Yum! Brands Reports Full-Year EPS Growth of 4%, or $3.09 Per Share, Excluding Special Items

Maintains Full-Year Guidance of at least 10% EPS Growth in 2015

LOUISVILLE, Ky. - February 04, 2015 - (BUSINESS WIRE) - Yum! Brands, Inc. (NYSE: YUM) today reported results for the fourth quarter ended December 27, 2014. EPS excluding Special Items was $0.61, a decline of 29%. A non-cash, Special Items net charge of $361 million related to the write-down of Little Sheep assets was recorded in the fourth quarter. This charge impacted reported EPS by $0.80 for the full year. Reported EPS was $(0.20) for the quarter and $2.32 for the year.

Full-Year Highlights

  • Worldwide system sales grew 3%. Worldwide restaurant margin decreased 0.5 percentage points to 14.5%. Worldwide operating profit increased 1%.
  • New international restaurants totaled a record 2,034, including 737 in China, 666 at KFC, 465 at Pizza Hut and 156 in India; 80% of this development occurred in emerging markets.
  • China Division system sales increased 1%, driven by 8% unit growth and offset by a 5% same-store sales decline. Restaurant margin decreased 0.6 percentage points to 14.8%. Operating profit decreased 8%.
  • KFC Division system sales increased 6%, driven by 2% unit growth and 3% same-store sales growth. Restaurant margin increased 0.7 percentage points to 13.3%. Operating profit increased 13%.
  • Pizza Hut Division system sales increased 1%, driven by 2% unit growth and offset by a 1% same-store sales decline. Restaurant margin decreased 3.5 percentage points to 8.2%. Operating profit decreased 13%.
  • Taco Bell Division system sales increased 4%, driven by 2% unit growth and 3% same-store sales growth. Restaurant margin decreased 0.6 percentage points to 18.9%. Operating profit increased 5%.
  • India Division system sales increased 14%, driven by 18% unit growth and offset by a 5% same-store sales decline.
  • Foreign currency translation negatively impacted operating profit by $27 million.

Fouth-Quarter Highlights

  • Worldwide system sales grew 3%. Worldwide restaurant margin decreased 4.0 percentage points to 10.2%. Worldwide operating profit decreased 24%.
  • China Division system sales decreased 11%, as 8% unit growth was offset by a 16% same-store sales decline. Restaurant margin decreased 7.2 percentage points to 7.1%. Operating profit decreased 84%.
  • KFC Division system sales increased 7%, driven by 2% unit growth and 4% same-store sales growth. Restaurant margin increased 1.4 percentage points to 13.8%. Operating profit increased 19%.
  • Pizza Hut Division system sales increased 2%, driven by 2% unit growth. Same-store sales were even. Restaurant margin decreased 2.7 percentage points to 6.4%. Operating profit decreased 11%.
  • Taco Bell Division system sales increased 9%, driven by 2% unit growth and 6% same-store sales growth. Restaurant margin increased 0.3 percentage points to 20.6%. Operating profit increased 20%.
  • India Division system sales increased 6%, driven by 18% unit growth and offset by a 10% same-store sales decline.
  • Foreign currency translation negatively impacted operating profit by $11 million.

Note: All comparisons are versus the same period a year ago and exclude Special Items unless noted. System sales and operating profit figures on this page exclude foreign currency translation.

SUMMARY FINANCIAL TABLE

           
   

Fourth Quarter

   

Full Year

   

2014

 

2013

 

% Change

   

2014

 

2013

 

% Change

EPS Excluding Special Items   $0.61   $0.86   (29)%     $3.09   $2.97   4%
Special Items Gain/(Loss)1   $(0.81)   $(0.16)   NM     $(0.77)   $(0.61)   NM
EPS   $(0.20)   $0.70   NM     $2.32   $2.36   (2)%

See Reconciliation of Non-GAAP Measurements to GAAP Results for further detail of the Special Items. Special Items for 2014 are primarily related to the impairment of Little Sheep and U.S. refranchising gains. Special Items for 2013 are primarily related to the Little Sheep impairment, expenses related to the extinguishment of debt, U.S. refranchising gains and Yum! pension settlement charges.

         

Greg Creed Comments

Greg Creed, CEO, said “We are committed to restoring our track record of delivering at least 10% annual EPS growth year after year. I am confident we will do this in 2015 as our China business recovers and we sustain positive momentum across the rest of Yum!. Overall results in 2014 were disappointing as the Chinese supplier incident in July offset our strong first half of the year. Our top priority is to recover sales in China and capture the significant profit leverage we have in this business.

