01—Abstract
Summary
Summary of the 10-Q filed May 7, 2024. Cited figures are marked; the original filing is the authoritative source.
Yum!
Brands, Inc. reported first-quarter 2024 total revenues of $1.598 billiona, down from $1.645 billion a year earlier, while net income rose to $314 million from $300 million and diluted EPS increased to $1.10 from $1.05. Operating profit was $520 million versus $523 million. Excluding Special Items, diluted EPS was $1.15 versus $1.06.
Worldwide same-store sales declined 3%, with KFC down 2%, Taco Bell up 1%, and Pizza Hut down 7%. System sales excluding FX grew 2%, and the company opened 808 gross units for 421 net new units. Core Operating Profit rose 6% to $555 millionb from $526 million, and Special Items included $21 million of resource optimization charges.
Cash from operating activities was $363 millionc, and the company sold its approximate 5% stake in Devyani International for $104 million in pre-tax proceeds, recognizing a $20 million pre-tax investment loss before the sale. Total debt was about $11.2 billion, with approximately 94% fixed-rate at an effective rate of about 4.6%, and the net leverage ratio ended at 4.1x EBITDA. Shareholders' deficit was $7.756 billion.
After the quarter, the company refinanced its Term Loan A and Revolving Facility, and on April 29, 2024 it acquired 216 KFC restaurants in the U.K. and Ireland for about $180 milliond in cash. The filing also discloses an unreserved IRS proposed underpayment of $2.1 billion plus $418 million in penalties for fiscal 2014, with interest estimated at about $1.2 billion, which the company is contesting. It also discloses an Indian regulatory penalty of about $135 million that the company is contesting and that is stayed by the Delhi High Court.
02—Key points
Key Highlights
- Total revenues fell 3% to $1.598 billion from $1.645 billion, while net income rose 5% to $314 million and diluted EPS rose to $1.10 from $1.05.
- Core Operating Profit grew 6% to $555 million, and diluted EPS excluding Special Items increased 9% to $1.15 from $1.06.
- Worldwide same-store sales declined 3%: KFC fell 2%, Pizza Hut fell 7%, and Taco Bell rose 1%.
- System sales excluding FX grew 2%, and the company opened 808 gross units for 421 net new units; total units reached 59,129.
- Sold its approximate 5% Devyani International stake for $104 million pre-tax proceeds, with a $20 million pre-tax investment loss before the sale.
- Subsequent to quarter-end, refinanced the Term Loan A and Revolving Facility and acquired 216 KFC restaurants in the U.K. and Ireland for about $180 million in cash.
- The IRS asserts a $2.1 billion underpayment plus $418 million in penalties for fiscal 2014; the company disagrees, has filed a protest, and has recorded no reserve.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Yum! Brands kept $0.20.
- Revenue$1.60B100.0%
- Cost of revenue−$400.0M25.0%
- Gross profit$1.20B75.0%
- Operating costs−$678.0M42.4%
- Operating income$520.0M32.5%
- Interest, other & tax−$206.0M12.9%
- Net income$314.0M19.6%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed May 7, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $1.60B$1.65B | −2.9% |
| Cost of Revenue | $400.00M$403.00M | −0.7% |
| Gross Profit | $1.20B$1.24B | −3.5% |
| Operating Expenses | $1.08B$1.12B | −3.9% |
| Operating Income | $520.00M$523.00M | −0.6% |
| Net Income | $314.00M$300.00M | +4.7% |
| EPS (Basic) | $1.11$1.07 | +3.7% |
| EPS (Diluted) | $1.10$1.05 | +4.8% |
| Shares Outstanding (Basic) | 282.00M281.00M | +0.4% |
| Shares Outstanding (Diluted) | 286.00M285.00M | +0.4% |
05—Questions
Frequently Asked Questions
How did Yum! Brands perform in the first quarter of 2024?
Total revenues were $1.598 billion versus $1.645 billion a year earlier, and operating profit was $520 million versus $523 million. Net income increased to $314 million from $300 million, and diluted EPS was $1.10 versus $1.05. Excluding Special Items, diluted EPS was $1.15 versus $1.06.
Which divisions drove same-store sales?
Worldwide same-store sales declined 3%. The KFC Division declined 2%, the Pizza Hut Division declined 7%, and the Taco Bell Division grew 1%. The Habit Burger Grill Division declined 8%. The filing attributes a low single-digit headwind to YUM's same-store sales growth from the Middle East conflict.
What is the status of the IRS dispute?
The IRS asserts an underpayment of $2.1 billion plus $418 million in penalties for fiscal 2014, with interest estimated at about $1.2 billion through the first quarter of 2024. The company disagrees, filed a protest in September 2022, and the case has been accepted by the IRS Office of Appeals. No reserve is recorded because the company believes it is more likely than not its position will be sustained.
How much debt does Yum! Brands carry and what is its cost?
Total debt outstanding, excluding finance leases and debt issuance costs, was $11.2 billion, with about 94% fixed including swaps at an effective overall interest rate of approximately 4.6%. The consolidated net leverage ratio was 4.1x EBITDA, and the company has credit ratings of BB+ (S&P) and Ba2 (Moody's).
What share repurchase capacity remains?
No shares were repurchased during the quarter. As of March 31, 2024, the company had remaining capacity to repurchase up to $1.7 billion of Common Stock under the September 2022 authorization, which runs through June 30, 2024.
06—Continue