Yum! Brands Reports Second-Quarter Results

Same-Store Sales Growth of 23%

Yum! Brands, Inc. (NYSE: YUM) today reported results for the second-quarter ended June 30, 2021. Worldwide system sales excluding foreign currency translation grew 26%, with 23% same-store sales and 2% unit growth. Second-quarter GAAP EPS was $1.29, an increase of 91% over the prior year quarter. Second-quarter EPS excluding Special Items was $1.16, an increase of 41% over the prior year quarter.

DAVID GIBBS COMMENTS

David Gibbs, CEO, said “Our strong second-quarter results, led by record unit development and 23% same-store sales growth are a testament to our iconic brands, world-class talent, and best-in-class franchisees. I’m proud that each of our divisions reported positive same-store sales growth on a 2-year basis, a step up from first-quarter trends. This sustained momentum was underpinned by our investments in digital and off-premise and the agility of our brands to meet the needs of consumers in an ever-changing environment. I’m thrilled to say that unit development has accelerated driven by strong unit-level economics. On the basis of these strong results, we’re reinstating our long-term growth algorithm and revising the unit growth component of this algorithm from 4% unit growth to between 4% and 5% unit growth. The resilience of our diversified global business positions us perfectly to drive growth and maximize value creation for all our stakeholders for years to come.”

SECOND-QUARTER HIGHLIGHTS

  • Worldwide system sales excluding foreign currency translation grew 26%, with KFC at 35%, Taco Bell at 24% and Pizza Hut at 10%.
  • We reported 2% unit growth year-over-year and record second-quarter net new unit growth of 603.
  • Foreign currency translation favorably impacted divisional operating profit by $27 million.

% Change

System Sales
Ex F/X

Same-Store Sales

Units

GAAP Operating
Profit

Core
Operating Profit1

KFC Division

+35

+30

+5

+108

+93

Pizza Hut Division

+10

+10

(3)

+18

+14

Taco Bell Division

+24

+21

+2

+29

+29

Worldwide

+26

+23

+2

+89

+53

Second-Quarter

Year-to-Date

2021

2020

% Change

2021

2020

% Change

GAAP EPS

$1.29

$0.67

+91

$2.35

$0.94

 +150

Special Items EPS1

$0.13

$(0.15)

NM

 $0.13

$(0.52)

NM

EPS Excluding Special Items

$1.16

$0.82

+41

$2.22

$1.46

+52

1 See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further detail of Core Operating Profit and Special Items.

All comparisons are versus the same period a year ago.

System sales growth figures exclude foreign currency translation (“F/X”) and core operating profit growth figures exclude F/X and Special Items. Special Items are not allocated to any segment and therefore only impact worldwide GAAP results. See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further details.

Digital system sales includes all transactions where consumers at system restaurants utilize ordering interaction that is primarily facilitated by automated technology.

KFC DIVISION

Second-Quarter

Year-to-Date

%/ppts Change

%/ppts Change

2021

2020

Reported

Ex F/X

2021

2020

Reported

Ex F/X

Restaurants

25,720

24,390

+5

N/A

25,720

24,390

+5

N/A

System Sales ($MM)

7,638

5,288

+44

+35

14,911

11,575

+29

+22

Same-Store Sales Growth (%)

+30

(21)

NM

NM

+18

(15)

NM

NM

Franchise and Property Revenues ($MM)

379

251

+52

+42

733

566

+30

+23

Operating Profit ($MM)

318

153

+108

+93

618

377

+64

+54

Operating Margin (%)

46.5

37.4

9.1

9.4

47.3

38.7

8.6

8.8

Second-Quarter (% Change)

Year-to-Date (% Change)

International

U.S.

International

U.S.

System Sales Growth Ex F/X

+42

+10

+24

+11

Same-Store Sales Growth

+36

+11

+20

+12

  • KFC Division opened 522 gross new restaurants in 62 countries.
  • Operating margin increased 9.1 percentage points driven by same-store sales growth, lower bad debt expense, and unit growth.
  • Foreign currency translation favorably impacted operating profit by $23 million.
  • For the division, same-store sales grew 2% on a 2-year basis, which includes the impact of about 1% of our stores being temporarily closed as of the end of the second-quarter 2021.
    • For KFC International, same-store sales declined 1% on a 2-year basis, which includes the impact of about 2% of our stores being temporarily closed as of the end of the second-quarter 2021.
    • For KFC U.S., same-store sales grew 19% on a 2-year basis.