While the sales recovery in China continues to be slower than expected, we anticipate a strong second half of 2015 as the turnaround gains momentum, led by menu innovation across the year. We continue to firmly believe in the long-term potential of China and will open at least 700 new units in what remains the world’s fastest-growing economy.

Outside of China, we are pleased with the momentum we are seeing across the KFC and Taco Bell divisions. We expect KFC’s strong results to sustain into 2015 as robust international performance, coupled with an improving U.S. business, drive solid sales and profit growth. At Taco Bell, the 2014 launch of breakfast and mobile ordering, combined with even more breakthrough innovation in 2015, gives us confidence as we enter the new year. Finally, while the initial relaunch of the Pizza Hut brand in the U.S. did not deliver the sales lift we expected, consumers have responded positively to the new menu and we intend to leverage this more effectively going forward.

Across Yum! we expect to open over 2,100 new international restaurants this year, further strengthening our lead in emerging markets. We remain focused on the three keys to driving shareholder value: same-store sales growth, new-unit development and generating high returns on invested capital. I'm confident that this formula will produce consistent double-digit EPS growth over the long term as we continue to build three iconic global brands that people trust and champion.”

CHINA DIVISION

           
   

Fourth Quarter

   

Full Year

        % Change             % Change
 

2014

 

2013

 

Reported

 

Ex F/X

   

2014

 

2013

 

Reported

 

Ex F/X

System Sales Growth           (12 )   (11 )             +1     +1  
Same-Store Sales Growth (%)   (16 )   (4 )   NM     NM       (5 )   (13 )   NM     NM  
Franchise & License Fees ($MM)   33     35     (7 )   (6 )     113     105     +7     +7  
Restaurant Margin (%)   7.1     14.3     (7.2 )   (7.1 )     14.8     15.4     (0.6 )   (0.6 )
Operating Profit ($MM)   32     220     (85 )   (84 )     713     777     (8 )   (8 )
                                   
  • China Division sales and profits were significantly impacted by adverse publicity in July surrounding improper food handling practices by a former supplier.
  • System sales grew 1% for the year and declined 11% in the quarter, prior to foreign currency translation.
    • KFC same-store sales declined 4% for the year and 18% in the quarter.
    • Pizza Hut Casual Dining same-store sales declined 5% for the year and 9% in the quarter.
  • China Division opened 737 new units during the year, including 385 units in the quarter. For the year, KFC opened 376 new units, Pizza Hut Casual Dining opened 271 new units and Pizza Hut Home Service opened 68 new units.
             
China Units     Q4 2014     % Change2
Restaurants1     6,715     +8
KFC     4,828     +6
Pizza Hut            
Casual Dining     1,313     +24
Home Service     259     +28

1 Total includes East Dawning and Little Sheep units.

2 Represents year-over-year change.

 
  • Excluding Little Sheep restaurants, unit growth was 10% for the year.
  • Restaurant margin decreased 0.6 percentage points to 14.8% for the year, driven by sales deleverage. Restaurant margin decreased 7.2 percentage points to 7.1% for the quarter.
    • Excluding Little Sheep, restaurant margin was 15.3% for the year.
  • In the quarter, operating profit benefited $25 million from an insurance recovery related to the 2012 poultry supply incident. This was recorded in Other Income.
  • Foreign currency translation negatively impacted operating profit by $1 million for the year and $2 million for the quarter.

KFC DIVISION

           
   

Fourth Quarter

   

Full Year

            % Change             % Change
   

2014

 

2013

 

Reported

 

Ex F/X

   

2014

 

2013

 

Reported

 

Ex F/X

Restaurants1   14,197   13,904   +2   NA     14,197   13,904   +2   NA
System Sales Growth           +3   +7             +2   +6
Same-Store Sales Growth (%)   +4   Even   NM   NM     +3   +1   NM   NM
Franchise & License Fees ($MM)   277   264   +5   +9     873   844   +4   +7
Restaurant Margin (%)   13.8   12.4   1.4   1.3     13.3   12.6   0.7   0.7
Operating Profit ($MM)   221   192   +15   +19     708   649   +9   +13
Operating Margin (%)   22.0   19.9   2.1   2.0     22.2   21.4   0.8   0.9

