(Source: Business Wire)
Yum! Brands Inc. (NYSE: YUM) today reported Earnings Per Share (EPS) of
$0.69, or $0.70 excluding special items, for the third quarter ended
September 5, 2009.
THIRD-QUARTER HIGHLIGHTS
International development continued at a strong pace with 267 new
restaurants including 88 new units in mainland China and 165 new units
in Yum! Restaurants International (YRI).
System sales growth of +11% in mainland China and +4% in YRI was
offset by a 5% decline in the U.S. resulting in flat worldwide system
sales in local currency terms; worldwide system sales declined 4%
after foreign currency translation.
Worldwide restaurant margin improved over 3 percentage points driven
by significant gains in both the U.S. and China.
Worldwide operating profit growth of 15% was driven by China, +32%,
and the U.S., +18%. YRI profit declined 13% due to negative foreign
currency translation. Worldwide operating profit growth was 19% prior
to foreign currency translation.
Foreign currency translation negatively impacted EPS by $0.02 per
share.
Note: All comparisons are versus the same period a year ago and
exclude Special Items unless noted.
Third Quarter Year-to-Date
2009 2008 % Change 2009 2008 % Change
EPS Excluding Special Items $0.70 $0.58 21% $1.67 $1.45 16%
Special Items Gain/(Loss)(1) ($0.01 ) $0.00 NM $0.10 $0.08 NM
EPS $0.69 $0.58 19% $1.77 $1.53 16%
-------------------------------------------------------------------------------
1 See Reconciliation of Non-GAAP Measurements to GAAP Results
for further detail of the 2009 and 2008 Special Items.
FULL-YEAR OUTLOOK
The Company raised its full-year 2009 EPS forecast from $2.10 to $2.14
per share or 12% growth prior to special items, driven by
stronger-than-expected full year performance in China and a
lower-than-expected full year effective tax rate.
David C. Novak, Chairman and CEO, said, "I'm pleased to report we are
raising our full year 2009 EPS growth forecast to 12% based on our
strong year-to-date profit performance. Our global portfolio delivered
an impressive 15% operating profit growth this quarter, driven by 32%
growth in China and 18% growth in our U.S. business. China and Yum!
Restaurants International are on track to open over 1,400 international
new units this year. We are confident our industry leading international
new unit development will continue to be a key factor in our ability to
drive future sales and profit growth.
"Our China business generated extraordinary operating profit growth of
32% in the third quarter. We leveraged our high-return, new unit
development and increased restaurant margin over two points. We are
especially pleased that our China team achieved margins near record
levels with high average unit volumes. We are on track to open over 475
new units in mainland China. Importantly, KFC is the only Western QSR
brand in the vast majority of the 600 cities in which we have a
presence. Our U.S. business achieved strong operating profit growth of
18%. This can be attributed to substantial improvement to restaurant
margin and significant G&A savings which offset a 6% same-store-sales
decline. There's no question the overall worldwide environment continues
to be challenging. However, we are more confident than ever in the
consistent earnings power of our global portfolio. We also continue to
make major progress developing our significant, new sales layers which
will better leverage our assets and drive future growth.
"Looking to 2010, we expect to deliver 10% EPS growth. This would be the
ninth consecutive year we meet or exceed our annual target of at least
10% EPS growth. Our fundamental opportunities remain intact. We continue
to have the unique ability to generate unparalleled international
growth, increase sales in our existing assets and drive significant free
cash flow while continuing to be an industry leader in return on
invested capital."
CHINA DIVISION
Third Quarter Year-to-Date
% Change % Change
2009 2008 Reported Ex F/X 2009 2008 Reported Ex F/X
System Sales Growth +11 +10 +11 +9
Restaurant Margin (%) 23.2 20.9 2.3 2.3 21.5 19.7 1.8 1.7
Operating Profit ($MM) 217 165 +32 +31 453 360 +26 +23
-------------------------------------------------------------------------------
China Division system sales growth of 10% excluding foreign
currency translation was driven by strong new unit development in
mainland China while same-store-sales were flat.
We opened 88 new restaurants in mainland China for the third
quarter for a total of 304 year to date.
Mainland China Units Q3 2009 % Change
Traditional Restaurants 3,281 +16
KFC 2,729 +16
Pizza Hut Casual Dining 442 +11
Pizza Hut Home Service 87 +24
-------------------------------------------------------------------------------
Restaurant margin increased 2.3 percentage points driven primarily by
significant commodity deflation of $21 million in the third quarter. A
similar benefit is expected in the fourth quarter.
Foreign currency conversion benefited operating profit by $1 million.
Operating profit growth of 32% overlapped growth of 22% in the third
quarter of 2008.
YUM! RESTAURANTS INTERNATIONAL (YRI)
DIVISION
Third Quarter Year-to-Date
% Change % Change
2009 2008 Reported Ex F/X 2009 2008 Reported Ex F/X
Traditional Restaurants 12,895 12,489 +3 NA 12,895 12,489 +3 NA
System Sales Growth (7 ) +4 (7 ) +7
Franchise & License Fees 156 165 (5 ) +5 442 467 (5 ) +8
Operating Profit ($MM) 119 137 (13 ) Flat 342 393 (13 ) +3
Operating Margin (%) 18.0 18.1 (0.1 ) (0.6 ) 18.7 18.0 +0.7 (0.2 )
-------------------------------------------------------------------------------
System sales growth of 4%, excluding foreign currency translation, was
driven by new unit development and same-store sales were flat. The
table below provides further insight into key YRI markets.
YRI opened 165 new restaurants with 93% coming from our franchise
partners.