KFC Markets1

Percent of KFC
System Sales
2

System Sales Growth Ex F/X

Second-Quarter
(% Change)

Year-to-Date
(% Change)

China

27%

+14

+19

United States

18%

+10

+11

Asia

12%

+11

+5

Russia, Central & Eastern Europe

7%

+101

+40

Australia

7%

+23

+17

United Kingdom

6%

+248

+80

Western Europe

5%

+65

+28

Latin America

5%

+81

+29

Africa

4%

+186

+55

Middle East / Turkey / North Africa

4%

+118

+49

Canada

2%

+15

+13

Thailand

2%

Even

(10)

India

1%

+221

+61

1Refer to investors.yum.com/financial-information/financial-reports/ for a list of the countries within each of the markets.

2Reflects Full Year 2020.

PIZZA HUT DIVISION

Second-Quarter

Year-to-Date

%/ppts Change

%/ppts Change

2021

2020

Reported

Ex F/X

2021

2020

Reported

Ex F/X

Restaurants

17,809

18,326

(3)

N/A

17,809

18,326

(3)

N/A

System Sales ($MM)

3,143

2,753

+14

+10

6,239

5,554

+12

+9

Same-Store Sales Growth (%)

+10

(9)

NM

NM

+11

(10)

NM

NM

Franchise and Property Revenues ($MM)

147

126

+16

+12

288

259

+11

+8

Operating Profit ($MM)

103

87

+18

+14

205

163

+25

+21

Operating Margin (%)

41.3

36.8

4.5

4.0

41.0

34.8

6.2

5.8

Second-Quarter (% Change)

Year-to-Date (% Change)

International

U.S.

International

U.S.

System Sales Growth Ex F/X

+19

Even

+13

+4

Same-Store Sales Growth

+16

+4

+12

+10

  • Pizza Hut Division opened 210 gross new restaurants in 36 countries.
  • Operating margin increased 4.5 percentage points driven by same-store sales growth.
  • Foreign currency translation favorably impacted operating profit by $4 million.
  • For the division, same-store sales grew 1% on a 2-year basis, which includes the impact of about 2% of our stores being temporarily closed as of the end of the second-quarter 2021.
    • For Pizza Hut International, same-store sales declined 6% on a 2-year basis, which includes the impact of about 2% of our stores being temporarily closed as of the end of the second-quarter 2021.
    • For Pizza Hut U.S., same-store sales grew 9% on a 2-year basis, which includes the impact of about 1% of our stores being temporarily closed as of the end of the second-quarter 2021.

Pizza Hut Markets1

Percent of Pizza Hut
System Sales2

System Sales Growth Ex F/X

Second-Quarter
(% Change)

Year-to-Date
(% Change)

United States

45%

Even

+4

China

15%

+16

+33

Asia

15%

+2

+1

Latin America / Spain / Portugal

10%

+36

+11

Europe (excluding Spain & Portugal)

8%

+26

(3)

Middle East / Turkey / North Africa

3%

+57

+13

Canada

3%

+12

+15

India

1%

+163

+51

Africa

<1%

+157

+60

1Refer to investors.yum.com/financial-information/financial-reports/ for a list of the countries within each of the markets.

2Reflects Full Year 2020.

TACO BELL DIVISION

Second-Quarter

Year-to-Date

%/ppts Change

%/ppts Change

2021

2020

Reported

Ex F/X

2021

2020

Reported

Ex F/X

Restaurants

7,567

7,400

+2

N/A

7,567

7,400

+2

N/A

System Sales ($MM)

3,189

2,564

+24

+24

6,069

5,160

+18

+17

Same-Store Sales Growth (%)

+21

(8)

NM

NM

+15

(4)

NM

NM

Franchise and Property Revenues ($MM)

179

147

+22

+21

341

295

+16

+15

Operating Profit ($MM)

198

154

+29

+29

376

298

+26

+26

Operating Margin (%)

37.2

34.4

2.8

2.8

36.8

33.0

3.8

3.8

  • Taco Bell Division opened 91 gross new restaurants in 18 countries.
  • Operating margin increased 2.8 percentage points due to same-store sales growth offset by higher restaurant costs.
  • For the division, same-store sales grew 12% on a 2-year basis.