1 Restaurant counts now reflect licensed units.

 
  • KFC Division system sales increased 6% for the year and 7% for the quarter, prior to foreign currency translation.
    • For the year, international system sales grew 12% in emerging markets and 5% in developed markets; U.S. system sales declined 1%. For the quarter, international system sales grew 12% in emerging markets and 5% in developed markets; U.S. system sales grew 4%.
    • For the year, international same-store sales grew 4% in emerging markets and 3% in developed markets; U.S. same-store sales grew 1%. For the quarter, international same-store sales grew 4% in emerging markets and 3% in developed markets; U.S. same-store sales grew 6%.
  • KFC Division opened 666 new international restaurants in 77 countries, including 481 units in emerging markets. For the quarter, KFC Division opened 335 new international units.
    • 82% of these new units were opened by franchisees for the year.
  • Operating profit growth was 19% for the quarter, prior to foreign currency translation. This included a benefit of 3 percentage points from the favorable resolution of a pension issue in the U.K.
  • Operating margin increased 0.9 percentage points for the year and 2.0 percentage points for the quarter, prior to foreign currency translation, driven by same-store sales growth.
  • Foreign currency translation negatively impacted operating profit by $24 million for the year and $8 million for the quarter.
           
KFC MARKETS1  

Percent of KFC 
System Sales 2

    SYSTEM Sales Growth Ex F/X
      Fourth Quarter (%)  

Full Year (%)

Emerging Markets              
Asia (e.g. Malaysia, Indonesia, Philippines)   8%     +2   +4
Africa3   7%     +16   +12
Latin America (e.g. Mexico, Peru)   6%     +8   +8
Middle East / North Africa   6%     +4   +8
Russia   4%     +39   +40
Thailand   3%     +12   +9
Continental Europe (e.g. Poland)   2%     +14   +12
               
               
Developed Markets              
U.S.   24%     +4   (1)
Asia (e.g. Japan, Korea, Taiwan)   10%     +3   +3
Australia   10%     +5   +4
U.K.   9%     +5   +9
Continental Europe (e.g. France, Germany)   7%     +10   +8
Canada   3%     (5)   (3)
Latin America (e.g. Puerto Rico)   1%     (4)   (3)
               

1 See website www.yum.com under tab "Investors" for a list of the countries within each of the markets.

2 Reflects Full Year 2014.

3 Starting in 2014, Africa market includes Mauritius results. For comparability purposes, systems sales growth excludes Mauritius.

 

PIZZA HUT DIVISION

           
   

Fourth Quarter

   

Full Year

            % Change             % Change
   

2014

 

2013

 

Reported

 

Ex F/X

   

2014

 

2013

 

Reported

 

Ex F/X

Restaurants1   13,602   13,333   +2   NA     13,602   13,333   +2   NA
System Sales Growth           +1   +2             Even   +1
Same-Store Sales Growth (%)   Even   (2)   NM   NM     (1)   (1)   NM   NM
Franchise & License Fees ($MM)   167   162   +4   +5     541   538   +1   +2
Restaurant Margin (%)   6.4   9.1   (2.7)   (2.9)     8.2   11.7   (3.5)   (3.7)
Operating Profit ($MM)   80   89   (11)   (11)     295   339   (13)   (13)
Operating Margin (%)   22.4   25.6   (3.2)   (3.2)     25.6   29.6   (4.0)   (3.9)

1 Restaurant counts now reflect licensed units.

 
  • Pizza Hut Division system sales increased 1% for the year and 2% for the quarter, prior to foreign currency translation.
    • For the year, international system sales grew 6% in emerging markets and 1% in developed markets; U.S. system sales declined 1%. For the quarter, international system sales grew 5% in emerging markets and 1% in developed markets; U.S. system sales grew 2%.
    • For the year, international same-store sales grew 1% in emerging markets and were even in developed markets; U.S. same-store sales declined 3%. For the quarter, international same-store sales were even for both emerging and developed markets; U.S. same-store sales were even.
  • Pizza Hut Division opened 465 new international units in 51 countries, including 247 units in emerging markets. For the quarter, Pizza Hut Division opened 257 new international units.
    • 89% of these new units were opened by franchisees for the year.
  • Operating margin declined 3.9 percentage points for the year and 3.2 percentage points for the quarter, driven by sales deleverage and strategic investments in international G&A.
  • Foreign currency translation negatively impacted operating profit by $2 million for the year and $1 million for the quarter.
           
