Yum Brands Inc 10-Q for FY2022 Q1
Yum Brands Inc (YUM)
10-Q
2022-05-10
For: 2022-03-31
View Original
Added on
April 11, 2026
About this 10-Q
Yum Brands Inc filed this 10-Q on May 10, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).
Headline figures
Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.55B
- up 4.1% from $1.49B a year earlier
- Net income
- $399M
- up 22.4% from net income of $326M a year earlier
- Diluted EPS
- $1.36
- up 27.1% from $1.07 a year earlier
| UNITED STATES | ||
| SECURITIES AND EXCHANGE COMMISSION | ||
| Washington, D. C. 20549 | ||
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES | |||||||||||
EXCHANGE ACT OF 1934 for the quarterly period ended | |||||||||||
| OR | |||||||||||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||||||
For the transition period from ____________ to _________________
Commission file number 1-13163
________________________
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |||||||||||||||||||
| incorporation or organization) | Identification No.) | |||||||||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||||||||
| Registrant’s telephone number, including area code: | | |||||||||||||||||||
| Securities registered pursuant to Section 12(b) of the Act | |||||||||||
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | |||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated Filer | ☐ | ||||||||||||
| Non-accelerated Filer | ☐ | Smaller Reporting Company | ||||||||||||
| Emerging Growth Company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
The number of shares outstanding of the registrant’s Common Stock as of May 5, 2022, was 285,163,809 shares.
YUM! BRANDS, INC.
INDEX
| Page | ||||||||
| No. | ||||||||
| Part I. | Financial Information | |||||||
| Item 1 - Financial Statements | ||||||||
Condensed Consolidated Statements of Income | ||||||||
Condensed Consolidated Statements of Comprehensive Income | ||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
Condensed Consolidated Balance Sheets | ||||||||
Condensed Consolidated Statements of Shareholders' Deficit | ||||||||
Notes to Condensed Consolidated Financial Statements | ||||||||
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||||||||
| Item 3 - Quantitative and Qualitative Disclosures About Market Risk | ||||||||
| Item 4 - Controls and Procedures | ||||||||
| Report of Independent Registered Public Accounting Firm | ||||||||
| Part II. | Other Information and Signatures | |||||||
| Item 1 - Legal Proceedings | ||||||||
| Item 1A - Risk Factors | ||||||||
| Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds | ||||||||
| Item 6 - Exhibits | ||||||||
| Signatures | ||||||||
2
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements
3
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | |||||||||||||||||||||||
| YUM! BRANDS, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
| (in millions, except per share data) | |||||||||||||||||||||||
| Quarter ended | |||||||||||||||||||||||
| Revenues | 3/31/2022 | 3/31/2021 | |||||||||||||||||||||
| Company sales | $ | $ | |||||||||||||||||||||
| Franchise and property revenues | |||||||||||||||||||||||
| Franchise contributions for advertising and other services | |||||||||||||||||||||||
| Total revenues | |||||||||||||||||||||||
| Costs and Expenses, Net | |||||||||||||||||||||||
| Company restaurant expenses | |||||||||||||||||||||||
| General and administrative expenses | |||||||||||||||||||||||
| Franchise and property expenses | |||||||||||||||||||||||
| Franchise advertising and other services expense | |||||||||||||||||||||||
| Refranchising (gain) loss | ( | ( | |||||||||||||||||||||
| Other (income) expense | ( | ( | |||||||||||||||||||||
| Total costs and expenses, net | |||||||||||||||||||||||
| Operating Profit | |||||||||||||||||||||||
| Investment (income) expense, net | ( | ||||||||||||||||||||||
| Other pension (income) expense | |||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||
| Income Before Income Taxes | |||||||||||||||||||||||
| Income tax (benefit) provision | ( | ||||||||||||||||||||||
| Net Income | $ | $ | |||||||||||||||||||||
| Basic Earnings Per Common Share | $ | $ | |||||||||||||||||||||
| Diluted Earnings Per Common Share | $ | $ | |||||||||||||||||||||
| Dividends Declared Per Common Share | $ | $ | |||||||||||||||||||||
| See accompanying Notes to Condensed Consolidated Financial Statements. | |||||||||||||||||||||||
4
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) | |||||||||||||||||||||||
| YUM! BRANDS, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Quarter ended | |||||||||||||||||||||||
| 3/31/2022 | 3/31/2021 | ||||||||||||||||||||||
| Net Income | $ | $ | |||||||||||||||||||||
