[] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES | |
EXCHANGE ACT OF 1934 for the fiscal year ended December 26, 2015 | ||
OR | ||
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES | |
EXCHANGE ACT OF 1934 |
North Carolina | 13-3951308 | ||
(State or other jurisdiction of | (I.R.S. Employer | ||
incorporation or organization) | Identification No.) | ||
1441 Gardiner Lane, Louisville, Kentucky | 40213 | ||
(Address of principal executive offices) | (Zip Code) | ||
Registrant’s telephone number, including area code: (502) 874-8300 |
Securities registered pursuant to Section 12(b) of the Act | |||
Title of Each Class | Name of Each Exchange on Which Registered | ||
Common Stock, no par value | New York Stock Exchange | ||
Securities registered pursuant to Section 12(g) of the Act: | |||
None |
Item 1. | Business. |
• | YUM China (“China” or “China Division”) which includes all operations in mainland China |
• | YUM India ("India" or "India Division") which includes all operations in India, Bangladesh, Nepal and Sri Lanka |
• | The KFC Division which includes all operations of the KFC concept outside of China Division and India Division |
• | The Pizza Hut Division which includes all operations of the Pizza Hut concept outside of China Division and India Division |
• | The Taco Bell Division which includes all operations of the Taco Bell concept outside of India Division |
• | KFC was founded in Corbin, Kentucky by Colonel Harland D. Sanders, an early developer of the quick service food business and a pioneer of the restaurant franchise concept. The Colonel perfected his secret blend of 11 herbs and spices for Kentucky Fried Chicken in 1939 and signed up his first franchisee in 1952. |
• | KFC operates in 125 countries and territories throughout the world. As of year end 2015, KFC had 5,003 units in China, 372 units in India and 14,577 units within the KFC Division. 76 percent of the China units, 30 percent of the India units and 10 percent of the units outside China and India are Company-owned. |
• | KFC restaurants across the world offer fried and non-fried chicken products such as sandwiches, chicken strips, chicken-on-the-bone and other chicken products marketed under a variety of names. KFC restaurants also offer a variety of entrees and side items suited to local preferences and tastes. Restaurant decor throughout the world is characterized by the image of the Colonel. |
• | The first Pizza Hut restaurant was opened in 1958 in Wichita, Kansas, and within a year, the first franchise unit was opened. Today, Pizza Hut is the largest restaurant chain in the world specializing in the sale of ready-to-eat pizza products. |
• | Pizza Hut operates in 95 countries and territories throughout the world. As of year end 2015, Pizza Hut had 1,903 units in China, 432 units in India and 13,728 units within the Pizza Hut Division. Nearly all of the China units, none of the India units and 6 percent of the units outside China and India are Company-owned. |
• | Pizza Hut operates in the delivery, carryout and casual dining segments around the world. Outside of the U.S., Pizza Hut often uses unique branding to differentiate these segments. Additionally, a growing percentage of Pizza Hut's customer orders are being generated digitally. |
• | Pizza Hut features a variety of pizzas which are marketed under varying names. Each of these pizzas is offered with a variety of different toppings suited to local preferences and tastes. Many Pizza Huts also offer pasta and chicken wings, including approximately 5,900 stores offering wings under the brand WingStreet in the U.S. Outside the U.S., Pizza Hut casual dining restaurants offer a variety of core menu products other than pizza, which are typically suited to local preferences and tastes. Pizza Hut units feature a distinctive red roof logo on their signage. |
• | The first Taco Bell restaurant was opened in 1962 by Glen Bell in Downey, California, and in 1964, the first Taco Bell franchise was sold. |
• | Taco Bell operates in 21 countries and territories throughout the world. As of year end 2015, there were 6,400 Taco Bell units within the Taco Bell Division, primarily in the U.S., and 7 units in India. 14 percent of the units within the Taco Bell Division and 86 percent of the India units are Company-owned. |
• | Taco Bell specializes in Mexican-style food products, including various types of tacos, burritos, quesadillas, salads, nachos and other related items. Taco Bell offers breakfast items in its U.S. stores. Taco Bell units feature a distinctive bell logo on their signage. |
Item 1A. | Risk Factors. |
• | The Americans with Disabilities Act in the U.S. and similar state laws that give civil rights protections to individuals with disabilities in the context of employment, public accommodations and other areas. |
• | The U.S. Fair Labor Standards Act, which governs matters such as minimum wages, overtime and other working conditions, as well as family leave mandates and a variety of similar state laws that govern these and other employment law matters. |
• | Laws and regulations in government-mandated health care benefits such as the Patient Protection and Affordable Care Act. |
• | Laws and regulations relating to nutritional content, nutritional labeling, product safety and menu labeling. |
• | Laws relating to state and local licensing. |
• | Laws and regulations relating to health, sanitation, food, workplace safety, child labor, including laws prohibiting the use of certain “hazardous equipment” by employees younger than the age of 18 years of age, and fire safety and prevention. |
• | Laws and regulations relating to union organizing rights and activities. |
• | Laws relating to information security, privacy, cashless payments, and consumer protection. |
• | Environmental regulations. |
• | Federal and state immigration laws and regulations in the U.S. |
• | increasing our vulnerability to, and reducing our flexibility to plan for and respond to, general adverse economic and industry conditions and changes in our business and the competitive environment; |
• | requiring the dedication of a substantial portion of our cash flow from operations to the payment of principal of, and interest on, indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures, acquisitions, dividends, share repurchases or other corporate purposes; |
• | increasing our vulnerability to a downgrade of our credit rating, which could adversely affect our cost of funds, liquidity and access to capital markets; |
• | restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; |
• | increasing our exposure to the risk of increased interest rates insofar as current and future borrowings are subject to variable rates of interest; |
• | making it more difficult for us to repay, refinance or satisfy our obligations with respect to our debt; |
• | limiting our ability to borrow additional funds in the future and increasing the cost of any such borrowing; |
• | imposing restrictive covenants on our operations, which, if not complied with, could result in an event of default, which in turn, if not cured or waived, could result in the acceleration of the applicable debt, and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies; and |
• | increasing our exposure to risks related to fluctuations in foreign currency as we earn profits in a variety of currencies around the world and our debt is or is expected to be denominated in U.S. dollars. |
Item 1B. | Unresolved Staff Comments. |
Item 2. | Properties. |
• | The China Division leased land, building or both in approximately 5,770 units. |
• | The KFC Division owned approximately 260 units and leased land, building or both in approximately 1,125 units. |
• | The Pizza Hut Division owned approximately 110 units and leased land, building or both in approximately 650 units. |
• | The Taco Bell Division owned approximately 535 units and leased land, building or both in approximately 360 units. |
• | The India Division leased land, building or both in approximately 120 units. |
Item 3. | Legal Proceedings. |
Item 4. | Mine Safety Disclosures. |
Item 5. | Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
2015 | ||||||||||||
Quarter | High | Low | Dividends Declared | |||||||||
First | $ | 81.80 | $ | 70.01 | $ | — | ||||||
Second | 94.88 | 78.29 | 0.82 | |||||||||
Third | 92.75 | 76.10 | — | |||||||||
Fourth | 83.42 | 67.12 | 0.92 |
2014 | ||||||||||||
Quarter | High | Low | Dividends Declared | |||||||||
First | $ | 77.40 | $ | 66.16 | $ | 0.37 | ||||||
Second | 79.99 | 73.20 | 0.37 | |||||||||
Third | 83.29 | 69.40 | — | |||||||||
Fourth | 78.36 | 67.23 | 0.82 |
Fiscal Periods | Total number of shares purchased (thousands) | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs (thousands) | Approximate dollar value of shares that may yet be purchased under the plans or programs (millions) | ||||||||
Period 10 | — | N/A | — | $ | 763 | |||||||
9/6/15 - 10/3/15 | ||||||||||||
Period 11 | 1,914 | $ | 73.16 | 1,914 | $ | 623 | ||||||
10/4/15 - 10/31/15 | ||||||||||||
Period 12 | 4,006 | $ | 71.14 | 4,006 | $ | 338 | ||||||
11/1/15 - 11/28/15 | ||||||||||||
Period 13 | 5,506 | $ | 73.56 | 5,506 | $ | 933 | ||||||
11/29/15 - 12/26/15 | ||||||||||||
Total | 11,426 | $ | 72.64 | 11,426 | $ | 933 |
12/23/2010 | 12/30/2011 | 12/28/2012 | 12/27/2013 | 12/26/2014 | 12/24/2015 | ||||||||||||||||||||
YUM | $ | 100 | $ | 121 | $ | 135 | $ | 158 | $ | 159 | $ | 165 | |||||||||||||
S&P 500 | $ | 100 | $ | 102 | $ | 117 | $ | 156 | $ | 181 | $ | 182 | |||||||||||||
S&P Consumer Discretionary | $ | 100 | $ | 106 | $ | 128 | $ | 186 | $ | 205 | $ | 227 |
Item 6. | Selected Financial Data. |
Fiscal Year | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011(g) | |||||||||||||||
Income Statement Data | |||||||||||||||||||
Revenues | |||||||||||||||||||
Company sales | $ | 11,145 | $ | 11,324 | $ | 11,184 | $ | 11,833 | $ | 10,893 | |||||||||
Franchise and license fees and income | 1,960 | 1,955 | 1,900 | 1,800 | 1,733 | ||||||||||||||
Total | 13,105 | 13,279 | 13,084 | 13,633 | 12,626 | ||||||||||||||
Closures and impairment income (expenses)(a) | (79 | ) | (535 | ) | (331 | ) | (37 | ) | (135 | ) | |||||||||
Refranchising gain (loss)(b) | (10 | ) | 33 | 100 | 78 | (72 | ) | ||||||||||||
Operating Profit(c) | 1,921 | 1,557 | 1,798 | 2,294 | 1,815 | ||||||||||||||
Interest expense, net(c) | 134 | 130 | 247 | 149 | 156 | ||||||||||||||
Income before income taxes | 1,787 | 1,427 | 1,551 | 2,145 | 1,659 | ||||||||||||||
Net Income – including noncontrolling interest | 1,298 | 1,021 | 1,064 | 1,608 | 1,335 | ||||||||||||||
Net Income – YUM! Brands, Inc. | 1,293 | 1,051 | 1,091 | 1,597 | 1,319 | ||||||||||||||
Basic earnings per common share | 2.97 | 2.37 | 2.41 | 3.46 | 2.81 | ||||||||||||||
Diluted earnings per common share | 2.92 | 2.32 | 2.36 | 3.38 | 2.74 | ||||||||||||||
Diluted earnings per common share before Special Items(c) | 3.18 | 3.09 | 2.97 | 3.25 | 2.87 | ||||||||||||||
Cash Flow Data | |||||||||||||||||||
Provided by operating activities | $ | 2,139 | $ | 2,049 | $ | 2,139 | $ | 2,294 | $ | 2,170 | |||||||||
Capital spending, excluding acquisitions and investments | 973 | 1,033 | 1,049 | 1,099 | 940 | ||||||||||||||
Proceeds from refranchising of restaurants | 246 | 114 | 260 | 364 | 246 | ||||||||||||||
Repurchase shares of Common Stock | 1,200 | 820 | 770 | 965 | 752 | ||||||||||||||
Dividends paid on Common Stock | 730 | 669 | 615 | 544 | 481 | ||||||||||||||
Balance Sheet Data | |||||||||||||||||||
Total assets(h) | $ | 8,075 | $ | 8,334 | $ | 8,695 | $ | 9,013 | $ | 8,834 | |||||||||
Long-term debt | 3,054 | 3,077 | 2,918 | 2,932 | 2,997 | ||||||||||||||
Total debt | 3,977 | 3,344 | 2,989 | 2,942 | 3,317 | ||||||||||||||
Other Data | |||||||||||||||||||
Number of stores at year end | |||||||||||||||||||
Company | 8,927 | 8,664 | 8,097 | 7,544 | 7,403 | ||||||||||||||
Unconsolidated Affiliates | 796 | 757 | 716 | 660 | 587 | ||||||||||||||
Franchisees & licensees | 32,969 | 32,125 | 31,420 | 30,733 | 29,056 | ||||||||||||||
System | 42,692 | 41,546 | 40,233 | 38,937 | 37,046 | ||||||||||||||
China Division system sales growth(d) | |||||||||||||||||||
Reported | — | % | 1 | % | (1 | )% | 23 | % | 35 | % | |||||||||
Local currency(e) | 2 | % | 1 | % | (4 | )% | 20 | % | 29 | % | |||||||||
KFC Division system sales growth(d) | |||||||||||||||||||
Reported | (4 | )% | 2 | % | — | % | 2 | % | 9 | % | |||||||||
Local currency(e) | 7 | % | 6 | % | 3 | % | 6 | % | 4 | % | |||||||||
Pizza Hut Division system sales growth(d) | |||||||||||||||||||
Reported | (2 | )% | — | % | — | % | 2 | % | 5 | % | |||||||||
Local currency(e) | 2 | % | 1 | % | 1 | % | 5 | % | 2 | % | |||||||||
Taco Bell Division system sales growth(d) | |||||||||||||||||||
Reported | 8 | % | 4 | % | 4 | % | 7 | % | 1 | % | |||||||||
Local currency(e) | 8 | % | 4 | % | 4 | % | 9 | % | (1 | )% | |||||||||
India Division system sales growth(d)(f) | |||||||||||||||||||
Reported | (9 | )% | (1 | )% | 11 | % | 13 | % | 36 | % | |||||||||
Local currency(e) | (5 | )% | 3 | % | 20 | % | 29 | % | 35 | % | |||||||||
Shares outstanding at year end | 420 | 434 | 443 | 451 | 460 | ||||||||||||||
Cash dividends declared per Common Share | $ | 1.74 | $ | 1.56 | $ | 1.41 | $ | 1.24 | $ | 1.07 | |||||||||
Market price per share at year end | $ | 74.00 | $ | 73.14 | $ | 73.87 | $ | 64.72 | $ | 59.01 |
(a) | Closures and impairment income (expense) includes $463 million and $295 million of Little Sheep impairment losses in 2014 and 2013 respectively. See Note 4. Additionally, 2011 included $80 million of net losses related to the divestitures of the Long John Silver's and A&W All-American Food Restaurants brands. |
(b) | See Note 4 for discussion of Refranchising gain (loss) for fiscal years 2015, 2014 and 2013. Fiscal year 2012 included $122 million in net gains from refranchising restaurants in the U.S., primarily Taco Bells, and $70 million in losses related to the refranchising of our remaining Company-owned Pizza Hut UK dine-in restaurants. Fiscal year 2011 included a charge of $76 million as a result of our initial decision to refranchise or close all of our remaining Company-owned Pizza Hut UK dine-in restaurants. |
(c) | In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) throughout this document, the Company provides non-GAAP measurements which present operating results on a basis before Special Items. The Company uses earnings before Special Items as a key performance measure of results of operations for the purpose of evaluating performance internally and Special Items are not included in any of our segment results. This non-GAAP measurement is not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of earnings before Special Items provides additional information to investors to facilitate the comparison of past and present results, excluding items that the Company does not believe are indicative of our ongoing operations due to their size and/or nature. |
(d) | System sales growth includes the results of all restaurants regardless of ownership, including company-owned, franchise, unconsolidated affiliate and license restaurants that operate our Concepts, except for non-company-owned restaurants for which we do not receive a sales-based royalty. Sales of franchise, unconsolidated affiliate and license restaurants typically generate ongoing franchise and license fees for the Company at a rate of 4% to 6% of sales. Franchise, unconsolidated affiliate and license restaurant sales are not included in Company sales on the Consolidated Statements of Income; however, the franchise and license fees are included in the Company’s revenues. We believe system sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates all of our revenue drivers, Company and franchise same-store sales as well as net unit growth. |
(e) | Local currency represents the percentage change excluding the impact of foreign currency translation. These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the foreign currency translation impact provides better year-to-year comparability without the distortion of foreign currency fluctuations. |
(f) | Effective the beginning of 2014, results from our Mauritius stores are included in KFC and Pizza Hut Divisions as applicable. While there was no impact to our consolidated results, this change negatively impacted India's 2014 reported and local currency system sales growth by 10% and 11%, respectively. |
(g) | Fiscal years 2015, 2014, 2013 and 2012 include 52 weeks and fiscal year 2011 includes 53 weeks. Our fiscal calendar results in a 53rd week every five or six years. This impacts all of our U.S. businesses and certain of our international businesses that report on a period, as opposed to a monthly, basis within our global brand divisions. Our China and India Divisions report on a monthly basis and thus did not have a 53rd week in 2011. |
(h) | In 2015, we retrospectively adopted Accounting Standard Update (ASU) No. 2015-17, Balance Sheet Classification of Deferred Taxes. See Income Taxes section of Note 2. We have restated Total assets for 2014 to reflect this change, but have not restated 2013, 2012 or 2011. |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