HABIT BURGER GRILL DIVISION

  • The Habit Burger Grill Division opened 4 gross new restaurants in the U.S and Cambodia.
  • During the quarter, The Habit Burger Grill Division same-store sales grew 31%.
    • For the year-to-date, The Habit Burger Grill Division same-store sales grew 22%.
  • For the division, same-store sales grew 7% on a 2-year basis, which includes the impact of about 1% of stores that were temporarily closed as of the end of the second-quarter 2021.

OTHER ITEMS

  • Same-store sales growth on a 2-year basis is calculated using the geometric method as follows: (1 + Q2 2020 reported same-store sales growth) * (1 + Q2 2021 reported same-store sales growth) – 1.
  • On April 1, we issued $1.1 billion of YUM Senior Unsecured Notes with a coupon of 4.625% due in 2032. The proceeds from this transaction were used to redeem $1.05 billion of 5.25% Subsidiary Senior Unsecured Notes (due in 2026), including the applicable call premium.
  • On June 30, we issued a redemption notice for our $350 million 3.75% YUM Senior Unsecured Notes, which were scheduled to mature on November 1, 2021. The notes will be redeemed on August 2, 2021 at par.
  • 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.

Yum! Brands, Inc., based in Louisville, Kentucky, has over 51,000 restaurants in more than 150 countries and territories primarily operating the company’s brands – KFC, Pizza Hut and Taco Bell – global leaders of the chicken, pizza and Mexican-style food categories. The Company’s family of brands also includes The Habit Burger Grill, a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more.

               

YUM! Brands, Inc.

Condensed Consolidated Summary of Results

(amounts in millions, except per share amounts)

(unaudited)

 

Quarter ended

% Change

Year to date

% Change

6/30/21

6/30/20

B/(W)

6/30/21

6/30/20

B/(W)

Revenues

Company sales

$

520

$

403

29

$

996

$

758

31

Franchise and property revenues

706

525

35

1,364

1,121

22

Franchise contributions for advertising and other services

376

270

39

728

582

25

Total revenues

1,602

1,198

34

3,088

2,461

26

Costs and Expenses, Net

Company restaurant expenses

417

349

(20)

809

647

(25)

General and administrative expenses

230

259

12

436

467

7

Franchise and property expenses

27

36

25

50

94

48

Franchise advertising and other services expense

372

264

(41)

715

574

(25)

Refranchising (gain) loss

(7

)

(8

)

(18)

(22

)

(21

)

2

Other (income) expense

(4

)

(2

)

NM

(10

)

150

NM

Total costs and expenses, net

1,035

898

(15)

1,978

1,911

(4)

Operating Profit

567

300

89

1,110

550

102

Investment (income) expense, net

(1

)

(91

)

(99)

(1

)

(57

)

(99)

Other pension (income) expense

2

2

23

5

5

7

Interest expense, net

159

132

(21)

290

250

(17)

Income before income taxes

407

257

58

816

352

132

Income tax provision

16

51

68

99

63

(58)

Net Income

$

391

$

206

89

$

717

$

289

148

Basic EPS

EPS

$

1.31

$

0.68

92

$

2.39

$

0.96

150

Average shares outstanding

298

303

1

299

302

1

Diluted EPS

EPS

$

1.29

$

0.67

91

$

2.35

$

0.94

150

Average shares outstanding

304

307

1

304

307

1

Dividends declared per common share

$

0.50

$

0.47

$

1.00

$

0.94

                               

See accompanying notes.

Percentages may not recompute due to rounding.

               

YUM! Brands, Inc.