PIZZA HUT MARKETS1  

Percent of Pizza 
Hut System Sales2

    SYSTEM Sales Growth Ex F/X
      Fourth Quarter (%)  

Full Year (%)

Emerging Markets              
Latin America (e.g. Mexico, Peru)   7%     +8   +9
Asia (e.g. Malaysia, Indonesia, Philippines)   5%     +2   +4
Middle East / North Africa   5%     +2   +3
Continental Europe (e.g. Poland)   1%     +5   +5
               
Developed Markets              
U.S.   55%     +2   (1)
Asia (e.g. Japan, Korea, Taiwan)   9%     (3)   (2)
U.K.   6%     +4   +1
Continental Europe (e.g. France, Germany)   5%     +5   +3
Australia   3%     (3)   (1)
Canada   3%     +3   +1
Latin America (e.g. Puerto Rico)   1%     +2   (3)
               

1 See website www.yum.com under tab "Investors" for a list of the countries within each of the markets.

2 Reflects Full Year 2014.

 

TACO BELL DIVISION

           
   

Fourth Quarter

   

Full Year

            % Change             % Change
   

2014

 

2013

 

Reported

 

Ex F/X

   

2014

 

2013

 

Reported

 

Ex F/X

Restaurants1   6,199   6,048   +2   NA     6,199   6,048   +2   NA
System Sales Growth           +9   +9             +4   +4
Same-Store Sales Growth (%)   +6   +2   NM   NM     +3   +3   NM   NM
Franchise & License Fees ($MM)   130   121   +7   +7     411   395   +4   +4
Restaurant Margin (%)   20.6   20.3   0.3   0.3     18.9   19.5   (0.6)   (0.6)
Operating Profit ($MM)   163   136   +20   +20     480   456   +5   +5
Operating Margin (%)   27.7   24.9   2.8   2.8     25.8   24.4   1.4   1.4

1 Restaurant counts now reflect licensed units.

                                   
  • Taco Bell Division system sales increased 4% for the year and 9% for the quarter.
    • U.S. same-store sales grew 3% for the year and 7% for the quarter, driven by breakfast sales.
  • Taco Bell Division opened 236 new restaurants for the year; 89% of these new units were opened by franchisees. This included 130 new units in the fourth quarter.
  • Operating margin increased 1.4 percentage points during the year and 2.8 percentage points during the quarter, driven by same-store sales growth.

INDIA DIVISION

  • India Division system sales increased 14% for the year and 6% for the quarter, prior to foreign currency translation.
    • Same-store sales declined 5% for the year and 10% for the quarter.
  • India Division opened 156 new restaurants for the year. This included 106 in the fourth quarter.
  • Operating loss was $9 million for the year.
  • Effective the beginning of 2014, results from our 28 franchised stores in Mauritius are no longer included in the India Division and are included in the KFC and Pizza Hut Divisions, as applicable. India unit and system sales growth as shown here exclude Mauritius from the prior year amounts to enhance comparability.
             
India Units     Q4 2014     % Change2
Restaurants1     833     +18%
KFC     395     +16%
Pizza Hut            
Casual Dining     185     +1%
Home Service     246     +40%

1 Total includes 7 Taco Bell units.

2 Represents year-over-year change.

             

SPECIAL ITEMS / TAX / SHARE REPURCHASE UPDATE

  • As previously communicated, our Little Sheep business has performed below expectations since being acquired in February 2012. As a result of our annual impairment tests, in the fourth quarter of 2014 we recorded net impairments of $361 million, primarily related to the Little Sheep trademark and goodwill. We previously recorded net impairments of $258 million in the third quarter of 2013. The remaining carrying value of the Little Sheep business is approximately $100 million.
  • Worldwide effective tax rate, prior to Special Items, decreased to 25.5% from 28.0% for the year. Last year’s tax rate included higher tax reserve adjustments related to a dispute with the IRS regarding the valuation of intangible assets. This issue was resolved in 2014.
  • For the year, we repurchased 11.2 million shares totaling $820 million at an average price of $73. For the quarter, we repurchased 4.4 million shares totaling $310 million at an average price of $71.

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 Thursday, February 5, 2015. 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 12:45 p.m. Eastern Time Thursday, February 5, through midnight Thursday, March 5, 2015. To access the playback, dial 855/859-2056 in the United States and 404/537-3406 internationally. The playback pass code is 65641562.