• | YUM China (“China” or “China Division”) which includes all operations in mainland China |
• | YUM India ("India" or "India Division") which includes all operations in India, Bangladesh, Nepal and Sri Lanka |
• | The KFC Division which includes all operations of the KFC concept outside of China Division and India Division |
• | The Pizza Hut Division which includes all operations of the Pizza Hut concept outside of China Division and India Division |
• | The Taco Bell Division which includes all operations of the Taco Bell concept outside of India Division |
• | The Company provides certain percentage changes excluding the impact of foreign currency translation (“FX” or “Forex”). These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the foreign currency translation impact provides better year-to-year comparability without the distortion of foreign currency fluctuations. |
• | System sales growth includes the results of all restaurants regardless of ownership, including company-owned, franchise, unconsolidated affiliate and license restaurants that operate our Concepts, except for non-company-owned restaurants for which we do not receive a sales-based royalty. Sales of franchise, unconsolidated affiliate and license restaurants typically generate ongoing franchise and license fees for the Company at a rate of 4% to 6% of sales. Franchise, unconsolidated affiliate and license restaurant sales are not included in Company sales on the Consolidated Statements of Income; however, the franchise and license fees are included in the Company’s revenues. We believe system sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates all of our revenue drivers, Company and franchise same-store sales as well as net unit growth. |
• | Same-store sales growth is the estimated percentage change in sales of all restaurants that have been open and in the YUM system one year or more. |
• | Company Restaurant profit ("Restaurant profit") is defined as Company sales less expenses incurred directly by our Company-owned restaurants in generating Company sales. Company restaurant margin as a percentage of sales is defined as Restaurant profit divided by Company sales. Within the Company Sales and Restaurant Profit analysis, Store Portfolio Actions represent the net impact of new unit openings, acquisitions, refranchising and store closures, and Other primarily represents the impact of same-store sales as well as the impact of changes in costs such as inflation/deflation. |
• | In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") throughout this MD&A, the Company provides non-GAAP measurements which present operating results on a basis before Special Items. The Company uses earnings before Special Items as a key performance measure of results of operations for the purpose of evaluating performance internally and Special Items are not included in any of our segment results. This non-GAAP measurement is not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of earnings before Special Items provides additional information to investors to facilitate the comparison of past and present results, excluding those items that the Company does not believe are indicative of our ongoing operations due to their size and/or nature. |
China Division | KFC Division | Pizza Hut Division | Taco Bell Division | India Division | |||||||||||
System Sales Growth (Decline) | 2 | % | 7 | % | 2 | % | 8 | % | (5 | )% | |||||
Operating Profit Growth (Decline) | 8 | % | 8 | % | 1 | % | 12 | % | (118 | )% | |||||
Same Store Sales Growth (Decline) | (4 | )% | 3 | % | 1 | % | 5 | % | (13 | )% | |||||
New Unit Openings | 743 | 715 | 577 | 276 | 54 |
Amount | % B/(W) | ||||||||||||||||||||
2015 | 2014 | 2013 | 2015 | 2014 | |||||||||||||||||
Company sales | $ | 11,145 | $ | 11,324 | $ | 11,184 | (2 | ) | 1 | ||||||||||||
Franchise and license fees and income | 1,960 | 1,955 | 1,900 | — | 3 | ||||||||||||||||
Total revenues | $ | 13,105 | $ | 13,279 | $ | 13,084 | (1 | ) | 1 | ||||||||||||
Restaurant profit | $ | 1,786 | $ | 1,642 | $ | 1,683 | 9 | (2 | ) | ||||||||||||
Restaurant Margin % | 16.0 | % | 14.5 | % | 15.0 | % | 1.5 | ppts. | (0.5 | ) | ppts. | ||||||||||
Operating Profit | $ | 1,921 | $ | 1,557 | $ | 1,798 | 23 | (13 | ) | ||||||||||||
Interest expense, net | 134 | 130 | 247 | (4 | ) | 47 | |||||||||||||||
Income tax provision | 489 | 406 | 487 | (20 | ) | 17 | |||||||||||||||
Net Income – including noncontrolling interests | 1,298 | 1,021 | 1,064 | 27 | (4 | ) | |||||||||||||||
Net Income (loss) – noncontrolling interests | 5 | (30 | ) | (27 | ) | NM | (12 | ) | |||||||||||||
Net Income – YUM! Brands, Inc. | $ | 1,293 | $ | 1,051 | $ | 1,091 | 23 | (4 | ) | ||||||||||||
Diluted EPS(a) | $ | 2.92 | $ | 2.32 | $ | 2.36 | 26 | (2 | ) | ||||||||||||
Diluted EPS before Special Items(a) | $ | 3.18 | $ | 3.09 | $ | 2.97 | 3 | 4 | |||||||||||||
Reported Effective tax rate | 27.3% | 28.5% | 31.4% | ||||||||||||||||||
Effective tax rate before Special Items | 25.6% | 25.5% | 28.0% |
(a) | See Note 3 for the number of shares used in these calculations. |
2015 | 2014 | |||||||||||||
System Sales Growth, reported | (1 | )% | 2 | % | ||||||||||
System Sales Growth, excluding FX | 5 | % | 3 | % | ||||||||||
% Increase (Decrease) | ||||||||||||||
Unit Count | 2015 | 2014 | 2013 | 2015 | 2014 | |||||||||
Franchise & License | 32,969 | 32,125 | 31,420 | 3 | 2 | |||||||||
Company-owned | 8,927 | 8,664 | 8,097 | 3 | 7 | |||||||||
Unconsolidated Affiliates | 796 | 757 | 716 | 5 | 6 | |||||||||
42,692 | 41,546 | 40,233 | 3 | 3 |
Year | ||||||||||||
Detail of Special Items | 2015 | 2014 | 2013 | |||||||||
Gains (losses) associated with the refranchising of equity markets outside the U.S. (See Note 4) | $ | (96 | ) | $ | 7 | $ | — | |||||
Costs associated with KFC U.S. Acceleration Agreement (See Note 4) | (72 | ) | — | — | ||||||||
Loss associated with planned sale of aircraft (See Note 7) | (15 | ) | — | — | ||||||||
Costs associated with the planned spin-off of the China business and YUM recapitalization(a) | (9 | ) | — | — | ||||||||
U.S. Refranchising gain (loss)(b) | 75 | 6 | 91 | |||||||||
Little Sheep impairment (See Note 4) | — | (463 | ) | (295 | ) | |||||||
Other Special Items Income (Expense)(c) | 1 | 3 | (18 | ) | ||||||||
Special Items Income (Expense) - Operating Profit | (116 | ) | (447 | ) | (222 | ) | ||||||
Losses related to the extinguishment of debt - Interest Expense, net (See Note 4) | — | — | (118 | ) | ||||||||
Special Items Income (Expense) before income taxes | (116 | ) | (447 | ) | (340 | ) | ||||||
Tax Benefit (Expense) on Special Items(d) | (1 | ) | 72 | 41 | ||||||||
Special Items Income (Expense), net of tax - including noncontrolling interests | (117 | ) | (375 | ) | (299 | ) | ||||||
Special Items Income (Expense), net of tax - noncontrolling interests (See Note 4) | — | 26 | 19 | |||||||||
Special Items Income (Expense), net of tax - YUM! Brands, Inc. | $ | (117 | ) | $ | (349 | ) | $ | (280 | ) | |||
Average diluted shares outstanding | 443 | 453 | 461 | |||||||||
Special Items diluted EPS | $ | (0.26 | ) | $ | (0.77 | ) | $ | (0.61 | ) | |||
Reconciliation of Operating Profit Before Special Items to Reported Operating Profit | ||||||||||||
Operating Profit before Special Items | $ | 2,037 | $ | 2,004 | $ | 2,020 | ||||||
Special Items Income (Expense) - Operating Profit | (116 | ) | (447 | ) | (222 | ) | ||||||
Reported Operating Profit | $ | 1,921 | $ | 1,557 | $ | 1,798 | ||||||
Reconciliation of EPS Before Special Items to Reported EPS | ||||||||||||
Diluted EPS before Special Items | $ | 3.18 | $ | 3.09 | $ | 2.97 | ||||||
Special Items EPS | (0.26 | ) | (0.77 | ) | (0.61 | ) | ||||||
Reported EPS | $ | 2.92 | $ | 2.32 | $ | 2.36 | ||||||
Reconciliation of Effective Tax Rate Before Special Items to Reported Effective Tax Rate | ||||||||||||
Effective Tax Rate before Special Items | 25.6 | % | 25.5 | % | 28.0 | % | ||||||
Impact on Tax Rate as a result of Special Items(d) | 1.7 | % | 3.0 | % | 3.4 | % | ||||||
Reported Effective Tax Rate | 27.3 | % | 28.5 | % | 31.4 | % |
(a) | We have incurred $9 million of expenses for initiatives related to the planned spin-off of our China business into an independent publicly-traded company and our recapitalization plan. |
(b) | The refranchising gains in 2015 and 2013 were primarily due to gains on sales of Taco Bell restaurants. |
(c) | Other Special Items Income (Expense) in 2013 primarily includes pension settlement charges of $10 million related to a program where the company allowed certain former employees the opportunity to voluntarily elect an early payout of their pension benefits, the majority of which were funded from existing pension plan assets, and $5 million of expense relating to U.S. G&A productivity initiatives and realignment of resources (primarily severance and early retirement costs) undertaken in conjunction with the refranchising of restaurants in the U.S. |
(d) | The tax benefit (expense) was determined based upon the impact of the nature, as well as the jurisdiction of the respective individual components within Special Items. |
% B/(W) | % B/(W) | |||||||||||||||||||||||||||
2015 | 2014 | |||||||||||||||||||||||||||
2015 | 2014 | 2013 | Reported | Ex FX | Reported | Ex FX | ||||||||||||||||||||||
Company sales | $ | 6,789 | $ | 6,821 | $ | 6,800 | — | 1 | — | 1 | ||||||||||||||||||
Franchise and license fees and income | 120 | 113 | 105 | 7 | 9 | 7 | 7 | |||||||||||||||||||||
Total revenues | $ | 6,909 | $ | 6,934 | $ | 6,905 | — | 2 | — | 1 | ||||||||||||||||||
Restaurant profit | $ | 1,077 | $ | 1,009 | $ | 1,050 | 7 | 9 | (4 | ) | (4 | ) | ||||||||||||||||
Restaurant margin % | 15.9 | % | 14.8 | % | 15.4 | % | 1.1 | ppts. | 1.0 | ppts. | (0.6 | ) | ppts. | (0.6 | ) | ppts. | ||||||||||||
G&A expenses | $ | 397 | $ | 391 | $ | 357 | (2 | ) | (3 | ) | (9 | ) | (9 | ) | ||||||||||||||
Operating Profit | $ | 757 | $ | 713 | $ | 777 | 6 | 8 | (8 | ) | (8 | ) |
2015 | 2014 | |||||||||
System Sales Growth, reported | — | % | 1 | % | ||||||
System Sales Growth, excluding FX | 2 | % | 1 | % | ||||||
Same-Store Sales Growth (Decline) % | (4 | )% | (5 | )% |
% Increase (Decrease) | ||||||||||||||||
Unit Count | 2015 | 2014 | 2013 | 2015 | 2014 | |||||||||||
Company-owned | 5,768 | 5,417 | 5,026 | 6 | 8 | |||||||||||
Unconsolidated Affiliates | 796 | 757 | 716 | 5 | 6 | |||||||||||
Franchise & License | 612 | 541 | 501 | 13 | 8 | |||||||||||
7,176 | 6,715 | 6,243 | 7 | 8 |
2014 | New Builds | Closures | Refranchised | Acquired | Other | 2015 | |||||||||||||||
Company-owned | 5,417 | 636 | (198 | ) | (90 | ) | 3 | — | 5,768 | ||||||||||||
Unconsolidated Affiliates | 757 | 58 | (15 | ) | — | — | (4 | ) | 796 | ||||||||||||
Franchise & License | 541 | 49 | (69 | ) | 90 | (3 | ) | 4 | 612 | ||||||||||||
Total | 6,715 | 743 | (282 | ) | — | — | — | 7,176 |
2013 | New Builds | Closures | Refranchised | Acquired | Other | 2014 | |||||||||||||||
Company-owned | 5,026 | 664 | (195 | ) | (79 | ) | 1 | — | 5,417 | ||||||||||||
Unconsolidated Affiliates | 716 | 56 | (14 | ) | — | — | (1 | ) | 757 | ||||||||||||
Franchise & License | 501 | 17 | (56 | ) | 79 | (1 | ) | 1 | 541 | ||||||||||||
Total | 6,243 | 737 | (265 | ) | — | — | — | 6,715 |
2015 vs. 2014 | |||||||||||||||||||
Income / (Expense) | 2014 | Store Portfolio Actions | Other | FX | 2015 | ||||||||||||||
Company sales | $ | 6,821 | $ | 363 | $ | (262 | ) | $ | (133 | ) | $ | 6,789 | |||||||
Cost of sales | (2,207 | ) | (102 | ) | 108 | 42 | (2,159 | ) | |||||||||||
Cost of labor | (1,407 | ) | (70 | ) | 63 | 28 | (1,386 | ) | |||||||||||
Occupancy and other | (2,198 | ) | (108 | ) | 97 | 42 | (2,167 | ) | |||||||||||
Restaurant profit | $ | 1,009 | $ | 83 | $ | 6 | $ | (21 | ) | $ | 1,077 | ||||||||
2014 vs. 2013 | |||||||||||||||||||
Income / (Expense) | 2013 | Store Portfolio Actions | Other | FX | 2014 | ||||||||||||||
Company sales | $ | 6,800 | $ | 358 | $ | (322 | ) | $ | (15 | ) | $ | 6,821 | |||||||
Cost of sales | (2,258 | ) | (104 | ) | 151 | 4 | (2,207 | ) | |||||||||||
Cost of labor | (1,360 | ) | (75 | ) | 26 | 2 | (1,407 | ) | |||||||||||
Occupancy and other | (2,132 | ) | (124 | ) | 52 | 6 | (2,198 | ) | |||||||||||
Restaurant profit | $ | 1,050 | $ | 55 | $ | (93 | ) | $ | (3 | ) | $ | 1,009 | |||||||
% B/(W) | % B/(W) | |||||||||||||||||||||||||||
2015 | 2014 | |||||||||||||||||||||||||||
2015 | 2014 | 2013 | Reported | Ex FX | Reported | Ex FX | ||||||||||||||||||||||
Company sales | $ | 2,106 | $ | 2,320 | $ | 2,192 | (9 | ) | 5 | 6 | 9 | |||||||||||||||||
Franchise and license fees and income | 842 | 873 | 844 | (4 | ) | 7 | 4 | 7 | ||||||||||||||||||||
Total revenues | $ | 2,948 | $ | 3,193 | $ | 3,036 | (8 | ) | 6 | 5 | 8 | |||||||||||||||||
Restaurant profit | $ | 312 | $ | 308 | $ | 277 | 1 | 16 | 12 | 14 | ||||||||||||||||||
Restaurant margin % | 14.8 | % | 13.3 | % | 12.6 | % | 1.5 | ppts. | 1.4 | ppts. | 0.7 | ppts. | 0.7 | ppts. | ||||||||||||||
G&A expenses | $ | 386 | $ | 383 | $ | 391 | (1 | ) | (12 | ) | 2 | — | ||||||||||||||||
Operating Profit | $ | 677 | $ | 708 | $ | 649 | (4 | ) | 8 | 9 | 13 |
2015 | 2014 | |||||||||
System Sales Growth, reported | (4 | )% | 2 | % | ||||||
System Sales Growth, excluding FX | 7 | % | 6 | % | ||||||
Same-Store Sales Growth % | 3 | % | 3 | % |
% Increase (Decrease) | ||||||||||||||||
Unit Count | 2015 | 2014 | 2013 | 2015 | 2014 | |||||||||||
Franchise & License | 13,189 | 12,874 | 12,647 | 2 | 2 | |||||||||||
Company-owned | 1,388 | 1,323 | 1,257 | 5 | 5 | |||||||||||
14,577 | 14,197 | 13,904 | 3 | 2 |
2014 | New Builds | Closures | Refranchised | Acquired | Other | 2015 | |||||||||||||||
Franchise & License | 12,874 | 609 | (302 | ) | 31 | (12 | ) | (11 | ) | 13,189 | |||||||||||
Company-owned | 1,323 | 106 | (22 | ) | (31 | ) | 12 | — | 1,388 | ||||||||||||
Total | 14,197 | 715 | (324 | ) | — | — | (11 | ) | 14,577 |
2013 | New Builds | Closures | Refranchised | Acquired | Other | 2014 | |||||||||||||||
Franchise & License | 12,647 | 553 | (356 | ) | 39 | (4 | ) | (5 | ) | 12,874 | |||||||||||
Company-owned | 1,257 | 123 | (22 | ) | (39 | ) | 4 | — | 1,323 | ||||||||||||
Total | 13,904 | 676 | (378 | ) | — | — | (5 | ) | 14,197 |
2015 vs. 2014 | |||||||||||||||||||
Income / (Expense) | 2014 | Store Portfolio Actions | Other | FX | 2015 | ||||||||||||||
Company sales | $ | 2,320 | $ | 54 | $ | 65 | $ | (333 | ) | $ | 2,106 | ||||||||
Cost of sales | (809 | ) | (25 | ) | 2 | 115 | (717 | ) | |||||||||||
Cost of labor | (552 | ) | (8 | ) | (16 | ) | 79 | (497 | ) | ||||||||||
Occupancy and other | (651 | ) | (16 | ) | (6 | ) | 93 | (580 | ) | ||||||||||
Restaurant profit | $ | 308 | $ | 5 | $ | 45 | $ | (46 | ) | $ | 312 | ||||||||
2014 vs. 2013 | |||||||||||||||||||
Income / (Expense) | 2013 | Store Portfolio Actions | Other | FX | 2014 | ||||||||||||||
Company sales | $ | 2,192 | $ | 110 | $ | 79 | $ | (61 | ) | $ | 2,320 | ||||||||
Cost of sales | (766 | ) | (43 | ) | (26 | ) | 26 | (809 | ) | ||||||||||
Cost of labor | (521 | ) | (25 | ) | (16 | ) | 10 | (552 | ) | ||||||||||
Occupancy and other | (628 | ) | (38 | ) | (3 | ) | 18 | (651 | ) | ||||||||||
Restaurant profit | $ | 277 | $ | 4 | $ | 34 | $ | (7 | ) | $ | 308 | ||||||||
% B/(W) | % B/(W) | |||||||||||||||||||||||||||
2015 | 2014 | |||||||||||||||||||||||||||
2015 | 2014 | 2013 | Reported | Ex FX | Reported | Ex FX | ||||||||||||||||||||||
Company sales | $ | 609 | $ | 607 | $ | 609 | — | 3 | — | (1 | ) | |||||||||||||||||
Franchise and license fees and income | 536 | 541 | 538 | (1 | ) | 3 | 1 | 2 | ||||||||||||||||||||
Total revenues | $ | 1,145 | $ | 1,148 | $ | 1,147 | — | 3 | — | 1 | ||||||||||||||||||
Restaurant profit | $ | 59 | $ | 50 | $ | 71 | 19 | 16 | (30 | ) | (32 | ) | ||||||||||||||||
Restaurant margin % | 9.7 | % | 8.2 | % | 11.7 | % | 1.5 | ppts. | 1.0 | ppts. | (3.5 | ) | ppts. | (3.7 | ) | ppts. | ||||||||||||
G&A expenses | $ | 266 | $ | 246 | $ | 224 | (8 | ) | (13 | ) | (10 | ) | (11 | ) | ||||||||||||||
Operating Profit | $ | 289 | $ | 295 | $ | 339 | (2 | ) | 1 | (13 | ) | (13 | ) |
2015 | 2014 | |||||||||
System Sales Growth, reported | (2 | )% | — | % | ||||||
System Sales Growth, excluding FX | 2 | % | 1 | % | ||||||
Same-Store Sales Growth (Decline) % | 1 | % | (1 | )% |
% Increase (Decrease) | ||||||||||||||||
Unit Count | 2015 | 2014 | 2013 | 2015 | 2014 | |||||||||||
Franchise & License | 12,969 | 12,814 | 12,601 | 1 | 2 | |||||||||||
Company-owned | 759 | 788 | 732 | (4 | ) | 8 | ||||||||||
13,728 | 13,602 | 13,333 | 1 | 2 |
2014 | New Builds | Closures | Refranchised | Acquired | Other | 2015 | |||||||||||||||
Franchise & License | 12,814 | 522 | (418 | ) | 90 | (44 | ) | 5 | 12,969 | ||||||||||||
Company-owned | 788 | 55 | (38 | ) | (90 | ) | 44 | — | 759 | ||||||||||||
Total | 13,602 | 577 | (456 | ) | — | — | 5 | 13,728 |
2013 | New Builds | Closures | Refranchised | Acquired | Other | 2014 | |||||||||||||||
Franchise & License | 12,601 | 586 | (359 | ) | 6 | (19 | ) | (1 | ) | 12,814 | |||||||||||
Company-owned | 732 | 91 | (48 | ) | (6 | ) | 19 | — | 788 | ||||||||||||
Total | 13,333 | 677 | (407 | ) | — | — | (1 | ) | 13,602 |
2015 vs. 2014 | |||||||||||||||||||
