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UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D. C. 20549
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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934 for the quarterly period ended
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June 30, 2019
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OR
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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North Carolina
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13-3951308
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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1441 Gardiner Lane,
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Louisville,
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Kentucky
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40213
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code:
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(502)
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874-8300
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Securities registered pursuant to Section 12(b) of the Act
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Title of Each Class
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Trading Symbol(s)
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Name of Each Exchange on Which Registered
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Common Stock, no par value
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YUM
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New York Stock Exchange
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Large Accelerated Filer
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x
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Accelerated Filer
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o
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Non-accelerated Filer
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o
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Smaller Reporting Company
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☐
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Emerging Growth Company
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☐
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Page
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No.
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Part I.
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Financial Information
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Item 1 - Financial Statements
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Condensed Consolidated Statements of Income
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Condensed Consolidated Statements of Comprehensive Income
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Condensed Consolidated Statements of Cash Flows
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Condensed Consolidated Balance Sheets
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Condensed Consolidated Statements of Shareholders' Deficit
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Notes to Condensed Consolidated Financial Statements
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Item 2 - Management’s Discussion and Analysis of Financial Condition
and Results of Operations
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Item 3 - Quantitative and Qualitative Disclosures About Market Risk
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Item 4 – Controls and Procedures
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Report of Independent Registered Public Accounting Firm
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Part II.
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Other Information and Signatures
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Item 1 – Legal Proceedings
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Item 1A – Risk Factors
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Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
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Item 6 – Exhibits
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Signatures
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Item 1.
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Financial Statements
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•
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The KFC Division which includes our worldwide operations of the KFC concept
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•
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The Pizza Hut Division which includes our worldwide operations of the Pizza Hut concept
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•
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The Taco Bell Division which includes our worldwide operations of the Taco Bell concept
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The components of lease expense were as follows:
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Quarter Ended
6/30/2019
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Year to date 6/30/2019
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Operating lease cost
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$
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27
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$
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56
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Finance lease cost
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Amortization of right-of-use assets
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1
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2
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Interest on lease liabilities
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—
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1
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Total finance lease cost
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1
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3
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Sublease income
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(16
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(34
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)
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Supplemental cash flow information related to leases was as follows:
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Year to date
6/30/2019
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Cash paid for amounts included in the measurement of lease liabilities
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Operating cash flows from operating leases
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$
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53
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Operating cash flows from finance leases
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1
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Financing cash flows from finance leases
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2
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Right-of-use assets obtained in exchange for lease obligations
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Operating leases
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29
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Finance leases
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3
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6/30/2019
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Condensed Consolidated Balance Sheet
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Assets
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Operating lease right-of-use assets
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$
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663
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Other assets
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Finance lease right-of-use assets
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34
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Property, plant and equipment, net
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Total right-of-use assets(a)
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$
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697
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Liabilities
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Current
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Operating
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$
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74
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Accounts payable and other current liabilities
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Finance
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6
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Short-term borrowings
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Non-current
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Operating
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653
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Other liabilities and deferred credits
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Finance
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63
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Long-term debt
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Total lease liabilities(a)
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$
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796
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Weighted-average Remaining Lease Term (in years)
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Operating leases
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12.1
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Finance leases
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11.9
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Weighted-average Discount Rate
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Operating leases
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5.5
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%
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Finance leases
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5.7
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%
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(a)
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U.S. operating lease right-of-use assets and liabilities totaled $282 million and $333 million, respectively, as of June 30, 2019 and primarily related to Taco Bell U.S.
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Commitments
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Finance
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Operating
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Less than 1 year
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$
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10
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$
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112
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1-2 years
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9
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103
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2-3 years
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9
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94
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3-4 years
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8
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85
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4-5 years
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7
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79
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Thereafter
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53
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548
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Total lease payments
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96
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1,021
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Less imputed interest
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(27
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(294
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Total lease liabilities
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$
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69
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$
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727
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Commitments
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Capital
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Operating
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2019
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$
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10
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$
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103
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2020
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10
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89
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2021
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9
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78
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2022
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8
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71
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2023
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8
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61
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Thereafter
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58
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384
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Total lease payments
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$
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103
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$
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786
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Quarter ended
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Year to date
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2019
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2018
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2019
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2018
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Net Income
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$
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289
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$
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321
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$
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551
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$
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754
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Weighted-average common shares outstanding (for basic calculation)
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307
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324
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307
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328
