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Yum! Brands Annual Report, Year Ended Dec 25, 2010

Filing Date
Filed February 15, 2011
Period End
December 25, 2010
Security
YUM
One revenue dollarkept$0.10
In the record · 2016–202610-K1110-Q328-K146

YUM filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 146 current reports (8-K) between 2016 and 2026.

  1. FY2016 annual report10-K · Feb ’17Feb ’17
  2. Material agreement8-K · Sep ’19Sep ’19
  3. Leadership change8-K · Sep ’21Sep ’21
  4. Material agreement8-K · Sep ’25Sep ’25

01—Abstract

Summary

Summary of the 10-K filed February 15, 2011. Cited figures are marked; the original filing is the authoritative source.

YUM!

Brands, Inc. reported fiscal 2010 (52 weeks ended December 25, 2010) with total revenues of $11.34 billiona, up from $10.84 billion in 2009, and Operating Profit of $1.77 billion versus $1.59 billion. Net Income attributable to YUM! Brands was $1.16 billion, or $2.38 per diluted share, compared with $2.22 in 2009.

Excluding Special Items, diluted EPS was $2.53b, up from $2.17. Special Items in 2010 totaled a net expense of $77 million pre-tax, driven mainly by U.S. refranchising losses and losses from refranchising the Mexico and Taiwan equity markets. Worldwide system sales grew 4% before foreign currency translation, with China up 17% and YRI up 4%.

Net cash provided by operating activities was $1.97 billionc, compared with $1.40 billion in 2009. The company is shifting toward a franchise-heavy model. It reports 37,835 system units, of which 19% are company-operated, 75% franchisee or unconsolidated affiliate-operated, and 6% licensee-operated.

Company-owned U.S. KFC, Pizza Hut and Taco Bell ownership is targeted to fall to about 12% from 15%. In 2010 the company refranchised 949 units and recorded a $63 milliond refranchising loss. In January 2011 it decided to sell Long John Silver's and A&W, which it expects will produce a non-cash pre-tax impairment loss in the first quarter of 2011.

Balance sheet items include $1.43 billion in cash, $3.59 billion in total debt, and a $0.92 per share dividend declared for 2010. In January 2011 the board authorized up to $750 million in additional share repurchases.

Key risks flagged in the filing include an IRS proposed adjustment that could add approximately $700 million in taxes plus about $150 million of net interest for fiscal 2004 through 2006, with a similar claim of about $320 million plus $20 million of interest for later years, which the company is contesting. Other risks include wage-and-hour class actions, particularly at Taco Bell, and negative publicity from a January 2011 lawsuit over Taco Bell's beef advertising, which the company says has adversely affected Taco Bell sales.

02—Key points

Key Highlights

  1. Total revenues rose to $11.34 billion in 2010 from $10.84 billion in 2009; Company sales were $9.78 billion and franchise and license fees and income were $1.56 billion.
  2. Operating Profit increased to $1.77 billion from $1.59 billion; diluted EPS was $2.38 reported and $2.53 before Special Items, versus $2.17 in 2009.
  3. Worldwide system sales grew 4% before foreign currency translation, led by 17% in China, 4% in YRI and 2% in the U.S.; China same store sales grew 6%.
  4. Operating cash flow was $1.97 billion, up from $1.40 billion, and capital spending was $796 million, with about $900 million estimated for 2011.
  5. The company returned capital through $412 million in dividends and $371 million in share repurchases, and its board authorized an additional $750 million buyback in January 2011.
  6. Long John Silver's and A&W were placed for sale after year end, with a non-cash pre-tax impairment loss expected in the first quarter of 2011.
  7. An IRS proposed adjustment could add approximately $700 million in taxes plus about $150 million of net interest for 2004 through 2006, which the company is contesting.

03—One dollar

Follow one dollar

Of each $1.00 of revenue in FY2010, Yum! Brands kept $0.10.

  1. Revenue$11.34B100.0%
  2. Cost of revenue−$8.12B71.6%
  3. Gross profit$3.22B28.4%
  4. Operating costs−$1.45B12.8%
  5. Operating income$1.77B15.6%
  6. Interest, other & tax−$611.0M5.4%
  7. Net income$1.16B10.2%
Computed from 10-KFY2010filed February 15, 2011Computed from this filing’s revenue, gross profit, operating income and net income · right columngrey figure: share of revenue

Where FY2010 revenue went

$11.34B
  • Cost of revenue: $8.12B, 72% of revenue
  • Other operating costs: $1.42B, 13% of revenue
  • Net income: $1.16B, 10% of revenue
  • R&D: $33.0M, 0.3% of revenue
  • Interest, other & tax: $611.0M, 5.4% of revenue

Kept 10% as net incomeR&D $33.0M · 0.3%

Full revenue history →

04—Financials

Financial Highlights

Figures from 10-KFY2010filed February 15, 2011
Revenue$11.34B28.4% Gross MarginNet Income$1.16B10.2% Net MarginEPS (Diluted)$2.38Total Assets$8.32BCash & Equivalents$1.43BFree Cash Flow$1.17B

Financial Statements

FY2010 against FY2009

Line itemFY2010FY2009Change
Revenue$11.34B$10.84B+4.7%
Cost of Revenue$8.12B$7.93B+2.3%
Gross Profit$3.22B$2.90B+11.1%
R&D Expenses$33.00M$31.00M+6.5%
Operating Expenses$9.57B$9.25B+3.5%
Operating Income$1.77B$1.59B+11.3%
Interest Expense$195.00M$212.00M−8.0%
Net Income$1.16B$1.07B+8.1%
EPS (Basic)$2.44$2.28+7.0%
EPS (Diluted)$2.38$2.22+7.2%
Shares Outstanding (Basic)474.00M471.00M+0.6%
Shares Outstanding (Diluted)486.00M483.00M+0.6%

05—Questions

Frequently Asked Questions

  1. How did YUM! Brands perform financially in 2010?

    Total revenues rose to $11.34 billion from $10.84 billion, and Operating Profit increased to $1.77 billion from $1.59 billion. Net Income attributable to YUM! Brands was $1.16 billion, or $2.38 per diluted share, compared with $2.22 in 2009. Before Special Items, diluted EPS was $2.53.

  2. Where is YUM's growth coming from?

    The filing reports China Division system sales up 17% before foreign currency translation, with Operating Profit up 27% in 2010, and YRI system sales up 4% with Operating Profit up 19% reported. U.S. system sales grew 2% and U.S. Operating Profit rose 3%. The company also opened 1,391 international restaurants in 2010, including 507 in China.

  3. What is the IRS dispute about?

    The IRS proposed increasing the taxable value of intangible rights that YUM transferred to certain foreign subsidiaries, which would add approximately $700 million in taxes plus about $150 million of net interest for fiscal 2004 through 2006. The IRS may make similar claims for later years, which could add about $320 million plus $20 million of interest. The company disagrees and has filed a protest.

  4. Why is the company selling Long John Silver's and A&W?

    After the fourth quarter, the company decided to place Long John Silver's and A&W All-American Food Restaurants for sale and began identifying buyers. It expects to record a non-cash pre-tax impairment loss in the first quarter of 2011, with the amount depending on potential sale prices, and does not expect the sale to have a material impact on ongoing earnings or cash flows.

  5. What is YUM's dividend and share repurchase policy?

    The company is targeting an annual dividend payout ratio of 35% to 40% of net income. It declared $0.92 per share in dividends for 2010, including a $0.50 fourth-quarter declaration, and repurchased $371 million of shares in 2010. In January 2011 the board authorized up to $750 million in repurchases through July 2012.

06—Continue

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