Income / (Expense) | 2014 | Store Portfolio Actions | Other | FX | 2015 | ||||||||||||||
Company sales | $ | 607 | $ | 24 | $ | (4 | ) | $ | (18 | ) | $ | 609 | |||||||
Cost of sales | (180 | ) | (7 | ) | 12 | 6 | (169 | ) | |||||||||||
Cost of labor | (188 | ) | (6 | ) | (2 | ) | 6 | (190 | ) | ||||||||||
Occupancy and other | (189 | ) | (9 | ) | (1 | ) | 8 | (191 | ) | ||||||||||
Restaurant profit | $ | 50 | $ | 2 | $ | 5 | $ | 2 | $ | 59 | |||||||||
2014 vs. 2013 | |||||||||||||||||||
Income / (Expense) | 2013 | Store Portfolio Actions | Other | FX | 2014 | ||||||||||||||
Company sales | $ | 609 | $ | 21 | $ | (24 | ) | $ | 1 | $ | 607 | ||||||||
Cost of sales | (173 | ) | (7 | ) | — | — | (180 | ) | |||||||||||
Cost of labor | (183 | ) | (9 | ) | 4 | — | (188 | ) | |||||||||||
Occupancy and other | (182 | ) | (8 | ) | — | 1 | (189 | ) | |||||||||||
Restaurant profit | $ | 71 | $ | (3 | ) | $ | (20 | ) | $ | 2 | $ | 50 | |||||||
% B/(W) | % B/(W) | |||||||||||||||||||||||||||
2015 | 2014 | |||||||||||||||||||||||||||
2015 | 2014 | 2013 | Reported | Ex FX | Reported | Ex FX | ||||||||||||||||||||||
Company sales | $ | 1,541 | $ | 1,452 | $ | 1,474 | 6 | 6 | (2 | ) | (2 | ) | ||||||||||||||||
Franchise and license fees and income | 447 | 411 | 395 | 9 | 9 | 4 | 4 | |||||||||||||||||||||
Total revenues | $ | 1,988 | $ | 1,863 | $ | 1,869 | 7 | 7 | — | — | ||||||||||||||||||
Restaurant profit | $ | 343 | $ | 274 | $ | 287 | 25 | 25 | (5 | ) | (5 | ) | ||||||||||||||||
Restaurant margin % | 22.3 | % | 18.9 | % | 19.5 | % | 3.4 | ppts. | 3.4 | ppts. | (0.6 | ) | ppts. | (0.6 | ) | ppts. | ||||||||||||
G&A expenses | $ | 228 | $ | 185 | $ | 206 | (23 | ) | (23 | ) | 10 | 10 | ||||||||||||||||
Operating Profit | $ | 539 | $ | 480 | $ | 456 | 12 | 12 | 5 | 5 |
2015 | 2014 | |||||||||
System Sales Growth, reported | 8 | % | 4 | % | ||||||
System Sales Growth, excluding FX | 8 | % | 4 | % | ||||||
Same-Store Sales Growth % | 5 | % | 3 | % |
% Increase (Decrease) | ||||||||||||||||
Unit Count | 2015 | 2014 | 2013 | 2015 | 2014 | |||||||||||
Franchise & License | 5,506 | 5,273 | 5,157 | 4 | 2 | |||||||||||
Company-owned | 894 | 926 | 891 | (3 | ) | 4 | ||||||||||
6,400 | 6,199 | 6,048 | 3 | 2 |
2014 | New Builds | Closures | Refranchised | Acquired | Other | 2015 | |||||||||||||||
Franchise & License | 5,273 | 239 | (80 | ) | 65 | — | 9 | 5,506 | |||||||||||||
Company-owned | 926 | 37 | (4 | ) | (65 | ) | — | — | 894 | ||||||||||||
Total | 6,199 | 276 | (84 | ) | — | — | 9 | 6,400 |
2013 | New Builds | Closures | Refranchised | Acquired | Other | 2014 | |||||||||||||||
Franchise & License | 5,157 | 209 | (90 | ) | 3 | (12 | ) | 6 | 5,273 | ||||||||||||
Company-owned | 891 | 27 | (1 | ) | (3 | ) | 12 | — | 926 | ||||||||||||
Total | 6,048 | 236 | (91 | ) | — | — | 6 | 6,199 |
2015 vs. 2014 | |||||||||||||||
Income / (Expense) | 2014 | Store Portfolio Actions | Other | 2015 | |||||||||||
Company sales | $ | 1,452 | $ | 38 | $ | 51 | $ | 1,541 | |||||||
Cost of sales | (431 | ) | (10 | ) | 20 | (421 | ) | ||||||||
Cost of labor | (414 | ) | (12 | ) | (1 | ) | (427 | ) | |||||||
Occupancy and other | (333 | ) | (11 | ) | (6 | ) | (350 | ) | |||||||
Restaurant profit | $ | 274 | $ | 5 | $ | 64 | $ | 343 | |||||||
2014 vs. 2013 | |||||||||||||||
Income / (Expense) | 2013 | Store Portfolio Actions | Other | 2014 | |||||||||||
Company sales | $ | 1,474 | $ | (47 | ) | $ | 25 | $ | 1,452 | ||||||
Cost of sales | (424 | ) | 14 | (21 | ) | (431 | ) | ||||||||
Cost of labor | (419 | ) | 14 | (9 | ) | (414 | ) | ||||||||
Occupancy and other | (344 | ) | 12 | (1 | ) | (333 | ) | ||||||||
Restaurant profit | $ | 287 | $ | (7 | ) | $ | (6 | ) | $ | 274 | |||||
% B/(W) | % B/(W) | |||||||||||||||||||||||||||
2015 | 2014 | |||||||||||||||||||||||||||
2015 | 2014 | 2013 | Reported | Ex FX | Reported | Ex FX | ||||||||||||||||||||||
Total revenues(a) | $ | 115 | $ | 141 | $ | 127 | (18 | ) | (14 | ) | 11 | 16 | ||||||||||||||||
Operating Profit (loss) | $ | (19 | ) | $ | (9 | ) | $ | (15 | ) | (108 | ) | (118 | ) | 39 | 35 |
2015 | 2014 | |||||||||
System Sales Growth, reported(a) | (9 | )% | (1 | )% | ||||||
System Sales Growth, excluding FX(a) | (5 | )% | 3 | % | ||||||
Same-Store Sales Growth (Decline) % | (13 | )% | (5 | )% |
% Increase (Decrease) | ||||||||||||||||
Unit Count | 2015 | 2014 | 2013 | 2015 | 2014 | |||||||||||
Franchise & License | 693 | 623 | 514 | 11 | 21 | |||||||||||
Company-owned | 118 | 210 | 191 | (44 | ) | 10 | ||||||||||
811 | 833 | 705 | (3 | ) | 18 |
2014 | New Builds | Closures | Refranchised | Acquired | 2015 | |||||||||||||
Franchise & License | 623 | 54 | (70 | ) | 86 | — | 693 | |||||||||||
Company-owned | 210 | — | (6 | ) | (86 | ) | — | 118 | ||||||||||
Total | 833 | 54 | (76 | ) | — | — | 811 |
2013 | New Builds | Closures | Refranchised | Acquired | 2014 | |||||||||||||
Franchise & License | 514 | 110 | (21 | ) | 20 | — | 623 | |||||||||||
Company-owned | 191 | 46 | (7 | ) | (20 | ) | — | 210 | ||||||||||
Total | 705 | 156 | (28 | ) | — | — | 833 |
(a) | Effective the beginning of 2014, results from our Mauritius stores are included in KFC and Pizza Hut Divisions as applicable. Prior year units have been adjusted for comparability while division System Sales Growth, Total Revenues and Operating Profit (loss) have not been restated due to the immaterial dollar impact of this change. While there was no impact to our consolidated results, this change negatively impacted India's 2014 System Sales Growth, reported and excluding FX, by 10% and 11%, respectively. This change negatively impacted India's 2014 Total revenues by 2% and Operating Profit (loss) by $1 million. |
% B/(W) | ||||||||||||||||||||
Income/(Expense) | 2015 | 2014 | 2013 | 2015 | 2014 | |||||||||||||||
Corporate G&A expenses | $ | (204 | ) | $ | (189 | ) | $ | (207 | ) | (7 | ) | 9 | ||||||||
Unallocated franchise and license expenses | (71 | ) | — | — | NM | — | ||||||||||||||
Unallocated closures and impairments | — | (463 | ) | (295 | ) | NM | (57 | ) | ||||||||||||
Refranchising gain (loss) (See Note 4) | (10 | ) | 33 | 100 | NM | (67 | ) | |||||||||||||
Other unallocated | (37 | ) | (11 | ) | (6 | ) | NM | (78 | ) | |||||||||||
Interest expense, net | (134 | ) | (130 | ) | (247 | ) | (4 | ) | 47 | |||||||||||
Income tax provision (See Note 16) | (489 | ) | (406 | ) | (487 | ) | (20 | ) | 17 | |||||||||||
Effective tax rate (See Note 16) | 27.3 | % | 28.5 | % | 31.4 | % | 1.2 | ppts. | 2.9 | ppts. |
2015 | 2014 | 2013 | ||||||||||||||||
Net Cash Provided by Operating Activities | $ | 2,139 | $ | 2,049 | $ | 2,139 | ||||||||||||
Refranchising Proceeds | 246 | 114 | 260 | |||||||||||||||
Capital spending | (973 | ) | (1,033 | ) | (1,049 | ) | ||||||||||||
Repurchase shares of Common Stock | (1,200 | ) | (820 | ) | (770 | ) | ||||||||||||
Dividends paid on Common Stock | (730 | ) | (669 | ) | (615 | ) |
Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | ||||||||||||||||
Long-term debt obligations(a) | $ | 5,072 | $ | 1,048 | $ | 1,233 | $ | 759 | $ | 2,032 | ||||||||||
Capital leases(b) | 287 | 20 | 40 | 39 | 188 | |||||||||||||||
Operating leases(b) | 4,957 | 672 | 1,189 | 973 | 2,123 | |||||||||||||||
Purchase obligations(c) | 765 | 568 | 136 | 54 | 7 | |||||||||||||||
Benefit plans(d) | 259 | 61 | 100 | 32 | 66 | |||||||||||||||
Total contractual obligations | $ | 11,340 | $ | 2,369 | $ | 2,698 | $ | 1,857 | $ | 4,416 |
(a) | Amounts include maturities of debt outstanding as of December 26, 2015 and expected interest payments on those outstanding amounts on a nominal basis. See Note 10. |
(b) | These obligations, which are shown on a nominal basis, relate primarily to approximately 8,000 company-owned restaurants. See Note 11. |
(c) | Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. We have excluded agreements that are cancelable without penalty. Purchase obligations relate primarily to supply agreements, marketing, information technology, purchases of property, plant and equipment ("PP&E") as well as consulting, maintenance and other agreements. |
(d) | Includes actuarially-determined timing of payments from our most significant unfunded pension plan as well as scheduled payments from our deferred compensation plan and other unfunded benefit plans where payment dates are determinable. This table excludes $34 million of future benefit payments for deferred compensation and other unfunded benefit plans to be paid upon separation of employee's service or retirement from the company, as we cannot reasonably estimate the dates of these future cash payments. |
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
Item 8. | Financial Statements and Supplementary Data. |
Page Reference | ||
Consolidated Financial Statements | ||
Report of Independent Registered Public Accounting Firm | ||
Consolidated Statements of Income for the fiscal years ended December 26, 2015, December 27, 2014 and December 28, 2013 | ||
Consolidated Statements of Comprehensive Income for the fiscal years ended December 26, 2015, December 27, 2014 and December 28, 2013 | ||
Consolidated Statements of Cash Flows for the fiscal years ended December 26, 2015, December 27, 2014 and December 28, 2013 | ||
Consolidated Balance Sheets as of December 26, 2015 and December 27, 2014 | ||
Consolidated Statements of Shareholders’ Equity for the fiscal years ended December 26, 2015, December 27, 2014 and December 28, 2013 | ||
Notes to Consolidated Financial Statements |
Consolidated Statements of Income | ||||||||||||
YUM! Brands, Inc. and Subsidiaries | ||||||||||||
Fiscal years ended December 26, 2015, December 27, 2014 and December 28, 2013 | ||||||||||||
(in millions, except per share data) | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
Revenues | ||||||||||||
Company sales | $ | 11,145 | $ | 11,324 | $ | 11,184 | ||||||
Franchise and license fees and income | 1,960 | 1,955 | 1,900 | |||||||||
Total revenues | 13,105 | 13,279 | 13,084 | |||||||||
Costs and Expenses, Net | ||||||||||||
Company restaurants | ||||||||||||
Food and paper | 3,507 | 3,678 | 3,669 | |||||||||
Payroll and employee benefits | 2,517 | 2,579 | 2,499 | |||||||||
Occupancy and other operating expenses | 3,335 | 3,425 | 3,333 | |||||||||
Company restaurant expenses | 9,359 | 9,682 | 9,501 | |||||||||
General and administrative expenses | 1,504 | 1,419 | 1,412 | |||||||||
Franchise and license expenses | 242 | 160 | 158 | |||||||||
Closures and impairment (income) expenses | 79 | 535 | 331 | |||||||||
Refranchising (gain) loss | 10 | (33 | ) | (100 | ) | |||||||
Other (income) expense | (10 | ) | (41 | ) | (16 | ) | ||||||
Total costs and expenses, net | 11,184 | 11,722 | 11,286 | |||||||||
Operating Profit | 1,921 | 1,557 | 1,798 | |||||||||
Interest expense, net | 134 | 130 | 247 | |||||||||
Income Before Income Taxes | 1,787 | 1,427 | 1,551 | |||||||||
Income tax provision | 489 | 406 | 487 | |||||||||
Net Income – including noncontrolling interests | 1,298 | 1,021 | 1,064 | |||||||||
Net Income (loss) – noncontrolling interests | 5 | (30 | ) | (27 | ) | |||||||
Net Income – YUM! Brands, Inc. | $ | 1,293 | $ | 1,051 | $ | 1,091 | ||||||
Basic Earnings Per Common Share | $ | 2.97 | $ | 2.37 | $ | 2.41 | ||||||
Diluted Earnings Per Common Share | $ | 2.92 | $ | 2.32 | $ | 2.36 | ||||||
Dividends Declared Per Common Share | $ | 1.74 | $ | 1.56 | $ | 1.41 | ||||||
See accompanying Notes to Consolidated Financial Statements. |
Consolidated Statements of Comprehensive Income | ||||||||||||
YUM! Brands, Inc. and Subsidiaries | ||||||||||||
Fiscal years ended December 26, 2015, December 27, 2014 and December 28, 2013 | ||||||||||||
(in millions) | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
Net income - including noncontrolling interests | $ | 1,298 | $ | 1,021 | $ | 1,064 | ||||||
Other comprehensive income (loss), net of tax: | ||||||||||||
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature | ||||||||||||
Adjustments and gains (losses) arising during the year | (259 | ) | (149 | ) | 10 | |||||||
Reclassifications of adjustments and (gains) losses into Net Income | 115 | 2 | — | |||||||||
(144 | ) | (147 | ) | 10 | ||||||||
Tax (expense) benefit | — | 4 | (2 | ) | ||||||||
(144 | ) | (143 | ) | 8 | ||||||||
Changes in pension and post-retirement benefits | ||||||||||||
Unrealized gains (losses) arising during the year | 101 | (209 | ) | 221 | ||||||||
Reclassification of (gains) losses into Net Income | 53 | 27 | 83 | |||||||||
154 | (182 | ) | 304 | |||||||||
Tax (expense) benefit | (57 | ) | 69 | (115 | ) | |||||||
97 | (113 | ) | 189 | |||||||||
Changes in derivative instruments | ||||||||||||
Unrealized gains (losses) arising during the year | 32 | 23 | 6 | |||||||||
Reclassification of (gains) losses into Net Income | (41 | ) | (23 | ) | (2 | ) | ||||||
(9 | ) | — | 4 | |||||||||
Tax (expense) benefit | 1 | — | (1 | ) | ||||||||
(8 | ) | — | 3 | |||||||||
Other comprehensive income (loss), net of tax | (55 | ) | (256 | ) | 200 | |||||||
Comprehensive Income - including noncontrolling interests | 1,243 | 765 | 1,264 | |||||||||
Comprehensive Income (loss) - noncontrolling interests | (1 | ) | (32 | ) | (23 | ) | ||||||
Comprehensive Income - Yum! Brands, Inc. | $ | 1,244 | $ | 797 | $ | 1,287 | ||||||
See accompanying Notes to Consolidated Financial Statements. |
Consolidated Statements of Cash Flows | ||||||||||||
YUM! Brands, Inc. and Subsidiaries | ||||||||||||
Fiscal years ended December 26, 2015, December 27, 2014 and December 28, 2013 | ||||||||||||
(in millions) | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
Cash Flows – Operating Activities | ||||||||||||
Net Income – including noncontrolling interests | $ | 1,298 | $ | 1,021 | $ | 1,064 | ||||||
Depreciation and amortization | 747 | 739 | 721 | |||||||||
Closures and impairment (income) expenses | 79 | 535 | 331 | |||||||||
Refranchising (gain) loss | 10 | (33 | ) | (100 | ) | |||||||
Contributions to defined benefit pension plans | (98 | ) | (18 | ) | (23 | ) | ||||||
Losses and other costs related to the extinguishment of debt | — | — | 120 | |||||||||
Deferred income taxes | (89 | ) | (172 | ) | (24 | ) | ||||||
Equity income from investments in unconsolidated affiliates | (41 | ) | (30 | ) | (26 | ) | ||||||
Distributions of income received from unconsolidated affiliates | 21 | 28 | 43 | |||||||||
Excess tax benefit from share-based compensation | (50 | ) | (42 | ) | (44 | ) | ||||||
Share-based compensation expense | 57 | 55 | 49 | |||||||||
Changes in accounts and notes receivable | (54 | ) | (21 | ) | (12 | ) | ||||||
Changes in inventories | 58 | (22 | ) | 18 | ||||||||
Changes in prepaid expenses and other current assets | (22 | ) | 12 | (21 | ) | |||||||
Changes in accounts payable and other current liabilities | 128 | 60 | (102 | ) | ||||||||
Changes in income taxes payable | 20 | (143 | ) | 14 | ||||||||
Other, net | 75 | 80 | 131 | |||||||||
Net Cash Provided by Operating Activities | 2,139 | 2,049 | 2,139 | |||||||||
Cash Flows – Investing Activities | ||||||||||||
Capital spending | (973 | ) | (1,033 | ) | (1,049 | ) | ||||||
Proceeds from refranchising of restaurants | 246 | 114 | 260 | |||||||||
Acquisitions | (9 | ) | (28 | ) | (99 | ) | ||||||
Other, net | 54 | 11 | 2 | |||||||||
Net Cash Used in Investing Activities | (682 | ) | (936 | ) | (886 | ) | ||||||
Cash Flows – Financing Activities | ||||||||||||
Proceeds from long-term debt | — | — | 599 | |||||||||
Repayments of long-term debt | (263 | ) | (66 | ) | (666 | ) | ||||||
Revolving credit facilities, three months or less, net | 285 | 416 | — | |||||||||
Short-term borrowings, by original maturity | ||||||||||||
More than three months – proceeds | 609 | 2 | 56 | |||||||||
More than three months – payments | — | (2 | ) | (56 | ) | |||||||
Three months or less, net | — | — | — | |||||||||
Repurchase shares of Common Stock | (1,200 | ) | (820 | ) | (770 | ) | ||||||
Excess tax benefit from share-based compensation | 50 | 42 | 44 | |||||||||
Employee stock option proceeds | 12 | 29 | 37 | |||||||||
Dividends paid on Common Stock | (730 | ) | (669 | ) | (615 | ) | ||||||
Other, net | (55 | ) | (46 | ) | (80 | ) | ||||||
Net Cash Used in Financing Activities | (1,292 | ) | (1,114 | ) | (1,451 | ) | ||||||
Effect of Exchange Rates on Cash and Cash Equivalents | (6 | ) | 6 | (5 | ) | |||||||
Net Increase (Decrease) in Cash and Cash Equivalents | 159 | 5 | (203 | ) | ||||||||
Cash and Cash Equivalents – Beginning of Year | 578 | 573 | 776 | |||||||||
Cash and Cash Equivalents – End of Year | $ | 737 | $ | 578 | $ | 573 | ||||||
See accompanying Notes to Consolidated Financial Statements. |
Consolidated Balance Sheets | ||||||||
YUM! Brands, Inc. and Subsidiaries | ||||||||
December 26, 2015 and December 27, 2014 | ||||||||
(in millions) | ||||||||
2015 | 2014 | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 737 | $ | 578 | ||||
Accounts and notes receivable, net | 377 | 325 | ||||||
Inventories | 229 | 301 | ||||||
Prepaid expenses and other current assets | 242 | 254 | ||||||
Advertising cooperative assets, restricted | 103 | 95 | ||||||
Total Current Assets | 1,688 | 1,553 | ||||||
Property, plant and equipment, net | 4,189 | 4,498 | ||||||