KFC DIVISION Operating Results

(amounts in millions)

(unaudited)

               

Quarter ended

% Change

Year to date

% Change

6/30/21

6/30/20

B/(W)

6/30/21

6/30/20

B/(W)

Company sales

$

147

$

86

70

$

280

$

216

29

Franchise and property revenues

379

251

52

733

566

30

Franchise contributions for advertising and other services

156

72

115

294

193

52

Total revenues

682

409

67

1,307

975

34

Company restaurant expenses

118

83

(41)

229

198

(16)

General and administrative expenses

80

70

(13)

153

143

(6)

Franchise and property expenses

15

29

46

29

62

53

Franchise advertising and other services expense

151

70

(117)

284

190

(50)

Other (income) expense

4

NM

(6

)

5

NM

Total costs and expenses, net

364

256

(42)

689

598

(15)

Operating Profit

$

318

$

153

108

$

618

$

377

64

Company restaurant margin %1

19.2

%

2.7

%

16.5 ppts.

18.0

%

8.1

%

9.9 ppts.

Operating margin

46.5

%

37.4

%

9.1 ppts.

47.3

%

38.7

%

8.6 ppts.

                             

See accompanying notes.

Percentages may not recompute due to rounding.

 

1See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further detail of Company restaurant margin %.

               

YUM! Brands, Inc.

PIZZA HUT DIVISION Operating Results

(amounts in millions)

(unaudited)

               

Quarter ended

% Change

Year to date

% Change

6/30/21

6/30/20

B/(W)

6/30/21

6/30/20

B/(W)

Company sales

$

12

$

19

(34)

$

26

$

37

(29)

Franchise and property revenues

147

126

16

288

259

11

Franchise contributions for advertising and other services

90

90

186

174

7

Total revenues

249

235

6

500

470

6

Company restaurant expenses

11

18

36

24

37

34

General and administrative expenses

43

44

6

83

90

9

Franchise and property expenses

5

1

(389)

7

13

48

Franchise advertising and other services expense

91

87

(5)

185

171

(8)

Other (income) expense

(4

)

(2

)

NM

(4

)

(4

)

NM

Total costs and expenses, net

146

148

2

295

307

4

Operating Profit

$

103

$

87

18

$

205

$

163

25

Company restaurant margin %1

8.0

%

4.5

%

3.5 ppts.

7.3

%

0.8

%

6.5 ppts.

Operating margin

41.3

%

36.8

%

4.5 ppts.

41.0

%

34.8

%

6.2 ppts.

                       

See accompanying notes.

Percentages may not recompute due to rounding.

 

1See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further detail of Company restaurant margin %.

               

YUM! Brands, Inc.

TACO BELL DIVISION Operating Results

(amounts in millions)

(unaudited)

               

Quarter ended

% Change

Year to date

% Change

6/30/21

6/30/20

B/(W)

6/30/21

6/30/20

B/(W)

Company sales

$

223

$

194

16

$

431

$

392

10

Franchise and property revenues

179

147

22

341

295

16

Franchise contributions for advertising and other services

130

108

21

248

215

15

Total revenues

532

449

19

1,020

902

13

Company restaurant expenses

165

147

(13)

323

300

(8)

General and administrative expenses

33

37

10

64

75

14

Franchise and property expenses

7

5

(34)

14

16

14

Franchise advertising and other services expense

130

107

(21)

246

213

(15)

Other (income) expense

(1

)

(1

)

NM

(3

)

NM

Total costs and expenses, net

334

295

(14)

644

604

(7)

Operating Profit

$

198

$

154

29

$

376

$

298

26

Company restaurant margin %1

25.9

%

24.5

%

1.4 ppts.

25.0

%

23.5

%

1.5 ppts.

Operating margin

37.2

%

34.4

%

2.8 ppts.

36.8

%

33.0

%

3.8 ppts.

                         

See accompanying notes.

Percentages may not recompute due to rounding.

 

1See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further detail of Company restaurant margin %.

       

YUM! Brands, Inc.

