72 unchanged sentences
All comparisons within this summary are versus the same period a year ago.
−Removed: The Financial Highlights tables below reflect the impact of removing the system sales of all Russian units from our system sales totals as of the beginning of the second quarter of 2022.
+Added: The year to date Financial Highlights table below reflects the impact of removing the system sales of all Russian units from our system sales totals as of the beginning of the second quarter of 2022.
Quarterly Financial Highlights:
8 unchanged sentences
Taco Bell Division +10 +7 +5 +9 +9
−Removed: Pizza Hut Division +8 +5 +4 Even +4
+Added: Pizza Hut Division +7 +4 +4 +2 +5
YUM +11 +7 +6 +6 +13
2 unchanged sentences
We removed 1,112 units and 53 units in Russia from our KFC and Pizza Hut units counts, respectively.
−Removed: ◦ Year to date YUM and KFC Division system sales growth excluding foreign currency as shown above were negatively impacted by 1 and 2 percentage points, respectively.
+Added: ◦ Year to date YUM and KFC Division system sales growth excluding foreign currency as shown above were each negatively impacted by 1 percentage point.
• Also, we elected to reclass future net profits attributable to Russia subsequent to the date of invasion from the Division segments in which those profits were earned to Unallocated Other income and reflected such profits as a Special Item as they are not indicative of our ongoing results.
As a result of the decline in Core Operating Profits attributable to Russia:
−Removed: ◦ Both the quarter and year to date YUM and KFC Division Core Operating Profit as shown above were negatively impacted by 1 and 2 percentage points, respectively.
−Removed: • Foreign currency translation unfavorably impacted Divisional Operating Profit by $17 million and $44 million for the quarter and year to date ended June 30, 2023, respectively.
−Removed: Second Quarter Year to date
+Added: ◦ Year to date YUM and KFC Division Core Operating Profit as shown above were each negatively impacted by 1 percentage point.
+Added: • Foreign currency translation unfavorably impacted Divisional Operating Profit by $5 million and $49 million for the quarter and year to date ended September 30, 2023, respectively.
+Added: Third Quarter
2023 2022 % Change 2023 2022 % Change
3 unchanged sentences
EPS Excluding Special Items $1.44 $1.09 +32 $3.91 $3.21 +22
−Removed: • In addition to the aforementioned factors impacting Operating Profit, our 2023 diluted EPS, excluding Special Items, was favorably impacted by $0.09 and $0.02 for the quarter and year to date ended June 30, 2023, respectively, from mark to market adjustments from unrealized investment gains and was unfavorably impacted by $0.04 and $0.02 for the quarter and year to date ended June 30, 2022, respectively, from mark to market adjustments from unrealized investment losses.
−Removed: Foreign currency translation unfavorably impacted our diluted EPS, excluding Special Items, by approximately $0.05 and $0.12 for the quarter and year to date ended June 30, 2023, respectively.
+Added: • In addition to the aforementioned factors impacting Operating Profit, our diluted EPS, excluding Special Items, was favorably impacted by $0.05 and $0.07 for the quarter and year to date ended September 30, 2023, respectively, and $0.08 and $0.06 for the quarter and year to date ended September 30, 2022, respectively, from mark to market adjustments from unrealized investment gains.
+Added: Foreign currency translation negatively impacted our diluted EPS, excluding Special Items, by approximately $0.01 and $0.14 for the quarter and year to date ended September 30, 2023, respectively.
• Gross unit openings for the quarter were 1,130 units resulting in 849 net new units.
42 unchanged sentences
System sales 15,830 14,543 46,272 42,645
−Removed: Negative Foreign Currency Impact on System sales (b)
+Added: Negative (Positive) Foreign Currency Impact (b)
148 N/A 1,177 N/A
4 unchanged sentences
System sales 8,620 7,824 24,975 22,809
−Removed: Negative Foreign Currency Impact on System sales (b)
+Added: Negative (Positive) Foreign Currency Impact (b)
133 N/A 967 N/A
5 unchanged sentences
System sales 3,804 3,417 11,028 10,034
−Removed: Negative Foreign Currency Impact on System sales (b)
+Added: Negative (Positive) Foreign Currency Impact (b)
+Added: (7) N/A 3 N/A
System sales, excluding FX $ 3,797 $ 3,417 $ 11,031 $ 10,034
4 unchanged sentences
System sales 3,243 3,146 9,780 9,345
−Removed: Negative Foreign Currency Impact on System sales (b)
+Added: Negative (Positive) Foreign Currency Impact (b)
22 N/A 207 N/A
5 unchanged sentences
System sales 163 156 489 457
−Removed: Foreign Currency Impact on System sales (b)
+Added: Negative (Positive) Foreign Currency Impact (b)
System sales, excluding FX $ 163 $ 156 $ 489 $ 457
6 unchanged sentences
2023 2022 2023 2022
−Removed: Core Operating Profit Growth (Decline) % 12 (1) 11 (3)
+Added: Core Operating Profit Growth %
Diluted EPS Growth (Decline) %, excluding Special Items 32 (11) 22 (7)
15 unchanged sentences
Special Items (Income) Expense - Operating Profit 1 (14) 19 (36)
−Removed: Negative Foreign Currency Impact on Divisional Operating Profit (d)
−Removed: 17 N/A 44 N/A
+Added: Negative (Positive) Foreign Currency Impact on Operating Profit 5 N/A 49 N/A
Core Operating Profit $ 619 $ 532 $ 1,777 $ 1,573
Special Items as shown above were recorded to the financial statement line items identified below.
