01—Abstract
Summary
Summary of the 10-K filed February 22, 2021. Cited figures are marked; the original filing is the authoritative source.
Yum!
Brands, Inc. (YUM) reported a difficult 2020 as COVID-19 closures and permanent Pizza Hut closures weighed on results. Total revenues were $5.65 billiona versus $5.60 billion in 2019, while operating profit fell to $1.50 billion from $1.93 billion. GAAP diluted EPS was $2.94, down from $4.14, and diluted EPS excluding Special Items was $3.62, up from $3.55.
Worldwide same-store sales declined 6%, and system sales were $50.36 billionb. The filing attributes the GAAP decline largely to Special Items, including a $144 million Habit Burger Grill goodwill impairment, $50 million in charitable contributions to the Unlocking Opportunity Initiative, and $25 million for COVID-19 relief. The company ended 2020 with 50,353 units, 98% of them franchised.
Net new units were flat for the year, with 2,423 openings offset by 2,516 permanent closures. Pizza Hut's unit count fell by 1,064 after 1,745 global closures, and the filing describes the closures as a headwind to Pizza Hut's 2021 unit and operating profit growth. The company acquired The Habit Restaurants, Inc. (Habit Burger Grill) for $408 millionc in March 2020 and sold its Grubhub stake for $206 million in the third quarter.
On liquidity, cash and cash equivalents were $730 milliond at year end, and operating cash flow was $1.31 billion. Total debt was $10.7 billion, with about 93% effectively fixed after swaps. The Revolving Facility was fully repaid and undrawn at year end.
Management expects to return to its roughly 5.0x EBITDA consolidated net leverage target by the second quarter of 2021, and it resumed share repurchases in the fourth quarter after suspending them in the first quarter. The company paid $566 million in dividends in 2020 and declared $1.88 per share.
02—Key points
Key Highlights
- Diluted EPS fell 29% to $2.94 on a GAAP basis, while diluted EPS excluding Special Items rose 2% to $3.62.
- Worldwide same-store sales declined 6% for 2020, with quarterly declines of 7%, 15%, 2%, and 1% in Q1 through Q4.
- Operating profit declined to $1.50 billion from $1.93 billion, including $267 million of Special Items charges in 2020.
- Pizza Hut Division net units declined by 1,064 after 1,745 global closures; the company expects this to be a headwind in 2021.
- Acquired The Habit Restaurants, Inc. for $408 million net of cash acquired and recorded a $144 million goodwill impairment on the Habit Burger Grill reporting unit.
- Total debt was $10.7 billion, with about 93% effectively fixed; the $1.0 billion Revolving Facility was undrawn at year end.
- Franchisee NPC International, Inc., formerly the largest Pizza Hut U.S. franchisee, filed for Chapter 11 in July 2020, and Flynn Restaurant Group announced plans to acquire its roughly 950 Pizza Hut U.S. restaurants.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Yum! Brands kept $0.16.
- Revenue$5.65B100.0%
- Cost of revenue−$1.51B26.6%
- Gross profit$4.15B73.4%
- Operating costs−$2.64B46.8%
- Operating income$1.50B26.6%
- Interest, other & tax−$599.0M10.6%
- Net income$904.0M16.0%
Where FY2020 revenue went
$5.65B- Operating costs: $2.64B, 47% of revenue
- Cost of revenue: $1.51B, 27% of revenue
- Net income: $904.0M, 16% of revenue
- Interest, other & tax: $599.0M, 11% of revenue
Kept 16% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 22, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $5.65B$5.60B | +1.0% |
| Cost of Revenue | $1.51B$1.24B | +21.9% |
| Gross Profit | $4.15B$4.36B | −5.0% |
| Operating Expenses | $4.15B$3.67B | +13.1% |
| Operating Income | $1.50B$1.93B | −22.1% |
| Interest Expense | $558.00M$519.00M | +7.5% |
| Net Income | $904.00M$1.29B | −30.1% |
| EPS (Basic) | $2.99$4.23 | −29.3% |
| EPS (Diluted) | $2.94$4.14 | −29.0% |
| Shares Outstanding (Basic) | 302.00M306.00M | −1.3% |
| Shares Outstanding (Diluted) | 307.00M313.00M | −1.9% |
05—Questions
Frequently Asked Questions
How did YUM's 2020 results compare with 2019?
Total revenues were $5.65 billion, compared with $5.60 billion in 2019. Operating profit fell to $1.50 billion from $1.93 billion, and net income fell to $904 million from $1.29 billion. Diluted EPS was $2.94 versus $4.14, and diluted EPS excluding Special Items was $3.62 versus $3.55.
What drove the impairment and other Special Items?
The filing reports a $144 million impairment of Habit Burger Grill goodwill, tied to COVID-19's effect on the acquired brand. Other Special Items included $50 million in charitable contributions to the Unlocking Opportunity Initiative, $25 million for COVID-19 relief, and $36 million in resource optimization charges.
How is YUM positioned for debt and liquidity?
Cash and cash equivalents were $730 million at December 31, 2020. Total debt was $10.7 billion, about 93% effectively fixed, with an effective overall rate of about 4.7%. The company issued $600 million of 7.75% notes due 2025 and $1.05 billion of 3.625% notes due 2031, and it said it expects to return to its target of about 5.0x EBITDA net leverage by the second quarter of 2021.
What is the outlook for Pizza Hut and the franchise base?
The filing says Pizza Hut's closures will remain a headwind to the Division's net unit and operating profit growth in 2021. Flynn Restaurant Group announced in January 2021 its intention to acquire NPC's roughly 950 remaining Pizza Hut U.S. restaurants. About 98% of YUM's 50,353 units are franchised.
What did YUM do with shareholder capital in 2020?
YUM suspended share repurchases in the first quarter of 2020 and resumed them in the fourth quarter. For the year it repurchased 2.4 million shares for $250 million, and it paid $566 million in dividends. Remaining repurchase capacity under the November 2019 authorization was $1.75 billion at year end.
06—Continue