Condensed Consolidated Balance Sheets

(amounts in millions)

       

(unaudited)
6/30/21

12/31/20

ASSETS

Current Assets

Cash and cash equivalents

$

552

$

730

Accounts and notes receivable, less allowance: $34 in 2021 and $45 in 2020

525

534

Prepaid expenses and other current assets

437

425

Total Current Assets

1,514

1,689

Property, plant and equipment, net of accumulated depreciation of $1,279 in 2021 and $1,230 in 2020

1,211

1,235

Goodwill

597

597

Intangible assets, net

352

343

Other assets

1,408

1,435

Deferred income taxes

567

553

Total Assets

$

5,649

$

5,852

LIABILITIES AND SHAREHOLDERS’ DEFICIT

Current Liabilities

Accounts payable and other current liabilities

$

1,142

$

1,189

Income taxes payable

16

33

Short-term borrowings

400

453

Total Current Liabilities

1,558

1,675

Long-term debt

10,258

10,272

Other liabilities and deferred credits

1,726

1,796

Total Liabilities

13,542

13,743

Shareholders’ Deficit

Common Stock, no par value, 750 shares authorized; 296 shares issued in 2021 and 300 issued in 2020

Accumulated deficit

(7,569

)

(7,480

)

Accumulated other comprehensive loss

(324

)

(411

)

Total Shareholders’ Deficit

(7,893

)

(7,891

)

Total Liabilities and Shareholders’ Deficit

$

5,649

$

5,852

           

See accompanying notes.

   

YUM! Brands, Inc.

Condensed Consolidated Statements of Cash Flows

(amounts in millions)

(unaudited)

   

Quarter ended

6/30/21

6/30/20

Cash Flows – Operating Activities

Net Income

$

717

$

289

Depreciation and amortization

78

53

Impairment and closure expense

1

146

Refranchising (gain) loss

(22

)

(21

)

Investment (income) expense, net

(1

)

(57

)

Contributions to defined benefit pension plans

(3

)

(1

)

Deferred income taxes

(41

)

(20

)

Share-based compensation expense

38

29

Changes in accounts and notes receivable

25

4

Changes in prepaid expenses and other current assets

(11

)

(26

)

Changes in accounts payable and other current liabilities

(95

)

(76

)

Changes in income taxes payable

(25

)

(49

)

Other, net

112

91

Net Cash Provided by Operating Activities

773

362

Cash Flows – Investing Activities

Capital spending

(84

)

(67

)

Acquisition of The Habit Restaurants, Inc.

(408

)

Proceeds from refranchising of restaurants

43

3

Other, net

33

Net Cash Used in Financing Activities

(8

)

(472

)

Cash Flows – Financing Activities

Proceeds from long-term debt

1,900

600

Repayments of long-term debt

(2,002

)

(41

)

Revolving credit facilities, three months or less, net

575

Short-term borrowings by original maturity

More than three months – proceeds

85

More than three months – payments

(90

)

Three months or less, net

Repurchase shares of Common Stock

(530

)

Dividends paid on Common Stock

(299

)

(283

)

Debt issuance costs

(18

)

(7

)

Other, net

(17

)

(31

)

Net Cash Provided by (Used in) Financing Activities

(966

)

808

Effect of Exchange Rate on Cash and Cash Equivalents

11

(18

)

Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

(190

)

680

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents – Beginning of Period

1,024

768

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents – End of Period

$

834

$

1,448

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 Generally Accepted Accounting Principles in the United States of America (“GAAP”), the Company provides the following non-GAAP measurements.

  • 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;
  • Company restaurant profit and Company restaurant margin as a percentage of sales (as defined below).

These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of these non-GAAP measurements provide additional information to investors to facilitate the comparison of past and present operations.

Special Items are not included in any of our Division segment results as the Company does not believe they are indicative of our ongoing operations due to their size and/or nature. Our chief operating decision maker does not consider the impact of Special Items when assessing segment performance. The Special Items are described in (a) – (h) in the accompanying notes.