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Effect of dilutive share-based employee compensation
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7
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7
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7
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8
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Weighted-average common and dilutive potential common shares outstanding (for diluted calculation)
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314
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331
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314
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336
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Basic EPS
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$
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0.94
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$
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0.99
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$
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1.79
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$
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2.30
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Diluted EPS
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$
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0.92
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$
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0.97
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$
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1.75
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$
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2.25
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Unexercised employee stock options and stock appreciation rights (in millions) excluded from the diluted EPS computation(a)
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2.3
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2.3
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1.8
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1.8
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(a)
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These unexercised employee stock options and stock appreciation rights were not included in the computation of diluted EPS because to do so would have been antidilutive for the periods presented.
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Shares Repurchased (thousands)
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Dollar Value of Shares Repurchased
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Remaining Dollar Value of Shares that may be Repurchased
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2019
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2018
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2019
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2018
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2019
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November 2017 Authorization
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—
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14,147
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$
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—
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$
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1,171
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$
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—
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August 2018 Authorization
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3,018
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—
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302
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—
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804
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Total
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3,018
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(a)
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14,147
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(b)
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$
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302
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(a)
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$
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1,171
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(b)
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$
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804
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|
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(a)
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Includes the effect of $2 million in share repurchases (0.02 million shares) with trade dates prior to June 30, 2019, but cash settlement dates subsequent to June 30, 2019 and excludes the effect of $5 million in share repurchases (0.05 million shares) with trade dates on, or prior to, December 31, 2018, but cash settlement dates subsequent to December 31, 2018.
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(b)
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Includes the effect of $3 million in share repurchases (0.03 million shares) with trade dates prior to June 30, 2018, but cash settlement dates subsequent to June 30, 2018.
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Translation Adjustments and Gains (Losses) From Intra-Entity Transactions of a Long-Term Nature
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Pension and Post-Retirement Benefits
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Derivative Instruments
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Total
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||||||||
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Balance at March 31, 2019, net of tax
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|
$
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(215
|
)
|
|
$
|
(79
|
)
|
|
$
|
(30
|
)
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|
$
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(324
|
)
|
|
|
|
|
|
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||||||||
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OCI, net of tax
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|
||||||||
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||||||||
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Gains (losses) arising during the period classified into AOCI, net of tax
|
|
(25
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)
|
|
—
|
|
|
(33
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)
|
|
(58
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)
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||||||||
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(Gains) losses reclassified from AOCI, net of tax
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|
—
|
|
|
1
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|
|
1
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|
|
2
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|
||||
|
|
|
(25
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)
|
|
1
|
|
|
(32
|
)
|
|
(56
|
)
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Balance at June 30, 2019, net of tax
|
|
$
|
(240
|
)
|
|
$
|
(78
|
)
|
|
$
|
(62
|
)
|
|
$
|
(380
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||
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Balance at December 31, 2018, net of tax
|
|
$
|
(245
|
)
|
|
$
|
(82
|
)
|
|
$
|
(7
|
)
|
|
$
|
(334
|
)
|
|
|
|
|
|
|
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|
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|
||||||||
|
OCI, net of tax
|
|
|
|
|
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|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
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Gains (losses) arising during the period classified into AOCI, net of tax
|
|
5
|
|
|
—
|
|
|
(44
|
)
|
|
(39
|
)
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
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(Gains) losses reclassified from AOCI, net of tax
|
|
—
|
|
|
4
|
|
|
(11
|
)
|
|
(7
|
)
|
||||
|
|
|
5
|
|
|
4
|
|
|
(55
|
)
|
|
(46
|
)
|
||||
|
Balance at June 30, 2019, net of tax
|
|
$
|
(240
|
)
|
|
$
|
(78
|
)
|
|
$
|
(62
|
)
|
|
$
|
(380
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
Quarter ended
|
|
Year to date
|
||||||||||||
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
KFC Division
|
|
$
|
(4
|
)
|
|
$
|
(42
|
)
|
|
$
|
(6
|
)
|
|
$
|
(99
|
)
|
|
Pizza Hut Division
|
|
—
|
|
|
13
|
|
|
—
|
|
|
11
|
|
||||
|
Taco Bell Division
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
(97
|
)
|
||||
|
Worldwide
|
|
$
|
(4
|
)
|
|
$
|
(29
|
)
|
|
$
|
(10
|
)
|
|
$
|
(185
|
)
|
|
CONDENSED CONSOLIDATED BALANCE SHEET
|
|||||||||||
|
|
As Reported 12/31/2018
|
|
Adjustments
|
|
Balances with Adoption of Topic 842 1/1/2019
|
||||||
|
ASSETS
|
|
|
|
|
|
||||||
|
Current Assets
|
|
|
|
|
|
||||||
|
Cash and cash equivalents
|
$
|
292
|
|
|
$
|
—
|
|
|
$
|
292
|
|
|
Accounts and notes receivable, net
|
561
|
|
|
—
|
|
|
561
|
|
|||
|
Prepaid expenses and other current assets
|
354
|
|
|
(10
|
)
|
|
344
|
|
|||
|
Total Current Assets
|
1,207
|
|
|
(10
|
)
|
|
1,197
|
|
|||
|
|
|
|
|
|
|
||||||
|
Property, plant and equipment, net
|
1,237
|
|
|
—
|
|
|
1,237
|
|
|||
|
Goodwill
|
525
|
|
|
—
|
|
|
525
|
|
|||
|
Intangible assets, net
|
242
|
|
|
—
|
|
|
242
|
|
|||
|
Other assets
|
724
|
|
|
689
|
|
|
1,413
|
|
|||
|
Deferred income taxes
|
195
|
|
|
—
|
|
|
195
|
|
|||
|
Total Assets
|
$
|
4,130
|
|
|
$
|
679
|
|
|
$
|
4,809
|
|
|
|
|
|
|
|
|
||||||
|
LIABILITIES AND SHAREHOLDERS’ DEFICIT
|
|
|
|
|
|
||||||
|
Current Liabilities
|
|
|
|
|
|
||||||
|
Accounts payable and other current liabilities
|
$
|
911
|
|
|
$
|
76
|
|
|
$
|
987
|
|
|
Income taxes payable
|
69
|
|
|
—
|
|
|
69
|
|
|||
|
Short-term borrowings
|
321
|
|
|
—
|
|
|
321
|
|
|||
|
Total Current Liabilities
|
1,301
|
|
|
76
|
|
|
1,377
|
|
|||
|
|
|
|
|
|
|
||||||
|
Long-term debt
|
9,751
|
|
|
—
|
|
|
9,751
|
|
|||
|
Other liabilities and deferred credits
|
1,004
|
|
|
605
|
|
|
1,609
|
|
|||
|
Total Liabilities
|
12,056
|
|
|
681
|
|
|
12,737
|
|
|||
|
|
|
|
|
|
|
||||||
|
Shareholders’ Deficit
|
|
|
|
|
|
||||||
|
Accumulated deficit
|
(7,592
|
)
|
|
(2
|
)
|
|
(7,594
|
)
|
|||
|
Accumulated other comprehensive loss
|
(334
|
)
|
|
—
|
|
|
(334
|
)
|
|||
|
Total Shareholders’ Deficit
|
(7,926
|
)
|
|
(2
|
)
|
|
(7,928
|
)
|
|||
|
Total Liabilities and Shareholders’ Deficit
|
$
|
4,130
|
|
|
$
|
679
|
|
|
$
|
4,809
|
|
|
|
6/30/2019
|
|
12/31/2018
|
||||
|
Accounts and notes receivable, gross
|
$
|
580
|
|
|
$
|
592
|
|
|
Allowance for doubtful accounts
|
(45
|
)
|
|
(31
|
)
|
||
|
Accounts and notes receivable, net
|
$
|
535
|
|
|
$
|
561
|
|
|
|
6/30/2019
|
|
12/31/2018
|
||||
|
Property, plant and equipment, gross
|
$
|
2,328
|
|
|
$
|
2,353
|
|
|
Accumulated depreciation and amortization
|
(1,135
|
)
|
|
(1,116
|
)
|
||
|
Property, plant and equipment, net
|
$
|
1,193
|
|
|
$
|
1,237
|
|
|
|
6/30/2019
|
|
12/31/2018
|
||||
|
Cash and cash equivalents as presented in Condensed Consolidated Balance Sheets
|
$
|
252
|
|
|
$
|
292
|
|
|
Restricted cash included in Prepaid expenses and other current assets(a)
|
112
|
|
|
151
|
|
||
|
Restricted cash and restricted cash equivalents included in Other assets(b)
|
25
|
|
|
31
|
|
||
|
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents as presented in Condensed Consolidated Statements of Cash Flows
|
$
|
389
|
|
|
$
|
474
|
|
|
(a)
|
Restricted cash within Prepaid expenses and other current assets reflects Taco Bell Securitization interest reserves and the cash related to advertising cooperatives that we consolidate that can only be used to settle obligations of the respective cooperatives.
|
|
(b)
|
Primarily trust accounts related to our self-insurance program.
|
|
|
Quarter ended
|
|
Year to date
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Income tax provision
|
$
|
88
|
|
|
$
|
36
|
|
|
$
|
125
|
|
|
$
|
112
|
|
|
Effective tax rate
|
23.3
|
%
|
|
9.9
|
%
|
|
18.5
|
%
|
|
12.9
|
%
|
||||
|
|
Quarter ended 6/30/2019
|
|||||||||||||||
|
|
|
KFC Division
|
|
Pizza Hut Division
|
|
Taco Bell Division
|
|
Total
|
||||||||
|
U.S.
|
|
|
|
|
|
|
|
|
||||||||
|
Company sales
|
|
$
|
18
|
|
|
$
|
5
|
|
|
$
|
212
|
|
|
$
|
235
|
|
|
Franchise revenues
|
|
41
|
|
|
67
|
|
|
140
|
|
|
248
|
|
||||
|
Property revenues
|
|
5
|
|
|
1
|
|
|
11
|
|
|
17
|
|
||||
|
Franchise contributions for advertising and other services
|
|
3
|
|
|
78
|
|
|
109
|
|
|
190
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
China
|
|
|
|
|
|
|
|
|
||||||||
|
Franchise revenues
|
|
52
|
|
|
15
|
|
|
—
|
|
|
67
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Other
|
|
|
|
|
|
|
|
|
||||||||
|
Company sales
|
|
117
|
|
|
6
|
|
|
1
|
|
|
124
|
|
||||
|
Franchise revenues
|
|
218
|
|
|
60
|
|
|
7
|
|
|
285
|
|
||||
|
Property revenues
|
|
16
|
|
|
—
|
|
|
—
|
|
|
16
|
|
||||
|
Franchise contributions for advertising and other services
|
|
114
|
|
|
14
|
|
|
—
|
|
|
128
|
|
||||
|
|
|
$
|
584
|
|
|
$
|
246
|
|
|
$
|
480
|
|
|
$
|
1,310
|
|
|
|
Quarter ended 6/30/2018
|
|||||||||||||||
|
|
|
KFC Division
|
|
Pizza Hut Division
|
|
Taco Bell Division
|
|
Total
|
||||||||
|
U.S.
|
|
|
|
|
|
|
|
|
||||||||
|
Company sales
|
|
$
|
16
|
|
|
$
|
11
|
|
|
$
|
252
|
|
|
$
|
279
|
|
|
Franchise revenues
|
|
40
|
|
|
63
|
|
|
123
|
|
|
226
|
|
||||
|
Property revenues
|
|
5
|
|
|
1
|
|
|
6
|
|
|
12
|
|
||||
|
Franchise contributions for advertising and other services
|
|
2
|
|
|
60
|
|
|
97
|
|
|
159
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
China
|
|
|
|
|
|
|
|
|
||||||||
|
Franchise revenues
|
|
49
|
|
|
15
|
|
|
—
|
|
|
64
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Other
|
|
|
|
|
|
|
|
|
||||||||
|
Company sales
|
|
225
|
|
|
7
|
|
|
1
|
|
|
233
|
|
||||
|
Franchise revenues
|
|
198
|
|
|
61
|
|
|
5
|
|
|
264
|
|
||||
|
Property revenues
|
|
18
|
|
|
—
|
|
|
—
|
|
|
18
|
|
||||
|
Franchise contributions for advertising and other services
|
|
98
|
|
|
15
|
|
|
—
|
|
|
113
|
|
||||
|
|
|
$
|
651
|
|
|
$
|
233
|
|
|
$
|
484
|
|
|
$
|
1,368
|
|
|
|
Year to date ended 6/30/2019
|
|||||||||||||||
|
|
|
KFC Division
|
|
Pizza Hut Division
|
|
Taco Bell Division
|
|
Total
|
||||||||
|
U.S.
|
|
|
|
|
|
|
|
|
||||||||
|
Company sales
|
|
$
|
34
|
|
|
$
|
10
|
|
|
$
|
408
|
|
|
$
|
452
|
|
|
Franchise revenues
|
|
79
|
|
|
134
|
|
|
268
|
|
|
481
|
|
||||
|
Property revenues
|
|
11
|
|
|
3
|
|
|
21
|
|
|
35
|
|
||||
|
Franchise contributions for advertising and other services
|
|
5
|
|
|
152
|
|
|
213
|
|
|
370
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
China
|
|
|
|
|
|
|
|
|
||||||||
|
Franchise revenues
|
|
108
|
|
|
30
|
|
|
—
|
|
|
138
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Other
|
|
|
|
|
|
|
|
|
||||||||
|
Company sales
|
|
226
|
|
|
12
|
|
|
2
|
|
|
240
|
|
||||
|
Franchise revenues
|
|
423
|
|
|
120
|
|
|
13
|
|
|
556
|
|
||||
|
Property revenues
|
|
34
|
|
|
1
|
|
|
—
|
|
|
35
|
|
||||
|
Franchise contributions for advertising and other services
|
|
230
|
|
|
27
|
|
|
—
|
|
|
257
|
|
||||
|
|
|
$
|
1,150
|
|
|
$
|
489
|
|
|
925
|
|
|
$
|
2,564
|
|
|
|
|
Year to date ended 6/30/2018
|
|||||||||||||||
|
|
|
KFC Division
|
|
Pizza Hut Division
|
|
Taco Bell Division
|
|
Total
|
||||||||
|
U.S.
