
|
Occupancy and other operating expenses
|
|
24.7
|
|
|
25.3
|
|
|
0.6 ppts.
|
|
|
16.8
|
%
|
|
14.4
|
%
|
|
2.4 ppts.
|
|
|
|
|
|
|
|
Operating margin
|
|
23.7
|
%
|
|
19.7
|
%
|
|
4.0 ppts.
|
|
See accompanying notes.
|
|
Percentages may not recompute due to rounding.
|
|
|
|
|
|
YUM! Brands, Inc. Condensed Consolidated Balance
Sheets (amounts in millions)
|
|
|
|
(unaudited)
|
|
|
|
|
3/23/13
|
|
12/29/12
|
ASSETS
|
|
|
|
|
Current Assets
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
762
|
|
|
$
|
776
|
|
Accounts and notes receivable, less allowance: $12 in 2013 and 2012
|
|
368
|
|
|
301
|
|
Inventories
|
|
288
|
|
|
313
|
|
Prepaid expenses and other current assets
|
|
227
|
|
|
272
|
|
Deferred income taxes
|
|
133
|
|
|
127
|
|
Advertising cooperative assets, restricted
|
|
120
|
|
|
136
|
|
Total Current Assets
|
|
1,898
|
|
|
1,925
|
|
|
|
|
|
|
Property, plant and equipment, net of accumulated depreciation and
amortization of $3,170 in 2013 and $3,139 in 2012
|
|
4,258
|
|
|
4,250
|
|
Goodwill
|
|
1,026
|
|
|
1,034
|
|
Intangible assets, net
|
|
693
|
|
|
690
|
|
Investments in unconsolidated affiliates
|
|
31
|
|
|
72
|
|
Other assets
|
|
571
|
|
|
575
|
|
Deferred income taxes
|
|
468
|
|
|
467
|
|
Total Assets
|
|
$
|
8,945
|
|
|
$
|
9,013
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
Current Liabilities
|
|
|
|
|
Accounts payable and other current liabilities
|
|
$
|
1,866
|
|
|
$
|
2,036
|
|
Income taxes payable
|
|
82
|
|
|
97
|
|
Short-term borrowings
|
|
21
|
|
|
10
|
|
Advertising cooperative liabilities
|
|
120
|
|
|
136
|
|
Total Current Liabilities
|
|
2,089
|
|
|
2,279
|
|
|
|
|
|
|
Long-term debt
|
|
2,924
|
|
|
2,932
|
|
Other liabilities and deferred credits
|
|
1,515
|
|
|
1,490
|
|
Total Liabilities
|
|
6,528
|
|
|
6,701
|
|
|
|
|
|
|
Redeemable noncontrolling interest
|
|
59
|
|
|
59
|
|
|
|
|
|
|
Shareholders' Equity
|
|
|
|
|
Common stock, no par value, 750 shares authorized; 450 shares and
451 shares issued in 2013 and 2012, respectively
|
|
—
|
|
|
—
|
|
Retained earnings
|
|
2,413
|
|
|
2,286
|
|
Accumulated other comprehensive income (loss)
|
|
(120
|
)
|
|
(132
|
)
|
Total Shareholders' Equity - YUM! Brands, Inc.
|
|
2,293
|
|
|
2,154
|
|
Noncontrolling interests
|
|
65
|
|
|
99
|
|
Total Shareholders' Equity
|
|
2,358
|
|
|
2,253
|
|
Total Liabilities, Redeemable Noncontrolling Interest and
Shareholders' Equity
|
|
$
|
8,945
|
|
|
$
|
9,013
|
|
|
See accompanying notes.