−Removed: Condensed Consolidated Summary of Results Line Item
+Added: Condensed Consolidated Statements of Income Line Item
General and administrative expenses $ 4 $ 2 $ 19 $ 5
4 unchanged sentences
GAAP Operating Profit $ 344 $ 304 $ 975 $ 888
−Removed: Negative Foreign Currency Impact on Divisional Operating Profit (d)
−Removed: 15 N/A 36 N/A
+Added: Negative (Positive) Foreign Currency Impact
Core Operating Profit $ 348 $ 304 $ 1,015 $ 888
1 unchanged sentence
GAAP Operating Profit $ 226 $ 204 $ 658 $ 604
−Removed: Negative Foreign Currency Impact on Divisional Operating Profit (d)
+Added: Negative (Positive) Foreign Currency Impact
+Added: (1) N/A — N/A
Core Operating Profit $ 225 $ 204 $ 658 $ 604
1 unchanged sentence
GAAP Operating Profit $ 97 $ 92 $ 292 $ 287
−Removed: Negative Foreign Currency Impact on Divisional Operating Profit (d)
+Added: Negative (Positive) Foreign Currency Impact
Core Operating Profit $ 99 $ 92 $ 301 $ 287
1 unchanged sentence
GAAP Operating Loss $ (2) $ (4) $ (4) $ (14)
−Removed: Foreign Currency Impact on Divisional Operating Profit (d)
+Added: Negative (Positive) Foreign Currency Impact
Core Operating Profit (Loss) $ (2) $ (4) $ (4) $ (14)
2 unchanged sentences
Special Items (Income) Expense - Operating Profit 1 (14) 19 (36)
−Removed: Special Items (Income) Expense - Interest Expense, net (e)
−Removed: Special Items Tax (Benefit) Expense (f)
+Added: Special Items (Income) Expense - Interest Expense, net (d)
+Added: Special Items Tax (Benefit) (e)
(4) — (36) (12)
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(a) Due to their size and volatility, we have reflected as Special Items those refranchising gains and losses that were recorded in connection with market-wide refranchisings.
−Removed: During the quarters ended June 30, 2023 and 2022, we recorded net refranchising gains of $2 million and net refranchising losses of $1 million, respectively, that have been reflected as a Special Item.
−Removed: During the years ended June 30, 2023 and 2022, we recorded net refranchising gains of $5 million and $2 million, respectively, that have been reflected as a Special Item.
−Removed: Additionally, we recorded net refranchising gains of $15 million and $9 million during the quarters ended June 30, 2023 and 2022, respectively, that have not been reflected as Special Items.
−Removed: During the years ended June 30, 2023 and 2022, we recorded net refranchising gains of $16 million and $10 million, respectively, that have not been reflected as Special Items.
−Removed: These net refranchising gains relate to refranchising of restaurants unrelated to market-wide refranchisings and that we believe are indicative of our expected ongoing refranchising activity.
+Added: During the quarter ended September 30, 2023, we recorded net refranchising gains of $2 million, that have been reflected as a Special Item.
+Added: During the years to date ended September 30, 2023 and 2022, we recorded net refranchising gains of $7 million and $2 million, respectively, that have been reflected as Special Items.
+Added: Additionally, we recorded net refranchising gains of $17 million and $3 million during the quarters ended September 30, 2023 and 2022, respectively, that have not been reflected as Special Items.
+Added: During the years to date ended September 30, 2023 and 2022, we recorded net refranchising gains of $33 million and $13 million, respectively, that have not been reflected as Special Items.
+Added: These net refranchising gains relate to refranchising of restaurants unrelated to market-wide refranchisings that we believe are indicative of our expected ongoing refranchising activity.
(b) In the first quarter of 2022, as a result of the Russian invasion of Ukraine, we suspended all investment and restaurant development in Russia.
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Further, we pledged to redirect any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts.
−Removed: During the second quarter of 2022, we completed the transfer of ownership of the Pizza Hut Russia business to a local operator who has initiated the process of re-branding locations to a non-YUM concept.