| Other comprehensive income, 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 period | ( | ||||||||||||||||||||||
| ( | |||||||||||||||||||||||
Tax (expense) benefit | |||||||||||||||||||||||
| ( | |||||||||||||||||||||||
Changes in pension and post-retirement benefits | |||||||||||||||||||||||
Unrealized gains (losses) arising during the period | |||||||||||||||||||||||
Reclassification of (gains) losses into Net Income | |||||||||||||||||||||||
Tax (expense) benefit | ( | ( | |||||||||||||||||||||
Changes in derivative instruments | |||||||||||||||||||||||
Unrealized gains (losses) arising during the period | |||||||||||||||||||||||
Reclassification of (gains) losses into Net Income | |||||||||||||||||||||||
Tax (expense) benefit | ( | ( | |||||||||||||||||||||
| Other comprehensive income, net of tax | |||||||||||||||||||||||
| Comprehensive Income | $ | $ | |||||||||||||||||||||
| See accompanying Notes to Condensed Consolidated Financial Statements. | |||||||||||||||||||||||
5
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | |||||||||||
| YUM! BRANDS, INC. AND SUBSIDIARIES | |||||||||||
| (in millions) | |||||||||||
| Quarter ended | |||||||||||
| 3/31/2022 | 3/31/2021 | ||||||||||
| Cash Flows – Operating Activities | |||||||||||
| Net Income | $ | $ | |||||||||
| Depreciation and amortization | |||||||||||
| Refranchising (gain) loss | ( | ( | |||||||||
| Investment (income) expense, net | ( | ||||||||||
| Deferred income taxes | ( | ||||||||||
| Share-based compensation expense | |||||||||||
| Changes in accounts and notes receivable | |||||||||||
| Changes in prepaid expenses and other current assets | ( | ( | |||||||||
| Changes in accounts payable and other current liabilities | ( | ( | |||||||||
| Changes in income taxes payable | |||||||||||
| Other, net | |||||||||||
| Net Cash Provided by Operating Activities | |||||||||||
| Cash Flows – Investing Activities | |||||||||||
| Capital spending | ( | ( | |||||||||
| Proceeds from refranchising of restaurants | |||||||||||
| Other, net | ( | ||||||||||
| Net Cash Provided by (Used In) Investing Activities | ( | ||||||||||
| Cash Flows – Financing Activities | |||||||||||
| Proceeds from long-term debt | |||||||||||
| Repayments of long-term debt | ( | ( | |||||||||
| Revolving credit facility, three months or less, net | |||||||||||
| Short-term borrowings by original maturity | |||||||||||
More than three months - proceeds | |||||||||||
More than three months - payments | |||||||||||
Three months or less, net | |||||||||||
| Repurchase shares of Common Stock | ( | ( | |||||||||
| Dividends paid on Common Stock | ( | ( | |||||||||
| Other, net | ( | ( | |||||||||
| Net Cash Used in Financing Activities | ( | ( | |||||||||
| Effect of Exchange Rates on Cash and Cash Equivalents | |||||||||||
| Net Decrease in Cash and Cash Equivalents, Restricted Cash and Restricted Cash Equivalents | ( | ( | |||||||||
| Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - Beginning of Period | |||||||||||
| Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - End of Period | $ | $ | |||||||||
| See accompanying Notes to Condensed Consolidated Financial Statements. | |||||||||||
6
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||
| YUM! BRANDS, INC. AND SUBSIDIARIES | |||||||||||
| (in millions) | |||||||||||
(Unaudited) 3/31/2022 | 12/31/2021 | ||||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts and notes receivable, net | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total Current Assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Other assets | |||||||||||
| Deferred income taxes | |||||||||||
| Total Assets | $ | $ | |||||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | |||||||||||
| Current Liabilities | |||||||||||
| Accounts payable and other current liabilities | $ | $ | |||||||||
| Income taxes payable | |||||||||||
| Short-term borrowings | |||||||||||
| Total Current Liabilities | |||||||||||
| Long-term debt | |||||||||||
| Other liabilities and deferred credits | |||||||||||
| Total Liabilities | |||||||||||
| Shareholders’ Deficit | |||||||||||
Common Stock, | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total Shareholders’ Deficit | ( | ( | |||||||||
| Total Liabilities and Shareholders’ Deficit | $ | $ | |||||||||
| See accompanying Notes to Condensed Consolidated Financial Statements. | |||||||||||
7
| CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (Unaudited) | ||||||||||||||||||||||||||||||||
| YUM! BRANDS, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||
Quarters ended March 31, 2022 and 2021 | ||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Yum! Brands, Inc. | ||||||||||||||||||||||||||||||||