|
|
|
|
|
|
YUM! Brands, Inc. Condensed Consolidated Statements
of Cash Flows (amounts in millions) (unaudited)
|
|
|
|
Quarter ended
|
|
|
3/23/2013
|
|
3/24/2012
|
Cash Flows - Operating Activities
|
|
|
|
|
Net income - including noncontrolling interests
|
|
$
|
336
|
|
|
$
|
461
|
|
Depreciation and amortization
|
|
130
|
|
|
127
|
|
Closures and impairment (income) expenses
|
|
4
|
|
|
1
|
|
Refranchising (gain) loss
|
|
(17
|
)
|
|
(26
|
)
|
Contributions to defined benefit pension plans
|
|
(1
|
)
|
|
(8
|
)
|
Gain upon acquisition of Little Sheep
|
|
—
|
|
|
(74
|
)
|
Deferred income taxes
|
|
(6
|
)
|
|
(4
|
)
|
Equity income from investments in unconsolidated affiliates
|
|
(7
|
)
|
|
(13
|
)
|
Excess tax benefit from share-based compensation
|
|
(11
|
)
|
|
(28
|
)
|
Share-based compensation expense
|
|
9
|
|
|
11
|
|
Changes in accounts and notes receivable
|
|
9
|
|
|
29
|
|
Changes in inventories
|
|
26
|
|
|
27
|
|
Changes in prepaid expenses and other current assets
|
|
(8
|
)
|
|
(15
|
)
|
Changes in accounts payable and other current liabilities
|
|
(81
|
)
|
|
(124
|
)
|
Changes in income taxes payable
|
|
18
|
|
|
70
|
|
Other, net
|
|
—
|
|
|
39
|
|
Net Cash Provided by Operating Activities
|
|
401
|
|
|
473
|
|
|
|
|
|
|
Cash Flows - Investing Activities
|
|
|
|
|
Capital spending
|
|
(237
|
)
|
|
(173
|
)
|
Proceeds from refranchising of restaurants
|
|
81
|
|
|
102
|
|
Acquisitions
|
|
—
|
|
|
(540
|
)
|
Changes in restricted cash
|
|
—
|
|
|
300
|
|
Increase in short-term investments
|
|
—
|
|
|
(79
|
)
|
Other, net
|
|
3
|
|
|
(1
|
)
|
Net Cash Used in Investing Activities
|
|
(153
|
)
|
|
(391
|
)
|
|
|
|
|
|
Cash Flows - Financing Activities
|
|
|
|
|
Repayments of long-term debt
|
|
(1
|
)
|
|
(3
|
)
|
Short-term borrowings, more than three months, net
|
|
9
|
|
|
—
|
|
Revolving credit facilities, three months or less, net
|
|
—
|
|
|
—
|
|
Repurchase shares of Common Stock
|
|
(98
|
)
|
|
(78
|
)
|
Excess tax benefit from share-based compensation
|
|
11
|
|
|
28
|
|
Employee stock option proceeds
|
|
5
|
|
|
16
|
|
Dividends paid on Common Stock
|
|
(151
|
)
|
|
(131
|
)
|
Other, net
|
|
(34
|
)
|
|
(20
|
)
|
Net Cash Used in Financing Activities
|
|
(259
|
)
|
|
(188
|
)
|
Effect of Exchange Rate on Cash and Cash Equivalents
|
|
(3
|
)
|
|
7
|
|
Net Decrease in Cash and Cash Equivalents
|
|
(14
|
)
|
|
(99
|
)
|
Cash and Cash Equivalents - Beginning of Period
|
|
776
|
|
|
1,198
|
|
Cash and Cash Equivalents - End of Period
|
|
$
|
762
|
|
|
$
|
1,099
|
|
|
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 2013 and 2012 on a basis before
Special Items. Included in Special Items are the U.S.
refranchising gain (loss), the gain on the acquisition of Little
Sheep and losses associated with the refranchising of the Pizza
Hut UK dine-in business. These amounts are described in (c), (d)
and (e) in the accompanying notes. Other Special Items Income
(Expense) includes the depreciation reductions in 2012 from Pizza
Hut UK and KFC U.S. restaurants impaired upon our decision or
offer to refranchise that remained Company stores for some or all
of the periods presented and charges relating to U.S. General and
Administrative ("G&A") productivity initiatives and realignment of
resources.