−Removed: In April 2023, we completed our exit from the Russia market by selling the KFC business in Russia.
−Removed: Our GAAP operating results presented herein reflect revenues from and expenses to support the Russian operations for KFC and Pizza Hut prior to the dates of sale or transfer, within their historical financial statement line items and operating segments.
−Removed: However, given our decision to exit Russia and our pledge to direct any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts, we have reclassed such net operating profits or losses subsequent to such date from the Division segment results in which they were earned to Unallocated Other income (expense).
−Removed: Additionally, we have incurred certain expenses related to the dispositions of the businesses and other one-time costs related to our exit from Russia which we have recorded within Corporate and unallocated G&A and Unallocated Franchise and property expenses.
−Removed: Also recorded in Unallocated Other income (expense) were foreign exchange impacts attributable to fluctuations in the value of the Russian ruble and a $4 million loss recorded during the quarter ended June 30, 2023 as a result of the sale of the KFC Russia business.
−Removed: The resulting net Operating Loss of $9 million and $12 million for the quarter and year to date ended June 30, 2023, respectively, and net Operating Profit of $14 million and $21 million for the quarter and year to date ended June 30, 2022, respectively, have been reflected as Special Items.
−Removed: (c) We recorded charges of $8 million and $10 million during the quarter and year to date ended June 30, 2023, respectively, and $1 million during the year to date ended June 30, 2022, to General and administrative expenses related to a resource optimization program initiated in the third quarter of 2020.
+Added: During the second quarter of 2022, we completed the transfer of ownership of the Pizza Hut Russia business to a local operator.
+Added: In the second quarter of 2023, we completed our exit from the Russia market by selling the KFC business in Russia.
+Added: Our GAAP operating results presented herein reflect revenues from and expenses to support the Russian operations for KFC and Pizza Hut prior to the dates of transfer or sale, within their historical financial statement line items and operating segments.
+Added: However, given our decision to exit Russia and our pledge to direct any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts, we reclassed such net operating profits or losses from the Division segment results in which they were earned to Unallocated Other income (expense).
+Added: Additionally, we incurred certain expenses related to the dispositions of the businesses and other one-time costs related to our exit from Russia which we recorded within Corporate and unallocated G&A and Unallocated Franchise and property expenses.
+Added: Also recorded in Unallocated Other income (expense) were foreign exchange impacts attributable to fluctuations in the value of the Russian ruble and income of $1 million and a charge of $3 million recorded during the quarter and year to date ended September 30, 2023, respectively, as a result of the completion of the sale of the KFC Russia business.
+Added: The resulting net Operating Profit of $2 million and net Operating Loss of $10 million for the quarter and year to date ended September 30, 2023, respectively, and net Operating Profit of $16 million and $37 million for the quarter and year to date ended September 30, 2022, respectively, have been reflected as Special Items.
+Added: (c) We recorded charges of $3 million and $13 million during the quarter and year to date ended September 30, 2023, respectively, and $2 million and $3 million during the quarter and year to date ended September 30, 2022, to General and administrative expenses related to a resource optimization program initiated in the third quarter of 2020.
This program is part of our efforts to optimize our resources, reallocating them toward critical areas of the business that will drive future growth.
−Removed: These critical areas include accelerating our digital, technology and innovation capabilities to deliver a modern, world-class team member and customer experience and improve unit economics.
−Removed: Due to the scope and size of the resource optimization program, these charges have been reflected as Special Items.
−Removed: (d) The foreign currency impact on reported Operating Profit is presented in relation only to the immediately preceding year presented.
−Removed: When determining applicable Core Operating Profit growth percentages, the Core Operating Profit for the current year should be compared to the prior year GAAP Operating Profit adjusted only for any prior year Special Items (Income) Expense.
−Removed: (e) During the quarter ended June 30, 2022, the Company redeemed $600 million aggregate principal amount of 7.75% YUM Senior Unsecured Notes due in 2025 (the "2025 Notes").
+Added: Due to their scope and size, these charges have been reflected as Special Items.
+Added: (d) During the year to date ended September 30, 2022, the Company redeemed $600 million aggregate principal amount of 7.75% YUM Senior Unsecured Notes due in 2025 (the "2025 Notes").
The redemption amount was equal to 103.875% of the $600 million aggregate principal amount redeemed, reflecting a $23 million "call premium".
We recognized the call premium and the write-off of $5 million of unamortized debt issuance costs associated with the 2025 Notes within Interest expense, net as a Special Item due to their size and the fact that the amounts are not indicative of our ongoing interest expense.
−Removed: (f) The below table includes the detail of Special Items Tax (Benefit) Expense:
+Added: (e) The below table includes the detail of Special Items Tax (Benefit) Expense:
Quarter ended Year to date
7 unchanged sentences
Tax (Benefit) Expense on Special Items Operating Profit and Interest Expense was determined by assessing the tax impact of each individual component within Special Items based upon the nature of the item and jurisdictional tax law.