| Issued Common Stock | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Shareholders' Deficit | |||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||||||||||
| Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature | ( | ( | ||||||||||||||||||||||||||||||
Pension and post-retirement benefit plans (net of tax impact of $ | ||||||||||||||||||||||||||||||||
Net gain on derivative instruments (net of tax impact of $ | ||||||||||||||||||||||||||||||||
| Comprehensive Income | ||||||||||||||||||||||||||||||||
| Dividends declared | ( | ( | ||||||||||||||||||||||||||||||
| Repurchase of shares of Common Stock | ( | ( | ( | ( | ||||||||||||||||||||||||||||
| Employee share-based award exercises | ( | ( | ||||||||||||||||||||||||||||||
| Share-based compensation events | ||||||||||||||||||||||||||||||||
Balance at March 31, 2022 | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||
Balance at December 31, 2020 | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||||||||||
| Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature | ||||||||||||||||||||||||||||||||
Pension and post-retirement benefit plans (net of tax impact of $ | ||||||||||||||||||||||||||||||||
Net gain on derivative instruments (net of tax impact of $ | ||||||||||||||||||||||||||||||||
| Comprehensive Income | ||||||||||||||||||||||||||||||||
| Dividends declared | ( | ( | ||||||||||||||||||||||||||||||
| Repurchase of shares of Common Stock | ( | ( | ( | ( | ||||||||||||||||||||||||||||
| Employee share-based award exercises | ( | ( | ||||||||||||||||||||||||||||||
| Share-based compensation events | ||||||||||||||||||||||||||||||||
Balance at March 31, 2021 | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||
| See accompanying Notes to Condensed Consolidated Financial Statements. | ||||||||||||||||||||||||||||||||
8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Tabular amounts in millions, except per share data)
Note 1 - Financial Statement Presentation
We have prepared our accompanying unaudited Condensed Consolidated Financial Statements (“Financial Statements”) in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by Generally Accepted Accounting Principles in the United States (“GAAP”) for complete financial statements. Therefore, we suggest that the accompanying Financial Statements be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (“2021 Form 10-K”).
Yum! Brands, Inc. and its Subsidiaries (collectively referred to herein as the “Company,” “YUM,” “we,” “us” or “our”) franchise or operate a system of over 54,000 restaurants in more than 155 countries and territories. As of March 31, 2022, 98 % of these restaurants were owned and operated by franchisees. The Company’s KFC, Taco Bell and Pizza Hut brands are global leaders of the chicken, Mexican-style and pizza food categories, respectively. The Habit Burger Grill is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more.
As of March 31, 2022, YUM consisted of four operating segments:
•The KFC Division which includes our worldwide operations of the KFC concept
•The Taco Bell Division which includes our worldwide operations of the Taco Bell concept
•The Pizza Hut Division which includes our worldwide operations of the Pizza Hut concept
•The Habit Burger Grill Division which includes our worldwide operations of the Habit Burger Grill concept
YUM's fiscal year begins on January 1 and ends December 31 of each year, with each quarter comprised of three months. The majority of our U.S. subsidiaries, including, beginning in fiscal year 2022, our Habit Burger Grill Division, and certain international subsidiaries operate on a weekly periodic calendar where the first three quarters of each fiscal year consist of 12 weeks and the fourth quarter consists of 16 weeks in fiscal years with 52 weeks and 17 weeks in fiscal years with 53 weeks. Our remaining international subsidiaries operate on a monthly calendar similar to that on which YUM operates.
For fiscal year 2021, our Habit Burger Grill Division operated on a weekly periodic calendar where each quarter consisted of 13 weeks. The impact of this change in reporting calendar was not significant and accordingly, prior year amounts presented in these Condensed Consolidated Financial Statements have not been restated.
Our preparation of the accompanying Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
The accompanying Financial Statements include all normal and recurring adjustments considered necessary to present fairly, when read in conjunction with our 2021 Form 10-K, the results of the interim periods presented. Our results of operations, comprehensive income, cash flows and changes in shareholders' deficit for these interim periods are not necessarily indicative of the results to be expected for the full year.