Goodwill | 656 | 700 | ||||||
Intangible assets, net | 271 | 318 | ||||||
Investments in unconsolidated affiliates | 61 | 52 | ||||||
Other assets | 534 | 560 | ||||||
Deferred income taxes | 676 | 653 | ||||||
Total Assets | $ | 8,075 | $ | 8,334 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable and other current liabilities | $ | 1,985 | $ | 1,970 | ||||
Income taxes payable | 77 | 77 | ||||||
Short-term borrowings | 923 | 267 | ||||||
Advertising cooperative liabilities | 103 | 95 | ||||||
Total Current Liabilities | 3,088 | 2,409 | ||||||
Long-term debt | 3,054 | 3,077 | ||||||
Other liabilities and deferred credits | 958 | 1,235 | ||||||
Total Liabilities | 7,100 | 6,721 | ||||||
Redeemable noncontrolling interest | 6 | 9 | ||||||
Shareholders’ Equity | ||||||||
Common Stock, no par value, 750 shares authorized; 420 shares and 434 shares issued in 2015 and 2014, respectively | — | — | ||||||
Retained earnings | 1,150 | 1,737 | ||||||
Accumulated other comprehensive income (loss) | (239 | ) | (190 | ) | ||||
Total Shareholders’ Equity – YUM! Brands, Inc. | 911 | 1,547 | ||||||
Noncontrolling interests | 58 | 57 | ||||||
Total Shareholders’ Equity | 969 | 1,604 | ||||||
Total Liabilities, Redeemable Noncontrolling Interest and Shareholders’ Equity | $ | 8,075 | $ | 8,334 | ||||
See accompanying Notes to Consolidated Financial Statements. |
Consolidated Statements of Shareholders’ Equity | |||||||||||||||||||||||||||
YUM! Brands, Inc. and Subsidiaries | |||||||||||||||||||||||||||
Fiscal years ended December 26, 2015, December 27, 2014 and December 28, 2013 | |||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||
Yum! Brands, Inc. | |||||||||||||||||||||||||||
Issued Common Stock | Retained Earnings | Accumulated Other Comprehensive Income(Loss) | Noncontrolling Interests | Total Shareholders' Equity | Redeemable Noncontrolling Interest | ||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||
Balance at December 29, 2012 | 451 | $ | — | $ | 2,286 | $ | (132 | ) | $ | 99 | $ | 2,253 | $ | 59 | |||||||||||||
Net Income (loss) | 1,091 | (5 | ) | 1,086 | (22 | ) | |||||||||||||||||||||
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature (net of tax impact of $2 million) | 4 | 2 | 6 | 2 | |||||||||||||||||||||||
Pension and post-retirement benefit plans (net of tax impact of $115 million) | 189 | 189 | |||||||||||||||||||||||||
Net unrealized gain on derivative instruments (net of tax impact of $1 million) | 3 | 3 | |||||||||||||||||||||||||
Comprehensive Income (loss) | 1,284 | (20 | ) | ||||||||||||||||||||||||
Dividends declared | (635 | ) | (18 | ) | (653 | ) | |||||||||||||||||||||
Acquisition of Little Sheep store-level noncontrolling interests | (15 | ) | (15 | ) | |||||||||||||||||||||||
Repurchase of shares of Common Stock | (11 | ) | (110 | ) | (640 | ) | (750 | ) | |||||||||||||||||||
Employee stock option and SARs exercises (includes tax impact of $42 million) | 3 | 49 | 49 | ||||||||||||||||||||||||
Compensation-related events (includes tax impact of $8 million) | 61 | 61 | |||||||||||||||||||||||||
Balance at December 28, 2013 | 443 | $ | — | $ | 2,102 | $ | 64 | $ | 63 | $ | 2,229 | $ | 39 | ||||||||||||||
Net Income (loss) | 1,051 | (1 | ) | 1,050 | (29 | ) | |||||||||||||||||||||
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature (net of tax impact of $4 million) | (143 | ) | (1 | ) | (144 | ) | (1 | ) | |||||||||||||||||||
Reclassification of translation adjustments into income | 2 | 2 | |||||||||||||||||||||||||
Pension and post-retirement benefit plans (net of tax impact of $69 million) | (113 | ) | (113 | ) | |||||||||||||||||||||||
Comprehensive Income (loss) | 795 | (30 | ) | ||||||||||||||||||||||||
Dividends declared | (691 | ) | (4 | ) | (695 | ) | |||||||||||||||||||||
Repurchase of shares of Common Stock | (11 | ) | (95 | ) | (725 | ) | (820 | ) | |||||||||||||||||||
Employee stock option and SARs exercises (includes tax impact of $37 million) | 2 | 33 | 33 | ||||||||||||||||||||||||
Compensation-related events (includes tax impact of $5 million) | 62 | 62 | |||||||||||||||||||||||||
Balance at December 27, 2014 | 434 | $ | — | $ | 1,737 | $ | (190 | ) | $ | 57 | $ | 1,604 | $ | 9 | |||||||||||||
Net Income (loss) | 1,293 | 6 | 1,299 | (1 | ) | ||||||||||||||||||||||
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature (net of tax impact of $3 million) | (250 | ) | (4 | ) | (254 | ) | (2 | ) | |||||||||||||||||||
Reclassification of translation adjustments into income (net of tax impact of $3 million) | 112 | 112 | |||||||||||||||||||||||||
Pension and post-retirement benefit plans (net of tax impact of $57 million) | 97 | 97 | |||||||||||||||||||||||||
Net unrealized loss on derivative instruments (net of tax impact of $1 million) | (8 | ) | (8 | ) | |||||||||||||||||||||||
Comprehensive Income (loss) | 1,246 | (3 | ) | ||||||||||||||||||||||||
Dividends declared | — | (756 | ) | (756 | ) | ||||||||||||||||||||||
Acquisition of Little Sheep store-level noncontrolling interests | 1 | (1 | ) | — | |||||||||||||||||||||||
Repurchase of shares of Common Stock | (16 | ) | (76 | ) | (1,124 | ) | (1,200 | ) | |||||||||||||||||||
Employee stock option and SARs exercises (includes tax impact of $43 million) | 2 | 11 | 11 | ||||||||||||||||||||||||
Compensation-related events (includes tax impact of $7 million) | 64 | 64 | |||||||||||||||||||||||||
Balance at December 26, 2015 | 420 | $ | — | $ | 1,150 | $ | (239 | ) | $ | 58 | $ | 969 | $ | 6 | |||||||||||||
See accompanying Notes to Consolidated Financial Statements. |
• | YUM China (“China” or “China Division”) which includes all operations in mainland China |
• | YUM India ("India" or "India Division") which includes all operations in India, Bangladesh, Nepal and Sri Lanka |
• | The KFC Division which includes all operations of the KFC concept outside of China Division and India Division |
• | The Pizza Hut Division which includes all operations of the Pizza Hut concept outside of China Division and India Division |
• | The Taco Bell Division which includes all operations of the Taco Bell concept outside of India Division |
Level 1 | Inputs based upon quoted prices in active markets for identical assets. |
Level 2 | Inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly. |
Level 3 | Inputs that are unobservable for the asset. |
2015 | 2014 | |||||||
Accounts and notes receivable | $ | 393 | $ | 337 | ||||
Allowance for doubtful accounts | (16 | ) | (12 | ) | ||||
Accounts and notes receivable, net | $ | 377 | $ | 325 |
2015 | 2014 | 2013 | ||||||||||
Net Income – YUM! Brands, Inc. | $ | 1,293 | $ | 1,051 | $ | 1,091 | ||||||
Weighted-average common shares outstanding (for basic calculation) | 436 | 444 | 452 | |||||||||
Effect of dilutive share-based employee compensation | 7 | 9 | 9 | |||||||||
Weighted-average common and dilutive potential common shares outstanding (for diluted calculation) | 443 | 453 | 461 | |||||||||
Basic EPS | $ | 2.97 | $ | 2.37 | $ | 2.41 | ||||||
Diluted EPS | $ | 2.92 | $ | 2.32 | $ | 2.36 | ||||||
Unexercised employee stock options and stock appreciation rights (in millions) excluded from the diluted EPS computation(a) | 4.5 | 5.5 | 4.9 |
(a) | These unexercised employee stock options and stock appreciation rights were not included in the computation of diluted EPS because to do so would have been antidilutive for the periods presented. |
2014 | 2013 | Income Statement Classification | |||||||
Impairment of Goodwill | $ | 160 | $ | 222 | Closures and Impairment (income) expense | ||||
Impairment of Trademark | 284 | 69 | Closures and Impairment (income) expense | ||||||
Impairment of PP&E | 14 | 4 | Closures and Impairment (income) expense | ||||||
Impairment of Investment in Little Sheep Meat | 5 | — | Closures and Impairment (income) expense | ||||||
Tax Benefit | (76 | ) | (18 | ) | Income tax provision | ||||
Loss Attributable to Non-Controlling Interest | (26 | ) | (19 | ) | Net Income (loss) noncontrolling interests | ||||
Net loss | $ | 361 | $ | 258 | Net Income - YUM! Brands, Inc. |
Refranchising (gain) loss | |||||||||||||||||
2015 | 2014 | 2013 | |||||||||||||||
China | $ | (13 | ) | $ | (17 | ) | $ | (5 | ) | ||||||||
KFC Division(a) | 30 | (18 | ) | (8 | ) | ||||||||||||
Pizza Hut Division(a)(b) | 55 | 4 | (3 | ) | |||||||||||||
Taco Bell Division | (65 | ) | (4 | ) | (84 | ) | |||||||||||
India | 3 | 2 | — | ||||||||||||||
Worldwide | $ | 10 | $ | (33 | ) | $ | (100 | ) |
(a) | In 2010 we refranchised our then-remaining Company-operated restaurants in Mexico. To the extent we owned it, we did not sell the real estate related to certain of these restaurants, instead leasing it to the franchisee. During 2015, we sold the real estate for approximately $58 million. While these proceeds exceeded the book value of the real estate, the sale represented a substantial liquidation of our Mexican foreign entities under GAAP. As such, the accumulated translation losses associated with our Mexican business were included in our loss on the sale. We recorded charges of $80 million representing the excess of the sum of the book value of the real estate and other related assets and our accumulated translation losses over the sales price. Consistent with the classification of the original market refranchising transaction, these charges were classified as Refranchising (gain) loss. Refranchising losses of $40 million were associated with both the KFC and Pizza Hut Divisions. |
(b) | During 2015 we recognized charges of $16 million within Refranchising (gain) loss associated with the refranchising of our company-owned Pizza Hut restaurants in Korea. While additional gains or losses may occur as the refranchising plans move forward, such amounts are not expected to be material at this time. |
2015 | ||||||||||||||||||||||||
China | KFC | Pizza Hut | Taco Bell | India | Worldwide | |||||||||||||||||||
Store closure (income) costs(a) | $ | (6 | ) | $ | 1 | $ | (2 | ) | $ | (1 | ) | $ | — | $ | (8 | ) | ||||||||
Store impairment charges | 70 | 7 | 5 | 4 | 1 | 87 | ||||||||||||||||||
Closure and impairment (income) expenses | $ | 64 | $ | 8 | $ | 3 | 3 | $ | 1 | $ | 79 |
2014 | ||||||||||||||||||||||||
China | KFC | Pizza Hut | Taco Bell | India | Worldwide | |||||||||||||||||||
Store closure (income) costs(a) | $ | — | $ | 2 | $ | 1 | $ | — | $ | — | $ | 3 | ||||||||||||
Store impairment charges | 54 | 7 | 4 | 3 | 1 | 69 | ||||||||||||||||||
Closure and impairment (income) expenses | $ | 54 | $ | 9 | $ | 5 | $ | 3 | $ | 1 | $ | 72 |
2013 | ||||||||||||||||||||||||
China | KFC | Pizza Hut | Taco Bell | India | Worldwide | |||||||||||||||||||
Store closure (income) costs(a) | $ | (1 | ) | $ | (1 | ) | $ | (3 | ) | $ | — | $ | — | $ | (5 | ) | ||||||||
Store impairment charges | 31 | 4 | 3 | 1 | 2 | 41 | ||||||||||||||||||
Closure and impairment (income) expenses | $ | 30 | $ | 3 | $ | — | $ | 1 | $ | 2 | $ | 36 |
(a) | Store closure (income) costs include the net gain or loss on sales of real estate on which we formerly operated a Company-owned restaurant that was closed, lease reserves established when we cease using a property under an operating lease and subsequent adjustments to those reserves and other facility-related expenses from previously closed stores. Remaining lease obligations for closed stores were not material at December 26, 2015 or December 27, 2014. |
2015 | 2014 | 2013 | ||||||||||
Cash Paid For: | ||||||||||||
Interest(a) | $ | 154 | $ | 149 | $ | 269 | ||||||
Income taxes(b) | 535 | 684 | 489 | |||||||||
Significant Non-Cash Investing and Financing Activities: | ||||||||||||
Capital lease obligations incurred | $ | 28 | $ | 24 | $ | 15 |
(a) | 2013 includes $109 million of cash premiums and fees paid related to the extinguishment of debt, which is the primary component of the $120 million loss on debt extinguishment. See Note 4. |
(b) | 2014 includes $200 million of cash paid related to the resolution of a valuation issue with the Internal Revenue Service ("IRS") related to years 2004 through 2008. See Note 16. |
2015 | 2014 | 2013 | ||||||||||
Initial fees, including renewal fees | $ | 88 | $ | 83 | $ | 90 | ||||||
Initial franchise fees included in Refranchising (gain) loss | (10 | ) | (5 | ) | (13 | ) | ||||||
78 | 78 | 77 | ||||||||||
Continuing fees and rental income | 1,882 | 1,877 | 1,823 | |||||||||
Franchise and license fees and income | $ | 1,960 | $ | 1,955 | $ | 1,900 |
2015 | 2014 | 2013 | ||||||||||
Equity (income) loss from investments in unconsolidated affiliates | $ | (41 | ) | $ | (30 | ) | $ | (26 | ) | |||
China poultry supply insurance recovery(a) | (5 | ) | (25 | ) | — | |||||||
Loss associated with planned sale of aircraft(b) | 15 | — | — | |||||||||
Foreign exchange net (gain) loss and other | 21 | 14 | 10 | |||||||||
Other (income) expense | $ | (10 | ) | $ | (41 | ) | $ | (16 | ) |
(a) | Recoveries related to lost profits associated with a 2012 poultry supply incident. |
(b) | During 2015, we made the decision to dispose of a corporate aircraft in China. The loss associated with this planned sale reflects the shortfall of the expected proceeds, less any selling costs, over the carrying value of the aircraft. |
Prepaid Expenses and Other Current Assets | 2015 | 2014 | ||||||
Income tax receivable | $ | 41 | $ | 55 | ||||
Assets held for sale(a) | 28 | 14 | ||||||
Other prepaid expenses and current assets | 173 | 185 | ||||||
Prepaid expenses and other current assets | $ | 242 | $ | 254 |
(a) | Reflects the carrying value of a corporate aircraft in China (See Note 7) as well as restaurants we have offered for sale to franchisees and excess properties that we do not intend to use for restaurant operations in the future. |
Property, Plant and Equipment | 2015 | 2014 | ||||||
Land | $ | 480 | $ | 506 | ||||
Buildings and improvements | 4,462 | 4,549 | ||||||
Capital leases, primarily buildings | 203 | 210 | ||||||
Machinery and equipment | 2,687 | 2,817 | ||||||
Property, plant and equipment, gross | 7,832 | 8,082 | ||||||
Accumulated depreciation and amortization | (3,643 | ) | (3,584 | ) | ||||
Property, plant and equipment, net | $ | 4,189 | $ | 4,498 |
Accounts Payable and Other Current Liabilities | 2015 | 2014 | ||||||
Accounts payable | $ | 616 | $ | 694 | ||||
Accrued capital expenditures | 174 | 250 | ||||||
Accrued compensation and benefits | 465 | 419 | ||||||
Dividends payable | 197 | 178 | ||||||
Accrued taxes, other than income taxes | 116 | 100 | ||||||
Other current liabilities | 417 | 329 | ||||||
Accounts payable and other current liabilities | $ | 1,985 | $ | 1,970 |
China | KFC | Pizza Hut | Taco Bell | India | Worldwide | |||||||||||||||||||
Balance as of December 28, 2013 | ||||||||||||||||||||||||
Goodwill, gross | $ | 478 | $ | 338 | 204 | $ | 106 | 2 | $ | 1,128 | ||||||||||||||
Accumulated impairment losses(a) | (222 | ) | — | (17 | ) | — | — | (239 | ) | |||||||||||||||
Goodwill,net | 256 | 338 | 187 | 106 | 2 | 889 | ||||||||||||||||||
Acquisitions | — | 2 | — | 8 | — | 10 | ||||||||||||||||||
Impairment Losses(a) | (160 | ) | — | — | — | — | (160 | ) | ||||||||||||||||
Disposals and other, net(b) | (7 | ) | (28 | ) | (4 | ) | — | — | (39 | ) | ||||||||||||||
Balance as of December 27, 2014 | ||||||||||||||||||||||||
Goodwill, gross | 471 | 312 | 200 | 114 | 2 | 1,099 | ||||||||||||||||||
Accumulated impairment losses(a) | (382 | ) | — | (17 | ) | — | — | (399 | ) | |||||||||||||||
Goodwill, net | 89 | 312 | 183 | 114 | 2 | 700 | ||||||||||||||||||
Acquisitions | — | 1 | — | 1 | — | 2 | ||||||||||||||||||
Disposals and other, net(b) | (4 | ) | (32 | ) | (7 | ) | (2 | ) | (1 | ) | (46 | ) | ||||||||||||
Balance as of December 26, 2015 | ||||||||||||||||||||||||
Goodwill, gross | 467 | 281 | 193 | 113 | 1 | 1,055 | ||||||||||||||||||
Accumulated impairment losses(a) | (382 | ) | — | (17 | ) | — | — | (399 | ) | |||||||||||||||
Goodwill, net | $ | 85 | $ | 281 | $ | 176 | $ | 113 | $ | 1 | $ | 656 |
(a) | China Accumulated impairment losses represent Little Sheep impairment, of which $160 million was recorded in 2014. See Note 4. |
(b) | Disposals and other, net includes the impact of foreign currency translation on existing balances and goodwill write-offs associated with refranchising. |
2015 | 2014 | |||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | |||||||||||||
Definite-lived intangible assets | ||||||||||||||||
Reacquired franchise rights | $ | 168 | $ | (91 | ) | $ | 186 | $ | (81 | ) | ||||||
Franchise contract rights | 123 | (94 | ) | 126 | (92 | ) | ||||||||||
Lease tenancy rights | 57 | (10 | ) | 67 | (12 | ) | ||||||||||
Favorable operating leases | 11 | (7 | ) | 15 | (9 | ) | ||||||||||
Other | 54 | (27 | ) | 52 | (25 | ) | ||||||||||
$ | 413 | $ | (229 | ) | $ | 446 | $ | (219 | ) | |||||||
Indefinite-lived intangible assets | ||||||||||||||||
KFC trademark | $ | 31 | $ | 31 | ||||||||||||
Little Sheep trademark | 56 | 60 | ||||||||||||||
$ | 87 | $ | 91 |
2015 | 2014 | |||||||
Short-term Borrowings | ||||||||
Current maturities of long-term debt | $ | 313 | $ | 264 | ||||
Current portion of fair value hedge accounting adjustment | 1 | 3 | ||||||
Unsecured Short-Term Loan Credit Facility, expires June 2016 | 600 | — | ||||||
Other | 9 | — | ||||||