−Removed: Special Items Tax (Benefit) Expense includes $71 million of net tax expense recorded in the quarter ended June 30, 2022, resulting from the Company’s decision to exit KFC Russia.
−Removed: We remeasured and reassessed the need for a valuation allowance on deferred tax assets in Switzerland due to the then expected reduction in the tax basis of intellectual property rights associated with the loss of the Russian royalty income.
−Removed: In addition, we reassessed certain deferred tax liabilities associated with the Russia business given the expectation that the existing basis difference was going to reverse by way of sale.
−Removed: Special Items Tax (Benefit) Expense includes a tax benefit discretely recorded in the quarter ended March 31, 2022 of $82 million.
+Added: Special Items Tax (Benefit) Expense includes $69 million of net tax expense recorded in the year to date ended September 30, 2022, resulting from the Company’s decision to exit KFC Russia.
+Added: We remeasured and reassessed the need for a valuation allowance on deferred tax assets in Switzerland due to the expected reduction in the tax basis of intellectual property rights associated with the loss of the Russian royalty income.
+Added: In addition, we reassessed certain deferred tax liabilities associated with the Russia business given the expectation that the existing basis difference would reverse by way of sale.
+Added: Special Items Tax (Benefit) Expense includes a tax benefit discretely recorded in the year to date ended September 30, 2022 of $82 million.
In January 2022, the U.S.
5 unchanged sentences
As such the valuation allowance on foreign tax credit carryforwards that was released in the quarter ended March 31, 2022, was re-established in the quarter ended December 31, 2022.
−Removed: Other Income Tax impacts recorded as Special in the quarter and year to date ended June 30, 2023 include benefits related to the reversal of a reserve due to the favorable resolution of a tax audit in a foreign jurisdiction.
+Added: Other Income Tax impacts recorded as Special in the year to date ended September 30, 2023 include benefits related to the reversal of a reserve due to the favorable resolution of a tax audit in a foreign jurisdiction.
Such reserve was established in prior years related to deferred tax assets originally recorded as a Special Item as part of an intercompany restructuring of intellectual property.
−Removed: Other Income Tax impacts recorded as Special in the quarter and year to date ended June 30, 2023 also include the release of valuation allowances associated with a jurisdiction in which a market-wide refranchising event occurred.
+Added: Other Income Tax impacts recorded as Special in the year to date ended September 30, 2023 also include the release of valuation allowances associated with a jurisdiction in which a market-wide refranchising event occurred.
Reconciliation of GAAP Operating Profit to Company Restaurant Profit
59 unchanged sentences
During the second quarter of 2022, we completed the transfer of ownership of the Pizza Hut Russia business to a local operator.
−Removed: In April 2023, we completed our exit from the Russian market by selling the KFC business in Russia to Smart Service Ltd., including all Russian company-owned KFC restaurants, operating system, and master franchise rights as well as the trademark for the Rostik’s brand.
+Added: During the second quarter of 2023, we completed our exit from the Russian market by selling the KFC business in Russia to Smart Service Ltd., including all Russian company owned KFC restaurants, operating system, and master franchise rights as well as the trademark for the Rostik's brand.
As of the beginning of the second quarter of 2022, we elected to remove all Russia units from our unit count and their associated sales from our total system sales.
We removed 1,112 units and 53 units in Russia from our global KFC and Pizza Hut units counts, respectively.
−Removed: This negatively impacted our system sales growth excluding foreign currency for YUM and KFC Division by 1 and 2 percentage points, respectively, for the year to date ended June 30, 2023.
+Added: This negatively impacted our system sales growth excluding foreign currency for YUM and KFC Division by 1 percentage point for the year to date ended September 30, 2023.
Russia units were removed from our same-store sales calculations as of the beginning of the second quarter of 2022.
Our GAAP operating results presented herein reflect revenues from and expenses to support the Russian operations for KFC and Pizza Hut prior to the dates of transfer or sale, within their historical financial statement line items and operating segments.
−Removed: However, given our decision to exit Russia and our pledge to direct any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts, we have reclassed such net operating profits or losses subsequent to that date from the Division segment results in which they were earned to Unallocated Other income (expense) and reflected such net profits as a Special item.
−Removed: Additionally, we have incurred certain expenses related to the dispositions of the businesses and other one-time costs related to our exit from Russia which we have recorded within Corporate and unallocated G&A and Unallocated Franchise and property expenses.
−Removed: Also recorded in Unallocated Other income (expense) were foreign exchange impacts attributable to fluctuations in the value of the Russian ruble and a $4 million loss recorded during the quarter ended June 30, 2023 as a result of the sale of the KFC Russia business.