|
|
|
|
|
|
|
|
|
||||||||
|
Company sales
|
|
$
|
33
|
|
|
$
|
25
|
|
|
$
|
494
|
|
|
552
|
|
|
|
Franchise revenues
|
|
78
|
|
|
132
|
|
|
240
|
|
|
450
|
|
||||
|
Property revenues
|
|
11
|
|
|
2
|
|
|
11
|
|
|
24
|
|
||||
|
Franchise contributions for advertising and other services
|
|
4
|
|
|
125
|
|
|
188
|
|
|
317
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
China
|
|
|
|
|
|
|
|
|
||||||||
|
Franchise revenues
|
|
103
|
|
|
31
|
|
|
—
|
|
|
134
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Other
|
|
|
|
|
|
|
|
|
||||||||
|
Company sales
|
|
453
|
|
|
17
|
|
|
2
|
|
|
472
|
|
||||
|
Franchise revenues
|
|
388
|
|
|
123
|
|
|
11
|
|
|
522
|
|
||||
|
Property revenues
|
|
37
|
|
|
1
|
|
|
—
|
|
|
38
|
|
||||
|
Franchise contributions for advertising and other services
|
|
202
|
|
|
28
|
|
|
—
|
|
|
230
|
|
||||
|
|
|
$
|
1,309
|
|
|
$
|
484
|
|
|
$
|
946
|
|
|
$
|
2,739
|
|
|
|
|
Deferred Franchise Fees
|
||
|
Balance at December 31, 2018
|
|
$
|
414
|
|
|
Revenue recognized that was included in unamortized upfront fees received from franchisees at the beginning of the period
|
|
(33
|
)
|
|
|
Increase for upfront fees associated with contracts that became effective during the period, net of amounts recognized as revenue during the period
|
|
38
|
|
|
|
Balance at June 30, 2019
|
|
$
|
419
|
|
|
Less than 1 year
|
$
|
61
|
|
|
|
1 - 2 years
|
57
|
|
|
|
|
2 - 3 years
|
52
|
|
|
|
|
3 - 4 years
|
48
|
|
|
|
|
4 - 5 years
|
43
|
|
|
|
|
Thereafter
|
158
|
|
|
|
|
Total
|
$
|
419
|
|
|
|
|
Quarter ended
|
|
Year to date
|
||||||||||||
|
Revenues
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
KFC Division
|
$
|
584
|
|
|
$
|
651
|
|
|
$
|
1,150
|
|
|
$
|
1,309
|
|
|
Pizza Hut Division
|
246
|
|
|
233
|
|
|
489
|
|
|
484
|
|
||||
|
Taco Bell Division
|
480
|
|
|
484
|
|
|
925
|
|
|
946
|
|
||||
|
|
$
|
1,310
|
|
|
$
|
1,368
|
|
|
$
|
2,564
|
|
|
$
|
2,739
|
|
|
|
Quarter ended
|
|
Year to date
|
||||||||||||
|
Operating Profit
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
KFC Division
|
$
|
261
|
|
|
$
|
235
|
|
|
$
|
497
|
|
|
$
|
456
|
|
|
Pizza Hut Division
|
96
|
|
|
81
|
|
|
193
|
|
|
169
|
|
||||
|
Taco Bell Division
|
159
|
|
|
149
|
|
|
297
|
|
|
281
|
|
||||
|
Corporate and unallocated G&A expenses
|
(38
|
)
|
|
(40
|
)
|
|
(81
|
)
|
|
(84
|
)
|
||||
|
Unallocated Company restaurant expenses
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||
|
Unallocated Franchise and property expenses(a)
|
(2
|
)
|
|
(1
|
)
|
|
(3
|
)
|
|
(2
|
)
|
||||
|
Unallocated Refranchising gain (loss) (See Note 5)
|
4
|
|
|
29
|
|
|
10
|
|
|
185
|
|
||||
|
Unallocated Other income (expense)(b)
|
(9
|
)
|
|
(5
|
)
|
|
(9
|
)
|
|
(4
|
)
|
||||
|
Operating Profit
|
$
|
471
|
|
|
$
|
449
|
|
|
$
|
904
|
|
|
$
|
1,002
|
|
|
Investment income (expense), net (See Note 5)
|
25
|
|
|
23
|
|
|
9
|
|
|
89
|
|
||||
|
Other pension income (expense) (See Note 11)
|
—
|
|
|
(3
|
)
|
|
(3
|
)
|
|
(6
|
)
|
||||
|
Interest expense, net
|
(119
|
)
|
|
(112
|
)
|
|
(234
|
)
|
|
(219
|
)
|
||||
|
Income before income taxes
|
$
|
377
|
|
|
$
|
357
|
|
|
$
|
676
|
|
|
$
|
866
|
|
|
(a)
|
Represents costs associated with the KFC U.S. Acceleration Agreement and Pizza Hut U.S. Transformation Agreement. See Note 5.
|
|
(b)
|
Includes settlement of contingent consideration associated with our 2013 acquisition of the KFC Turkey and Pizza Hut Turkey businesses. See Note 5.
|
|
|
Quarter ended
|
|
Year to date
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Service cost
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
4
|
|
|
Interest cost
|
10
|
|
|
9
|
|
|
20
|
|
|
18
|
|
||||
|
Expected return on plan assets
|
(11
|
)
|
|
(11
|
)
|
|
(22
|
)
|
|
(21
|
)
|
||||
|
Amortization of net loss
|
1
|
|
|
3
|
|
|
1
|
|
|
7
|
|
||||
|
Amortization of prior service cost
|
1
|
|
|
2
|
|
|
2
|
|
|
3
|
|
||||
|
Net periodic benefit cost
|
$
|
2
|
|
|
$
|
5
|
|
|
$
|
4
|
|
|
$
|
11
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Additional loss recognized due to settlements(a)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
(a)
|
Loss is a result of settlement transactions which exceeded the sum of annual service and interest costs for the applicable plan. These losses were recorded in Other pension (income) expense.
|
|
Short-term Borrowings
|
|
6/30/2019
|
|
12/31/2018
|
|
|||
|
Current maturities of long-term debt
|
|
$
|
331
|
|
|
$
|
331
|
|
|
Other
|
|
4
|
|
|
—
|
|
||
|
|
|
335
|
|
|
331
|
|
||
|
Less current portion of debt issuance costs and discounts
|
|
(10
|
)
|
|
(10
|
)
|
||
|
Short-term borrowings
|
|
$
|
325
|
|
|
$
|
321
|
|
|
|
|
|
|
|
||||
|
Long-term Debt
|
|
|
|
|
||||
|
Securitization Notes
|
|
$
|
2,913
|
|
|
$
|
2,928
|
|
|
Subsidiary Senior Unsecured Notes
|
|
2,850
|
|
|
2,850
|
|
||
|
Revolving Facility
|
|
157
|
|
|
—
|
|
||
|
Term Loan A Facility
|
|
475
|
|
|
488
|
|
||
|
Term Loan B Facility
|
|
1,945
|
|
|
1,955
|
|
||
|
YUM Senior Unsecured Notes
|
|
1,875
|
|
|
1,875
|
|
||
|
Finance lease obligations
|
|
69
|
|
|
71
|
|
||
|
|
|
$
|
10,284
|
|
|
$
|
10,167
|
|
|
Less debt issuance costs and discounts
|
|
(84
|
)
|
|
(85
|
)
|
||
|
Less current maturities of long-term debt
|
|
(331
|
)
|
|
(331
|
)
|
||
|
Long-term debt
|
|
$
|
9,869
|
|
|
$
|
9,751
|
|
|
|
Quarter ended
|
|
Year to date
|
||||||||||||||||||||||||||||
|
|
Gains/(Losses) Recognized in OCI
|
|
(Gains)/Losses Reclassified from AOCI into Net Income
|
|
Gains/(Losses) Recognized in OCI
|
|
(Gains)/Losses Reclassified from AOCI into Net Income
|
||||||||||||||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Interest rate swaps
|
$
|
(43
|
)
|
|
$
|
(2
|
)
|
|
$
|
(5
|
)
|
|
$
|
(2
|
)
|
|
$
|
(70
|
)
|
|
$
|
16
|
|
|
$
|
(10
|
)
|
|
$
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Foreign currency contracts
|
(1
|
)
|
|
27
|
|
|
6
|
|
|
(24
|
)
|
|
10
|
|
|
11
|
|
|
(4
|
)
|
|
(12
|
)
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Income tax benefit/(expense)
|
11
|
|
|
(1
|
)
|
|
—
|
|
|
2
|
|
|
16
|
|
|
(5
|
)
|
|
3
|
|
|
2
|
|
||||||||
|
|
6/30/2019
|
|
12/31/2018
|
||||||||||||||||
|
|
Carrying Value
|
|
Fair Value (Level 2)
|
|
Carrying Value
|
|
Fair Value (Level 2)
|
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
|
Securitization Notes(a)
|
$
|
2,913
|
|
|
|
$
|
3,048
|
|
|
|
$
|
2,928
|
|
|
|
$
|
2,967
|
|
|
|
Subsidiary Senior Unsecured Notes(b)
|
2,850
|
|
|
|
2,972
|
|
|
|
2,850
|
|
|
|
2,733
|
|
|
||||
|
Term Loan A Facility(b)
|
475
|
|
|
|
474
|
|
|
|
488
|
|
|
|
479
|
|
|
||||
|
Term Loan B Facility(b)
|
1,945
|
|
|
|
1,946
|
|
|
|
1,955
|
|
|
|
1,915
|
|
|
||||
|
YUM Senior Unsecured Notes(b)
|
1,875
|
|
|
|
1,899
|
|
|
|
1,875
|
|
|
|
1,798
|
|
|
||||
|
|
|||||||||||||||||||
|
(a)
|
We estimated the fair value of the Securitization Notes by obtaining broker quotes from two separate brokerage firms that are knowledgeable about the Company’s Securitization Notes and, at times, trade these notes. The markets in which the Securitization Notes trade are not considered active markets.