The webcast and the playback can be accessed via the internet by visiting Yum! Brands' website, www.yum.com/investors and selecting “Q4 2014 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; changes in economic conditions, consumer preferences, tax rates and laws and the regulatory environment, as well as increased competition and other risks in China, where a significant and growing portion of our restaurants are located; changes in economic and political conditions in the other countries outside the U.S. where we operate; the impact or threat of any widespread illness or outbreaks of viruses or other diseases; our ability to protect the integrity and security of individually identifiable data of our customers and employees; our ability to secure and maintain distribution and adequate supply to our restaurants; the success of our international development strategy; commodity, labor and other operating costs; the continued viability and success of our franchise and license operators; consumer preferences and perceptions of our brands; the impact of social media; a potential suspension of the Chinese affiliate of our independent auditor; pending or future litigation and legal claims or proceedings; changes in or noncompliance with government regulations; tax matters, including disagreements with taxing authorities; significant changes in global economic conditions, including consumer spending, consumer confidence and unemployment; and 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. 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.

About Yum! Brands

Yum! Brands, Inc., based in Louisville, Kentucky, has over 41,000 restaurants in more than 120 countries and territories. Yum! is ranked #216 on the Fortune 500 List with revenues of over $13 billion and in 2014 was named among the top 100 Corporate Citizens by Corporate Responsibility Magazine. 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.

Consolidated Summary of Results

(amounts in millions, except per share amounts)

(unaudited)

                 

 

  Quarter ended   % Change   Year ended   % Change
    12/27/14     12/28/13     B/(W)     12/27/14     12/28/13     B/(W)
                                 
Company sales   $ 3,383     $ 3,590     (6)   $ 11,324     $ 11,184     1
Franchise and license fees and income   614     589     4   1,955     1,900     3
Total revenues   3,997     4,179     (4)   13,279     13,084     1
                                 
Company restaurant expenses                                
Food and paper   1,116     1,188     6   3,678     3,669    
Payroll and employee benefits   824     798     (3)   2,579     2,499     (3)
Occupancy and other operating expenses   1,099     1,095       3,425     3,333     (3)
Company restaurant expenses   3,039     3,081     1   9,682     9,501     (2)
                                 
General and administrative expenses   473     479     1   1,419     1,412     (1)
Franchise and license expenses   51     50     (1)   160     158     (1)
Closures and impairment (income) expenses   505     21     NM   535     331     (62)
Refranchising (gain) loss   (6 )   (13 )   (49)   (33 )   (100 )   (67)
Other (income) expense   (22 )   (10 )   94   (41 )   (16 )   NM
Total costs and expenses, net   4,040     3,608     (12)   11,722     11,286     (4)
                                 
Operating Profit (loss)   (43 )   571     NM   1,557     1,798     (13)
Interest expense, net   40     153     74   130     247     47
Income (loss) before income taxes   (83 )   418     NM   1,427     1,551     (8)
Income tax provision   36     103     64   406     487     17
Net income (loss) - including noncontrolling interests   (119 )   315     NM   1,021     1,064     (4)
Net income (loss) - noncontrolling interests   (33 )   (6 )   NM   (30 )   (27 )   (12)
Net income (loss) - YUM! Brands, Inc.   $ (86 )   $ 321     NM   $ 1,051     $ 1,091     (4)
                                 
Effective tax rate   (44.1 )%   24.6 %   NM   28.5 %   31.4 %   2.9 ppts.
                                 
Basic EPS Data                                
EPS   $ (0.20 )   $ 0.72     NM   $ 2.37     $ 2.41     (2)
Weighted average shares used in computation   441     448     2   444     452     2
                                 
Diluted EPS Data                                
EPS   $ (0.20 )   $ 0.70     NM   $ 2.32     $ 2.36     (2)
Weighted average shares used in computation   441     458     4   453     461     2
                                 
Dividends declared per common share   $ 0.82     $ 0.74         $ 1.56     $ 1.41      
                                         

See accompanying notes.

 

Percentages may not recompute due to rounding.

 

 

                 

YUM! Brands, Inc.