−Removed: The resulting net Operating Loss of $9 million and $12 million for the quarter and year to date ended June 30, 2023, respectively, and net Operating Profit of $14 million and $21 million for the quarter and year to date ended June 30, 2022, respectively, have been reflected as a Special Item.
−Removed: Prior to the invasion, our Russian business has constituted approximately 3% of our total operating profit and 2% of our total system sales.
−Removed: During both the quarter and year to date ended June 30, 2023, our Core Operating Profits in Russia declined versus the prior year, negatively impacting YUM and KFC Division Core Operating Profit growth by 1 and 2 percentage points, respectively.
+Added: However, given our decision to exit Russia and our pledge to direct any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts, we reclassed such net operating profits or losses subsequent to that date from the Division segment results in which they were earned to Unallocated Other income (expense) and reflected such net profits as a Special item.
+Added: Additionally, we incurred certain expenses related to the dispositions of the businesses and other one-time costs related to our exit from Russia which we recorded within Corporate and unallocated G&A and Unallocated Franchise and property expenses.
+Added: Also recorded in Unallocated Other income (expense) were foreign exchange impacts attributable to fluctuations in the value of the Russian ruble and income of $1 million and a charge of $3 million recorded during the quarter and year to date ended September 30, 2023, respectively, as a result of the sale of the KFC Russia business.
+Added: The resulting net Operating Profit of $2 million and net Operating Loss of $10 million for the quarter and year to date ended September 30, 2023, respectively, and net Operating Profit of $16 million and $37 million for the quarter and year to date ended September 30, 2022, respectively, have been reflected as a Special Items.
+Added: Prior to the invasion, our Russian business constituted approximately 3% of our total operating profit and 2% of our total system sales.
+Added: During the year to date ended September 30, 2023, our Core Operating Profits in Russia declined versus the prior year, negatively impacting both YUM and KFC Division Core Operating Profit growth by 1 percentage point.
Impact of Foreign Currency Translation on Operating Profit
−Removed: Changes in foreign currency exchange rates negatively impacted the translation of our foreign currency denominated Divisional Operating Profit by $17 million and $44 million for the quarter and year to date ended June 30, 2023, respectively.
−Removed: This included a negative impact to our KFC Division Operating Profit of $15 million and $36 million for the quarter and year to date ended June 30, 2023, respectively.
−Removed: For the second half of 2023, we currently expect changes in foreign currency to have an insignificant impact on Divisional Operating Profit.
+Added: Changes in foreign currency exchange rates negatively impacted the translation of our foreign currency denominated Divisional Operating Profit by $5 million and $49 million for the quarter and year to date ended September 30, 2023, respectively.
+Added: This included a negative impact to our KFC Division Operating Profit of $4 million and $40 million for the quarter and year to date ended September 30, 2023, respectively.
+Added: We currently expect changes in foreign currency to negatively impact Divisional Operating Profit by approximately $45 to $55 million on a full-year basis.
Investment in Devyani
−Removed: Changes in the fair value of our approximate 5% minority investment in Devyani International Limited ("Devyani"), a franchise entity that operates KFC and Pizza Hut restaurants in India, resulted in pre-tax gains of $28 million and $5 million in the quarter and year to date ended June 30, 2023, respectively, and pre-tax investment losses of $14 million and $7 million in the quarter and year to date ended June 30, 2022, respectively.
+Added: Changes in the fair value of our approximate 5% minority investment in Devyani International Limited ("Devyani"), a franchise entity that operates KFC and Pizza Hut restaurants in India, resulted in pre-tax gains of $16 million and $21 million in the quarter and year to date ended September 30, 2023, respectively, and pre-tax investment income of $27 million and $20 million in the quarter and year to date ended September 30, 2022, respectively.
The KFC Division has 29,051 units, 87% of which are located outside the U.S.
−Removed: Additionally, 99% of the KFC Division units were operated by franchisees as of June 30, 2023.
+Added: Additionally, 99% of the KFC Division units were operated by franchisees as of September 30, 2023.
Quarter ended Year to date
21 unchanged sentences
The quarterly increase in Company sales, excluding the impact of foreign currency translation, was driven by Company same-store sales growth of 5%.
−Removed: The year to date increase in Company sales, excluding the impact of foreign currency translation, was driven by Company same-store sales growth of 7%, partially offset by the suspension of operations of our 70 company owned KFC restaurants in Russia in the first quarter of 2022.
+Added: The year to date increase in Company sales, excluding the impact of foreign currency translation, was driven by Company same-store sales growth of 6%, partially offset by the suspension of operations of our 70 company owned KFC restaurants in Russia.
As discussed in the Introduction and Overview section of this MD&A, all units in Russia, both Company and franchised, were removed from our same-store sales calculations beginning April 1, 2022.