|
|
(b)
|
We estimated the fair value of the YUM and Subsidiary Senior Unsecured Notes, Term Loan A Facility, and Term Loan B Facility using market quotes and calculations based on market rates.
|
|
|
|
|
|
|
|
Fair Value
|
|||||||
|
|
|
Condensed Consolidated Balance Sheet
|
|
Level
|
|
6/30/2019
|
|
12/31/2018
|
|||||
|
Assets
|
|
|
|
|
|
|
|
|
|||||
|
Interest Rate Swaps
|
|
Prepaid expenses and other current assets
|
|
2
|
|
|
$
|
10
|
|
|
$
|
21
|
|
|
Foreign Currency Contracts
|
|
Prepaid expenses and other current assets
|
|
2
|
|
|
—
|
|
|
5
|
|
||
|
Interest Rate Swaps
|
|
Other assets
|
|
2
|
|
|
6
|
|
|
29
|
|
||
|
Investment in Grubhub Common Stock
|
|
Other assets
|
|
1
|
|
|
218
|
|
|
214
|
|
||
|
Other Investments
|
|
Other assets
|
|
1
|
|
|
32
|
|
|
27
|
|
||
|
|
|
|
|
|
|
|
|
|
|||||
|
Liabilities
|
|
|
|
|
|
|
|
|
|||||
|
Foreign Currency Contracts
|
|
Accounts payable and other current liabilities
|
|
2
|
|
|
9
|
|
|
—
|
|
||
|
Interest Rate Swaps
|
|
Other liabilities and deferred credits
|
|
2
|
|
|
69
|
|
|
23
|
|
||
|
Foreign Currency Contracts
|
|
Other liabilities and deferred credits
|
|
2
|
|
|
—
|
|
|
24
|
|
||
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
•
|
The KFC Division which includes our worldwide operations of the KFC concept
|
|
•
|
The Pizza Hut Division which includes our worldwide operations of the Pizza Hut concept
|
|
•
|
The Taco Bell Division which includes our worldwide operations of the Taco Bell concept
|
|
•
|
More Focused. Four growth drivers form the basis of YUM’s strategic plans and repeatable business model to accelerate same-store sales growth and net-new restaurant development at KFC, Pizza Hut and Taco Bell around the world over the long term. The Company is focused on becoming best-in-class in:
|
|
•
|
Building Relevant, Easy and Distinctive Brands, by increasing investment in consumer insights, core product innovation, digital excellence and initiatives that strengthen the quality, convenience and appeal of the customer experience;
|
|
•
|
Developing Unmatched Franchise Operating Capability, strengthening how we equip and recruit the best restaurant operators to deliver great customer experiences, and build and protect our brands;
|
|
•
|
Driving Bold Restaurant Development through partnerships with growth-minded franchisees who can expand and penetrate markets with modern restaurants, strong economics and value; and
|
|
•
|
Growing Unrivaled Culture and Talent to strengthen the customer experience and franchise success with best-in-class people capability and culture.
|
|
•
|
More Franchised. YUM successfully increased franchise restaurant ownership to its 98% target as of the end of 2018.
|
|
•
|
More Efficient. The Company is revamping its financial profile, improving the efficiency of its organization and cost structure globally, by:
|
|
•
|
Reducing annual capital expenditures associated with Company-operated restaurant maintenance and other projects to less than $100 million and funding any additional capital for any new Company units through the refranchising of existing Company units. Capital spending in 2019 net of refranchising proceeds is expected to approximate $125 million as we fund additional strategic investments in technology that we believe will generate faster growth and incremental value for the Company;
|
|
•
|
Lowering General and administrative expenses ("G&A") to 1.7% of system sales in 2019; and
|
|
•
|
Maintaining an optimized capital structure of ~5.0x Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) leverage.
|
|
•
|
Same-store sales growth is the estimated percentage change in sales of all restaurants that have been open and in the YUM system for one year or more. In 2019 we are also including in our prior year base the sales of stores that were added as a result of the Telepizza strategic alliance and that have been open for one year or more. See description of the Telepizza strategic alliance within this MD&A.
|
|
•
|
Net new units represents new unit openings, offset by store closures.
|
|
•
|
Company restaurant profit ("Restaurant profit") is defined as Company sales less expenses incurred directly by our Company-owned restaurants in generating Company sales. Company restaurant margin as a percentage of sales is defined as Restaurant profit divided by Company sales.
|
|
•
|
System sales and System sales excluding the impacts of foreign currency translation ("FX"). System sales include the results of all restaurants regardless of ownership, including Company-owned and franchise restaurants. Sales at franchise restaurants typically generate ongoing franchise and license fees for the Company at a rate of 3% to 6% of sales. Franchise restaurant sales are not included in Company sales on the Condensed Consolidated Statements of Income; however, the franchise and license fees are included in the Company’s revenues. We believe System sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates our primary revenue drivers, Company and franchise same-store sales as well as net unit growth.
|
|
•
|
Diluted Earnings Per Share 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.
|
|
|
% Change
|
||||
|
|
System Sales, ex FX
|
Same-Store Sales
|
Net New Units
|
GAAP Operating Profit
|
Core Operating Profit
|
|
KFC Division
|
+10
|
+6
|
+6
|
+11
|
+17
|
|
Pizza Hut Division
|
+10
|
+2
|
+10
|
+18
|
+21
|
|
Taco Bell Division
|
+10
|
+7
|
+3
|
+7
|
+7
|
|
Worldwide
|
+10
|
+5
|
+7
|
+5
|
+18
|
|
|
% Change
|
||||
|
|
System Sales, ex FX
|
Same-Store Sales
|
Net New Units
|
GAAP Operating Profit
|
Core Operating Profit
|
|
KFC Division
|
+10
|
+5
|
+6
|
+9
|
+16
|
|
Pizza Hut Division
|
+8
|
+1
|
+10
|
+14
|
+18
|
|
Taco Bell Division
|
+8
|
+6
|
+3
|
+6
|
+6
|
|
Worldwide
|
+9
|
+4
|
+7
|
(10)
|
+15
|
|
|
|
|
|
|
|
|
•
|
Adjusting the prior year base to include units added as a result of our fourth quarter 2018 strategic alliance with Telepizza, system sales growth excluding foreign currency translation would have been 9% and 8% Worldwide and 4% and 3% for the Pizza Hut Division for the quarter and year to date, respectively.
|
|
•
|
We opened 312 and 622 net new units for the quarter and year to date, respectively. On a year-over-year basis, which takes into account the strategic alliance with Telepizza in the fourth quarter of 2018, net new unit growth was 7%.
|
|
•
|
During the quarter, we repurchased 1.9 million shares totaling $196 million at an average price of $104. During the year to date, we repurchased 3.0 million shares totaling $302 million at an average price of $100.
|
|
•
|
Foreign currency translation impacted Divisional Operating Profit unfavorably for the quarter and year to date by $17 million and $36 million, respectively.
|
|
|
Quarter ended
|
|
Year to date
|
||||||||||||||||||||
|
|
2019
|
|
2018
|
|
% B/(W)
|
|
2019
|
|
2018
|
|
% B/(W)
|
||||||||||||
|
Company sales
|
$
|
359
|
|
|
$
|
512
|
|
|
(30
|
)
|
|
|
$
|
692
|
|
|
$
|
1,024
|
|
|
(32
|
)
|
|
|
Franchise and property revenues
|
633
|
|
|
584
|
|
|
8
|
|
|
|
1,245
|
|
|
1,168
|
|
|
7
|
|
|
||||
|
Franchise contributions for advertising and other services
|
318
|
|
|
272
|
|
|
17
|
|
|
|
627
|
|
|
547
|
|
|
15
|
|
|
||||
|
Total revenues
|
$
|
1,310
|
|
|
$
|
1,368
|
|
|
(4
|
)
|
|
|
$
|
2,564
|
|
|
$
|
2,739
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Restaurant profit
|
$
|
73
|
|
|
$
|
91
|
|
|
(21
|
)
|
|
|
$
|
134
|
|
|
$
|
165
|
|
|
(19
|
)
|
|
|
Restaurant margin %
|
20.0
|
%
|
|
17.8
|
%
|
|
2.2
|
|
ppts.
|
|
19.2
|
%
|
|
16.1
|
%
|
|
3.1
|
|
ppts.