$ | 923 | $ | 267 | |||||
Long-term Debt | ||||||||
Senior Unsecured Notes | $ | 2,497 | $ | 2,746 | ||||
Unsecured Revolving Credit Facility, expires March 2017 | 701 | 416 | ||||||
Capital lease obligations (See Note 11) | 169 | 175 | ||||||
3,367 | 3,337 | |||||||
Less current maturities of long-term debt | (313 | ) | (264 | ) | ||||
Long-term debt excluding long-term portion of hedge accounting adjustment | 3,054 | 3,073 | ||||||
Long-term portion of fair value hedge accounting adjustment | — | 4 | ||||||
Long-term debt including hedge accounting adjustment | $ | 3,054 | $ | 3,077 |
Interest Rate | ||||||||||
Issuance Date(a) | Maturity Date | Principal Amount (in millions) | Stated | Effective(b) | ||||||
April 2006 | April 2016 | $ | 300 | 6.25% | 6.03% | |||||
October 2007 | March 2018 | $ | 325 | 6.25% | 6.36% | |||||
October 2007 | November 2037 | $ | 325 | 6.88% | 7.45% | |||||
August 2009 | September 2019 | $ | 250 | 5.30% | 5.59% | |||||
August 2010 | November 2020 | $ | 350 | 3.88% | 4.01% | |||||
August 2011 | November 2021 | $ | 350 | 3.75% | 3.88% | |||||
October 2013 | November 2023 | $ | 325 | 3.88% | 4.01% | |||||
October 2013 | November 2043 | $ | 275 | 5.35% | 5.42% |
(a) | Interest payments commenced approximately six months after issuance date and are payable semi-annually thereafter. |
(b) | Includes the effects of the amortization of any (1) premium or discount; (2) debt issuance costs; and (3) gain or loss upon settlement of related treasury locks and forward-starting interest rate swaps utilized to hedge the interest rate risk prior to the debt issuance. Excludes the effect of any swaps that remain outstanding. |
Year ended: | |||
2016 | $ | 909 | |
2017 | 701 | ||
2018 | 325 | ||
2019 | 250 | ||
2020 | 350 | ||
Thereafter | 1,275 | ||
Total | $ | 3,810 |
Commitments | Lease Receivables | |||||||||||||||
Capital | Operating | Direct Financing | Operating | |||||||||||||
2016 | $ | 20 | $ | 672 | $ | 2 | $ | 55 | ||||||||
2017 | 20 | 620 | 2 | 50 | ||||||||||||
2018 | 20 | 569 | 2 | 47 | ||||||||||||
2019 | 20 | 516 | 2 | 40 | ||||||||||||
2020 | 19 | 457 | 1 | 33 | ||||||||||||
Thereafter | 188 | 2,123 | 3 | 125 | ||||||||||||
$ | 287 | $ | 4,957 | $ | 12 | $ | 350 |
2015 | 2014 | 2013 | ||||||||||
Rental expense | ||||||||||||
Minimum | $ | 737 | $ | 766 | $ | 759 | ||||||
Contingent | 294 | 302 | 293 | |||||||||
$ | 1,031 | $ | 1,068 | $ | 1,052 | |||||||
Rental income | $ | 97 | $ | 103 | $ | 94 |
Fair Value | |||||||||||
Level | 2015 | 2014 | |||||||||
Foreign Currency Forwards and Swaps, net | 2 | $ | 19 | $ | 24 | ||||||
Interest Rate Swaps, net | 2 | 2 | 10 | ||||||||
Other Investments | 1 | 21 | 21 | ||||||||
Total | $ | 42 | $ | 55 |
2015 | 2014 | ||||||||
Little Sheep impairments(a) | $ | — | $ | 463 | |||||
Refranchising related impairment(b) | — | 9 | |||||||
Restaurant-level impairment(c) | 61 | 46 | |||||||
Total | $ | 61 | $ | 518 |
(a) | Except for the Little Sheep trademark, which had a carrying value of $56 million at December 26, 2015, the remaining carrying value of assets measured at fair value due to the 2014 Little Sheep impairments (Level 3) is insignificant. See Note 4 for further discussion. Our 2014 fair value estimate of the Little Sheep trademark was determined using a relief-from-royalty valuation approach that included future revenues as a significant input and a discount rate of 13% as our estimate of the required rate-of-return that a third party buyer would expect to receive when purchasing the trademark. The primary drivers of the trademark’s fair value are franchise revenue growth and revenues associated with a wholly-owned business that sells seasoning to retail customers. Franchise revenue growth reflected annual same store sales growth of 4% and approximately 35 new franchise units per year, partially offset by approximately 25 franchise closures per year. The retail seasoning business was forecasted to generate sales growth consistent with historical results. Our 2015 fair value estimate exceeded its carrying value using similar assumptions and methods as those used in 2014. |
(b) | Refranchising related impairment results from writing down the assets of restaurants or restaurant groups offered for refranchising. The fair value measurements used in our impairment evaluation are based on either actual bids received from potential buyers (Level 2), or on estimates of the sales prices we anticipated receiving from a buyer for the restaurant or restaurant groups (Level 3). |
(c) | Restaurant-level impairment charges are recorded in Closures and impairment (income) expenses and resulted primarily from our semi-annual impairment evaluation of long-lived assets of individual restaurants that were being operated at the time of impairment and had not been offered for refranchising. The fair value measurements used in these impairment evaluations were based on discounted cash flow estimates using unobservable inputs (Level 3). The remaining net book value of assets measured at fair value during the years ended December 26, 2015 and December 27, 2014 is insignificant. |
2015 | 2014 | |||||||
Change in benefit obligation | ||||||||
Benefit obligation at beginning of year | $ | 1,301 | $ | 1,025 | ||||
Service cost | 18 | 17 | ||||||
Interest cost | 55 | 54 | ||||||
Plan amendments | 28 | 1 | ||||||
Curtailments | (2 | ) | (2 | ) | ||||
Special termination benefits | 1 | 3 | ||||||
Benefits paid | (50 | ) | (65 | ) | ||||
Settlements(a) | (16 | ) | (17 | ) | ||||
Actuarial (gain) loss | (196 | ) | 290 | |||||
Administrative expense | (5 | ) | (5 | ) | ||||
Benefit obligation at end of year | $ | 1,134 | $ | 1,301 | ||||
Change in plan assets | ||||||||
Fair value of plan assets at beginning of year | $ | 991 | $ | 933 | ||||
Actual return on plan assets | (10 | ) | 124 | |||||
Employer contributions | 94 | 21 | ||||||
Settlement payments(a) | (16 | ) | (17 | ) | ||||
Benefits paid | (50 | ) | (65 | ) | ||||
Administrative expenses | (5 | ) | (5 | ) | ||||
Fair value of plan assets at end of year | $ | 1,004 | $ | 991 | ||||
Funded status at end of year | $ | (130 | ) | $ | (310 | ) |
(a) | For discussion of the settlement payments and settlement losses, see Components of net periodic benefit cost below. |
Amounts recognized in the Consolidated Balance Sheet: | ||||||||
2015 | 2014 | |||||||
Accrued benefit liability - current | $ | (13 | ) | $ | (11 | ) | ||
Accrued benefit liability - non-current | (117 | ) | (299 | ) | ||||
$ | (130 | ) | $ | (310 | ) |
Information for pension plans with an accumulated benefit obligation in excess of plan assets: | ||||||||
2015 | 2014 | |||||||
Projected benefit obligation | $ | 101 | $ | 1,301 | ||||
Accumulated benefit obligation | 88 | 1,254 | ||||||
Fair value of plan assets | — | 991 |
Information for pension plans with a projected benefit obligation in excess of plan assets: | ||||||||
2015 | 2014 | |||||||
Projected benefit obligation | $ | 1,134 | $ | 1,301 | ||||
Accumulated benefit obligation | 1,088 | 1,254 | ||||||
Fair value of plan assets | 1,004 | 991 |
Net periodic benefit cost | 2015 | 2014 | 2013 | |||||||||
Service cost | $ | 18 | $ | 17 | $ | 21 | ||||||
Interest cost | 55 | 54 | 54 | |||||||||
Amortization of prior service cost(a) | 1 | 1 | 2 | |||||||||
Expected return on plan assets | (62 | ) | (56 | ) | (59 | ) | ||||||
Amortization of net loss | 45 | 17 | 48 | |||||||||
Net periodic benefit cost | $ | 57 | $ | 33 | $ | 66 | ||||||
Additional (gain) loss recognized due to: Settlements(b) | $ | 5 | $ | 6 | $ | 30 | ||||||
Special termination benefits | $ | 1 | $ | 3 | $ | 5 |
(a) | Prior service costs are amortized on a straight-line basis over the average remaining service period of employees expected to receive benefits. |
(b) | Settlement losses result when benefit payments exceed the sum of the service cost and interest cost within a plan during the year. During 2013 the Company allowed certain former employees with deferred vested balances an opportunity to voluntarily elect an early payout of their pension benefits. The majority of these payouts were funded from existing pension plan assets. |
Pension gains (losses) in Accumulated other comprehensive income (loss): | ||||||||
2015 | 2014 | |||||||
Beginning of year | $ | (319 | ) | $ | (124 | ) | ||
Net actuarial (gain) loss | 124 | (220 | ) | |||||
Curtailments | 2 | 2 | ||||||
Amortization of net loss | 45 | 17 | ||||||
Amortization of prior service cost | 1 | 1 | ||||||
Prior service cost | (28 | ) | (1 | ) | ||||
Settlement charges | 5 | 6 | ||||||
End of year | $ | (170 | ) | $ | (319 | ) |
Accumulated pre-tax losses recognized within Accumulated Other Comprehensive Income: | ||||||||
2015 | 2014 | |||||||
Actuarial net loss | $ | (138 | ) | $ | (314 | ) | ||
Prior service cost | (32 | ) | (5 | ) | ||||
$ | (170 | ) | $ | (319 | ) |
Weighted-average assumptions used to determine benefit obligations at the measurement dates: | ||||||
2015 | 2014 | |||||
Discount rate | 4.90 | % | 4.30 | % | ||
Rate of compensation increase | 3.75 | % | 3.75 | % |
Weighted-average assumptions used to determine the net periodic benefit cost for fiscal years: | |||||||||
2015 | 2014 | 2013 | |||||||
Discount rate | 4.30 | % | 5.40 | % | 4.40 | % | |||
Long-term rate of return on plan assets | 6.75 | % | 6.90 | % | 7.25 | % | |||
Rate of compensation increase | 3.75 | % | 3.75 | % | 3.75 | % |
2015 | 2014 | |||||||
Level 1: | ||||||||
Cash | $ | 3 | $ | — | ||||
Level 2: | ||||||||
Cash Equivalents(a) | 9 | 5 | ||||||
Equity Securities – U.S. Large cap(b) | 310 | 298 | ||||||
Equity Securities – U.S. Mid cap(b) | 50 | 50 | ||||||
Equity Securities – U.S. Small cap(b) | 51 | 50 | ||||||
Equity Securities – Non-U.S.(b) | 100 | 91 | ||||||
Fixed Income Securities – U.S. Corporate(d) | 289 | 305 | ||||||
Fixed Income Securities – U.S. Government and Government Agencies(c) | 195 | 178 | ||||||
Fixed Income Securities – Other(d) | 17 | 11 | ||||||
Total fair value of plan assets(e) | $ | 1,024 | $ | 988 |
(a) | Short-term investments in money market funds |
(b) | Securities held in common trusts |
(c) | Investments held directly by the Plan |
(d) | Includes securities held in common trusts and investments held directly by the Plan |
(e) | 2015 and 2014 exclude net unsettled trades (payable) receivable of $(20) million and $3 million, respectively. |
Year ended: | ||||
2016 | $ | 61 | ||
2017 | 50 | |||
2018 | 55 | |||
2019 | 56 | |||
2020 | 56 | |||
2021 - 2025 | 331 |
2015 | 2014 | 2013 | |||||||
Risk-free interest rate | 1.3 | % | 1.6 | % | 0.8 | % | |||
Expected term (years) | 6.4 | 6.2 | 6.2 | ||||||
Expected volatility | 26.9 | % | 29.7 | % | 29.9 | % | |||
Expected dividend yield | 2.2 | % | 2.1 | % | 2.1 | % |
Shares (in thousands) | Weighted-Average Exercise Price | Weighted- Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (in millions) | |||||||||||||
Outstanding at the beginning of the year | 27,172 | $ | 46.68 | |||||||||||||
Granted | 3,811 | 74.32 | ||||||||||||||
Exercised | (4,089 | ) | 35.25 | |||||||||||||
Forfeited or expired | (961 | ) | 65.86 | |||||||||||||
Outstanding at the end of the year | 25,933 | (a) | $ | 51.79 | 5.41 | $ | 577 | |||||||||
Exercisable at the end of the year | 17,084 | $ | 42.49 | 4.03 | $ | 538 |
(a) | Outstanding awards include 1,623 options and 24,310 SARs with weighted average exercise prices of $49.34 and $51.98, respectively. |
2015 | 2014 | 2013 | ||||||||||
Options and SARs | $ | 50 | $ | 48 | $ | 44 | ||||||
Restricted Stock Units | 4 | 6 | 6 | |||||||||
Performance Share Units | 3 | 1 | (1 | ) | ||||||||
Total Share-based Compensation Expense | $ | 57 | $ | 55 | $ | 49 | ||||||
Deferred Tax Benefit recognized | $ | 18 | $ | 17 | $ | 15 | ||||||
EID compensation expense not share-based | $ | 1 | $ | 8 | $ | 11 |
Shares Repurchased (thousands) | Dollar Value of Shares Repurchased | ||||||||||||||||||||||||||
Authorization Date | 2015 | 2014 | 2013 | 2015 | 2014 | 2013 | |||||||||||||||||||||
December 2015 | 932 | — | — | $ | 67 | $ | — | $ | — | ||||||||||||||||||
November 2014 | 13,231 | — | — | 1,000 | — | — | |||||||||||||||||||||
November 2013 | 1,779 | 8,488 | — | 133 | 617 | — | |||||||||||||||||||||
November 2012 | — | 2,737 | 10,922 | — | 203 | 750 | |||||||||||||||||||||
Total | 15,942 | 11,225 | 10,922 | (a) | $ | 1,200 | $ | 820 | $ | 750 | (a) |
(a) | 2013 amount excludes the effect of $20 million in share repurchases (0.3 million shares) with trade dates prior to the 2012 fiscal year end but with settlement dates subsequent to the 2012 fiscal year end. |
Translation Adjustments and Gains (Losses) From Intra-Entity Transactions of a Long-Term Nature | Pension and Post-Retirement Benefits(a) | Derivative Instruments | Total | |||||||||||||
Balance at December 28, 2013, net of tax | $ | 170 | $ | (97 | ) | $ | (9 | ) | 64 | |||||||
Gains (losses) arising during the year classified into accumulated OCI, net of tax | (143 | ) | (131 | ) | 15 | (259 | ) | |||||||||
(Gains) losses reclassified from accumulated OCI, net of tax | 2 | 18 | (15 | ) | 5 | |||||||||||
OCI, net of tax | (141 | ) | (113 | ) | — | (254 | ) | |||||||||
Balance at December 27, 2014, net of tax | $ | 29 | $ | (210 | ) | $ | (9 | ) | $ | (190 | ) | |||||
Gains (losses) arising during the year classified into accumulated OCI, net of tax | (250 | ) | 63 | 28 | (159 | ) | ||||||||||
(Gains) losses reclassified from accumulated OCI, net of tax | 112 | 34 | (36 | ) | 110 | |||||||||||
OCI, net of tax | (138 | ) | 97 | (8 | ) | (49 | ) | |||||||||
Balance at December 26, 2015, net of tax | $ | (109 | ) | (113 | ) | $ | (17 | ) | (239 | ) |
(a) | Amounts reclassified from accumulated OCI for pension and post-retirement benefit plan losses during 2015 include amortization of net losses of $46 million, settlement charges of $5 million, amortization of prior service cost of $2 million and related income tax benefit of $20 million. Amounts reclassified from accumulated OCI for pension and post-retirement benefit plan losses during 2014 include amortization of net losses of $20 million, settlement charges of $6 million, amortization of prior service cost of $1 million and the related income tax benefit of $9 million. See Note 13. |
2015 | 2014 | 2013 | ||||||||||
U.S. | $ | 471 | $ | 506 | $ | 464 | ||||||
Foreign | 1,316 | 921 | 1,087 | |||||||||
$ | 1,787 | $ | 1,427 | $ | 1,551 |
2015 | 2014 | 2013 | ||||||||||||
Current: | Federal | $ | 287 | $ | 255 | $ | 159 | |||||||
Foreign | 263 | 321 | 330 | |||||||||||
State | 28 | 2 | 22 | |||||||||||
$ | 578 | $ | 578 | 511 | ||||||||||
Deferred: | Federal | $ | (143 | ) | $ | (67 | ) | 42 | ||||||
Foreign | 54 | (106 | ) | (53 | ) | |||||||||
State | — | 1 | (13 | ) | ||||||||||
$ | (89 | ) | $ | (172 | ) | $ | (24 | ) | ||||||
$ | 489 | $ | 406 | $ | 487 |
2015 | 2014 | 2013 | |||||||||||||||||||
U.S. federal statutory rate | $ | 625 | 35.0 | % | $ | 500 | 35.0 | % | $ | 543 | 35.0 | % | |||||||||
State income tax, net of federal tax benefit | 12 | 0.7 | 8 | 0.6 | 3 | 0.2 | |||||||||||||||
Statutory rate differential attributable to foreign operations | (210 | ) | (11.8 | ) | (168 | ) | (11.7 | ) | (177 | ) | (11.4 | ) | |||||||||
Adjustments to reserves and prior years | 12 | 0.7 | (5 | ) | (0.3 | ) | 49 | 3.1 | |||||||||||||
Change in valuation allowances | 54 | 3.0 | 35 | 2.4 | 23 | 1.5 | |||||||||||||||
Other, net | (4 | ) | (0.3 | ) | 36 | 2.5 | 46 | 3.0 | |||||||||||||
Effective income tax rate | $ | 489 | 27.3 | % | $ | 406 | 28.5 | % | $ | 487 | 31.4 | % |
2015 | 2014 | |||||||
Operating losses | $ | 239 | $ | 271 | ||||
Tax credit carryforwards | 282 | 162 | ||||||
Employee benefits | 154 | 238 | ||||||
Share-based compensation | 126 | 119 | ||||||
Self-insured casualty claims | 36 | 42 | ||||||
Lease-related liabilities | 112 | 119 | ||||||
Various liabilities | 82 | 73 | ||||||
Property, plant and equipment | 33 | 39 | ||||||
Deferred income and other | 86 | 102 | ||||||
Gross deferred tax assets | 1,150 | 1,165 | ||||||
Deferred tax asset valuation allowances | (250 | ) | (228 | ) | ||||
Net deferred tax assets | $ | 900 | $ | 937 | ||||
Intangible assets, including goodwill | $ | (130 | ) | $ | (148 | ) | ||
Property, plant and equipment | (56 | ) | (63 | ) | ||||
Other | (70 | ) | (104 | ) | ||||
Gross deferred tax liabilities | $ | (256 | ) | $ | (315 | ) | ||
Net deferred tax assets (liabilities) | $ | 644 | $ | 622 |
Reported in Consolidated Balance Sheets as: | ||||||||
Deferred income taxes | $ | 676 | $ | 653 | ||||
Other liabilities and deferred credits | (32 | ) | (31 | ) | ||||
$ | 644 | $ | 622 |
Year of Expiration | ||||||||||||||||||||
2016 | 2017-2020 | 2021-2035 | Indefinitely | Total | ||||||||||||||||
Foreign | $ | 5 | $ | 211 | $ | 98 | $ | 305 | $ | 619 | ||||||||||
U.S. state | 53 | 26 | 876 | — | 955 | |||||||||||||||
U.S. federal | 64 | — | 277 | — | 341 | |||||||||||||||
$ | 122 | $ | 237 | $ | 1,251 | $ | 305 | $ | 1,915 |
2015 | 2014 | |||||||
Beginning of Year | $ | 115 | $ | 243 | ||||
Additions on tax positions - current year | — | 19 | ||||||
Additions for tax positions - prior years | 5 | 31 | ||||||
Reductions for tax positions - prior years | (13 | ) | (20 | ) | ||||