CHINA DIVISION Operating Results

(amounts in millions)

(unaudited)

                 
    Quarter ended   % Change   Year ended   % Change
    12/27/14     12/28/13     B/(W)    12/27/14     12/28/13     B/(W)
                                 
Company sales   $ 1,973     $ 2,237     (12)   $ 6,821     $ 6,800    
Franchise and license fees and income   33     35     (7)   113     105     7
Total revenues   2,006     2,272     (12)   6,934     6,905    
                                 
Company restaurant expenses                                
Food and paper   660     750     12   2,207     2,258     2
Payroll and employee benefits   463     453     (2)   1,407     1,360     (3)
Occupancy and other operating expenses   710     713       2,198     2,132     (3)
Company restaurant expenses   1,833     1,916     4   5,812     5,750     (1)
General and administrative expenses   132     124     (6)   391     357     (9)
Franchise and license expenses   5     5     (26)   16     13     (29)
Closures and impairment (income) expenses   31     16     (93)   54     30     (83)
Other (income) expense   (27 )   (9 )   NM   (52 )   (22 )   NM
Total costs and expenses, net   1,974     2,052     4   6,221     6,128     (2)
Operating Profit   $ 32     $ 220     (85)   $ 713     $ 777     (8)
                                 
Company sales   100.0 %   100.0 %       100.0 %   100.0 %    
Food and paper   33.4     33.5     0.1 ppts.   32.4     33.2     0.8 ppts.
Payroll and employee benefits   23.5     20.3     (3.2 ppts.)   20.6     20.0     (0.6 ppts.)
Occupancy and other operating expenses   36.0     31.9     (4.1 ppts.)   32.2     31.4     (0.8 ppts.)
Restaurant margin   7.1 %   14.3 %   (7.2 ppts.)   14.8 %   15.4 %   (0.6 ppts.)
                                 
Operating margin   1.6 %   9.7 %   (8.1 ppts.)   10.3 %   11.3 %   (1.0 ppts.)
                                 

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 ended   % Change
    12/27/14     12/28/13     B/(W)     12/27/14     12/28/13     B/(W)
                                 
Company sales   $ 727     $ 706     3   $ 2,320     $ 2,192     6
Franchise and license fees and income   277     264     5   873     844     4
Total revenues   1,004     970     4   3,193     3,036     5
                                 
Company restaurant expenses                                
Food and paper   254     248     (2)   809     766     (6)
Payroll and employee benefits   168     165     (1)   552     521     (6)
Occupancy and other operating expenses   206     205     (1)   651     628     (4)
Company restaurant expenses   628     618     (1)   2,012     1,915     (5)
General and administrative expenses   122     130     6   383     391     2
Franchise and license expenses   26     25     (3)   80     76     (5)
Closures and impairment (income) expenses   7     3     NM   9     3     NM
Other (income) expense       2     43   1     2     16
Total costs and expenses, net   783     778     (1)   2,485     2,387     (4)
Operating Profit   $ 221     $ 192     15   $ 708     $ 649     9
                                 
Company sales   100.0 %   100.0 %       100.0 %   100.0 %    
Food and paper   34.8     35.1     0.3 ppts.   34.8     35.0     0.2 ppts.
Payroll and employee benefits   23.0     23.5     0.5 ppts.   23.8     23.8    
Occupancy and other operating expenses   28.4     29.0     0.6 ppts.   28.1     28.6     0.5 ppts.
Restaurant margin   13.8 %   12.4 %   1.4 ppts.   13.3 %   12.6 %   0.7 ppts.
                                 
Operating margin   22.0 %   19.9 %   2.1 ppts.   22.2 %   21.4 %   0.8 ppts.
                                 

See accompanying notes.

 

Percentages may not recompute due to rounding.

 

 

                 

YUM! Brands, Inc.

PIZZA HUT DIVISION Operating Results

(amounts in millions)

(unaudited)

                 
    Quarter ended   % Change   Year ended   % Change
    12/27/14     12/28/13     B/(W)     12/27/14     12/28/13     B/(W)
                                 
Company sales   $ 185     $ 187     (1)   $ 607     $ 609    
Franchise and license fees and income   167     162     4   541     538     1
Total revenues   352     349     1   1,148     1,147    
                                 