Our significant interim accounting policies include the recognition of advertising and marketing costs, generally in proportion to revenue, and the recognition of income taxes using an estimated annual effective tax rate.
We have reclassified certain other items in the Financial Statements for the prior periods to be comparable with the classification for the quarter ended March 31, 2022. These reclassifications had no effect on previously reported Net Income.
Russia Invasion of Ukraine
Given the Russian invasion of Ukraine, during the quarter ended March 31, 2022, we announced the suspension of all investment and restaurant development efforts in Russia as well as the operations of our 70 company-owned KFC restaurants in Russia and that we are finalizing an agreement with our Pizza Hut master franchisee to suspend all Pizza Hut restaurant operations. In addition to these actions, we have begun a process aimed at transferring ownership to local operators.
9
Note 2 - Earnings Per Common Share (“EPS”)
| Quarter ended | ||||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||||
| Net Income | $ | $ | ||||||||||||||||||||||||
| Weighted-average common shares outstanding (for basic calculation) | ||||||||||||||||||||||||||
| Effect of dilutive share-based employee compensation | ||||||||||||||||||||||||||
| Weighted-average common and dilutive potential common shares outstanding (for diluted calculation) | ||||||||||||||||||||||||||
| Basic EPS | $ | $ | ||||||||||||||||||||||||
| Diluted EPS | $ | $ | ||||||||||||||||||||||||
Unexercised employee stock options and stock appreciation rights (in millions) excluded from the diluted EPS computation(a) | ||||||||||||||||||||||||||
(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.
Note 3 - Shareholders' Deficit
Under the authority of our Board of Directors, we repurchased shares of our Common Stock during the quarters ended March 31, 2022 and 2021 as indicated below. All amounts exclude applicable transaction fees.
| Shares Repurchased (thousands) | Dollar Value of Shares Repurchased | Remaining Dollar Value of Shares that may be Repurchased | ||||||||||||||||||||||||||||||||||||||||||
| Authorization Date | 2022 | 2021 | 2022 | 2021 | 2022 | |||||||||||||||||||||||||||||||||||||||
| November 2019 | $ | — | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| May 2021 | ||||||||||||||||||||||||||||||||||||||||||||
| Total | (a) | (b) | $ | (a) | $ | (b) | $ | |||||||||||||||||||||||||||||||||||||
(a) 2022 amount includes the effect of $64 million in share repurchases (0.5 million shares) with trade dates on, or prior to, March 31, 2022, but cash settlement dates subsequent to March 31, 2022.
(b) 2021 amount excludes the effect of $11 million in share repurchases (0.1 million shares) with trade dates on, or prior to December 31, 2020, but cash settlement dates subsequent to December 31, 2020.
In May 2021, our Board of Directors authorized share repurchases from July 1, 2021 through December 31, 2022, of up to $2 billion (excluding applicable transaction fees) of our outstanding Common Stock.
10
Changes in Accumulated other comprehensive loss (“AOCI”) are presented below.
| Translation Adjustments and Gains (Losses) From Intra-Entity Transactions of a Long-Term Nature | Pension and Post-Retirement Benefits | Derivative Instruments | Total | |||||||||||||||||||||||
| Balance at December 31, 2021, net of tax | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| OCI, net of tax | ||||||||||||||||||||||||||
Gains (losses) arising during the period classified into AOCI, net of tax | ( | |||||||||||||||||||||||||
(Gains) losses reclassified from AOCI, net of tax | ||||||||||||||||||||||||||
| ( | ||||||||||||||||||||||||||
| Balance at March 31, 2022, net of tax | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Note 4 - Other (Income) Expense
| Quarter ended | ||||||||||||||||||||||||||
| 3/31/2022 | 3/31/2021 | |||||||||||||||||||||||||
| Foreign exchange net (gain) loss | $ | ( | $ | |||||||||||||||||||||||
| Impairment and closure expense | ||||||||||||||||||||||||||
Other(a) | ( | ( | ||||||||||||||||||||||||
| Other (income) expense | $ | ( | $ | ( | ||||||||||||||||||||||
(a) The quarter ended March 31, 2021, includes a gain of $6 million associated with the sale of property.