Reductions for settlements | (7 | ) | (144 | ) | ||||
Reductions due to statute expiration | (2 | ) | (13 | ) | ||||
Foreign currency translation adjustment | — | (1 | ) | |||||
End of Year | $ | 98 | $ | 115 |
2015 | 2014 | |||||||
Accrued interest and penalties | $ | 15 | $ | 5 |
Revenues | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
China | $ | 6,909 | $ | 6,934 | $ | 6,905 | ||||||
KFC Division(a) | 2,948 | 3,193 | 3,036 | |||||||||
Pizza Hut Division(a) | 1,145 | 1,148 | 1,147 | |||||||||
Taco Bell Division(a) | 1,988 | 1,863 | 1,869 | |||||||||
India | 115 | 141 | 127 | |||||||||
$ | 13,105 | $ | 13,279 | $ | 13,084 |
Operating Profit; Interest Expense, Net; and Income Before Income Taxes | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
China (b) | $ | 757 | $ | 713 | $ | 777 | ||||||
KFC Division | 677 | 708 | 649 | |||||||||
Pizza Hut Division | 289 | 295 | 339 | |||||||||
Taco Bell Division | 539 | 480 | 456 | |||||||||
India | (19 | ) | (9 | ) | (15 | ) | ||||||
Unallocated restaurant costs(c) | — | (1 | ) | — | ||||||||
Unallocated Franchise and License expenses(c)(j) | (71 | ) | — | — | ||||||||
Unallocated and corporate expenses(c) | (204 | ) | (189 | ) | (207 | ) | ||||||
Unallocated Closures and impairment expense(c)(d) | — | (463 | ) | (295 | ) | |||||||
Unallocated Refranchising gain (loss)(c) | (10 | ) | 33 | 100 | ||||||||
Unallocated Other income (expense)(c) | (37 | ) | (10 | ) | (6 | ) | ||||||
Operating Profit | 1,921 | 1,557 | 1,798 | |||||||||
Interest expense, net(c)(e) | (134 | ) | (130 | ) | (247 | ) | ||||||
Income Before Income Taxes | $ | 1,787 | $ | 1,427 | $ | 1,551 |
Depreciation and Amortization | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
China | $ | 425 | $ | 411 | $ | 394 | ||||||
KFC Division | 176 | 187 | 190 | |||||||||
Pizza Hut Division | 40 | 39 | 36 | |||||||||
Taco Bell Division | 88 | 83 | 84 | |||||||||
India | 10 | 10 | 9 | |||||||||
Corporate | 8 | 9 | 8 | |||||||||
$ | 747 | $ | 739 | $ | 721 |
Capital Spending | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
China | $ | 512 | $ | 525 | $ | 568 | ||||||
KFC Division | 273 | 273 | 294 | |||||||||
Pizza Hut Division | 54 | 62 | 52 | |||||||||
Taco Bell Division | 116 | 143 | 100 | |||||||||
India | 7 | 21 | 31 | |||||||||
Corporate | 11 | 9 | 4 | |||||||||
$ | 973 | $ | 1,033 | $ | 1,049 |
Identifiable Assets | ||||||||
2015 | 2014 | |||||||
China (f) | $ | 3,150 | $ | 3,202 | ||||
KFC Division(i) | 2,181 | 2,328 | ||||||
Pizza Hut Division(i) | 707 | 710 | ||||||
Taco Bell Division(i) | 1,127 | 1,084 | ||||||
India | 84 | 118 | ||||||
Corporate(g)(i) | 826 | 892 | ||||||
$ | 8,075 | $ | 8,334 |
Long-Lived Assets(h) | ||||||||
2015 | 2014 | |||||||
China | $ | 2,033 | $ | 2,217 | ||||
KFC Division | 1,663 | 1,823 | ||||||
Pizza Hut Division | 419 | 433 | ||||||
Taco Bell Division | 911 | 920 | ||||||
India | 35 | 72 | ||||||
Corporate | 55 | 51 | ||||||
$ | 5,116 | $ | 5,516 |
(a) | U.S. revenues included in the combined KFC, Pizza Hut and Taco Bell Divisions totaled $3.1 billion in 2015 and $3.0 billion in both 2014 and 2013. |
(b) | Includes equity income from investments in unconsolidated affiliates of $41 million, $30 million and $26 million in 2015, 2014 and 2013, respectively. |
(c) | Amounts have not been allocated to any segment for performance reporting purposes. |
(d) | Represents 2014 and 2013 impairment losses related to Little Sheep. See Note 4. |
(e) | 2013 includes $118 million of premiums and other costs related to the extinguishment of debt. See Note 4. |
(f) | China includes investments in 4 unconsolidated affiliates totaling $61 million and $52 million for 2015 and 2014, respectively. |
(g) | Primarily includes cash, deferred tax assets and property, plant and equipment, net, related to our office facilities. |
(h) | Includes property, plant and equipment, net, goodwill, and intangible assets, net. |
(i) | U.S. identifiable assets included in the combined Corporate and KFC, Pizza Hut and Taco Bell Divisions totaled $2.3 billion and $2.0 billion in 2015 and 2014, respectively. |
(j) | Represents 2015 costs associated with the KFC U.S. Acceleration Agreement. See Note 4. |
Beginning Balance | Expense | Payments | Ending Balance | |||||||||||
2015 Activity | $ | 116 | 39 | (53 | ) | $ | 102 | |||||||
2014 Activity | $ | 128 | 42 | (54 | ) | $ | 116 |
2015 | ||||||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Total | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Company sales | $ | 2,179 | $ | 2,659 | $ | 2,968 | $ | 3,339 | $ | 11,145 | ||||||||||
Franchise and license fees and income | 443 | 446 | 459 | 612 | 1,960 | |||||||||||||||
Total revenues | 2,622 | 3,105 | 3,427 | 3,951 | 13,105 | |||||||||||||||
Restaurant profit | 382 | 411 | 539 | 454 | 1,786 | |||||||||||||||
Operating Profit(a) | 506 | 371 | 603 | 441 | 1,921 | |||||||||||||||
Net Income – YUM! Brands, Inc. | 362 | 235 | 421 | 275 | 1,293 | |||||||||||||||
Basic earnings per common share | 0.83 | 0.54 | 0.97 | 0.64 | 2.97 | |||||||||||||||
Diluted earnings per common share | 0.81 | 0.53 | 0.95 | 0.63 | 2.92 | |||||||||||||||
Dividends declared per common share | — | 0.82 | — | 0.92 | 1.74 |
2014 | ||||||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Total | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Company sales | $ | 2,292 | $ | 2,758 | $ | 2,891 | $ | 3,383 | $ | 11,324 | ||||||||||
Franchise and license fees and income | 432 | 446 | 463 | 614 | 1,955 | |||||||||||||||
Total revenues | 2,724 | 3,204 | 3,354 | 3,997 | 13,279 | |||||||||||||||
Restaurant profit | 441 | 428 | 429 | 344 | 1,642 | |||||||||||||||
Operating Profit(b) | 571 | 479 | 550 | (43 | ) | 1,557 | ||||||||||||||
Net Income – YUM! Brands, Inc. | 399 | 334 | 404 | (86 | ) | 1,051 | ||||||||||||||
Basic earnings per common share | 0.89 | 0.75 | 0.91 | (0.20 | ) | 2.37 | ||||||||||||||
Diluted earnings per common share | 0.87 | 0.73 | 0.89 | (0.20 | ) | 2.32 | ||||||||||||||
Dividends declared per common share | 0.37 | 0.37 | — | 0.82 | 1.56 |
(a) | Includes losses associated with refranchising of equity markets outside of the U.S. of $73 million, $20 million and $3 million in the second, third and fourth quarters, respectively, costs associated with the KFC U.S. Acceleration Agreement of $2 million, $8 million, $21 million and $41 million in the first, second, third and fourth quarters, respectively, and net U.S. refranchising gains of $7 million, $1 million, $16 million and $51 million in the first, second, third and fourth quarters, respectively. See Note 4. |
(b) | Includes a non-cash charge of $463 million in the fourth quarter related primarily to the impairment of Little Sheep intangible assets. See Note 4. |
Item 9. | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure. |
Item 9A. | Controls and Procedures. |
Item 9B. | Other Information. |
Item 10. | Directors, Executive Officers and Corporate Governance. |
Item 11. | Executive Compensation. |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
Item 14. | Principal Accountant Fees and Services. |
Item 15. | Exhibits and Financial Statement Schedules. |
(a) | (1 | ) | Financial Statements: Consolidated Financial Statements filed as part of this report are listed under Part II, Item 8 of this Form 10-K. | |
(2 | ) | Financial Statement Schedules: No schedules are required because either the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the Consolidated Financial Statements thereto filed as a part of this Form 10-K. | ||
(3 | ) | Exhibits: The exhibits listed in the accompanying Exhibit Index are filed as part of this Form 10-K. The Index to Exhibits specifically identifies each management contract or compensatory plan required to be filed as an exhibit to this Form 10-K. |
SIGNATURES |
Date: | February 16, 2016 |
YUM! BRANDS, INC. |
By: | /s/ Greg Creed |
Signature | Title | Date | ||
/s/ David C. Novak | Executive Chairman | February 16, 2016 | ||
David C. Novak | ||||
/s/ Greg Creed | Chief Executive Officer | February 16, 2016 | ||
Greg Creed | (principal executive officer) | |||
/s/ Patrick J. Grismer | Chief Financial Officer | February 16, 2016 | ||
Patrick J. Grismer | (principal financial officer) | |||
/s/ David E. Russell | Vice President, Finance and Corporate Controller | February 16, 2016 | ||
David E. Russell | (principal accounting officer) | |||
/s/ Michael J. Cavanagh | Director | February 16, 2016 | ||
Michael J. Cavanagh | ||||
/s/ Brian Cornell | Director | February 16, 2016 | ||
Brian Cornell | ||||
/s/ David W. Dorman | Director | February 16, 2016 | ||
David W. Dorman | ||||
/s/ Massimo Ferragamo | Director | February 16, 2016 | ||
Massimo Ferragamo | ||||
/s/ Mirian Graddick-Weir | Director | February 16, 2016 | ||
Mirian Graddick-Weir | ||||
/s/ Jonathan S. Linen | Director | February 16, 2016 | ||
Jonathan S. Linen | ||||
/s/ Keith Meister | Director | February 16, 2016 | ||
Keith Meister | ||||
/s/ Thomas C. Nelson | Director | February 16, 2016 | ||
Thomas C. Nelson | ||||
/s/ Thomas M. Ryan | Director | February 16, 2016 | ||
Thomas M. Ryan | ||||
/s/ Elane Stock | Director | February 16, 2016 | ||
Elane Stock | ||||
/s/ Jing-Shyh S. Su | Director | February 16, 2016 | ||
Jing-Shyh S. Su | ||||
/s/ Robert D. Walter | Director | February 16, 2016 | ||
Robert D. Walter |
Exhibit Number | Description of Exhibits | |||
3.1 | Restated Articles of Incorporation of YUM, effective May 26, 2011, which is incorporated herein by reference from Exhibit 3.1 to YUM's Report on Form 8-K filed on May 31, 2011. | |||
3.2 | Amended and restated Bylaws of YUM, effective September 18, 2015, which are incorporated herein by reference from Exhibit 3.1 to YUM's Report on Form 8-K filed on September 23, 2015. | |||
4.1 | Indenture, dated as of May 1, 1998, between YUM and The Bank of New York Mellon Trust Company, N.A., successor in interest to The First National Bank of Chicago, which is incorporated herein by reference from Exhibit 4.1 to YUM's Report on Form 8-K filed on May 13, 1998. | |||
(i) | 6.25% Senior Notes due April 15, 2016 issued under the foregoing May 1, 1998 indenture, which notes are incorporated by reference from Exhibit 4.2 to YUM's Report on Form 8-K filed on April 17, 2006. | |||
(ii) | 6.25% Senior Notes due March 15, 2018 issued under the foregoing May 1, 1998 indenture, which notes are incorporated by reference from Exhibit 4.2 to YUM's Report on Form 8-K filed on October 22, 2007. | |||
(iii) | 6.875% Senior Notes due November 15, 2037 issued under the foregoing May 1, 1998 indenture, which notes are incorporated by reference from Exhibit 4.3 to YUM's Report on Form 8-K filed on October 22, 2007. | |||
(iv) | 5.30% Senior Notes due September 15, 2019 issued under the foregoing May 1, 1998 indenture, which notes are incorporated by reference from Exhibit 4.1 to YUM's Report on Form 8-K filed on August 25, 2009. | |||
(v) | 3.875% Senior Notes due November 1, 2020 issued under the foregoing May 1, 1998 indenture, which notes are incorporated by reference from Exhibit 4.2 to YUM's Report on Form 8-K filed on August 31, 2010. | |||
(vi) | 3.750% Senior Notes due November 1, 2021 issued under the foregoing May 1, 1998 indenture, which notes are incorporated by reference from Exhibit 4.2 to YUM's Report on Form 8-K filed August 29, 2011. | |||
(vii) | 3.875% Senior Notes due November 1, 2023 issued under the foregoing May 1, 1998 indenture, which notes are incorporated by reference from Exhibit 4.2 to YUM's Report on Form 8-K filed October 31, 2013. | |||
(viii) | 5.350% Senior Notes due November 1, 2043 issued under the foregoing May 1, 1998 indenture, which notes are incorporated by reference from Exhibit 4.3 to YUM's Report on Form 8-K filed October 31, 2013. |
10.1 + | Master Distribution Agreement between Unified Foodservice Purchasing Co-op, LLC, for and on behalf of itself as well as the Participants, as defined therein (including certain subsidiaries of Yum! Brands, Inc.) and McLane Foodservice, Inc., effective as of January 1, 2011 and Participant Distribution Joinder Agreement between Unified Foodservice Purchasing Co-op, LLC, McLane Foodservice, Inc., and certain subsidiaries of Yum! Brands, Inc., which are incorporated herein by reference from Exhibit 10.1 to YUM's Quarterly Report on Form 10-Q for the quarter ended September 4, 2010. | ||||
10.2 | Credit Agreement, dated March 22, 2012 among YUM, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A. and Wells Fargo Bank, National Association, as Syndication Agents, J.P. Morgan Securities LLC, Citigroup Global Markets Inc. and Wells Fargo Securities, LLC, as Lead Arrangers and Bookrunners and HSBC Bank USA, National Association, US Bank, National Association and Fifth Third Bank, as Documentation Agents, which is incorporated herein by reference from Exhibit 10.26 to YUM's Quarterly Report on Form 10-Q for quarter ended March 24, 2012. | ||||
10.2.1 | Term Loan Credit Agreement, dated as of December 8, 2015, among the lenders party thereto, Goldman Sachs Bank USA as Administrative Agent, Citibank N.A. and JP Morgan Chase Bank, N.A. as Syndication Agents, and Goldman Sachs Bank USA, J.P. Morgan Securities LLC and Citigroup Global Markets Inc. as Lead Arrangers and Bookrunners, as filed herewith. | ||||
10.3† | YUM Director Deferred Compensation Plan, as effective October 7, 1997, which is incorporated herein by reference from Exhibit 10.7 to YUM's Annual Report on Form 10-K for the fiscal year ended December 27, 1997. | ||||
10.3.1† | YUM Director Deferred Compensation Plan, Plan Document for the 409A Program, as effective January 1, 2005, and as Amended through November 14, 2008, which is incorporated by reference from Exhibit 10.7.1 to YUM's Quarterly Report on Form 10-Q for the quarter ended June 13, 2009. | ||||
10.4† | YUM 1997 Long Term Incentive Plan, as effective October 7, 1997, which is incorporated herein by reference from Exhibit 10.8 to YUM's Annual Report on Form 10-K for the fiscal year ended December 27, 1997. | ||||
10.5† | YUM Executive Incentive Compensation Plan, as effective May 20, 2004, and as Amended through the Second Amendment, as effective May 21, 2009, which is incorporated herein by reference from Exhibit A of YUM's Definitive Proxy Statement on Form DEF 14A for the Annual Meeting of Shareholders held on May 21, 2009. | ||||
10.6† | YUM Executive Income Deferral Program, as effective October 7, 1997, and as amended through May 16, 2002, which is incorporated herein by reference from Exhibit 10.10 to YUM's Annual Report on Form 10-K for the fiscal year ended December 31, 2005. | ||||
10.6.1† | YUM! Brands Executive Income Deferral Program, Plan Document for the 409A Program, as effective January 1, 2005, and as Amended through June 30, 2009, which is incorporated by reference from Exhibit 10.10.1 to YUM's Quarterly Report on Form 10-Q for the quarter ended June 13, 2009. | ||||
10.7† | YUM! Brands Pension Equalization Plan, Plan Document for the Pre-409A Program, as effective January 1, 2005, and as Amended through December 31, 2010, which is incorporated by reference from Exhibit 10.7 to Yum's Quarterly Report on Form 10-Q for the quarter ended March 19, 2011. | ||||
10.7.1† | YUM! Brands, Inc. Pension Equalization Plan, Plan Document for the 409A Program, as effective January 1, 2005, and as Amended through December 30, 2008, which is incorporated by reference from Exhibit 10.13.1 to YUM's Quarterly Report on Form 10-Q for the quarter ended June 13, 2009. | ||||
10.7.2† | YUM! Brands Pension Equalization Plan Amendment, as effective January 1, 2012, which is incorporated by reference from Exhibit 10.7.2 to Yum’s Quarterly Report on Form 10-Q for the quarter ended March 23, 2013. | ||||
10.7.3† | YUM! Brands Pension Equalization Plan Amendment, as effective January 1, 2013, which is incorporated by reference from Exhibit 10.7.3 to Yum’s Quarterly Report on Form 10-Q for the quarter ended March 23, 2013. | ||||
10.8† | Form of Directors' Indemnification Agreement, which is incorporated herein by reference from Exhibit 10.17 to YUM's Annual Report on Form 10-K for the fiscal year ended December 27, 1997. | ||||
10.9† | Form of YUM! Brands, Inc. Change in Control Severance Agreement, which is incorporated herein by reference from Exhibit 10.1 to Yum’s Report on Form 8-K filed on March 21, 2013. |
10.10† | YUM Long Term Incentive Plan, as Amended through the Fourth Amendment, as effective November 21, 2008, which is incorporated by reference from Exhibit 10.18 to YUM's Quarterly Report on Form 10-Q for the quarter ended June 13, 2009. | ||||
10.11 | Second Amended and Restated YUM Purchasing Co-op Agreement, dated as of January 1, 2012, between YUM and the Unified Foodservice Purchasing Co-op, LLC, which is incorporated herein by reference from Exhibit 10.11 to YUM’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011. | ||||
10.12† | YUM Restaurant General Manager Stock Option Plan, as effective April 1, 1999, and as amended through June 23, 2003, which is incorporated herein by reference from Exhibit 10.22 to YUM's Annual Report on Form 10-K for the fiscal year ended December 31, 2005. | ||||
