01—Abstract
Summary
Summary of the 10-K filed February 20, 2024. Cited figures are marked; the original filing is the authoritative source.
Yum!
Brands, Inc. (YUM) reported fiscal 2023 results with total revenues of $7.08 billiona, up from $6.84 billion in 2022, and GAAP operating profit of $2.32 billion versus $2.19 billion. GAAP diluted EPS rose to $5.59 from $4.57, and diluted EPS excluding Special Items was $5.17 versus $4.53. The system operated over 58,000 restaurants in more than 155 countries and territories, with 98% of units operated by franchisees.
System sales reached $63.79 billionb, and worldwide same-store sales grew 6% with 4,754 gross unit openings and 3,349 net new units. Company-level growth was led by the KFC and Taco Bell divisions, while Pizza Hut grew more modestly. Balance sheet and cash flow data show $11.2 billion of total debt, with approximately 94% effectively fixed-rate at an effective overall rate of about 4.6%, and a consolidated net leverage ratio of 4.2x EBITDA.
Net cash provided by operating activities was $1.60 billionc in 2023 versus $1.43 billion in 2022. The Board declared a quarterly dividend of $0.67 per share for March 2024, and $1.7 billion remained under the September 2022 share repurchase authorization. Shareholders' deficit was $7.86 billion.
The filing highlights several risks and contingencies. The IRS has issued a Revenue Agent's Report asserting a $2.1 billiond underpayment of tax plus $418 million in penalties for fiscal 2014, with interest estimated at about $1.1 billion through December 31, 2023; the company disputes the position and carries no reserve. A Middle East conflict was a low single-digit headwind to fourth-quarter same-store sales, and a January 2023 ransomware attack closed fewer than 300 restaurants in one market for one day.
02—Key points
Key Highlights
- Total revenues of $7,076 million in 2023, up from $6,842 million in 2022
- GAAP diluted EPS of $5.59 versus $4.57 in 2022; EPS excluding Special Items of $5.17 versus $4.53
- Worldwide system sales of $63.79 billion; worldwide same-store sales growth of 6%
- Gross unit openings of 4,754 and 3,349 net new units; 58,708 total units at year-end 2023
- Total debt of $11.2 billion, about 94% effectively fixed-rate, with consolidated net leverage of 4.2x EBITDA
- Quarterly dividend increased to $0.67 per share from $0.605, with $1.7 billion remaining under the repurchase authorization
- Unresolved IRS proposed adjustment of $2.1 billion in tax plus $418 million in penalties for fiscal 2014, which the company is contesting
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Yum! Brands kept $0.23.
- Revenue$7.08B100.0%
- Cost of revenue−$1.77B25.1%
- Gross profit$5.30B74.9%
- Operating costs−$2.98B42.2%
- Operating income$2.32B32.8%
- Interest, other & tax−$721.0M10.2%
- Net income$1.60B22.6%
Where FY2023 revenue went
$7.08B- Operating costs: $2.98B, 42% of revenue
- Cost of revenue: $1.77B, 25% of revenue
- Net income: $1.60B, 23% of revenue
- Interest, other & tax: $721.0M, 10% of revenue
Kept 23% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 20, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $7.08B$6.84B | +3.4% |
| Cost of Revenue | $1.77B$1.75B | +1.7% |
| Gross Profit | $5.30B$5.10B | +4.0% |
| Operating Expenses | $4.76B$4.66B | +2.2% |
| Operating Income | $2.32B$2.19B | +6.0% |
| Interest Expense | $602.00M$558.00M | +7.9% |
| Net Income | $1.60B$1.32B | +20.5% |
| EPS (Basic) | $5.68$4.63 | +22.7% |
| EPS (Diluted) | $5.59$4.57 | +22.3% |
| Shares Outstanding (Basic) | 281.00M286.00M | −1.7% |
| Shares Outstanding (Diluted) | 285.00M290.00M | −1.7% |
05—Questions
Frequently Asked Questions
How did YUM's core business perform in 2023?
Worldwide system sales ex-FX rose 10% and same-store sales grew 6%. The KFC Division led with system sales ex-FX up 12% and same-store sales up 7%, while Taco Bell grew system sales ex-FX 9% with same-store sales up 5%, and Pizza Hut grew 5% with same-store sales up 2%.
How much debt does YUM carry and how is it structured?
Total outstanding short-term borrowings and long-term debt was approximately $11.2 billion at December 31, 2023. About 94% is effectively fixed-rate, including interest rate swaps, at an effective overall rate of about 4.6%. The consolidated net leverage ratio was 4.2x EBITDA, and the company had $500 million of cash and a $1.25 billion undrawn Revolving Facility.
What is the main tax risk disclosed in the filing?
The IRS asserts an underpayment of $2.1 billion plus $418 million in penalties for fiscal 2014, tied to 2014 reorganizations that the IRS says resulted in about $6.0 billion of taxable distributions. Interest is estimated at about $1.1 billion through December 31, 2023. YUM disagrees, has filed a protest that was accepted by the IRS Office of Appeals, and recorded no reserve because it believes the position is more likely than not to be sustained.
How much capital is returned to shareholders?
The company paid four cash dividends of $0.605 per share in 2023 and declared a $0.67 per share dividend in January 2024, totaling about $190 million. Share repurchases were $50 million in 2023, and no shares were repurchased in the fourth quarter. As of December 31, 2023, $1.7 billion remained under the $2.0 billion authorization that runs through June 30, 2024.
What is the company's Russia exposure after 2023?
YUM completed its exit from Russia in April 2023 by selling its KFC business there to Smart Service Ltd. for cash proceeds of $121 million, and recorded a $3 million charge. The company no longer has a corporate presence in Russia, and any future net profits attributable to Russia are directed to humanitarian efforts.
06—Continue