Note 5 - Supplemental Balance Sheet Information
Accounts and Notes Receivable, net
The Company’s receivables are primarily generated from ongoing business relationships with our franchisees as a result of franchise and lease agreements. Trade receivables consisting of royalties from franchisees are generally due within 30 days of the period in which the corresponding sales occur and are classified as Accounts and notes receivable, net in our Condensed Consolidated Balance Sheets. Accounts and notes receivable, net also includes receivables generated from advertising cooperatives that we consolidate.
11
| 3/31/2022 | 12/31/2021 | ||||||||||
| Accounts and notes receivable, gross | $ | $ | |||||||||
| Allowance for doubtful accounts | ( | ( | |||||||||
Accounts and notes receivable, net(a) | $ | $ | |||||||||
(a) Accounts and notes receivable, net includes approximately $2 million in license fees at March 31, 2022 related to Yum China Holdings, Inc. ("Yum China") gross revenue during the quarter ended March 31, 2022 that Yum China is now disputing are due under the terms of the Master License Agreement (“MLA”) between the Company and Yum China. License fees related to such revenue have historically been paid by Yum China and we believe they continue to be due under the terms of the MLA.
Property, Plant and Equipment, net
| 3/31/2022 | 12/31/2021 | ||||||||||
| Property, plant and equipment, gross | $ | $ | |||||||||
| Accumulated depreciation and amortization | ( | ( | |||||||||
| Property, plant and equipment, net | $ | $ | |||||||||
Assets held-for-sale totaled $9 million and $12 million as of March 31, 2022 and December 31, 2021, respectively, and are included in Prepaid expenses and other current assets in our Condensed Consolidated Balance Sheets.
| Other Assets | 3/31/2022 | 12/31/2021 | |||||||||
Operating lease right-of-use assets(a) | $ | $ | |||||||||
| Franchise incentives | |||||||||||
Investment in Devyani International Limited (See Note 12) | |||||||||||
| Other | |||||||||||
| Other assets | $ | $ | |||||||||
(a) Non-current operating lease liabilities of $776 million and $793 million as of March 31, 2022 and December 31, 2021, respectively, are included in Other liabilities and deferred credits in our Condensed Consolidated Balance Sheets.
Reconciliation of Cash and Cash Equivalents for Condensed Consolidated Statements of Cash Flows
| 3/31/2022 | 12/31/2021 | ||||||||||
| Cash and cash equivalents as presented in Condensed Consolidated Balance Sheets | $ | $ | |||||||||
Restricted cash included in Prepaid expenses and other current assets(a) | |||||||||||
Restricted cash and restricted cash equivalents included in Other assets(b) | |||||||||||
| Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents as presented in Condensed Consolidated Statements of Cash Flows | $ | $ | |||||||||
(a) Restricted cash within Prepaid expenses and other current assets reflects the cash related to advertising cooperatives which we consolidate that can only be used to settle obligations of the respective cooperatives and cash held in reserve for Taco Bell Securitization interest payments.
(b) Primarily trust accounts related to our self-insurance program.
Note 6 - Income Taxes
| Quarter ended | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Income tax (benefit) provision | $ | ( | $ | ||||||||||||||||||||
| Effective tax rate | ( | % | % | ||||||||||||||||||||
12
Note 7 - Revenue Recognition
Disaggregation of Total Revenues
The following tables disaggregate revenue by Concept, for our two most significant markets based on Operating Profit and for all other markets. We believe this disaggregation best reflects the extent to which the nature, amount, timing and uncertainty of our revenues and cash flows are impacted by economic factors.
| Quarter ended 3/31/2022 | ||||||||||||||||||||||||||||||||
| KFC Division | Taco Bell Division | Pizza Hut Division | Habit Burger Grill Division | Total | ||||||||||||||||||||||||||||
| U.S. | ||||||||||||||||||||||||||||||||
| Company sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Franchise revenues | ||||||||||||||||||||||||||||||||
| Property revenues | ||||||||||||||||||||||||||||||||
| Franchise contributions for advertising and other services | ||||||||||||||||||||||||||||||||
| China | ||||||||||||||||||||||||||||||||
| Franchise revenues | ||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||
| Company sales | ||||||||||||||||||||||||||||||||
| Franchise revenues | ||||||||||||||||||||||||||||||||
| Property revenues | ||||||||||||||||||||||||||||||||
| Franchise contributions for advertising and other services | ||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
13
| Quarter ended 3/31/2021 | ||||||||||||||||||||||||||||||||
| KFC Division | Taco Bell Division | Pizza Hut Division | Habit Burger Grill Division | Total | ||||||||||||||||||||||||||||
| U.S. | ||||||||||||||||||||||||||||||||
| Company sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Franchise revenues | ||||||||||||||||||||||||||||||||
| Property revenues | ||||||||||||||||||||||||||||||||
| Franchise contributions for advertising and other services | ||||||||||||||||||||||||||||||||
| China | ||||||||||||||||||||||||||||||||
| Franchise revenues | ||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||
| Company sales | ||||||||||||||||||||||||||||||||
| Franchise revenues | ||||||||||||||||||||||||||||||||
| Property revenues | ||||||||||||||||||||||||||||||||
| Franchise contributions for advertising and other services | ||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
Our contract liabilities are comprised of unamortized upfront fees received from franchisees and are presented within Accounts payable and other current liabilities and Other liabilities and deferred credits in our Condensed Consolidated Balance Sheets. A summary of significant changes to the contract liability balance during 2022 is presented below.