10.13† | YUM SharePower Plan, as effective October 7, 1997, and as amended through June 23, 2003, which is incorporated herein by reference from Exhibit 10.23 to YUM's Annual Report on Form 10-K for the fiscal year ended December 31, 2005. | ||||
10.14† | Form of YUM Director Stock Option Award Agreement, which is incorporated herein by reference from Exhibit 10.25 to YUM's Quarterly Report on Form 10-Q for the quarter ended September 4, 2004. | ||||
10.15† | Form of YUM 1999 Long Term Incentive Plan Award Agreement, which is incorporated herein by reference from Exhibit 10.26 to YUM's Quarterly Report on Form 10-Q for the quarter ended September 4, 2004. | ||||
10.15.1† | Form of YUM 1999 Long Term Incentive Plan Award Agreement (2013) (Stock Options), which is incorporated herein by reference from Exhibit 10.15.1 to YUM’s Quarterly Report on Form 10-Q for the quarter ended March 23, 2013. | ||||
10.15.2† | Form of YUM 1999 Long Term Incentive Plan Award Agreement (2015) (Stock Options), which is incorporated herein by reference from Exhibit 10.15.2 to YUM's Annual Report on Form 10-K for the fiscal year ended December 27, 2014. | ||||
10.16† | YUM! Brands, Inc. International Retirement Plan, as in effect January 1, 2005, which is incorporated herein by reference from Exhibit 10.27 to YUM's Annual Report on Form 10-K for the fiscal year ended December 25, 2004. | ||||
10.17† | Letter of Understanding, dated July 13, 2004, and as amended on May 18, 2011, by and between the Company and Samuel Su, which is incorporated herein by reference from Exhibit 10.28 to YUM's Annual Report on Form 10-K for the fiscal year ended December 25, 2004, and from Item 5.02 of Form 8-K on May 24, 2011. | ||||
10.18† | Form of 1999 Long Term Incentive Plan Award Agreement (Stock Appreciation Rights) which is incorporated by reference from Exhibit 99.1 to YUM's Report on Form 8-K as filed on January 30, 2006. | ||||
10.18.1† | Form of YUM 1999 Long Term Incentive Plan Award Agreement (2013) (Stock Appreciation Rights), which is incorporated by reference from Exhibit 10.18.1 to YUM’s Quarterly Report on Form 10-Q for the quarter ended March 23, 2013. | ||||
10.18.2† | Form of YUM 1999 Long Term Incentive Plan Award Agreement (2015) (Stock Appreciation Rights), which is incorporated herein by reference from Exhibit 10.18.2 to YUM's Annual Report on Form 10-K for the fiscal year ended December 27, 2014. | ||||
10.20† | YUM! Brands Leadership Retirement Plan, as in effect January 1, 2005, which is incorporated herein by reference from Exhibit 10.32 to YUM's Quarterly Report on Form 10-Q for the quarter ended March 24, 2007. |
10.20.1† | YUM! Brands Leadership Retirement Plan, Plan Document for the 409A Program, as effective January 1, 2005, and as Amended through December, 2009, which is incorporated by reference from Exhibit 10.21.1 to YUM's Annual Report on Form 10-K for the fiscal year ended December 26, 2009. | |||||
10.21† | 1999 Long Term Incentive Plan Award (Restricted Stock Unit Agreement) by and between the Company and David C. Novak, dated as of January 24, 2008, which is incorporated herein by reference from Exhibit 10.33 to YUM's Annual Report on Form 10-K for the fiscal year ended December 29, 2007. | |||||
10.22† | YUM! Performance Share Plan, as amended and restated January 1, 2013, which is incorporated by reference from Exhibit 10.1 to YUM's Quarterly Report on Form 10-Q for the quarter ended June 13, 2015. | |||||
10.23† | YUM! Brands Third Country National Retirement Plan, as effective January 1, 2009, which is incorporated by reference from Exhibit 10.25 to YUM's Annual Report on Form 10-K for the fiscal year ended December 26, 2009. | |||||
10.24† | 2010 YUM! Brands Supplemental Long Term Disability Coverage Summary, as effective January 1, 2010, which is incorporated by reference from Exhibit 10.26 to YUM's Annual Report on Form 10-K for the fiscal year ended December 26, 2009. | |||||
10.25† | 1999 Long Term Incentive Plan Award (Restricted Stock Unit Agreement) by and between the Company and Jing-Shyh S. Su, dated as of May 20, 2010, which is incorporated by reference from Exhibit 10.27 to YUM's Annual Report on Form 10-K for the fiscal year ended December 25, 2010. | |||||
10.27† | 1999 Long Term Incentive Plan Award (Stock Appreciation Rights) by and between the Company and David C. Novak, dated as of February 6, 2015, which is incorporated herein by reference from Exhibit 10.27 to YUM's Annual Report on Form 10-K for the fiscal year ended December 27, 2014. | |||||
10.28† | YUM! Brands, Inc. Compensation Recovery Policy, Amended and Restated January 1, 2015, which is incorporated herein by reference from Exhibit 10.28 to YUM's Annual Report on Form 10-K for the fiscal year ended December 27, 2014. | |||||
10.29† | Retirement Agreement and General Release, dated August 13, 2015, by and between the Company and Jing-Shyh S. Su, which is incorporated by reference from Exhibit 10.29 to YUM's Quarterly Report on Form 10-Q for the quarter ended September 5, 2015. | |||||
10.30† | Letter of Understanding dated December 7, 2015 by and between the Company and Patrick J. Grismer as filed herewith. | |||||
12.1 | Computation of ratio of earnings to fixed charges. | |||||
21.1 | Active Subsidiaries of YUM. | |||||
23.1 | Consent of KPMG LLP. | |||||
31.1 | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||
31.2 | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||
32.1 | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||
32.2 | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS | XBRL Instance Document | |||||
101.SCH | XBRL Taxonomy Extension Schema Document | |||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |||||
+ | Confidential treatment has been granted for certain portions which are omitted in the copy of the exhibit electronically filed with the SEC. The omitted information has been filed separately with the SEC pursuant to our application for confidential treatment. | |||||
† | Indicates a management contract or compensatory plan. |
• | Your current salary and participation in benefit plans will continue through your Termination Date but will end on the date your employment terminates for any reason, even if that date occurs before the Termination Date. |
• | On your Termination Date, the Company will accelerate vesting of that certain number of your unvested stock appreciation rights (“SARs”) (the SARs as to which vesting is accelerated is herein referred to as the “Accelerated Vesting SARs”) which have an aggregate value on the Termination Date of five hundred thousand dollars ($500,000) . The value of each Accelerated Vesting SAR shall be equal to the excess of (a) the Fair Market Value (as defined in the Yum! Brands, Inc. Long-Term Incentive Plan (the “LTIP”)) of a share of Stock (as defined in the LTIP) as of the Termination Date over (b) the exercise price of the Accelerated Vesting SAR. The Company shall have the sole discretion to determine which of your outstanding SARs will constitute Accelerated Vesting SARs. This additional consideration referred to herein as the “Accelerated Vesting”. |
• | The Company’s management will recommend to the Management Planning and Development (“MP&D”) Committee that you receive no less than an “on target” performance rating and no less than an individual factor of 100 for 2015 for purposes of determining your annual bonus for 2015 under the Yum Leaders’ Bonus program. You will not receive a bonus for 2016. |
• | Between the date of this letter and the Termination Date, you will be allowed reasonable flexibility to pursue job search activities, including interviewing. |
◦ | You completing the year-end process for filing the Company’s Form 10-K for the 2015 fiscal year and remaining employed through the Termination Date; and |
◦ | You signing the attached Waiver and Release of All Claims, Covenant Not to Sue and Agreement to Provide Assistance After Termination (“Waiver”) within the time provided in Section 10 of the Waiver, and also signing the Reaffirmation of the Waiver on the Termination Date and your not revoking the Waiver or Reaffirmation of the Waiver. |
Page |
Section 1.01. | Defined Terms | 1 | |||
Section 1.02. | Classification of Loans and Borrowings | 25 | |||
Section 1.03. | Terms Generally | 25 | |||
Section 1.04. | Accounting Terms; GAAP | 26 |
Section 2.01. | Commitments | 26 | |||
Section 2.02. | Loans and Borrowings | 27 | |||
Section 2.03. | Requests for Borrowings | 27 | |||
Section 2.04. | Competitive Bid Procedure | 28 | |||
Section 2.05. | [Intentionally Omitted] | 30 | |||
Section 2.06. | [Intentionally Omitted] | 30 | |||
Section 2.07. | [Intentionally Omitted] | 30 | |||
Section 2.08. | Funding of Borrowings | 31 | |||
Section 2.09. | Interest Elections | 31 | |||
Section 2.10. | Termination, Reduction and Extension of Commitments | 32 | |||
Section 2.11. | Repayment of Loans; Evidence of Debt | 34 | |||
Section 2.12. | Prepayment of Loans | 35 | |||
Section 2.13. | Fees | 36 | |||
Section 2.14. | Interest | 36 | |||
Section 2.15. | Alternate Rate of Interest; Illegality | 37 | |||
Section 2.16. | Increased Costs | 38 | |||
Section 2.17. | Break Funding Payments | 39 | |||
Section 2.18. | Taxes | 40 | |||
Section 2.19. | Payments Generally; Pro Rata Treatment; Sharing of Set‑offs | 43 | |||
Section 2.20. | Mitigation Obligations; Replacement of Lenders | 44 | |||
Section 2.21. | [Intentionally Omitted] | 45 | |||
Section 2.22. | [Intentionally Omitted] | 45 | |||
Section 2.23. | Defaulting Lenders | 45 |
Section 3.01. | Organization; Powers | 46 | |||
Section 3.02. | Authorization; Enforceability | 46 | |||
Section 3.03. | Governmental Approvals; No Conflicts | 46 |
Section 3.04. | Financial Condition; No Material Adverse Change | 47 | |||
Section 3.05. | Properties | 47 | |||
Section 3.06. | Litigation and Environmental Matters | 47 | |||
Section 3.07. | Compliance with Laws and Agreements | 48 | |||
Section 3.08. | Investment Company Status | 48 | |||
Section 3.09. | Taxes | 48 | |||
Section 3.10. | ERISA | 48 | |||
Section 3.11. | Disclosure | 48 | |||
Section 3.12. | Subsidiary Guarantors | 49 |
Section 4.01. | Effective Date | 49 | |||
Section 4.02. | Each Credit Event | 50 |
Section 5.01. | Financial Statements and Other Information | 51 | |||
Section 5.02. | Notices of Material Events | 52 | |||
Section 5.03. | Existence; Conduct of Business | 53 | |||
Section 5.04. | Payment of Obligations | 53 | |||
Section 5.05. | Maintenance of Properties; Insurance | 53 | |||
Section 5.06. | Books and Records; Inspection Rights | 53 | |||
Section 5.07. | Compliance with Laws | 54 | |||
Section 5.08. | Use of Proceeds | 54 |
Section 6.01. | Subsidiary Indebtedness | 54 | |||
Section 6.02. | Liens | 54 | |||
Section 6.03. | Fundamental Changes | 56 | |||
Section 6.04. | OFAC/FCPA | 56 | |||
Section 6.05. | Hedging Agreements | 56 | |||
Section 6.06. | [Intentionally omitted] | 57 | |||
Section 6.07. | Transactions with Affiliates | 57 | |||
Section 6.08. | Issuances of Equity Interests by Principal Domestic Subsidiaries | 57 | |||
Section 6.09. | Leverage Ratio | 57 | |||
Section 6.10. | Fixed Charge Coverage Ratio | 57 | |||
Section 6.11. | Sale and Lease-Back Transactions | 57 | |||
Section 6.12. | Equity Payments | 58 |
Section 7.01. | Events of Default | 58 | |||
Section 7.02. | Exclusion of Immaterial Subsidiaries | 61 |
Section 10.01. | Notices | 64 | |||
Section 10.02. | Waivers; Amendments | 65 | |||
Section 10.03. | Expenses; Indemnity; Damage Waiver | 66 | |||
Section 10.04. | Successors and Assigns | 67 | |||
Section 10.05. | Survival | 71 | |||
Section 10.06. | Counterparts; Integration; Effectiveness | 72 | |||
Section 10.07. | Severability | 72 | |||
Section 10.08. | Right of Setoff | 72 | |||
Section 10.09. | Governing Law; Jurisdiction; Consent to Service of Process | 73 | |||
Section 10.10. | WAIVER OF JURY TRIAL | 73 | |||
Section 10.11. | Headings | 73 | |||
Section 10.12. | Confidentiality | 73 | |||
Section 10.13. | Interest Rate Limitation | 74 | |||
Section 10.14. | Judgment Currency | 75 | |||
Section 10.15. | USA Patriot Act | 75 | |||
Section 10.16. | [Intentionally Omitted] | 75 | |||
Section 10.17. | No Fiduciary Duty | 75 |
Category | Index Debt Ratings (Moody’s/S&P) | Commitment Fee (basis points) | LIBO Rate Spread (basis points) | ABR Spread (basis points) |
1 | A3 / A- | 10.0 | 100.0 | 0.0 |
2 | Baa1 / BBB+ | 12.5 | 112.5 | 12.5 |
3 | Baa2 / BBB | 17.5 | 125.0 | 25.0 |
4 | Baa3 / BBB- | 22.5 | 150.0 | 50.0 |
5 | ≤ Ba1 / BB+ | 25.0 | 175.0 | 75.0 |
YUM! BRANDS, INC., | |
By: | |
Name: | |
Title: |
JPMORGAN CHASE BANK, N.A., | |
By: | |
Name: | |
Title: |
CITIBANK, N.A., | |
By: | |
Name: | |
Title: |
GOLDMAN SACHS BANK USA, individually and as Administrative Agent, | |
By: | |
Name: | |
Title: |
Name of Institution: | |
By: | |
Name: | |
Title: |
By: | |
Name: | |
Title: |
Lender | Commitment |
Citibank, N.A. | $500,000,000 |
Goldman Sachs Bank USA | $500,000,000 |
JPMorgan Chase Bank, N.A. | $500,000,000 |
Total | 1,500,000,000 |
1. | Within 30 days after the Effective Date, the Borrower shall deliver to the Administrative Agent the organizational documents and certificates of good standing for each of Pizza Hut, Inc. and Taco Bell Corp, in each case, certified by the California Secretary of State. |
1. | Indebtedness of Domestic Subsidiaries (primarily relating to Capital Lease Obligations), in an amount of US$9,451,053 as of September 5, 2015. |
1. | Liens created and existing pursuant to the sale-leaseback agreements, Master Lease Agreements and related agreements entered into by certain subsidiaries of the Borrower and evidencing the following sale-leaseback transactions: |
Original Transaction Date | Lessor | Lessee |
April 30, 2003 | GE Capital Franchise Finance Corporation, successor in interest to FFCA Acquisition Corporation | KFC Corporation (as successor to KFC U.S. Properties, Inc.) |
April 30, 2003 Amended August 15, 2003 | LoJon Property II LLC | KFC Corporation (as successor to KFC U.S. Properties, Inc.) |
Exhibit 12.1 YUM! Brands, Inc. Ratio of Earnings to Fixed Charges Years Ended 2015 - 2011 (In millions except ratio amounts) | ||||||||||||||||||||
52 Weeks | 53 Weeks | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Earnings: | ||||||||||||||||||||
Pretax income from continuing operations before cumulative effect of accounting changes | 1,787 | $ | 1,427 | $ | 1,551 | $ | 2,145 | $ | 1,659 | |||||||||||
50% or less owned Affiliates' interests, net | (20 | ) | (2 | ) | 17 | (6 | ) | (8 | ) | |||||||||||
Interest Expense | 159 | 159 | 279 | 181 | 203 | |||||||||||||||
Interest portion of net rent expense | 206 | 219 | 359 | 341 | 314 | |||||||||||||||
Earnings available for fixed charges | $ | 2,132 | $ | 1,803 | $ | 2,206 | $ | 2,661 | $ | 2,168 | ||||||||||
Fixed Charges: | ||||||||||||||||||||
Interest Expense | 160 | $ | 161 | $ | 281 | $ | 182 | $ | 204 | |||||||||||
Interest portion of net rent expense | 206 | 219 | 359 | 341 | 314 | |||||||||||||||
Total fixed charges | $ | 366 | $ | 380 | $ | 640 | $ | 523 | $ | 518 | ||||||||||
Ratio of earnings to fixed charges | 5.83 | 4.74 | 3.45 | 5.09 | 4.19 | |||||||||||||||
Exhibit 21.1 | ||
SUBSIDIARIES OF YUM! BRANDS, INC. | ||
State or Country of | ||
Name of Subsidiary | Incorporation | |
A.C.N. 003 190 163 Pty. Limited | Australia | |
A.C.N. 003 190 172 Pty. Limited | Australia | |
A.C.N. 003 273 854 Pty. Limited | Australia | |
A.C.N. 054 055 917 Pty. Ltd. | Australia | |
A.C.N. 085 239 961 Pty. Ltd. (SA1) | Australia | |
A.C.N. 085 239 998 Pty. Ltd. (SA2) | Australia | |
ABR Insurance Company | Vermont | |
Ashton Fried Chicken Pty. Limited | Australia | |
Atto Primo (Shanghai) Co., Ltd. | China | |
Baotou Little Sheep Jingchen Catering Co., Ltd | China | |
Baotou Little Sheep Shenhua Catering Company Limited | China | |
Beijing KFC Co., Ltd. | China | |
Beijing Pizza Hut Co., Ltd. | China | |
Beijing Yizhuang Little Sheep Catering Co., Ltd. | China | |
Beijing Zhichun Road Little Sheep Catering Co., Ltd. | China | |
Changsha Fuwang Catering Management Co., Ltd | China | |
Changsha KFC Co., Ltd. | China | |
ChangSha Little Sheep Catering Administration Co., Ltd | China | |
Changsha Yongao Catering Co. Ltd. | China | |
China XiaoFeiYang Catering Chain Co., Ltd. | British Virgin Islands | |
Chongqing KFC Co., Ltd. | China | |
Cyprus Caramel Restaurants Limited | Cyprus | |
Dalian KFC Co., Ltd. | China | |
Dezhou Little Sheep Catering Co., Ltd. | China | |
Dongguan Humen Little Sheep Catering Co. Ltd. | China | |
Dongguan KFC Co., Ltd. | China | |
East Dawning (Shanghai) Co., Ltd. | China | |
Finger Lickin' Chicken Limited | United Kingdom | |
Foshan Little Sheep Catering Co., Ltd | China | |
Foshan Mengjie Catering Company Limited | China | |
Fuzhou Cangshan Little Sheep Catering Co., Ltd. | China | |
Fuzhou Fuxing Little Sheep Catering Company Limited | China | |
Fuzhou Gulou Hualin Little Sheep Catering Co., Ltd. | China | |
Fuzhou Gulou Little Sheep Catering Company Limited | China | |
Fuzhou Taijiang Little Sheep Catering Co., Ltd. | China | |
Gansu Hongfu Little Sheep Catering Management Company Limited | China | |
Gansu Hongxi Little Sheep Catering Co., Ltd. | China | |
Gansu Hongxiang Little Sheep Catering Co., Ltd. | China |