Company restaurant profit is defined as Company sales less Company restaurant expenses, both of which appear on the face of our Condensed Consolidated Statements of Income. Company restaurant expenses include those expenses incurred directly by our Company-owned restaurants in generating Company sales, including cost of food and paper, cost of restaurant-level labor, rent, depreciation and amortization of restaurant-level assets and advertising expenses incurred by and on behalf of that Company restaurant. Company restaurant margin as a percentage of sales (“Company restaurant margin %”) is defined as Company restaurant profit divided by Company sales. We use Company restaurant profit for the purposes of internally evaluating the performance of our Company-owned restaurants and we believe Company restaurant profit provides useful information to investors as to the profitability of our Company-owned restaurants. In calculating Company restaurant profit, the Company excludes revenues and expenses directly associated with our franchise operations as well as non-restaurant-level costs included in General and administrative expenses, some of which may support Company-owned restaurant operations. The Company also excludes restaurant-level asset impairment and closures expenses, which have historically not been significant, from the determination of Company restaurant profit as such expenses are not believed to be indicative of ongoing operations. Company restaurant profit and Company restaurant margin % as presented may not be comparable to other similarly titled measures of other companies in the industry.

Certain non-GAAP measurements are presented excluding the impact of FX. These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the FX impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.

         

Quarter ended

Year to date

6/30/21

6/30/20

6/30/21

6/30/20

Detail of Special Items

Refranchising gain (loss)(a)

$

2

$

3

$

4

$

6

Costs associated with acquisition and integration of Habit Burger Grill(b)

(3

)

(9

)

Impairment of Habit Burger Grill goodwill(c)

(139

)

Unlocking Opportunity Initiative contribution(d)

(50

)

(50

)

Charges associated with resource optimization(e)

(2

)

(3

)

Other Special Items Income (Expense)

(4

)

1

(7

)

Special Items Income (Expense) – Operating Profit

(54

)

2

(199

)

Charges associated with resource optimization – Other pension (expense) income(e)

1

1

Interest expense, net(f)

(34

)

(34

)

Special Items Income (Expense) before Income Taxes

(33

)

(54

)

(31

)

(199

)

Tax Benefit on Special Items(g)

8

7

7

40

Tax Benefit – Intra-entity transfer of intellectual property(h)

64

64

Special Items Income (Expense), net of tax

$

39

$

(47

)

$

40

$

(159

)

Average diluted shares outstanding

304

307

304

307

Special Items diluted EPS

$

0.13

$

(0.15

)

$

0.13

$

(0.52

)

Reconciliation of GAAP Operating Profit to Core Operating Profit

Consolidated

GAAP Operating Profit

$

567

$

300

$

1,110

$

550

Special Items Income (Expense)

(54

)

2

(199

)

Foreign Currency Impact on Divisional Operating Profit

27

N/A

43

N/A

Core Operating Profit

$

540

$

354

$

1,065

$

749

KFC Division

GAAP Operating Profit

$

318

$

153

$

618

$

377

Foreign Currency Impact on Divisional Operating Profit

23

N/A

36

N/A

Core Operating Profit

$

295

$

153

$

582

$

377

Pizza Hut Division

GAAP Operating Profit

$

103

$

87

$

205

$

163

Foreign Currency Impact on Divisional Operating Profit

4

N/A

7

N/A

Core Operating Profit

$

99

$

87

$

198

$

163

Taco Bell Division

GAAP Operating Profit

$

198

$

154

$

376

$

298

Foreign Currency Impact on Divisional Operating Profit

N/A

N/A

Core Operating Profit

$

198

$

154

$

376

$

298

Habit Burger Grill Division

GAAP Operating Profit (Loss)

$

5

$

(6

)

$

5

$

(8

)

Foreign Currency Impact on Divisional Operating Profit

N/A

N/A

Core Operating Profit

$

5

$

(6

)

$

5

$

(8

)

Reconciliation of Diluted EPS to Diluted EPS excluding Special Items

Diluted EPS

$

1.29

$

0.67

$

2.35

$

0.94

Special Items Diluted EPS

0.13

(0.15

)

0.13

(0.52

)

Diluted EPS excluding Special Items

$

1.16

$

0.82

$

2.22

$

1.46

Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items

GAAP Effective Tax Rate

4.0

%

19.8

%

12.1

%

17.8

%

Impact on Tax Rate as a result of Special Items

(16.0

)%

1.0

%

(8.0

)%

(0.9

)%

Effective Tax Rate excluding Special Items

20.0

%

18.8

%

20.1

%

18.7

%

 