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
G&A expenses
|
$
|
198
|
|
|
$
|
208
|
|
|
5
|
|
|
|
$
|
409
|
|
|
$
|
427
|
|
|
4
|
|
|
|
Franchise and property expenses
|
38
|
|
|
40
|
|
|
9
|
|
|
|
81
|
|
|
87
|
|
|
8
|
|
|
||||
|
Franchise advertising and other services expense
|
315
|
|
|
274
|
|
|
(15
|
)
|
|
|
616
|
|
|
546
|
|
|
(13
|
)
|
|
||||
|
Refranchising (gain) loss
|
(4
|
)
|
|
(29
|
)
|
|
(85
|
)
|
|
|
(10
|
)
|
|
(185
|
)
|
|
(95
|
)
|
|
||||
|
Other (income) expense
|
6
|
|
|
5
|
|
|
NM
|
|
|
|
6
|
|
|
3
|
|
|
NM
|
|
|
||||
|
Operating Profit
|
$
|
471
|
|
|
$
|
449
|
|
|
5
|
|
|
|
$
|
904
|
|
|
$
|
1,002
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Investment (income) expense, net
|
$
|
(25
|
)
|
|
$
|
(23
|
)
|
|
11
|
|
|
|
$
|
(9
|
)
|
|
$
|
(89
|
)
|
|
(89
|
)
|
|
|
Other pension (income) expense
|
—
|
|
|
3
|
|
|
71
|
|
|
|
3
|
|
|
6
|
|
|
41
|
|
|
||||
|
Interest expense, net
|
119
|
|
|
112
|
|
|
(5
|
)
|
|
|
234
|
|
|
219
|
|
|
(7
|
)
|
|
||||
|
Income tax provision
|
88
|
|
|
36
|
|
|
NM
|
|
|
|
125
|
|
|
112
|
|
|
(12
|
)
|
|
||||
|
Net Income
|
$
|
289
|
|
|
$
|
321
|
|
|
(10
|
)
|
|
|
$
|
551
|
|
|
$
|
754
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Diluted EPS(a)
|
$
|
0.92
|
|
|
$
|
0.97
|
|
|
(5
|
)
|
|
|
$
|
1.75
|
|
|
$
|
2.25
|
|
|
(22
|
)
|
|
|
Effective tax rate
|
23.3
|
%
|
|
9.9
|
%
|
|
(13.4
|
)
|
ppts.
|
|
18.5
|
%
|
|
12.9
|
%
|
|
(5.6
|
)
|
ppts.
|
||||
|
(a)
|
See Note 3 for the number of shares used in this calculation.
|
|
Unit Count
|
6/30/2019
|
|
|
6/30/2018
|
|
|
% Increase (Decrease)
|
|
|||
|
Franchise
|
47,910
|
|
|
44,264
|
|
|
8
|
|
|
||
|
Company-owned
|
859
|
|
|
1,302
|
|
|
(34
|
)
|
|
||
|
|
48,769
|
|
|
45,566
|
|
|
7
|
|
(a)
|
||
|
(a)
|
Adjusting the prior year base to include Telepizza, System Sales Growth in 2019 would have been 5% and 4% on a reported basis and 9% and 8% excluding FX for the quarter and year to date, respectively.
|
|
|
|
Quarter ended
|
|
Year to date
|
||||||||||||
|
Detail of Special Items
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Refranchising gain (loss) (See Note 5)
|
|
$
|
4
|
|
|
$
|
29
|
|
|
$
|
10
|
|
|
$
|
185
|
|
|
Other Special Items Expense(a)
|
|
(9
|
)
|
|
—
|
|
|
(11
|
)
|
|
(3
|
)
|
||||
|
Special Items Income (Expense) - Operating Profit
|
|
(5
|
)
|
|
29
|
|
|
(1
|
)
|
|
182
|
|
||||
|
Interest expense, net(a)
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
||||
|
Special Items Income (Expense) before Income Taxes
|
|
(7
|
)
|
|
29
|
|
|
(3
|
)
|
|
182
|
|
||||
|
Tax Benefit (Expense) on Special Items(b)
|
|
3
|
|
|
(18
|
)
|
|
2
|
|
|
(37
|
)
|
||||
|
Tax Benefit (Expense) - U.S. Tax Act(c)
|
|
—
|
|
|
40
|
|
|
—
|
|
|
34
|
|
||||
|
Special Items Income (Expense), net of tax
|
|
$
|
(4
|
)
|
|
$
|
51
|
|
|
$
|
(1
|
)
|
|
$
|
179
|
|
|
Average diluted shares outstanding
|
|
314
|
|
|
331
|
|
|
314
|
|
|
336
|
|
||||
|
Special Items diluted EPS
|
|
$
|
(0.01
|
)
|
|
$
|
0.15
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Reconciliation of GAAP Operating Profit to Core Operating Profit
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Consolidated
|
|
|
|
|
|
|
|
|
||||||||
|
GAAP Operating Profit
|
|
$
|
471
|
|
|
$
|
449
|
|
|
$
|
904
|
|
|
$
|
1,002
|
|
|
Special Items Income
|
|
(5
|
)
|
|
29
|
|
|
(1
|
)
|
|
182
|
|
||||
|
Foreign Currency Impact on Divisional Operating Profit(d)
|
|
(17
|
)
|
|
N/A
|
|
|
(36
|
)
|
|
N/A
|
|
||||
|
Core Operating Profit
|
|
$
|
493
|
|
|
$
|
420
|
|
|
$
|
941
|
|
|
$
|
820
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
KFC Division
|
|
|
|
|
|
|
|
|
||||||||
|
GAAP Operating Profit
|
|
$
|
261
|
|
|
$
|
235
|
|
|
$
|
497
|
|
|
$
|
456
|
|
|
Foreign Currency Impact on Divisional Operating Profit(d)
|
|
(14
|
)
|
|
N/A
|
|
|
(30
|
)
|
|
N/A
|
|
||||
|
Core Operating Profit
|
|
$
|
275
|
|
|
$
|
235
|
|
|
$
|
527
|
|
|
$
|
456
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Pizza Hut Division
|
|
|
|
|
|
|
|
|
||||||||
|
GAAP Operating Profit
|
|
$
|
96
|
|
|
$
|
81
|
|
|
$
|
193
|
|
|
$
|
169
|
|
|
Foreign Currency Impact on Divisional Operating Profit(d)
|
|
(3
|
)
|
|
N/A
|
|
|
(6
|
)
|
|
N/A
|
|
||||
|
Core Operating Profit
|
|
$
|
99
|
|
|
$
|
81
|
|
|
$
|
199
|
|
|
$
|
169
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Taco Bell Division
|
|
|
|
|
|
|
|
|
||||||||
|
GAAP Operating Profit
|
|
$
|
159
|
|
|
$
|
149
|
|
|
$
|
297
|
|
|
$
|
281
|
|
|
Foreign Currency Impact on Divisional Operating Profit(d)
|
|
—
|
|
|
N/A
|
|
|
—
|
|
|
N/A
|
|
||||
|
Core Operating Profit
|
|
$
|
159
|
|
|
$
|
149
|
|
|
$
|
297
|
|
|
$
|
281
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Reconciliation of Diluted EPS to Diluted EPS excluding Special Items
|
|
|
|
|
|
|
|
|
||||||||
|
Diluted EPS
|
|
$
|
0.92
|
|
|
$
|
0.97
|
|
|
$
|
1.75
|
|
|
$
|
2.25
|
|
|
Special Items Diluted EPS
|
|
(0.01
|
)
|
|
0.15
|
|
|
(0.01
|
)
|
|
0.54
|
|
||||
|
Diluted EPS excluding Special Items
|
|
$
|
0.93
|
|
|
$
|
0.82
|
|
|
$
|
1.76
|
|
|
$
|
1.71
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items
|
|
|
|
|
|
|
|
|
||||||||
|
GAAP Effective Tax Rate
|
|
23.3
|
%
|
|
9.9
|
%
|
|
18.5
|
%
|
|
12.9
|
%
|
||||
|
Impact on Tax Rate as a result of Special Items(b)(c)
|
|
(0.4
|
)%
|
|
(7.5
|
)%
|
|
(0.2
|
)%
|
|
(2.9
|
)%
|
||||
|
Effective Tax Rate excluding Special Items
|
|
23.7
|
%
|
|
17.4
|
%
|
|
18.7
|
%
|
|
15.8
|
%
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Reconciliation of GAAP Company sales to System sales
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Consolidated
|
|
|
|
|
|
|
|
|
||||||||
|
GAAP Company sales(e)
|
|
$
|
359
|
|
|
$
|
512
|
|
|
$
|
692
|
|
|
$
|
1,024
|
|
|
Franchise sales
|
|
12,114
|
|
|
11,177
|
|
|
23,965
|
|
|
22,373
|
|
||||
|
System sales
|
|
12,473
|
|
|
11,689
|
|
|
24,657
|
|
|
23,397
|
|
||||
|
Foreign Currency Impact on System sales(f)
|
|
(410
|
)
|
|
N/A
|
|
|
(901
|
)
|
|
N/A
|
|
||||
|
System sales, excluding FX
|
|
$
|
12,883
|
|
|
$
|
11,689
|
|
|
$
|
25,558
|
|
|
$
|
23,397
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
KFC Division
|
|
|
|
|
|
|
|
|
||||||||
|
GAAP Company sales(e)
|
|
$
|
135
|
|
|
$
|
241
|
|
|
$
|
260
|
|
|
$
|
486
|
|
|
Franchise sales
|
|
6,513
|
|
|
6,065
|
|
|
12,935
|
|
|
12,149
|
|
||||
|
System sales
|
|
6,648
|
|
|
6,306
|
|
|
13,195
|
|
|
12,635
|
|
||||
|
Foreign Currency Impact on System sales(f)
|
|
(317
|
)
|
|
N/A
|
|
|
(700
|
)
|
|
N/A
|
|
||||
|
System sales, excluding FX
|
|
$
|
6,965
|
|
|
$
|
6,306
|
|
|
$
|
13,895
|
|
|
$
|
12,635
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Pizza Hut Division
|
|
|
|
|
|
|
|
|
||||||||
|
GAAP Company sales(e)
|
|
$
|
11
|
|
|
$
|
18
|
|
|
$
|
22
|
|
|
$
|
42
|
|
|
Franchise sales
|
|
3,087
|
|
|
2,876
|
|
|
6,207
|
|
|
5,884
|
|
||||
|
System sales
|
|
3,098
|
|
|
2,894
|
|
|
6,229
|
|
|
5,926
|
|
||||
|
Foreign Currency Impact on System sales(f)
|
|
(89
|
)
|
|
N/A
|
|
|
(192
|
)
|
|
N/A
|
|
||||
|
System sales, excluding FX
|
|
$
|
3,187
|
|
|
$
|
2,894
|
|
|
$
|
6,421
|
|
|
$
|
5,926
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Taco Bell Division