Operating profit growth was negatively impacted by poor performance in
two company markets, Mexico and South Korea, and timing related to
overhead expenses.
Foreign currency translation negatively impacted operating profit by
$17 million.
Key YRI Markets System Sales Growth Ex F/X (%)
Third Quarter Year-to-Date
Franchise Only Markets
Asia (ex China Division) +4 +7
Continental Europe Flat +3
Middle East +6 +8
Latin America +4 +6
Company/Franchise Markets
Australia +3 +6
UK +9 +10
New Growth Markets +20 +18
Note: The markets listed above generate approximately 80% of YRI operating profit. NewGrowth Markets include France, Russia and India.
-------------------------------------------------------------------------------
U.S. DIVISION
Third Quarter Year-to-Date
2009 2008 % Change 2009 2008 % Change
Same-Store-Sales Growth (%) (6 ) +3 NM (3 ) +3 NM
Restaurant Margin (%) 14.1 10.8 +3.3 14.0 11.9 +2.1
Operating Profit ($MM) 171 146 +18 497 447 +11
Operating Margin (%) 16.2 12.0 +4.2 15.5 12.3 +3.2
-------------------------------------------------------------------------------
Same-store-sales declined 6% which included a 13% decline at Pizza Hut.
Restaurant margin improved by 3.3 points due largely to commodity cost
deflation of $16 million this quarter. Year-to-date commodity cost
deflation has totaled $11 million. The full year benefit from
commodity cost deflation is expected to be about $20 million.
Third quarter operating profit growth of 18% and operating margin
improvement of 4.2 points were driven by a $16 million decline in our
U.S. G&A cost structure from actions initiated in the fourth quarter
of 2008. For the full year, we continue to expect G&A cost savings of
at least $60 million.
U.S. REFRANCHISING UPDATE
In the third quarter, 98 company-owned U.S. restaurants were sold to
franchisees. Year to date, we have refranchised a total of 286 units,
including 210 Pizza Huts, 50 KFCs and 26 Taco Bells. We continue to
expect to refranchise 500 units in 2009. Full year proceeds from U.S.
refranchising are expected to be about $175 million.
CONFERENCE CALL
Yum! Brands Inc. will host a conference call to review the company's
financial performance and strategies at 9:15 a.m. ET Wednesday, October
7, 2009.
The number is 877/815-2029 for U.S. callers and 706/645-9271 for
international callers.
The call will be available for playback beginning at noon Eastern Time
Wednesday, October 7, through midnight October 21, 2009.
To access the playback, dial 800/642-1687 in the United States and
706/645-9291 internationally. The playback pass code is 29944595.
The webcast and the playback can be accessed via the Internet by
visiting Yum! Brands' Web site, www.yum.com/investors
and selecting "Q3 2009 Earnings Call".
For your added convenience . . . A podcast will be
available within 24 hours of the end of the call at www.yum.com/investors.
ADDITIONAL INFORMATION ONLINE
Third quarter end dates for each division, restaurant-count details, and
definitions of terms including Key Markets are available online at http://investors.yum.com/phoenix.zhtml?c=117941&p=irol-newsEarnings.
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: economic and political conditions in the
countries where we operate; currency exchange and interest rates;
commodity, labor and other operating costs; competition, consumer
preferences or perceptions; the impact of any widespread illness or food
borne illness; the effectiveness of our operating initiatives and
marketing; new-product and concept development by us and our
competitors; the success of our strategies for refranchising and
international development; the continued viability of our franchise and
license operators; our ability to secure and maintain distribution and
adequate supply to our restaurants; publicity that may impact our
business and/or industry; pending or future legal claims; our effective
tax rates; our actuarially determined casualty loss estimates;
government regulations; and accounting policies and practices. You
should consult our filings with the Securities and Exchange Commission
(including the information set forth under the captions "Risk Factors"
and "Forward-Looking Statements" in our Annual Report on Form 10-K) for
additional detail about factors that could affect our financial and
other results. Forward-looking statements are based on current
expectations and assumptions and currently available data and are
neither predictions nor guarantees of future events or performance. You
should not place undue reliance on forward-looking statements, which
speak only as of the date hereof. We are not undertaking to update any
of these statements.
Yum! Brands, Inc., based in Louisville, Kentucky, is the world's largest
restaurant company in terms of system restaurants, with more than 36,000
restaurants in over 110 countries and territories. The company is ranked
#239 on the Fortune 500 List, with revenues in excess of $11 billion in
2008. Four of the company's restaurant brands -- KFC, Pizza Hut, Taco
Bell and Long John Silver's -- are the global leaders of the chicken,
pizza, Mexican -- style food and quick -- service seafood categories,
respectively. Outside the United States, the Yum! Brands system opened
more than four new restaurants each day of the year, making it a leader
in international retail development. The company has consistently been
recognized for its reward and recognition culture, diversity leadership,
community giving, and consistent shareholder returns. In 2007, the
company launched World Hunger Relief, the world's largest private sector
hunger relief effort to raise awareness, volunteerism and funds to
benefit the United Nations World Food Programme (WFP) and other hunger
relief agencies. To date, this effort has raised $36 million for the WFP
and other hunger relief agencies and is helping to provide 160 million
meals and save the lives of about 4 million people in remote corners of
the world, where hunger is most prevalent.
Exception caught in main.
Exception caught in main.
China Division includes mainland China, Thailand and KFC Taiwan.
As discussed in (d) in the accompanying notes, we began consolidating
the operating entity that owns the KFC business in Shanghai, China, with
236 units, during the second quarter of 2009. This entity was previously
accounted for as an unconsolidated affiliate.
Exception caught in main.
Exception caught in main.
YUM! Brands, Inc.