|
|
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 23, 2013 and March 24, 2012 that the Company does not
believe are indicative of our ongoing operations due to their size
and/or nature.
|
|
|
|
Quarter ended
|
|
|
3/23/13
|
|
3/24/12
|
Detail of Special Items
|
|
|
|
|
U.S. Refranchising gain (loss)(c) |
|
$
|
17
|
|
|
$
|
45
|
|
Gain upon acquisition of Little Sheep(d) |
|
—
|
|
|
74
|
|
Loss associated with the refranchising of the Pizza Hut UK dine-in
business(e) |
|
—
|
|
|
(21
|
)
|
Other Special Items Income (Expense)
|
|
—
|
|
|
3
|
|
Total Special Items Income (Expense)
|
|
17
|
|
|
101
|
|
Tax Benefit (Expense) on Special Items
|
|
(6
|
)
|
|
(7
|
)
|
Special Items Income (Expense), net of tax
|
|
$
|
11
|
|
|
$
|
94
|
|
Average diluted shares outstanding
|
|
465
|
|
|
478
|
|
Special Items diluted EPS
|
|
$
|
0.02
|
|
|
$
|
0.20
|
|
|
|
|
|
|
Reconciliation of Operating Profit Before Special Items to
Reported Operating Profit
|
|
|
|
|
Operating Profit Before Special Items
|
|
$
|
470
|
|
|
$
|
544
|
|
Special Items Income (Expense)
|
|
17
|
|
|
101
|
|
Reported Operating Profit
|
|
$
|
487
|
|
|
$
|
645
|
|
|
|
|
|
|
Reconciliation of EPS Before Special Items to Reported EPS
|
|
|
|
|
Diluted EPS Before Special Items
|
|
$
|
0.70
|
|
|
$
|
0.76
|
|
Special Items EPS
|
|
0.02
|
|
|
0.20
|
|
Reported EPS
|
|
$
|
0.72
|
|
|
$
|
0.96
|
|
|
|
|
|
|
Reconciliation of Effective Tax Rate Before Special Items to
Reported Effective Tax Rate
|
|
|
|
|
Effective Tax Rate Before Special Items
|
|
26.0
|
%
|
|
27.5
|
%
|
Impact on Tax Rate as a result of Special Items
|
|
0.4
|
%
|
|
(3.4
|
)%
|
Reported Effective Tax Rate
|
|
26.4
|
%
|
|
24.1
|
%
|
|
|
|
|
|
YUM! Brands, Inc. Segment Results (amounts
in millions) (unaudited)
|
|
Quarter Ended 3/23/13
|
|
China
|
|
YRI
|
|
United
States
|
|
India
|
|
Corporate
and
Unallocated
|
|
Consolidated
|
Total revenues
|
|
$
|
1,151
|
|
|
$
|
669
|
|
|
$
|
695
|
|
|
$
|
20
|
|
|
$
|
—
|
|
|
$
|
2,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company restaurant expenses
|
|
945
|
|
|
384
|
|
|
420
|
|
|
17
|
|
|
—
|
|
|
1,766
|
|
General and administrative expenses
|
|
55
|
|
|
74
|
|
|
94
|
|
|
4
|
|
|
46
|
|
|
273
|
|
Franchise and license expenses
|
|
2
|
|
|
12
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
30
|
|
Closures and impairment (income) expenses
|
|
2
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
4
|
|
Refranchising (gain) loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
|
(17
|
)
|
Other (income) expense
|
|
(7
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
|
997
|
|
|
470
|
|
|
530
|
|
|
22
|
|
|
29
|
|
|
2,048
|
|
Operating Profit (loss)
|
|
$
|
154
|
|
|
$
|
199
|
|
|
$
|
165
|
|
|
$
|
(2
|
)
|
|
$
|
(29
|
)
|
|
$
|
487
|
|
|
|
|
|
Quarter Ended 3/24/12
|
|
China
|
|
YRI
|
|
United
States
|
|
India
|
|
Corporate
and
Unallocated
|
|
Consolidated
|
Total revenues
|
|
$
|
1,218
|
|
|
$
|
708
|
|
|
$
|
800
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
2,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company restaurant expenses
|
|
917
|
|
|
447
|
|
|
532
|
|
|
12
|
|
|
(4
|
)
|
|
1,904
|
|
General and administrative expenses
|
|
48
|
|
|
82
|
|
|
96
|
|
|
4
|
|
|
42
|
|
|
272
|
|
Franchise and license expenses
|
|
1
|
|
|
10
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
26
|
|
Closures and impairment (income) expenses