|
|
|
|
|
|
|
|
|
||||||||
|
GAAP Company sales(e)
|
|
$
|
213
|
|
|
$
|
253
|
|
|
$
|
410
|
|
|
$
|
496
|
|
|
Franchise sales
|
|
2,514
|
|
|
2,236
|
|
|
4,823
|
|
|
4,340
|
|
||||
|
System sales
|
|
2,727
|
|
|
2,489
|
|
|
5,233
|
|
|
4,836
|
|
||||
|
Foreign Currency Impact on System sales(f)
|
|
(4
|
)
|
|
N/A
|
|
|
(9
|
)
|
|
N/A
|
|
||||
|
System sales, excluding FX
|
|
$
|
2,731
|
|
|
$
|
2,489
|
|
|
$
|
5,242
|
|
|
$
|
4,836
|
|
|
(a)
|
During the quarter ended June 30, 2019 we recorded charges of $8 million and $2 million to Other (income) expense and Interest expense, net, respectively, related to cash payments in excess of our recorded liability to settle contingent consideration associated with our 2013 acquisition of the KFC Turkey and Pizza Hut Turkey businesses. Consistent with prior adjustments to the recorded contingent consideration we have reflected this as a Special Item.
|
|
(b)
|
Tax Expense on Special Items was determined based upon the impact of the nature, as well as the jurisdiction of the respective individual components within Special Items. Additionally, during the quarter ended June 30, 2018, we recorded a $19 million increase to our Income tax provision for the correction of an error associated with the tax recorded on a prior year divestiture, the effects of which were previously recorded as a Special Item.
|
|
(c)
|
During the quarter and year to date ended June 30, 2018, we recorded $32 million and $16 million decreases, respectively, related to our provisional tax expense recorded in the fourth quarter of 2017 associated with the Tax Cuts and Jobs Act of 2017 ("Tax Act") that was reported as a Special Item. We also recorded Special Items tax benefits of $8 million and $18 million in the quarter and year to date ended June 30, 2018, respectively, related to 2018 U.S. foreign tax credits that became realizable directly as a result of the impact of deemed repatriation tax expense associated with the Tax Act.
|
|
(d)
|
The foreign currency impact on reported Operating Profit is presented in relation only to the immediately preceding year presented. When determining applicable Core Operating Profit growth percentages, the Core Operating Profit for the current year should be compared to the prior year GAAP Operating Profit adjusted only for any prior year Special Items Income (Expense).
|
|
(e)
|
Company sales represents sales from our Company-operated stores as presented on our Condensed Consolidated Statements of Income.
|
|
(f)
|
The foreign currency impact on System sales is presented in relation only to the immediately preceding year presented. When determining applicable System sales growth percentages, the System sales excluding FX for the current year should be compared to the prior year System sales.
|
|
•
|
In Spain and Portugal, Telepizza will continue operating the Telepizza brand and will oversee franchisees operating Pizza Hut branded restaurants
|
|
•
|
In Latin America (excluding Brazil), the Caribbean and Switzerland, Telepizza will progressively convert its existing restaurants to the Pizza Hut brand and oversee franchisees operating Pizza Hut branded restaurants
|
|
•
|
Telepizza will manage supply chain logistics for the entire master franchise territory and will become an authorized supplier of Pizza Hut branded restaurants
|
|
•
|
Across the regions covered by the master franchise agreement, Telepizza will target opening at least 1,300 new units over the next ten years and 2,550 units in total over 20 years
|
|
|
|
Quarter ended
|
|
Year to date
|
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
% B/(W)
|
|
|
|
|
|
% B/(W)
|
||||||||||||||||||||
|
|
|
2019
|
|
2018
|
|
Reported
|
|
Ex FX
|
|
2019
|
|
2018
|
|
Reported
|
|
Ex FX
|
||||||||||||||||
|
System Sales
|
|
$
|
6,648
|
|
|
$
|
6,306
|
|
|
5
|
|
|
|
10
|
|
|
|
$
|
13,195
|
|
|
$
|
12,635
|
|
|
4
|
|
|
|
10
|
|
|
|
Same-Store Sales Growth %
|
|
6
|
|
|
2
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
5
|
|
|
2
|
|
|
N/A
|
|
|
|
N/A
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Company sales
|
|
$
|
135
|
|
|
$
|
241
|
|
|
(44
|
)
|
|
|
(41
|
)
|
|
|
$
|
260
|
|
|
$
|
486
|
|
|
(47
|
)
|
|
|
(42
|
)
|
|
|
Franchise and property revenues
|
|
332
|
|
|
310
|
|
|
7
|
|
|
|
12
|
|
|
|
655
|
|
|
617
|
|
|
6
|
|
|
|
12
|
|
|
||||
|
Franchise contributions for advertising and other services
|
|
117
|
|
|
100
|
|
|
18
|
|
|
|
26
|
|
|
|
235
|
|
|
206
|
|
|
14
|
|
|
|
23
|
|
|
||||
|
Total revenues
|
|
$
|
584
|
|
|
$
|
651
|
|
|
(10
|
)
|
|
|
(5
|
)
|
|
|
$
|
1,150
|
|
|
$
|
1,309
|
|
|
(12
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Restaurant profit
|
|
$
|
22
|
|
|
$
|
31
|
|
|
(29
|
)
|
|
|
(25
|
)
|
|
|
$
|
39
|
|
|
$
|
56
|
|
|
(30
|
)
|
|
|
(25
|
)
|
|
|
Restaurant margin %
|
|
15.8
|
%
|
|
12.5
|
%
|
|
3.3
|
|
ppts.
|
|
3.3
|
|
ppts.
|
|
15.0
|
%
|
|
11.5
|
%
|
|
3.5
|
|
ppts.
|
|
3.5
|
|
ppts.
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
G&A expenses
|
|
$
|
75
|
|
|
$
|
81
|
|
|
6
|
|
|
|
3
|
|
|
|
$
|
153
|
|
|
$
|
166
|
|
|
7
|
|
|
|
4
|
|
|
|
Franchise and property expenses
|
|
19
|
|
|
25
|
|
|
25
|
|
|
|
20
|
|
|
|
47
|
|
|
54
|
|
|
13
|
|
|
|
7
|
|
|
||||
|
Franchise advertising and other services expense
|
|
116
|
|
|
101
|
|
|
(15
|
)
|
|
|
(23
|
)
|
|
|
232
|
|
|
205
|
|
|
(13
|
)
|
|
|
(21
|
)
|
|
||||
|
Operating Profit
|
|
$
|
261
|
|
|
$
|
235
|
|
|
11
|
|
|
|
17
|
|
|
|
$
|
497
|
|
|
$
|
456
|
|
|
9
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
% Increase (Decrease)
|
|
|||||
|
Unit Count
|
|
6/30/2019
|
|
|
6/30/2018
|
|
|
|
||||
|
Franchise
|
|
22,789
|
|
|
21,235
|
|
|
7
|
|
|
||
|
Company-owned
|
|
329
|
|
|
603
|
|
|
(45
|
)
|
|
||
|
Total
|
|
23,118
|
|
|
21,838
|
|
|
6
|
|
|
||
|
|
|
Quarter ended
|
|
Year to date
|
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
% B/(W)
|
|
|
|
|
|
% B/(W)
|
||||||||||||||||||||
|
|
|
2019
|
|
2018
|
|
Reported
|
|
Ex FX
|
|
2019
|
|
2018
|
|
Reported
|
|
Ex FX
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
System Sales
|
|
$
|
3,098
|
|
|
$
|
2,894
|
|
|
7
|
|
|
|
10
|
|
|
|
$
|
6,229
|
|
|
$
|
5,926
|
|
|
5
|
|
|
|
8
|
|
|
|
Same-Store Sales Growth (Decline) %
|
|
2
|
|
|
(1
|
)
|
|
N/A
|
|
|
|
N/A
|
|
|
|
1
|
|
|
Even
|
|
N/A
|
|
|
|
N/A
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Company sales
|
|
$
|
11
|
|
|
$
|
18
|
|
|
(38
|
)
|
|
|
(36
|
)
|
|
|
$
|
22
|
|
|
$
|
42
|
|
|
(47
|
)
|
|
|
(46
|
)
|
|
|
Franchise and property revenues
|
|
143
|
|
|
140
|
|
|
3
|
|
|
|
5
|
|
|
|
288
|
|
|
289
|
|
|
—
|
|
|
|
2
|
|
|
||||
|
Franchise contributions for advertising and other services
|
|
92
|
|
|
75
|
|
|
21
|
|
|
|
22
|
|
|
|
179
|
|
|
153
|
|
|
17
|
|
|
|
17
|
|
|
||||
|
Total revenues
|
|
$
|
246
|
|
|
$
|
233
|
|
|
6
|
|
|
|
7
|
|
|
|
$
|
489
|
|
|
$
|
484
|
|
|
1
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Restaurant profit
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
NM
|
|
|
|
NM
|
|
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
NM
|
|
|
NM
|
|
||
|
Restaurant margin %
|
|
1.6
|
%
|
|
(2.4
|
)%
|
|
4.0
|
|
ppts.