Reconciliation of GAAP Operating Profit to Company Restaurant Profit

Quarter ended 6/30/2021

KFC
Division

Pizza Hut
Division

Taco Bell
Division

Habit
Burger Grill
Division

Unallocated

Total

GAAP Operating Profit (Loss)

$

318

$

103

$

198

$

5

$

(57

)

$

567

Less:

Franchise and property revenues

379

147

179

1

706

Franchise contributions for advertising and other services

156

90

130

376

Add:

General and administrative expenses

80

43

33

11

63

230

Franchise and property expenses

15

5

7

27

Franchise advertising and other services expense

151

91

130

372

Refranchising (gain) loss

(7

)

(7

)

Other (income) expense

(4

)

(1

)

1

(4

)

Company restaurant profit

$

29

$

1

$

58

$

15

$

$

103

Company sales

$

147

$

12

$

223

$

138

$

$

520

Company restaurant margin %

19.2

%

8.0

%

25.9

%

11.6

%

%

19.8

%

     

Quarter ended 6/30/2020

KFC
Division

Pizza Hut
Division

Taco Bell
Division

Habit
Burger Grill
Division

Unallocated

Total

GAAP Operating Profit (Loss)

$

153

$

87

$

154

$

(6

)

$

(88

)

$

300

Less:

Franchise and property revenues

251

126

147

1

525

Franchise contributions for advertising and other services

72

90

108

270

Add:

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

)

Company restaurant profit

$

3

$

1

$

47

$

3

$

$

54

Company sales

$

86

$

19

$

194

$

104

$

$

403

Company restaurant margin %

2.7

%

4.5

%

24.5

%

3.0

%

%

13.4

     

Year to date 6/30/2021

KFC
Division

Pizza Hut
Division

Taco Bell
Division

Habit
Burger Grill
Division

Unallocated

Total

GAAP Operating Profit (Loss)

$

618

$

205

$

376

$

5

$

(94

)

$

1,110

Less:

Franchise and property revenues

733

288

341

2

1,364

Franchise contributions for advertising and other services

294

186

248

728

Add:

General and administrative expenses

153

83

64

23

113

436

Franchise and property expenses

29

7

14

50

Franchise advertising and other services expense

284

185

246

715

Refranchising (gain) loss

(22

)

(22

)

Other (income) expense

(6

)

(4

)

(3

)

3

(10

)

Company restaurant profit

$

51

$

2

$

108

$

26

$

$

187

Company sales

$

280

$

26

$

431

$

259

$

$

996

Company restaurant margin %

18.0

%

7.3

%

25.0

%

10.3

%

%

18.7

%

     

Year to date 6/30/2020

KFC
Division

Pizza Hut
Division

Taco Bell
Division

Habit
Burger Grill
Division

Unallocated

Total

GAAP Operating Profit (Loss)

$

377

$

163

$

298

$

(8

)

$

(280

)

$

550

Less:

Franchise and property revenues

566

259

295

1

1,121

Franchise contributions for advertising and other services

193

174

215

582

Add:

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

Company restaurant profit

$

18

$

$

92

$

2

$

(1

)

$

111

Company sales

$

216

$

37

$

392

$

113

$

$

758

Company restaurant margin %

8.1

%

0.8

%

23.5

%

2.1

%

%

14.7

%

                       

YUM! Brands, Inc.

Segment Results

(amounts in millions)

(unaudited)

                       

Quarter Ended 6/30/2021

KFC

Pizza Hut

Taco Bell

Habit
Burger
Grill

Corporate
and
Unallocated

Consolidated

Total revenues

$

682

$

249

$

532

$

139

$

$

1,602

Company restaurant expenses

118

11

165

123

417

General and administrative expenses

80

43

33

11

63

230

Franchise and property expenses

15

5

7

27

Franchise advertising and other services expense

151

91

130

372

Refranchising (gain) loss

(7

)

(7

)

Other (income) expense

(4

)

(1

)

1

(4

)

Total costs and expenses, net

364

146

334

134

57

1,035

Operating Profit (Loss)

$

318

$

103

$

198

$

5

$

(57

)

$

567

Quarter Ended 6/30/2020

KFC

Pizza Hut

Taco Bell

Habit
Burger
Grill

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

                                               

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.