| Deferred Franchise Fees | ||||||||
| Balance at December 31, 2021 | $ | |||||||
| Revenue recognized that was included in unamortized upfront fees received from franchisees at the beginning of the period | ( | |||||||
| Increase for upfront fees associated with contracts that became effective during the period, net of amounts recognized as revenue during the period | ||||||||
| Balance at March 31, 2022 | $ | |||||||
We expect to recognize contract liabilities as revenue over the remaining term of the associated franchise agreement as follows:
| Less than 1 year | $ | |||||||
| 1 - 2 years | ||||||||
| 2 - 3 years | ||||||||
| 3 - 4 years | ||||||||
| 4 - 5 years | ||||||||
| Thereafter | ||||||||
| Total | $ | |||||||
Note 8 - Reportable Operating Segments
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| Quarter ended | |||||||||||||||||||||||
| Revenues | 2022 | 2021 | |||||||||||||||||||||
| KFC Division | $ | $ | |||||||||||||||||||||
| Taco Bell Division | |||||||||||||||||||||||
| Pizza Hut Division | |||||||||||||||||||||||
| Habit Burger Grill Division | |||||||||||||||||||||||
| $ | $ | ||||||||||||||||||||||
| Quarter ended | |||||||||||||||||||||||
| Operating Profit | 2022 | 2021 | |||||||||||||||||||||
| KFC Division | $ | $ | |||||||||||||||||||||
| Taco Bell Division | |||||||||||||||||||||||
| Pizza Hut Division | |||||||||||||||||||||||
| Habit Burger Grill Division | ( | ||||||||||||||||||||||
| Corporate and unallocated G&A expenses | ( | ( | |||||||||||||||||||||
| Unallocated Company restaurant expenses | |||||||||||||||||||||||
| Unallocated Franchise and property expenses | |||||||||||||||||||||||
| Unallocated Refranchising gain (loss) | |||||||||||||||||||||||
| Unallocated Other income (expense) | ( | ||||||||||||||||||||||
| Operating Profit | $ | $ | |||||||||||||||||||||
Investment income (expense), net(a) | |||||||||||||||||||||||
| Other pension income (expense) | ( | ||||||||||||||||||||||
Interest expense, net(b) | ( | ( | |||||||||||||||||||||
| Income before income taxes | $ | $ | |||||||||||||||||||||
Our chief operating decision maker (“CODM”) does not consider the impact of Corporate and unallocated amounts when assessing Divisional segment performance. As such, we do not allocate such amounts to our Divisional segments for performance reporting purposes.
(a)Includes changes in the value of our investment in Devyani International Limited (see Note 12).
(b)Includes fees expensed and unamortized debt-issuance costs written off totaling $12 million related to the refinancing of the Credit Agreement (as described within our 2021 Form 10-K) during the quarter ended March 31, 2021.