|
|
1
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
Refranchising (gain) loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26
|
)
|
|
(26
|
)
|
Other (income) expense
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(74
|
)
|
|
(79
|
)
|
|
|
962
|
|
|
540
|
|
|
642
|
|
|
16
|
|
|
(62
|
)
|
|
2,098
|
|
Operating Profit (loss)
|
|
$
|
256
|
|
|
$
|
168
|
|
|
$
|
158
|
|
|
$
|
1
|
|
|
$
|
62
|
|
|
$
|
645
|
|
|
|
The above tables reconcile segment information, which is based on
management responsibility, with our Condensed Consolidated Summary
of Results. Corporate and unallocated expenses comprise items
that are not allocated to segments for performance reporting
purposes.
|
|
The Corporate and Unallocated column in the above tables includes,
among other amounts, all amounts that we have deemed Special
Items. See Reconciliation of Non-GAAP Measurements to GAAP
Results.
|
|
|
|
|
|
Notes to the Condensed Consolidated Summary of Results,
Condensed Consolidated Balance Sheets
|
and Condensed Consolidated Statements of Cash Flows
|
(amounts in millions, except per share amounts)
|
(unaudited)
|
|
|
(a)
|
Amounts presented as of and for the quarter ended March 23, 2013 are
preliminary.
|
|
|
(b)
|
Other (income) expense for the China Division primarily consists of
equity income from investments in unconsolidated affiliates. The
quarter ended March 24, 2012 also includes costs related to the
acquisition of Little Sheep Group Limited ("Little Sheep").
|
|
|
(c)
|
During the quarters ended March 23, 2013 and March 24, 2012, we
recorded gains of $17 million and $45 million, respectively, 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).
|
|
|
(d)
|
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).
|
|
|
(e)
|
During the quarter ended December 29, 2012, we refranchised our
remaining 331 Pizza Hut UK dine-in restaurants. During the quarter
ended March 24, 2012, we recorded pre-tax losses of $21 million to
Refranchising (gain) loss primarily to adjust the carrying amount of
the asset group to its then estimated fair value. These losses were
not allocated for segment reporting purposes and were reflected as
Special Items for certain performance measures (see accompanying
reconciliation to reported results).
|
|
|
|
For the quarter ended March 23, 2013, the refranchising of the Pizza
Hut UK dine-in restaurants decreased Company sales by 21% and
increased Franchise and license fees and income and Operating Profit
by 2% and 3%, respectively, for the YRI Division.
|
|
|
(f)
|
During the quarter ended March 23, 2013 we eliminated the period
lag that we previously used to facilitate the reporting of our
India Division's results. Accordingly, the India Division results
for the first quarter of 2013 include the months of January and
February 2013. Due to the immateriality of the India Division's
results we did not restate the prior year operating results for
the elimination of this period lag and therefore the results for
the first quarter of 2012 continue to include the months of
December 2011 and January 2012. However, we have presented India
Division system sales growth, same-store sales growth and
restaurant unit growth within this release by comparing January
and February 2013 to January and February 2012 to enhance
comparability.
|
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