                       

YUM! Brands, Inc.

Segment Results

(amounts in millions)

(unaudited)

                       

Year to Date 6/30/2021

KFC

Pizza Hut

Taco Bell

Habit
Burger
Grill

Corporate
and
Unallocated

Consolidated

Total revenues

$

1,307

$

500

$

1,020

$

261

$

$

3,088

Company restaurant expenses

229

24

323

233

809

General and administrative expenses

153

83

64

23

113

436

Franchise and property expenses

29

7

14

50

Franchise advertising and other services expense

284

185

246

715

Refranchising (gain) loss

(22

)

(22

)

Other (income) expense

(6

)

(4

)

(3

)

3

(10

)

Total costs and expenses, net

689

295

644

256

94

1,978

Operating Profit (Loss)

$

618

$

205

$

376

$

5

$

(94

)

$

1,110

Year to Date 6/30/2020

KFC

Pizza Hut

Taco Bell

Habit
Burger
Grill

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

                                       

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)
(unaudited)

Amounts presented as of and for the quarters and years to date ended June 30, 2021 and 2020 are preliminary.

(a)

Due to their size and volatility, 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, 2021 and 2020 as Special Items directly relate to refranchising actions initiated prior to December 31, 2018.

During the quarters ended June 30, 2021 and 2020, we recorded net refranchising gains of $2 million and $3 million, respectively, that have been reflected as Special Items. During the years to date ended June 30, 2021 and 2020, we recorded net refranchising gains of $4 million and $6 million, respectively, that have been reflected as Special Items.

Additionally, we recorded net refranchising gains of $5 million during both quarters ended June 30, 2021 and 2020, that have not been reflected as Special Items. During the years to date ended June 30, 2021 and 2020, we recorded net refranchising gains of $18 million and $15 million, respectively, that have not been reflected as Special Items. These gains relate to refranchising of restaurants in 2021 and 2020 that were not part of our aforementioned plans to achieve 98% franchise ownership and that we believe are now more indicative of our expected ongoing refranchising activity.

(b)

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”).

(c)

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, during the quarter ended March 31, 2020 we recorded a goodwill impairment charge of $139 million to Other (income) expense, which has been reflected as a Special Item. We reflected the tax benefit of this impairment charge of $32 million as a Special Item.

(d)

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 contributed $50 million in the quarter ended June 30, 2020 to Yum! Brands Foundation, Inc. (a stand-alone, not-for-profit organization that is not consolidated in the Company’s results) as part of these efforts and investment. As a result of the size and specific nature of this contribution, we have reflected the associated expense as a Special Item.

(e)

During the quarter ended June 30, 2021, we recorded a charge of $2 million to General and administrative expenses and a credit of $1 million to Other pension (income) expense related to a resource optimization program initiated in the third quarter of 2020. This program is part of our efforts to optimize our resources, reallocating them toward critical areas of the business that will drive future growth. These critical areas include accelerating our digital, technology and innovation capabilities to deliver a modern, world-class team member and customer experience and improve unit economics. These charges have been reflected as Special Items.

(f)

During the quarter ended June 30, 2021, certain subsidiaries of the Company redeemed $1,050 million aggregate principal amount of 5.25% Subsidiary Senior Unsecured Notes due in 2026 (the “2026 Notes”). The redemption amount was equal to 102.625% of the $1,050 million aggregate principal amount redeemed, reflecting a $28 million “call premium”. We recognized the call premium and the write-off of $6 million of unamortized debt issuance costs associated with the 2026 Notes within Interest expense, net and we reflected the charges as Special Items due to their collective size and the fact that the amounts are not indicative of our ongoing interest expense.

(g)

Tax Benefit 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.

(h)

During the quarter ended June 30, 2021, the United Kingdom (“UK”) Finance Act 2021 was enacted resulting in an increase in the UK corporate income tax rate from 19% to 25%. As a result, in the quarter ended June 30, 2021, we remeasured the deferred tax assets originally recorded as a Special Item as part of a fourth quarter 2019 intercompany restructuring of intellectual property rights into the UK, which resulted in the recognition of an additional $64 million deferred tax benefit as a Special Item.