−Removed: The quarterly and year to date increases in Company restaurant margin percentage were driven by driven by Company same-store sales growth, partially offset by commodity inflation.
+Added: The quarterly and year to date increases in Company restaurant margin percentage were driven by Company same-store sales growth, partially offset by commodity inflation.
Franchise and property revenues
1 unchanged sentence
As discussed in the Introduction and Overview section of this MD&A, all units in Russia, both Company and franchised, were removed from our same-store sales calculations beginning April 1, 2022.
−Removed: The quarterly increase in G&A, excluding the impact of foreign currency translation, was driven by higher expenses related to our annual incentive compensation programs, higher travel related costs, and higher headcount and salaries, partially offset by the impact of the sale of our Russia business during the quarter ended June 30, 2023 and lower professional fees.
−Removed: The year to date increase in G&A, excluding the impact of foreign currency translation, was driven by higher headcount and salaries, higher expenses related to our annual incentive compensation programs, and higher travel related costs, partially offset by the impact of the sale of our Russia business during the quarter ended June 30, 2023 and lower professional fees.
+Added: The quarterly decrease in G&A, excluding the impact of foreign currency translation, was driven by the impact of the sale of our Russia business during the quarter ended June 30, 2023 and lower professional fees, partially offset by higher expenses related to our annual incentive compensation programs and higher headcount and salaries.
+Added: G&A was flat year to date, excluding the impact of foreign currency translation, as the impact of the sale of our Russia business during the quarter ended June 30, 2023 and lower professional fees were offset by higher expenses related to our annual incentive compensation programs, higher headcount and salaries, and higher travel related costs.
Operating Profit
−Removed: The quarterly and year to date increases in Operating Profit, excluding the impact of foreign currency translation, were driven by same-store sales growth and unit growth, partially offset by higher G&A, higher restaurant operating costs, and the negative impact of 2 percentage points on both quarterly and year to date operating profit growth as a result of lower profits in Russia.
+Added: The quarterly increase in Operating Profit, excluding the impact of foreign currency translation, was driven by same-store sales growth and unit growth, partially offset by higher restaurant operating costs.
+Added: The year to date increase in Operating Profit, excluding the impact of foreign currency translation, was driven by same-store sales growth and unit growth, partially offset by higher restaurant operating costs and the negative impact of 1 percentage point on operating profit growth as a result of lower profits in Russia.
Taco Bell Division
1 unchanged sentence
The Company owned 7% of the Taco Bell units in the U.S.
−Removed: as of June 30, 2023.
+Added: as of September 30, 2023.
Quarter ended Year to date
9 unchanged sentences
Company restaurant margin % 23.8 % 23.9 % (0.1) ppts.
−Removed: 24.0 % 23.9 % 0.1 ppts.
+Added: 23.9 % 23.9 % Even Even
G&A expenses $ 47 $ 41 (14) (14) $ 141 $ 116 (21) (21)
9 unchanged sentences
The quarterly and year to date increases in Company sales were driven by company same-store sales growth of 8% and 6% for the quarter and year to date, respectively, and unit growth partially offset by refranchising.
−Removed: The quarterly decrease in Company restaurant margin percentage was driven by higher labor costs and commodity inflation partially offset by same-store sales growth.
−Removed: The year to date increase in Company restaurant margin percentage was driven by same-store sales growth partially offset by higher labor costs and commodity inflation.
+Added: The quarterly decrease in Company restaurant margin percentage was driven by higher labor costs, commodity inflation and an increase in other restaurant operating costs partially offset by same-store sales growth.
+Added: Company restaurant margin percentage for the year to date was flat with prior year, as same-store sales growth was offset by higher labor costs, commodity inflation and an increase in other restaurant operating costs.
Franchise and property revenues
The quarterly and year to date increases in Franchise and property revenues were driven by franchise same-store sales growth of 8% and 7% for the quarter and year to date, respectively, and unit growth.
−Removed: The quarterly and year to date increases in G&A, excluding the impacts of foreign currency translation, were driven by higher digital and technology expenses and higher headcount and salaries.
+Added: The quarterly and year to date increase in G&A, excluding the impacts of foreign currency translation, were driven by higher digital and technology expenses, higher headcount and salaries and higher share-based compensation offset partially by lower expenses related to our annual incentive compensation programs.
Operating Profit
4 unchanged sentences
airports) and includes units operating under both the Pizza Hut and Telepizza brands.
−Removed: Additionally, over 99% of the Pizza Hut Division units were operated by franchisees as of June 30, 2023.
+Added: Additionally, over 99% of the Pizza Hut Division units were operated by franchisees as of September 30, 2023.