|
|
3.9
|
|
ppts.
|
|
2.7
|
%
|
|
(1.0
|
)%
|
|
3.7
|
|
ppts.
|
|
3.6
|
|
ppts.
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
G&A expenses
|
|
$
|
44
|
|
|
$
|
46
|
|
|
6
|
|
|
|
5
|
|
|
|
$
|
91
|
|
|
$
|
96
|
|
|
6
|
|
|
|
4
|
|
|
|
Franchise and property expenses
|
|
9
|
|
|
8
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
14
|
|
|
19
|
|
|
30
|
|
|
|
28
|
|
|
||||
|
Franchise advertising and other services expense
|
|
89
|
|
|
77
|
|
|
(16
|
)
|
|
|
(16
|
)
|
|
|
172
|
|
|
155
|
|
|
(11
|
)
|
|
|
(12
|
)
|
|
||||
|
Operating Profit
|
|
$
|
96
|
|
|
$
|
81
|
|
|
18
|
|
|
|
21
|
|
|
|
$
|
193
|
|
|
$
|
169
|
|
|
14
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
% Increase (Decrease)
|
|
|||||
|
Unit Count
|
|
6/30/2019
|
|
|
6/30/2018
|
|
|
|
||||
|
Franchise
|
|
18,459
|
|
|
16,730
|
|
|
10
|
|
|
||
|
Company-owned
|
|
56
|
|
|
93
|
|
|
(40
|
)
|
|
||
|
|
|
18,515
|
|
|
16,823
|
|
|
10
|
|
|
||
|
|
|
Quarter ended
|
|
Year to date
|
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
% B/(W)
|
|
|
|
|
|
% B/(W)
|
||||||||||||||||||||
|
|
|
2019
|
|
2018
|
|
Reported
|
|
Ex FX
|
|
2019
|
|
2018
|
|
Reported
|
|
Ex FX
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
System Sales
|
|
$
|
2,727
|
|
|
$
|
2,489
|
|
|
10
|
|
|
|
10
|
|
|
|
$
|
5,233
|
|
|
$
|
4,836
|
|
|
8
|
|
|
|
8
|
|
|
|
Same-Store Sales Growth %
|
|
7
|
|
|
2
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
6
|
|
|
1
|
|
|
N/A
|
|
|
|
N/A
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Company sales
|
|
$
|
213
|
|
|
$
|
253
|
|
|
(16
|
)
|
|
|
(16
|
)
|
|
|
$
|
410
|
|
|
$
|
496
|
|
|
(17
|
)
|
|
|
(17
|
)
|
|
|
Franchise and property revenues
|
|
158
|
|
|
134
|
|
|
18
|
|
|
|
18
|
|
|
|
302
|
|
|
262
|
|
|
15
|
|
|
|
15
|
|
|
||||
|
Franchise contributions for advertising and other services
|
|
109
|
|
|
97
|
|
|
13
|
|
|
|
13
|
|
|
|
213
|
|
|
188
|
|
|
14
|
|
|
|
14
|
|
|
||||
|
Total revenues
|
|
$
|
480
|
|
|
$
|
484
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
$
|
925
|
|
|
$
|
946
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Restaurant profit
|
|
$
|
50
|
|
|
$
|
60
|
|
|
(18
|
)
|
|
|
(18
|
)
|
|
|
$
|
94
|
|
|
$
|
109
|
|
|
(14
|
)
|
|
|
(14
|
)
|
|
|
Restaurant margin %
|
|
23.6
|
%
|
|
24.1
|
%
|
|
(0.5
|
)
|
ppts.
|
|
(0.5
|
)
|
ppts.
|
|
22.8
|
%
|
|
21.9
|
%
|
|
0.9
|
|
ppts.
|
|
0.9
|
|
ppts.
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
G&A expenses
|
|
$
|
41
|
|
|
$
|
41
|
|
|
—
|
|
|
|
—
|
|
|
|
$
|
84
|
|
|
$
|
81
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
Franchise and property expenses
|
|
8
|
|
|
6
|
|
|
(30
|
)
|
|
|
(30
|
)
|
|
|
17
|
|
|
12
|
|
|
(41
|
)
|
|
|
(41
|
)
|
|
||||
|
Franchise advertising and other services expense
|
|
110
|
|
|
96
|
|
|
(14
|
)
|
|
|
(14
|
)
|
|
|
212
|
|
|
186
|
|
|
(14
|
)
|
|
|
(14
|
)
|
|
||||
|
Operating Profit
|
|
$
|
159
|
|
|
$
|
149
|
|
|
7
|
|
|
|
7
|
|
|
|
$
|
297
|
|
|
$
|
281
|
|
|
6
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
% Increase (Decrease)
|
|
|||||
|
Unit Count
|
|
6/30/2019
|
|
|
6/30/2018
|
|
|
|
||||
|
Franchise
|
|
6,662
|
|
|
6,299
|
|
|
6
|
|
|
||
|
Company-owned
|
|
474
|
|
|
606
|
|
|
(22
|
)
|
|
||
|
|
|
7,136
|
|
|
6,905
|
|
|
3
|
|
|
||
|
|
|
Quarter ended
|
|
Year to date
|
||||||||||||||||||||
|
(Expense) / Income
|
|
2019
|
|
2018
|
|
% B/(W)
|
|
2019
|
|
2018
|
|
% B/(W)
|
||||||||||||
|
Corporate and unallocated G&A
|
|
$
|
(38
|
)
|
|
$
|
(40
|
)
|
|
3
|
|
|
|
$
|
(81
|
)
|
|
$
|
(84
|
)
|
|
3
|
|
|
|
Unallocated Company restaurant expenses
|
|
—
|
|
|
1
|
|
|
NM
|
|
|
|
—
|
|
|
1
|
|
|
NM
|
|
|
||||
|
Unallocated Franchise and property expenses
|
|
(2
|
)
|
|
(1
|
)
|
|
(30
|
)
|
|
|
(3
|
)
|
|
(2
|
)
|
|
(30
|
)
|
|
||||
|
Refranchising gain (loss) (See Note 5)
|
|
4
|
|
|
29
|
|
|
(85
|
)
|
|
|
10
|
|
|
185
|
|
|
(95
|
)
|
|
||||
|
Unallocated Other income (expense)
|
|
(9
|
)
|
|
(5
|
)
|
|
NM
|
|
|
|
(9
|
)
|
|
(4
|
)
|
|
NM
|
|
|
||||
|
Investment income (expense), net (See Note 5)
|
|
25
|
|
|
23
|
|
|
11
|
|
|
|
9
|
|
|
89
|
|
|
(89
|
)
|
|
||||
|
Other pension income (expense) (See Note 11)
|
|
—
|
|
|
(3
|
)
|
|
71
|
|
|
|
(3
|
)
|
|
(6
|
)
|
|
41
|
|
|
||||
|
Interest expense, net
|
|
(119
|
)
|
|
(112
|
)
|
|
(5)
|
|
|
|
(234
|
)
|
|
(219
|
)
|
|
(7
|
)
|
|
||||
|
Income tax provision (See Note 8)
|
|
(88
|
)
|
|
(36
|
)
|
|
NM
|
|
|
|
(125
|
)
|
|
(112
|
)
|
|
(12
|
)
|
|
||||
|
Effective tax rate (See Note 8)
|
|
23.3
|
%
|
|
9.9
|
%
|
|
(13.4
|
)
|
ppts.
|
|
18.5
|
%
|
|
12.9
|
%
|
|
(5.6
|
)
|
ppts.