Company restaurant expenses                                
Food and paper   54     54     (1)   180     173     (4)
Payroll and employee benefits   59     56     (5)   188     183     (3)
Occupancy and other operating expenses   60     60     1   189     182     (4)
Company restaurant expenses   173     170     (2)   557     538     (4)
General and administrative expenses   81     74     (12)   246     224     (10)
Franchise and license expenses   15     15     2   44     47     7
Closures and impairment (income) expenses   3     1     NM   5         NM
Other (income) expense           NM   1     (1 )   NM
Total costs and expenses, net   272     260     (5)   853     808     (6)
Operating Profit   $ 80     $ 89     (11)   $ 295     $ 339     (13)
                                 
Company sales   100.0 %   100.0 %       100.0 %   100.0 %    
Food and paper   29.6     29.0     (0.6 ppts.)   29.7     28.4     (1.3 ppts.)
Payroll and employee benefits   31.6     29.7     (1.9 ppts.)   30.9     30.0     (0.9 ppts.)
Occupancy and other operating expenses   32.4     32.2     (0.2 ppts.)   31.2     29.9     (1.3 ppts.)
    6.4 %   9.1 %   (2.7 ppts.)   8.2 %   11.7 %   (3.5 ppts.)
                                 
Operating margin   22.4 %   25.6 %   (3.2 ppts.)   25.6 %   29.6 %   (4.0 ppts.)
                                 

See accompanying notes.

 

Percentages may not recompute due to rounding.

                                 

 

                 

YUM! Brands, Inc.

TACO BELL DIVISION Operating Results

(amounts in millions)

(unaudited)

                 
    Quarter ended   % Change   Year ended   % Change
    12/27/14     12/28/13     B/(W)     12/27/14     12/28/13     B/(W)
                                 
Company sales   $ 460     $ 423     9   $ 1,452     $ 1,474     (2)
Franchise and license fees and income   130     121     7   411     395     4
Total revenues   590     544     8   1,863     1,869    
                                 
Company restaurant expenses                                
Food and paper   134     121     (12)   431     424     (2)
Payroll and employee benefits   127     118     (8)   414     419     1
Occupancy and other operating expenses   104     99     (4)   333     344     3
Company restaurant expenses   365     338     (8)   1,178     1,187     1
General and administrative expenses   57     68     18   185     206     10
Franchise and license expenses   5     5     8   18     20     9
Closures and impairment (income) expenses   1         (34)   3     1     (59)
Other (income) expense   (1 )   (3 )   (80)   (1 )   (1 )   (35)
Total costs and expenses, net   427     408     (4)   1,383     1,413     2
Operating Profit   $ 163     $ 136     20   $ 480     $ 456     5
                                 
Company sales   100.0 %   100.0 %       100.0 %   100.0 %    
Food and paper   29.2     28.4     (0.8 ppts.)   29.7     28.7     (1.0 ppts.)
Payroll and employee benefits   27.7     27.8     0.1 ppts.   28.5     28.4     (0.1 ppts.)
Occupancy and other operating expenses   22.5     23.5     1.0 ppts.   22.9     23.4     0.5 ppts.
    20.6 %   20.3 %   0.3 ppts.   18.9 %   19.5 %   (0.6 ppts.)
                                 
Operating margin   27.7 %   24.9 %   2.8 ppts.   25.8 %   24.4 %   1.4 ppts.
                                 

See accompanying notes.

 

Percentages may not recompute due to rounding.

                                 

 

 

YUM! Brands, Inc.

Consolidated Balance Sheets

(amounts in millions)

 
    (unaudited)    
    12/27/2014      12/28/2013
ASSETS          
Current Assets          
Cash and cash equivalents   $ 578     $ 573
Accounts and notes receivable, less allowance: $12 in 2014 and $11 in 2013   325     319
Inventories   301     294
Prepaid expenses and other current assets   254     286
Deferred income taxes   93     123
Advertising cooperative assets, restricted   95     96
Total Current Assets   1,646     1,691
           

Property, plant and equipment, net of accumulated depreciation and amortization of $3,584 in 2014 and $3,391 in 2013

  4,498     4,459
Goodwill   700     889
Intangible assets, net   318     638
Investments in unconsolidated affiliates   52     53
Other assets   560     566
Deferred income taxes   571     399
Total Assets   $ 8,345     $ 8,695
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
Current Liabilities          
Accounts payable and other current liabilities   $ 1,972     $ 1,929
Income taxes payable   77     169
Short-term borrowings   267     71
Advertising cooperative liabilities   95     96
Total Current Liabilities   2,411     2,265
           
Long-term debt   3,077     2,918
Other liabilities and deferred credits   1,244     1,244
Total Liabilities   6,732     6,427
           