Quarter ended Year to date
2 unchanged sentences
System Sales $ 3,243 $ 3,146 3 4 $ 9,780 $ 9,345 5 7
−Removed: Same-Store Sales Growth (Decline) % 4 (3) N/A N/A 5 (1) N/A N/A
+Added: Same-Store Sales Growth (Decline) % 1 1 N/A N/A 4 Even N/A N/A
Company sales $ 2 $ 4 (55) (55) $ 11 $ 14 (20) (20)
2 unchanged sentences
Total revenues $ 242 $ 237 2 2 $ 738 $ 716 3 4
−Removed: Company restaurant profit $ — $ — NM NM $ — $ — NM NM
+Added: Company restaurant profit $ — $ (1) 24 24 $ — $ (1) NM NM
Company restaurant margin % (9.0) % (5.4) % (3.6) ppts.
3 unchanged sentences
Franchise advertising and other services expense 91 91 — 1 273 266 (3) (3)
−Removed: Operating Profit $ 91 $ 93 (2) 1 $ 195 $ 195 Even 4
+Added: Operating Profit $ 97 $ 92 5 7 $ 292 $ 287 2 5
% Increase (Decrease)
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Franchise and property revenues
−Removed: The quarterly increase in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by franchise same-store sales growth of 4% and unit growth.
+Added: The quarterly increase in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by unit growth and franchise same-store sales growth of 2%.
The year to date increase in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by franchise same-store sales growth of 4% and unit growth, partially offset by lapping the prior year recognition of franchise fees related to unexercised development rights arising from a master franchise agreement.
−Removed: The quarterly increase in G&A, excluding the impacts of foreign currency translation, was driven by higher professional fees.
−Removed: The year to date increase in G&A, excluding the impacts of foreign currency translation, was driven by higher headcount and salaries and higher travel related expenses.
+Added: The quarterly increase in G&A, excluding the impacts of foreign currency translation, was driven by higher professional fees and higher headcount and salaries.
+Added: The year to date increase in G&A, excluding the impacts of foreign currency translation, was driven by higher headcount and salaries, higher professional fees and higher travel related expenses.
Operating Profit
−Removed: The quarterly increase in Operating Profit, excluding the impacts of foreign currency translation, was driven by same-store sales growth and unit growth, partially offset by higher G&A and current year bad debt expense lapping prior year net bad debt recoveries for past due franchise receivables .
−Removed: The year to date increase in Operating Profit, excluding the impacts of foreign currency translation, was driven by same-store sales growth and unit growth partially offset by higher G&A, lapping the upfront recognition of franchise fees related to unexercised development rights arising from a master franchise agreement and current year bad debt expense lapping prior year net bad debt recoveries for past due franchise receivables.
+Added: The quarterly increase in Operating Profit, excluding the impacts of foreign currency translation, was driven by unit growth and same-store sales growth, partially offset by higher G&A.
+Added: The year to date increase in Operating Profit, excluding the impacts of foreign currency translation, was driven by same-store sales growth and unit growth partially offset by higher G&A and lapping the prior year recognition of franchise fees related to unexercised development rights arising from a master franchise agreement.
Habit Burger Grill Division
1 unchanged sentence
The Company owned 85% of the Habit Burger Grill units in the U.S.
−Removed: as of June 30, 2023.
+Added: as of September 30, 2023.
Quarter ended Year to date
2 unchanged sentences
System Sales $ 163 $ 156 4 $ 489 $ 457 7
−Removed: Same-Store Sales Growth % Even (4) N/A Even Even N/A
+Added: Same-Store Sales Growth % (5) (1) N/A (2) (1) N/A
Total revenues $ 137 $ 131 4 $ 411 $ 395 4
−Removed: Operating Profit (Loss) $ 3 $ (2) NM $ (2) $ (10) 81
+Added: Operating Profit (Loss) $ (2) $ (4) 43 $ (4) $ (14) 70
Unit Count 9/30/2023 9/30/2022 % Increase (Decrease)
6 unchanged sentences
Corporate and unallocated G&A $ ( 68 ) $ ( 67 ) (1) $ ( 238 ) $ ( 203 ) (17)
−Removed: Unallocated Franchise and property expenses (See Note 8)
+Added: Unallocated Franchise and property income (expenses) (See Note 8)
1 — NM ( 1 ) ( 4 ) NM
10 unchanged sentences
Corporate and unallocated G&A
−Removed: The quarterly increase in Corporate and Unallocated G&A expense was driven by higher professional fees, higher current year expenses related to our annual incentive compensation programs, higher software costs and amortization and costs associated with the previously disclosed ransomware attack.
−Removed: The year to date increase in Corporate and Unallocated G&A expense was driven by costs associated with the previously disclosed ransomware attack, higher professional fees, higher current year expenses related to our annual incentive compensation programs and higher software costs and amortization.