|
||||
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
2026
|
|
2027
|
|
2028
|
|
2037
|
|
2043
|
|
Total
|
||||||||||||||||||||||||||
|
Securitization Notes
|
|
$
|
15
|
|
|
$
|
29
|
|
|
$
|
29
|
|
|
$
|
29
|
|
|
$
|
1,281
|
|
|
$
|
16
|
|
|
$
|
16
|
|
|
$
|
921
|
|
|
$
|
6
|
|
|
$
|
571
|
|
|
|
|
|
|
$
|
2,913
|
|
||||
|
Credit Agreement
|
|
22
|
|
|
51
|
|
|
76
|
|
|
395
|
|
|
20
|
|
|
20
|
|
|
1,836
|
|
|
|
|
|
|
|
|
|
|
|
|
2,420
|
|
||||||||||||||||||
|
Subsidiary Senior Unsecured Notes
|
|
|
|
|
|
|
|
|
|
|
|
1,050
|
|
|
|
|
1,050
|
|
|
750
|
|
|
|
|
|
|
|
|
2,850
|
|
||||||||||||||||||||||
|
YUM Senior Unsecured Notes
|
|
250
|
|
|
350
|
|
|
350
|
|
|
|
|
325
|
|
|
|
|
|
|
|
|
|
|
|
|
325
|
|
|
275
|
|
|
1,875
|
|
|||||||||||||||||||
|
Revolving Facility
|
|
|
|
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
157
|
|
||||||||||||||||||||||||
|
Total
|
|
$
|
287
|
|
|
$
|
430
|
|
|
$
|
455
|
|
|
$
|
581
|
|
|
$
|
1,626
|
|
|
$
|
1,086
|
|
|
$
|
1,852
|
|
|
$
|
1,971
|
|
|
$
|
756
|
|
|
$
|
571
|
|
|
$
|
325
|
|
|
$
|
275
|
|
|
$
|
10,215
|
|
|
Fiscal Periods
|
|
Total number of shares purchased
(thousands)
|
|
Average price paid per share
|
|
Total number of shares purchased as part of publicly announced plans or programs
(thousands)
|
|
Approximate dollar value of shares that may yet be purchased under the plans or programs
(millions)
|
|
4/1/19-4/30/19
|
|
116
|
|
$100.79
|
|
116
|
|
$988
|
|
|
|
|
|
|
|
|
|
|
|
5/1/19-5/31/19
|
|
1,170
|
|
$101.10
|
|
1,170
|
|
$870
|
|
|
|
|
|
|
|
|
|
|
|
6/1/19-6/30/19
|
|
605
|
|
$108.82
|
|
605
|
|
$804
|
|
Total
|
|
1,891
|
|
$103.55
|
|
1,891
|
|
$804
|
|
|
YUM! BRANDS, INC.
|
|
|
(Registrant)
|
|
Date:
|
August 8, 2019
|
/s/ David E. Russell
|
|
|
|
Senior Vice President, Finance and Corporate Controller
|
|
|
|
(Principal Accounting Officer)
|
|
•
|
Start Date: To be determined
|
|
•
|
Salary: You will be paid bi-weekly in the amount of $23,076.92 per pay period, ($600,000 if annualized), less applicable taxes and withholdings.
|
|
•
|
Bonus: In addition to your annual salary, you are also eligible for our Yum! Leaders' Bonus. This annual bonus recognizes and rewards you for our overall performance as a company as well as your individual contributions to the business.
|
|
◦
|
Your payout from the Team Performance Factor is based on the year-end results of Yum!’s annual performance and can range from 0 to 200% of your target bonus.
|
|
◦
|
Likewise, depending on how well you perform against the personal goals and objectives set by you and your manager, your Individual Performance Factor could range from 0 to 150% of your target bonus.
|
|
◦
|
If we achieved the maximum 200% Team Factor multiplied by the maximum 150% Individual Factor this would result in a bonus award 3 times your target.
|
|
◦
|
For your first year in an eligible position, your reward will be prorated based on the number of days in position.
|
|
•
|
Long-Term Incentives: The target value of your award is $1,250,000 in economic value on the date of the grant. The actual award you receive will be based on management’s assessment of your performance. This award will be delivered 50% in Stock Appreciation Rights (SARs) and 50% in Performance Shares. Awards are typically granted annually in February.
|
|
◦
|
Stock Appreciation Rights: Our performance-based stock appreciation rights program allows you to have a stake in the long-term growth of the company by granting you the right to the appreciation or gain in Yum!'s stock price over time.
|
|
◦
|
Performance Share Plan: Your actual payout can range from 0% to 200% of the value granted to you depending on Yum!’s performance against pre-defined metrics over a three year performance period.
|
|
•
|
Sign-on Bonus: We are also offering you a one-time sign-on bonus in the amount of $500,000 (less applicable taxes and withholdings). This bonus will be paid to you within 30 days of your employment start date. If you voluntarily resign within one year of this date, you will be required to repay this bonus to Yum.
|
|
•
|
Sign-on Grant: You will also receive a sign-on Restricted Stock Units grants of $1,500,000 in economic value on the date of the grant. This grant will vest one-third (33%) per year.
|
|
•
|
Ownership Guidelines: To be eligible to receive an annual long-term incentive grant, you must be on trend with your Ownership Guidelines. Ownership guidelines are set by a multiple of your base salary and you have five years to reach these guidelines through a variety of ownership vehicles. For your level, you must hold a multiple of 3 times your salary.
|
|
•
|
Executive Income Deferral: The Executive Income Deferral Program (EID) provides our leaders with an opportunity to enjoy tax-deferred investment returns by deferring up to 100% of your annual bonus and/or up to 85% of your annual base salary. There are several investment choices for your deferred money. As an executive officer, you will be eligible to defer your income through any of the investment options in the Yum!'s Executive Income Deferral Program (EID) except for the Yum! Matching Stock Fund for bonus deferrals and the Yum Stock Fund for base salary deferrals.
|
|
•
|
Executive Physical: You will be eligible for an annual physical examination.
|
|
•
|
Retirement: In addition, after 60 days of employment, you are also eligible to participate in the YUM! Brands 401(k) Plan (the “401(k) Plan”). The 401(k) Plan will match your contribution $1 for $1 on up to 6% of eligible pay per pay period-starting with your very first contribution. Information regarding the 401(k) Plan, including enrollment and investment options, will be sent to your home address prior to your eligibility date.
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Leadership Retirement Plan (LRP): The LRP is a nonqualified plan with 4 percent of Base Pay and Target Bonus credited on your behalf each year employed. Annual credits are subject to the actual plan provisions, including eligibility and vesting terms. After three years of service with Yum!, you will be vested in the LRP.
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Benefits: A variety of benefits are available to you as a Yum! Employee.
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Medical, dental, vision, and legal are available to you effective on your first day of employment. However, you must enroll before your 45th day in order to receive coverage for 2019 and it will be backdated to day one of employment.
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There are other benefits available to you immediately, including but not limited to 24/7/365 physician access for only $20, wellness programs and information security protection.
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You can learn more about these benefits, and others, by visiting HRonline.yum.com. You will have access to HRonline.yum.com after your first day of work.
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Vacation: You are eligible to receive four weeks of vacation.
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Sign Offer Letter and Confidentiality Agreement: We are thrilled to extend this offer, and look forward to your acceptance. Enclosed you will find two copies of this letter. Please sign and return one copy to me to accept this offer. The second copy of the offer letter is for your records.
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Change in Control: You will be provided a Change in Control agreement.
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Complete Background Check: This offer of employment is contingent upon a satisfactory background check and proof of your work eligibility. Federal law requires that you provide documentation, which verifies your identity and your eligibility to work in the United States.
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Agreement to Arbitrate: This offer of employment is also contingent upon your agreement and signature on our Agreement to Arbitrate form, which is enclosed with this letter. The Agreement to Arbitrate is intended to provide all employees and the company with an efficient and fair procedure to resolve any disputes that may relate to your employment. It is an alternative solution to litigation that often provides faster results for all parties involved.
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And remember, your employment at Yum! is at-will. This means that either you or Yum! can end the employment relationship at any time. An at-will employee’s status (for example, position, salary change, promotions, demotions, etc.) may also be changed at-will, with or without cause and with or without notice, at any time by Yum!.
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/s/ Chris Turner
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June 21, 2019
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Signature - Chris Turner
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Date
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Description
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Registration Statement Number
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Form S-8
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Restaurant Deferred Compensation Program
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333-36877, 333-32050
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Executive Income Deferral Program
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333-36955
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SharePower Stock Option Plan
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333-36961
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YUM! Brands 401(k) Plan
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333-36893, 333-32048, 333-109300
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YUM! Brands, Inc. Restaurant General Manager Stock Option Plan
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333-64547
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YUM! Brands, Inc. Long-Term Incentive Plan
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333-32052, 333-109299, 333-170929, 333-223152
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1.
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I have reviewed this report on Form 10-Q of YUM! Brands, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant, as of, and for, the periods presented in this report.
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
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(a)
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all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date:
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August 8, 2019
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/s/ Greg Creed
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Chief Executive Officer
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1.
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I have reviewed this report on Form 10-Q of YUM! Brands, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant, as of, and for, the periods presented in this report.
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
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(a)
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all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date:
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August 8, 2019
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/s/ David W. Gibbs
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President, Chief Operating Officer and Chief Financial Officer
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1.
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the Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date:
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August 8, 2019
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/s/ Greg Creed
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Chief Executive Officer
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1.
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the Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date:
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August 8, 2019
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/s/ David W. Gibbs
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President, Chief Operating Officer and Chief Financial Officer
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