Redeemable noncontrolling interest   9     39
           
Shareholders' Equity          
Common stock, no par value, 750 shares authorized; 434 shares and 443 shares issued in 2014 and 2013, respectively      
Retained earnings   1,737     2,102
Accumulated other comprehensive income (loss)   (190 )   64
Total Shareholders' Equity - YUM! Brands, Inc.   1,547     2,166
Noncontrolling interests   57     63
Total Shareholders' Equity   1,604     2,229
Total Liabilities, Redeemable Noncontrolling Interest and Shareholders' Equity   $ 8,345     $ 8,695
               

See accompanying notes.

               

 

 

YUM! Brands, Inc.

Consolidated Statements of Cash Flows

(amounts in millions)

                                 
                                Year ended
                                (unaudited)      
                                12/27/14     12/28/13
Cash Flows - Operating Activities                                      
Net income - including noncontrolling interests                               $ 1,021       $ 1,064  
Depreciation and amortization                               739       721  
Closures and impairment (income) expenses                               535       331  
Refranchising (gain) loss                               (33 )     (100 )
Losses and other costs related to the extinguishment of debt                                     120  
Deferred income taxes                               (172 )     (24 )
Equity income from investments in unconsolidated affiliates                               (30 )     (26 )
Distribution of income received from unconsolidated affiliates                               28       43  
Excess tax benefit from share-based compensation                               (42 )     (44 )
Share-based compensation expense                               55       49  
Changes in accounts and notes receivable                               (21 )     (12 )
Changes in inventories                               (22 )     18  
Changes in prepaid expenses and other current assets                               (10 )     (21 )
Changes in accounts payable and other current liabilities                               60       (102 )
Changes in income taxes payable                               (143 )     14  
Other, net                               84       108  
Net Cash Provided by Operating Activities                               2,049       2,139  
                                       
Cash Flows - Investing Activities                                      
Capital spending                               (1,033 )     (1,049 )
Proceeds from refranchising of restaurants                               114       260  
Acquisitions                               (28 )     (99 )
Other, net                               11       2  
Net Cash Used in Investing Activities                               (936 )     (886 )
                                       
Cash Flows - Financing Activities                                      
Proceeds from long-term debt                                     599  
Repayments of long-term debt                               (66 )     (666 )
Short-term borrowings, by original maturity                                      
More than three months - proceeds                               2       56  
More than three months - payments                               (2 )     (56 )
Three months or less, net                                      
Revolving credit facilities, three months or less, net                               416        
Repurchase shares of Common Stock                               (820 )     (770 )
Excess tax benefit from share-based compensation                               42       44  
Employee stock option proceeds                               29       37  
Dividends paid on Common Stock                               (669 )     (615 )
Other, net                               (46 )     (80 )
Net Cash Used in Financing Activities                               (1,114 )     (1,451 )
Effect of Exchange Rate on Cash and Cash Equivalents                               6       (5 )
Net Decrease in Cash and Cash Equivalents                               5       (203 )
Cash and Cash Equivalents - Beginning of Period                               573       776  
Cash and Cash Equivalents - End of Period                               $ 578       $ 573  
                                           

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 2014 and 2013 on a basis before Special Items. Special items presented below relate primarily to the impairment of certain Little Sheep assets, U.S. refranchising gains/(losses) and losses related to the extinguishment of debt in 2013. These amounts are described in (d), (e) and (f) in the accompanying notes. Other Special Items Income (Expense) in the year ended December 27, 2014 primarily includes gains from real estate sales related to our previously refranchised Mexico business. Other Special Items Income (Expense) in the quarter and year ended December 28, 2013 primarily includes YUM pension settlement charges.

 

The Company uses earnings before Special Items as a key performance measure of results 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 results, excluding items in the quarters and years to date ended December 27, 2014 and December 28, 2013 that the Company does not believe are indicative of our ongoing operations due to their size and/or nature.

SOURCE Yum! Brands, Inc

Contacts:

Steve Schmitt
Yum! Brands, Inc.
Analysts Relations
888-298-6986
Vice President Investor Relations & Corporate Strategy

Elizabeth Grenfell
Yum! Brands, Inc.
888-298-6986
Director Investor Relations

Virginia Ferguson
Media Relations
Yum! Brands, Inc.
Director Public Relations
502-874-8200

###

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