+Added: The quarterly increase in Corporate and Unallocated G&A expense was driven by higher current year expenses related to our annual incentive compensation programs, partially offset by actions taken to mitigate the negative G&A impacts of the previously disclosed January 2023 ransomware attack.
+Added: The year to date increase in Corporate and Unallocated G&A expense was driven by higher current year expenses related to our annual incentive compensation programs and costs associated with the previously disclosed January 2023 ransomware attack.
Interest expense, net
−Removed: The quarterly and year to date decrease in Interest expense, net was primarily driven by lapping of $28 millon of expense in the prior year relating to the call premium and unamortized debt issuance costs written-off associated with the redemption of the 2025 Notes (as discussed in our 2022 Form 10-K) and higher interest income.
−Removed: This decrease was partially offset by a higher weighted average interest rate on our outstanding borrowings.
+Added: The quarterly increase in Interest expense, net was primarily driven by a higher weighted average interest rate, partially offset by higher interest income.
+Added: The year to date decrease in Interest expense, net was primarily driven by lapping of $28 million of expense in the prior year relating to the call premium and unamortized debt issuance costs written-off associated with the redemption of the 2025 Notes (as discussed in our 2022 Form 10-K) and higher interest income.
+Added: This was partially offset by a higher weighted average interest rate.
Consolidated Cash Flows
Net cash provided by operating activities was $1,155 million in 2023 versus $975 million in 2022.
−Removed: The increase was primarily driven by an increase in Operating profit before Special Items, timing of spending on advertising and a decrease in incentive compensation payments, partially offset by higher interest payments.
−Removed: Net cash provided by investing activities was $26 million in 2023 versus net cash used in investing activities of $64 million in 2022.
+Added: The increase was primarily driven by an increase in Operating profit and a decrease in incentive compensation payments, partially offset by higher interest payments.
+Added: Net cash used in investing activities was $4 million in 2023 versus $112 million in 2022.
The change was primarily driven by proceeds from the current year sale of KFC Russia, partially offset by higher current year capital spending.
Net cash used in financing activities was $921 million in 2023 versus $928 million in 2022.
−Removed: The change was primarily driven by lower net borrowings, partially offset by lower current year share repurchases.
+Added: The change was primarily driven by lower current year share repurchases, partially offset by lower net borrowings.
Liquidity and Capital Resources
2 unchanged sentences
It is our intent to use these operating cash flows to continue to invest in growing our business and pay a competitive dividend, with any remaining excess then returned to shareholders through share repurchases.
−Removed: To the extent operating cash flows plus other sources of cash do not cover our anticipated cash needs, we maintain a $1.25 billion Revolving Facility under our Credit Agreement which had $30 million outstanding as of June 30, 2023.
−Removed: We believe that our ongoing cash from operations, cash on hand, which was approximately $440 million at June 30, 2023, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months.
+Added: To the extent operating cash flows plus other sources of cash do not cover our anticipated cash needs, we maintain a $1.25 billion Revolving Facility under our Credit Agreement that was undrawn as of September 30, 2023.
+Added: We believe that our ongoing cash from operations, cash on hand, which was approximately $650 million at September 30, 2023, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months.
There have been no material changes to the disclosures made in Item 7 of the Company's 2022 Form 10-K regarding our material cash requirements.
1 unchanged sentence
Debt Instruments
−Removed: As of June 30, 2023, approximately 94%, including the impact of interest rate swaps, of our $11.6 billion of total debt outstanding, excluding the Revolving Facility balances, finance leases and debt issuance costs and discounts, is fixed with an effective overall interest rate of approximately 4.5%.
+Added: As of September 30, 2023, approximately 94%, including the impact of interest rate swaps, of our $11.6 billion of total debt outstanding, excluding finance leases and debt issuance costs and discounts, is fixed with an effective overall interest rate of approximately 4.6%.
We ended the quarter with a consolidated net leverage ratio of 4.4x EBITDA.
2 unchanged sentences
We have credit ratings of BB+ (Standard & Poor's)/Ba2 (Moody's) with a balance sheet consistent with highly-levered peer restaurant franchise companies.
−Removed: The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and discounts, as of June 30, 2023.
+Added: The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and discounts, as of September 30, 2023.
2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2037 2043 Total
1 unchanged sentence
Credit Agreement $ 8 $ 48 $ 53 662 15 1,399 2,185
−Removed: Revolving Facility 30 30
Subsidiary Senior Unsecured Notes 750 750
12 unchanged sentences
Quantitative and Qualitative Disclosures About Market Risk
−Removed: There were no material changes during the quarter ended June 30, 2023, to the disclosures made in Item 7A of the Company’s 2022 Form 10-K.
+Added: There were no material changes during the quarter ended September 30, 2023, to the disclosures made in Item 7A of the Company’s 2022 Form 10-K.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.