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Yum! Brands Annual Report, Year Ended Dec 31, 2011

Filing Date
Filed February 21, 2012
Period End
December 31, 2011
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 21, 2012. Cited figures are marked; the original filing is the authoritative source.

YUM!

Brands, Inc. reported fiscal 2011 total revenues of $12.63 billiona (up from $11.34 billion in 2010) and Operating Profit of $1.82 billion, with Net Income attributable to YUM! Brands of $1.32 billion and diluted EPS of $2.74 (diluted EPS before Special Items of $2.87). Fiscal 2011 included a 53rd week that added $91 million to revenues and $25 million to Operating Profit.

The results were weighed down by Special Items totaling $187 millionb of pre-tax expense, largely tied to the sale of the Long John Silver's and A&W brands, U.S. refranchising, and refranchising of equity markets outside the U.S. Company sales rose to $10.89 billion, and China and YRI together represented more than 70% of Operating Profit excluding unallocated items. Operating Profit in the U.S. declined to $589 million from $668 million. Cash generation remained strong, with net cash provided by operating activities of $2.17 billion, capital spending of $940 million, $752 million in share repurchases, and $481 million in dividends paid.

The Board authorized an additional $750 millionc share repurchase program in November 2011, and the Company reported approximately $938 million of remaining repurchase capacity at year end. Total debt was $3.32 billion, and cash and cash equivalents were $1.20 billion. The Company also disclosed that on February 1, 2012 it paid $584 million to acquire an additional 66% interest in Little Sheep, raising its ownership to approximately 93%, and that the IRS has proposed adjustments that could result in approximately $700 million of additional taxes plus net interest of approximately $170 million for fiscal years 2004 through 2006, which the Company is contesting.

The filing's principal risks for investors center on China and other international exposure, franchisee financial health, the pace of refranchising, commodity and labor costs, and the unresolved IRS matter. Management's stated long-term targets include China system sales growth of at least 13%d and an annual dividend payout ratio of 35% to 40% of net income.

02—Key points

Key Highlights

  1. Total revenues rose to $12.63 billion in 2011 from $11.34 billion in 2010, and Operating Profit increased to $1.82 billion from $1.77 billion.
  2. Diluted EPS was $2.74 on a reported basis and $2.87 before Special Items, which included $187 million of pre-tax expense in 2011.
  3. China Operating Profit grew to $908 million and YRI to $673 million, while U.S. Operating Profit declined to $589 million from $668 million.
  4. Net cash provided by operating activities was $2.17 billion, with $940 million of capital spending and $752 million of share repurchases.
  5. The Board authorized an additional $750 million share repurchase program in November 2011, with about $938 million of capacity remaining at year end.
  6. Subsequent to year end, the Company acquired an additional 66% interest in Little Sheep for $584 million, bringing its total ownership to approximately 93%.
  7. The IRS has proposed adjustments for fiscal 2004 through 2006 that could add approximately $700 million in taxes plus about $170 million of net interest; the Company is contesting the proposal.

03—One dollar

Follow one dollar

Of each $1.00 of revenue in FY2011, Yum! Brands kept $0.10.

  1. Revenue$12.63B100.0%
  2. Cost of revenue−$9.14B72.4%
  3. Gross profit$3.49B27.6%
  4. Operating costs−$1.67B13.2%
  5. Operating income$1.81B14.4%
  6. Interest, other & tax−$496.0M3.9%
  7. Net income$1.32B10.4%
Computed from 10-KFY2011filed February 21, 2012Computed from this filing’s revenue, gross profit, operating income and net income · right columngrey figure: share of revenue

Where FY2011 revenue went

$12.63B
  • Cost of revenue: $9.14B, 72% of revenue
  • Other operating costs: $1.64B, 13% of revenue
  • Net income: $1.32B, 10% of revenue
  • R&D: $34.0M, 0.3% of revenue
  • Interest, other & tax: $496.0M, 3.9% of revenue

Kept 10% as net incomeR&D $34.0M · 0.3%

Full revenue history →

04—Financials

Financial Highlights

Figures from 10-KFY2011filed February 21, 2012
Revenue$12.63B27.6% Gross MarginNet Income$1.32B10.4% Net MarginEPS (Diluted)$2.74Total Assets$8.83BCash & Equivalents$1.20BFree Cash Flow$1.23B

Financial Statements

FY2011 against FY2010

Line itemFY2011FY2010Change
Revenue$12.63B$11.34B+11.3%
Cost of Revenue$9.14B$8.12B+12.6%
Gross Profit$3.49B$3.22B+8.2%
R&D Expenses$34.00M$33.00M+3.0%
Operating Expenses$10.81B$9.57B+12.9%
Operating Income$1.81B$1.77B+2.6%
Interest Expense$184.00M$195.00M−5.6%
Net Income$1.32B$1.16B+13.9%
EPS (Basic)$2.81$2.44+15.2%
EPS (Diluted)$2.74$2.38+15.1%
Shares Outstanding (Basic)469.00M474.00M−1.1%
Shares Outstanding (Diluted)481.00M486.00M−1.0%

05—Questions

Frequently Asked Questions

  1. What drove the difference between reported and pre-Special Items earnings in 2011?

    Special Items reduced 2011 Operating Profit by $187 million pre-tax, or $64 million after tax, equal to $0.13 of diluted EPS. The largest components were $86 million of losses and other costs related to the sale of the Long John Silver's and A&W brands, $76 million of losses associated with refranchising equity markets outside the U.S., and $17 million of U.S. refranchising losses.

  2. How much did the 53rd week contribute to fiscal 2011 results?

    The 53rd week added $91 million to total revenues and $25 million to Operating Profit. The Company noted that the $25 million benefit was offset during 2011 by investments, including franchise development incentives, and by higher-than-normal spending such as restaurant closures in the U.S. and YRI.

  3. What is the Company's capital return policy?

    The Company targets an annual dividend payout ratio of 35% to 40% of net income. Dividends paid in 2011 totaled $481 million, and the quarterly dividend was $0.285 per share for the payment on February 3, 2012. Share repurchases totaled $752 million in 2011.

  4. What is the potential exposure from the IRS proposed adjustment?

    The IRS proposed an adjustment that would result in approximately $700 million of additional taxes plus net interest to date of approximately $170 million for fiscal 2004 through 2006. The potential additional taxes for later years through 2011 could be approximately $350 million plus about $25 million of net interest. The Company believes its tax reporting was proper, has filed a protest, and does not expect resolution within twelve months.

  5. How concentrated are the Company's profits geographically?

    China and YRI represented more than 70% of Operating Profit in 2011, excluding Corporate and unallocated income and expenses. The filing states that the China Division, YRI and Taco Bell U.S. together represent approximately 90% of operating profits on the same basis.

06—Continue

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