State or Country of | ||
Name of Subsidiary | Incorporation | |
GanSu Little Sheep Catering Co., Ltd | China | |
GCTB, LLC f/k/a GCTB, Inc. | Virginia | |
Gloucester Properties Pty. Ltd. | Australia | |
Guangzhou Little Sheep Corporation Consulting Management Co., Ltd. | China | |
Guangzhou Little Sheep Trading Company Limited | China | |
Guangzhou Xingwang Catering Co., Ltd. f/k/a Guangzhou Hajie Catering Co., Ltd | China | |
Guangzhou Yingfeng Yijing Catering Co., Ltd. | China | |
Guangzhou Yuansheng Catering Co., Ltd | China | |
Hangzhou KFC Co., Ltd. | China | |
Hangzhou YongAo Catering Co. Ltd. | China | |
Hohhot Little Sheep Catering Co., Ltd | China | |
Huansheng Advertising (Shanghai) Company Ltd. | China | |
Huansheng Consulting (Wuhan) Co., Ltd. | China | |
Huizhou Yanfu Catering Management Co., Ltd | China | |
Inner Mongolia Little Sheep Catering Chain Company Limited | China | |
Inner Mongolia Little Sheep Seasoning Company Limited | China | |
Inventure Restaurantes Ltda. | Brazil | |
Jiangmen Pengjiang Little Sheep Catering Co., Ltd | China | |
Jiaozuo Little Sheep Catering Co., Ltd. | China | |
Jinan Zhaofei Little Sheep Catering Co., Ltd | China | |
Jinjiang Little Sheep Catering Co., Ltd | China | |
Kentucky Fried Chicken (Germany) Restaurant Holdings GmbH | Germany | |
Kentucky Fried Chicken (Great Britain) Limited | United Kingdom | |
Kentucky Fried Chicken (Great Britain) Services Limited | United Kingdom | |
Kentucky Fried Chicken Canada Company | Canada | |
Kentucky Fried Chicken Global B.V. | Netherlands | |
Kentucky Fried Chicken International Holdings, Inc. | Delaware | |
Kentucky Fried Chicken Pty. Ltd. | Australia | |
KFC Advertising, Ltd. | United Kingdom | |
KFC Asia LLC | Delaware | |
KFC Australia Holdings Limited f/k/a Yum! Australia Holdings Limited | Cayman Islands | |
KFC Brasil Publicidade e Propaganda Ltda | Brazil | |
KFC Chamnord SAS | France | |
KFC Corporation | Delaware | |
KFC Europe S.à r.l. | Luxembourg | |
KFC France SAS | France | |
KFC Global Holdings, Inc. | Delaware | |
KFC Holding SAS | France | |
KFC Holding Co. | Delaware | |
KFC Holdings B.V. | Netherlands | |
KFC Intermediate Holdings S.à r.l. | Luxembourg | |
KFC International Finance Company S.à r.l. | Luxembourg |
State or Country of | ||
Name of Subsidiary | Incorporation | |
KFC International Holdings I S.à r.l. f/k/a Yum! Finance Holdings ll Sarl f/k/a Stealth Investments Sarl | Luxembourg | |
KFC International Holdings II S.à r.l. | Luxembourg | |
KFC Italy S.r.l. | Italy | |
KFC Menapak LLC | Delaware | |
KFC MENAPAK S.à r.l. | Luxembourg | |
KFC Mexico B.V. | Netherlands | |
KFC Mexico Holdings LLC | Delaware | |
KFC Netherlands B.V. | Netherlands | |
KFC North America S.à r.l. | Luxembourg | |
KFC (Pty) Ltd f/k/a Yum Restaurants International (Proprietary) Limited | South Africa | |
KFC Pacific Holdings Ltd f/k/a THC II Limited | Malta | |
KFC Pacific LLC | Delaware | |
KFC Real Estate B.V. | Netherlands | |
KFC Restaurants Asia Pte., Ltd. | Singapore | |
KFC Restaurants Spain S.L. | Spain | |
KFC Russia Holdings I S.à r.l. | Luxembourg | |
KFC South Africa Holdings B.V. | Netherlands | |
KFC THC V Ltd f/k/a THC V Limited | Malta | |
KFC Turkey LLC | Delaware | |
KFC YFI Holdco S.à r.l. | Luxembourg | |
KFC Yum! Franchise I LP | Canada | |
KFC Yum! Franchise III f/k/a Yum! Franchise III | Australia | |
Kunming KFC Co., Ltd. | China | |
Lanzhou KFC Co., Ltd. | China | |
Little Sheep Catering Company Limited, Yongding Road, Beijing City | China | |
Little Sheep Group Limited | Cayman Islands | |
Little Sheep Hong Kong Company Limited | Hong Kong | |
Little Sheep Hong Kong Holdings Company Limited | Hong Kong | |
Little Sheep Macau - Restaurant Chain of Stores Limited | Macau | |
Little Sheep MongKok Company Limited | Hong Kong | |
Little Sheep Tsim Sha Tsui Company Limited | Hong Kong | |
Little Sheep Tsuen Wan Company Limited | Hong Kong | |
Little Sheep Yuenlang Co., Ltd | China | |
Multibranding Pty. Ltd. | Australia | |
Nanchang KFC Co., Ltd. | China | |
Nanchang Taoyuan Little Sheep Catering Management Co, Ltd. | China | |
Nanjing KFC Co., Ltd. | China | |
Nanjing Lucheng Little Sheep Catering Business Management Co. Ltd. | China | |
Nanjing Mengle Little Sheep Catering Company Limited | China | |
Nanjing MengYuan Little Sheep Catering Co., Ltd | China | |
NanJing XingMeng Little Sheep Catering Co., Ltd | China | |
Nanning KFC Co., Ltd. | China |
State or Country of | ||
Name of Subsidiary | Incorporation | |
Nanning Little Sheep Catering Chain Company Limited | China | |
Nanning Ruyun Catering Co., Ltd. | China | |
Newcastle Fried Chicken Pty. Ltd. | Australia | |
NingBo JiangDong ShuGuang Little Sheep Catering Co., Ltd | China | |
Ningbo Little Sheep Catering Company Limited | China | |
Norfolk Fast Foods Limited | United Kingdom | |
Northside Fried Chicken Pty Limited | Australia | |
Novo BL SAS | France | |
Novo Re IMMO SAS | France | |
PH Asia LLC | Delaware | |
PH Canada Company | Canada | |
PH Canada Holdco Company | Canada | |
PH Digico LLC | Delaware | |
PH Europe LLC f/k/a PH US LLC | Delaware | |
PH Europe S.à r.l. | Luxembourg | |
PH Global Holdings, Inc. | Delaware | |
PH Intermediate Holdings S.à r.l. | Luxembourg | |
PH International Finance Company S.à r.l. | Luxembourg | |
PH International Holdings I S.à r.l. f/k/a Yum! Finance Holdings lll Sarl f/k/a ITRAS Holdings Sarl | Luxembourg | |
PH International Holdings II S.à r.l. | Luxembourg | |
PH Mexico B.V. | Netherlands | |
PH Mexico S.à r.l. | Luxembourg | |
PH North America S.à r.l. | Luxembourg | |
PH Restaurant Holdings GmbH | Germany | |
PH South Africa Holdings B.V. | Netherlands | |
PH THC V Ltd | Malta | |
PH YFI Holdco S.à r.l. | Luxembourg | |
PH Yum! Franchise I LP | Canada | |
PH Yum! Franchise III | Australia | |
Pizza Hut (Pty) Ltd f/k/a Friedshelf 1503 Proprietary Limited | South Africa | |
Pizza Hut Australia Pty Limited f/k/a ACN 054 121 416 Pty. Ltd. | Australia | |
Pizza Hut Delivery Germany GmbH | Germany | |
Pizza Hut Gida ve Ticaret Anonim Sirketi | Turkey | |
Pizza Hut HSR Advertising Limited | United Kingdom | |
Pizza Hut International, LLC | Delaware | |
Pizza Hut Korea Limited f/k/a Pizza Hut Korea Co., Ltd. | Korea, Republic of | |
Pizza Hut MENAPAK S.à r.l. | Luxembourg | |
Pizza Hut of America, LLC f/k/a Pizza Hut of America, Inc. | Delaware | |
Pizza Hut Pacific Holdings Ltd. | Malta | |
Pizza Hut Restaurants Asia Pte., Ltd. | Singapore | |
Pizza Hut Turkey LLC | Delaware | |
Pizza Hut, Inc. | California |
State or Country of | ||
Name of Subsidiary | Incorporation | |
Qingdao KFC Co., Ltd. | China | |
Restaurant Concepts LLC | Delaware | |
Restaurants Development Co., Ltd. | Thailand | |
Restaurant Holdings Limited | United Kingdom | |
Shandong Little Sheep Hotel Management Company Limited | China | |
Shanghai Changning Little Sheep Catering Company Limited | China | |
Shanghai ChengShan Little Sheep Catering Co, Ltd | China | |
Shanghai Fengnan Little Sheep Catering Co., Ltd | China | |
Shanghai Gumei Little Sheep Catering Co., Ltd | China | |
Shanghai Huijin Little Sheep Catering Co., Ltd | China | |
Shanghai Jingan Little Sheep Catering Management Company Limited | China | |
Shanghai KFC Co., Ltd. | China | |
Shanghai Little Sheep Catering Company Limited | China | |
Shanghai Lujiabang Little Sheep Catering Company Limited | China | |
Shanghai Luyuan Little Sheep Catering Company Limited | China | |
Shanghai Pengpu Little Sheep Catering Company Limited | China | |
Shanghai Pizza Hut Co., Ltd. | China | |
Shanghai Putuo Little Sheep Catering Company Limited | China | |
Shanghai Qibao Little Sheep Catering Company Limited | China | |
Shanghai Qingpu Little Sheep Catering Management Company Limited | China | |
ShangHai WangYuan Little Sheep Catering Co., Ltd | China | |
Shanghai Yangpu Little Sheep Catering Company Limited | China | |
Shanghai Zhenhua Little Sheep Catering Co., Ltd | China | |
Shantou KFC Co., Ltd. | China | |
ShenYang MengXing Little Sheep Catering Co., Ltd | China | |
Shenyang Minsheng Little Sheep Catering Company Limited | China | |
Shenyang Wangda Little Sheep Catering Co., Ltd. | China | |
Shenyang Xiangjiang Little Sheep Catering Company Limited | China | |
ShenYang YongAo Little Sheep Catering Co., Ltd | China | |
Shenzhen Little Sheep Catering Chain Company Limited | China | |
Shenzhen Little Sheep Enterprise Company Limited | China | |
Shenzhen Tianjiao Catering Co., Ltd. | China | |
Shenzhen Xintu Catering Co., Ltd. | China | |
Shenzheng Huacai Catering Co., Ltd. | China | |
ShiShi Little Sheep Catering Co., Ltd | China | |
Southern Fast Foods Limited f/k/a Milne Fast Foods Limited | United Kingdom | |
Suffolk Fast Foods Limited | United Kingdom | |
Sunrise Investments, Co., Ltd. | British Virgin Islands | |
Suzhou KFC Co., Ltd. | China | |
Taco Bell Corp | California | |
Taco Bell of America, LLC f/k/a Taco Bell of America, Inc. | Delaware | |
Taco Bell Restaurants Asia Pte., Ltd. | Singapore |
State or Country of | ||
Name of Subsidiary | Incorporation | |
Taiyuan KFC Co., Ltd. | China | |
Tangshan Little Sheep Catering Co., Ltd. | China | |
TB Asia LLC | Delaware | |
TB Canada Company | Canada | |
TB Global Holdings, Inc. | Delaware | |
TB Intermediate Holdings S.à r.l. | Luxembourg | |
TB International Finance Company S.à r.l. | Luxembourg | |
TB International Holdings I S.à r.l. | Luxembourg | |
TB International Holdings II S.à r.l. | Luxembourg | |
TB North America S.à r.l. | Luxembourg | |
TB YFI Holdco S.à r.l. | Luxembourg | |
TB Yum! Franchise I LP | Canada | |
THC I Limited | Malta | |
THC III Limited | Malta | |
Tianjin KFC Co., Ltd. | China | |
Tricon Global Restaurants, Inc. | North Carolina | |
Turkent Gida Ve Turizm Sanayi Ve Ticaret A.S. | Turkey | |
U.S. Taco Co., LLC | New York | |
U.S. Taco Holding Co., LLC | New York | |
Valleythorn Limited | United Kingdom | |
Versailles Resto S.A.S. | France | |
Wandle Investments Ltd. | Hong Kong | |
Wuhan Mengwang Catering Co., Ltd | China | |
WuHan MengXiang Little Sheep Catering Co., Ltd | China | |
WuHan YongAo Little Sheep Catering Co., Ltd | China | |
Wuxi KFC Co., Ltd. | China | |
Xiamen KFC Co., Ltd. | China | |
Xiamen Lianqian Little Sheep Catering Co., Ltd | China | |
Xiamen Shixin Little Sheep Catering Co., Ltd. | China | |
Xian Hepingmen Little Sheep Catering Co., Ltd | China | |
Xian Hezong Little Sheep Catering Co., Ltd. | China | |
XiNing Little Sheep Catering Co., Ltd | China | |
Xinjiang KFC Co., Ltd. | China | |
Xinxiang Hongqi Heping Little Sheep Catering Co., Ltd | China | |
YA Company One Pty. Ltd. | Australia | |
YRH Holdco Limited | United Kingdom | |
YCH S.a.r.l. | Luxembourg | |
YEB Holdings LLC | Delaware | |
YEB II LLC | Delaware | |
YEB III LLC | Delaware | |
YIF US LLC | Delaware | |
Yinchuan Little Sheep Catering Company Limited | China |
State or Country of | ||
Name of Subsidiary | Incorporation | |
YRI Europe S.a.r.l. | Luxembourg | |
YRI Global Liquidity S.a.r.l. f/k/a Bolden Holding Sarl | Luxembourg | |
YRI Hong Kong II Limited | Hong Kong | |
YRI Hong Kong IV Limited | Hong Kong | |
YRI Investment Company S.a.r.l. f/k/a Brownstone Holdings Sarl | Luxembourg | |
Yum Restaurant Services Group, LLC f/k/a Yum Restaurant Services Group, Inc. | Delaware | |
Yum Restaurants Espana, S.L. | Spain | |
Yum! Asia Franchise Pte Ltd | Singapore | |
Yum! Asia Holdings Pte. Ltd. | Singapore | |
Yum! Australia Equipment Pty. Ltd. | Australia | |
Yum! Brands Mexico Holdings II LLC | Delaware | |
YUM! Finance Holdings l Sarl f/k/a Sunhill Holdings Sarl | Luxembourg | |
Yum! Food (Shanghai) Co., Ltd. | China | |
Yum! Franchise China IV S.à r.l. | Luxembourg | |
Yum! Franchise China Trust I S.à r.l. | Luxembourg | |
Yum! Franchise China Trust III S.à r.l. | Luxembourg | |
Yum! Franchise de Mexico, S.a.r.l. | Luxembourg | |
Yum! Franchise II LLP | United Kingdom | |
Yum! Global Investments I B.V. | Netherlands | |
Yum! Global Investments II B.V. | Netherlands | |
Yum! Global Investments III, LLC | Delaware | |
Yum! International Finance Company S.a.r.l. | Luxembourg | |
Yum! International Participations LLC f/k/a Yum! International Participations S.a.r.l | Delaware | |
Yum! KFC Australia Holdings I LLC f/k/a Yum! Australia Holdings I LLC | Delaware | |
Yum! KFC Australia Holdings II LLC f/k/a Yum! Australia Holdings II LLC | Delaware | |
Yum! lll (UK) Limited | United Kingdom | |
Yum! Luxembourg Investments LLC f/k/a Yum! Luxembourg Investments S.a.r.l. | Delaware | |
Yum! Myanmar Holdings Pte. Ltd. | Singapore | |
Yum! PH Australia Holdings I LLC | Delaware | |
Yum! PH Australia Holdings II LLC | Delaware | |
Yum! Restaurant Holdings | United Kingdom | |
Yum! Restaurantes do Brasil Ltda. | Brazil | |
Yum! Restaurants (Chengdu) Co., Ltd. | China | |
Yum! Restaurants (China) Investment Co., Ltd. | China | |
Yum! Restaurants (Fuzhou) Co., Ltd. | China | |
Yum! Restaurants (Guangdong) Co., Ltd. | China | |
Yum! Restaurants (Hong Kong) Ltd. | Hong Kong | |
Yum! Restaurants (India) Private Limited | India | |
Yum! Restaurants (NZ) Ltd. | New Zealand | |
Yum! Restaurants (Shenyang) Co., Ltd. | China | |
Yum! Restaurants (Shenzhen) Co., Ltd. | China | |
Yum! Restaurants (Wuhan) Co., Ltd. | China |
State or Country of | ||
Name of Subsidiary | Incorporation | |
Yum! Restaurants (Xian) Co., Ltd. | China | |
Yum! Restaurants Asia Pte. Ltd. | Singapore | |
Yum! Restaurants Australia Pty Limited | Australia | |
Yum! Restaurants China Holdings Limited | Hong Kong | |
Yum! Restaurants Consulting (Shanghai) Co., Ltd. | China | |
Yum! Restaurants Europe Limited | United Kingdom | |
Yum! Restaurants Germany GmbH | Germany | |
Yum! Restaurants International (MENAPAK) Co. S.P.C. | Bahrain | |
Yum! Restaurants International (Thailand) Co., Ltd. | Thailand | |
Yum! Restaurants International Holdings, Ltd. | Delaware | |
Yum! Restaurants International Limited | United Kingdom | |
Yum! Restaurants International Ltd. & Co. Kommanditgesellschaft | Germany | |
Yum! Restaurants International Management LLC f/k/a Yum! Restaurants International Management S.a.r.l. | Delaware | |
Yum! Restaurants International Russia and CIS LLC | Russian Federation | |
Yum! Restaurants International Russia LLC | Russia Federation | |
Yum! Restaurants International S.a.r.l. | Luxembourg | |
Yum! Restaurants International, Inc. | Delaware | |
Yum! Restaurants International, S de RL de CV | Mexico | |
Yum! Restaurants KFC Australia Services Pty Ltd f/k/a Yum! Restaurants Australia Services Pty Ltd | Australia | |
Yum! Restaurants Limited | United Kingdom | |
Yum! Restaurants Marketing Private Limited | India | |
Yum! Restaurants New Zealand Services Pty. Ltd | Australia | |
Yumsop Pty Limited | Australia | |
Zhengzhou Hezong Little Sheep Catering Co., Ltd. | China | |
Zhengzhou Hongzhuan Little Sheep Catering Co., Ltd | China | |
Zhengzhou KFC Co., Ltd. | China | |
Zhongshan Little Sheep Catering Co., Ltd | China |
We consent to the incorporation by reference in the registration statements listed below of YUM! Brands, Inc. and Subsidiaries (YUM) of our report dated February 16, 2016, with respect to the consolidated balance sheets of YUM as of December 26, 2015 and December 27, 2014, and the related consolidated statements of income, comprehensive income, cash flows and shareholders' equity for each of the fiscal years in the three-year period ended December 26, 2015, and the effectiveness of internal control over financial reporting as of December 26, 2015, which report appears in the December 26, 2015 annual report on Form 10-K of YUM. | ||
Description | Registration Statement Number | |
Form S-3 | ||
YUM! Direct Stock Purchase Program | 333-46242 | |
Debt Securities | 333-188216 | |
Form S-8 | ||
Restaurant Deferred Compensation Plan | 333-36877, 333-32050 | |
Executive Income Deferral Program | 333-36955 | |
SharePower Stock Option Plan | 333-36961 | |
YUM! Brands 401(k) Plan | 333-36893, 333-32048, 333-109300 | |
YUM! Brands, Inc. Restaurant General Manager | ||
Stock Option Plan | 333-64547 | |
YUM! Brands, Inc. Long-Term Incentive Plan | 333-32052, 333-109299, 333-170929 | |
/s/ KPMG LLP Louisville, Kentucky February 16, 2016 |
1. | I have reviewed this report on Form 10-K of YUM! Brands, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant, as of, and for, the periods presented in this report. |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
February 16, 2016 | /s/ Greg Creed |
Chief Executive Officer |
1. | I have reviewed this report on Form 10-K of YUM! Brands, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant, as of, and for, the periods presented in this report. |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: February 16, 2016 | /s/ Patrick J. Grismer |
Chief Financial Officer |
1. | the Annual Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | the information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: February 16, 2016 | /s/ Greg Creed |
Chief Executive Officer |
1. | the Annual Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | the information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: February 16, 2016 | /s/ Patrick J. Grismer |
Chief Financial Officer |
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