Note 9 - Pension Benefits
15
The components of net periodic benefit cost associated with our U.S. pension plans are as follows:
| Quarter ended | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Service cost | $ | $ | |||||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Expected return on plan assets | ( | ( | |||||||||||||||||||||
| Amortization of net loss | |||||||||||||||||||||||
| Amortization of prior service cost | |||||||||||||||||||||||
| Net periodic benefit cost | $ | $ | |||||||||||||||||||||
Note 10 - Short-term Borrowings and Long-term Debt
| Short-term Borrowings | 3/31/2022 | 12/31/2021 | ||||||||||||
| Current maturities of long-term debt | $ | $ | ||||||||||||
| Less current portion of debt issuance costs and discounts | ( | ( | ||||||||||||
| Short-term borrowings | $ | $ | ||||||||||||
| Long-term Debt | ||||||||||||||
| Securitization Notes | $ | $ | ||||||||||||
| Subsidiary Senior Unsecured Notes | ||||||||||||||
| Revolving Facility | ||||||||||||||
| Term Loan A Facility | ||||||||||||||
| Term Loan B Facility | ||||||||||||||
| YUM Senior Unsecured Notes | ||||||||||||||
| Finance lease obligations | ||||||||||||||
| $ | $ | |||||||||||||
| Less debt issuance costs and discounts | ( | ( | ||||||||||||
| Less current maturities of long-term debt | ( | ( | ||||||||||||
| Long-term debt | $ | $ | ||||||||||||
Details of our Short-term borrowings and Long-term debt as of December 31, 2021 can be found within our 2021 Form 10-K.
On February 23, 2022, Yum! Brands, Inc. issued a notice of redemption for the $600 million aggregate principal amount of 7.75 % YUM Senior Unsecured Notes due April 1, 2025 (the “2025 Notes”). The 2025 Notes were redeemed subsequent to the first quarter, on April 1, 2022, at an amount equal to 103.875 % of the aggregate principal amount of the 2025 Notes, reflecting a $23 million “call premium”, plus accrued and unpaid interest to the date of redemption.
Also subsequent to the first quarter, on April 1, 2022, Yum! Brands, Inc. issued $1.0 billion aggregate principal amount of 5.375 % YUM Senior Unsecured Notes due April 1, 2032 (the “April 2032 Notes”). The net proceeds from the April 2032 Notes were used to fund the redemption of the 2025 Notes discussed above and for general corporate purposes. The redemption of the 2025 Notes and issuance of the April 2032 Notes are not reflected in the table above.
Cash paid for interest during the quarter ended March 31, 2022, was $90 million. During the quarter ended March 31, 2021, fees expensed as well as previously recorded unamortized debt issuance costs written off totaling $12 million were recognized within Interest expense, net due to the refinancing of our Credit Agreement. Excluding these amounts associated with the Credit Agreement refinancing, cash paid for interest during the quarter ended March 31, 2021, was $88 million.
Note 11 - Derivative Instruments
16
Interest Rate Swaps
We have entered into interest rate swaps, with the objective of reducing our exposure to interest rate risk for a portion of our variable-rate debt interest payments primarily under our Term Loan B Facility. At both March 31, 2022 and December 31, 2021, we had interest rate swaps expiring in March 2025 with notional amounts of $1.5
Gains or losses on the interest rate swaps are reported as a component of AOCI and reclassified into Interest expense, net in our Condensed Consolidated Statements of Income in the same period or periods during which the related hedged interest payments affect earnings. Through March 31, 2022, the swaps were highly effective cash flow hedges.
As a result of the use of interest rate swaps, the Company is exposed to risk that the counterparties will fail to meet their contractual obligations. To mitigate the counterparty credit risk, we only enter into contracts with major financial institutions carefully selected based upon their credit ratings and other factors, and continually assess the creditworthiness of counterparties. At March 31, 2022, all of the counterparties to our interest rate swaps had investment grade ratings according to the three major ratings agencies. To date, all counterparties have performed in accordance with their contractual obligations.
Gains and losses on these interest rate swaps recognized in OCI and reclassifications from AOCI into Net Income were as follows:
| Quarter ended | |||||||||||||||||||||||||||||||||||||||||||||||
| Gains/(Losses) Recognized in OCI | (Gains)/Losses Reclassified from AOCI into Net Income | ||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||||||
| Interest rate swaps | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Income tax benefit/(expense) | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2022, the estimated net loss included in AOCI related to our cash flow hedges that will be reclassified into earnings in the next 12 months is $17 million, based on current LIBOR interest rates.
Total Return Swaps
We have entered into total return swap derivative contracts, with the objective of reducing our exposure to market-driven changes in certain of the liabilities associated with compensation deferrals into our Executive Income Deferral (“EID”) plan. While these total return swaps represent economic hedges, we have not designated them as hedges for accounting purposes. As a result, the changes in the fair value of these derivatives are recognized immediately in earnings within General and administrative expenses in our Condensed Consolidated Statements of Income largely offsetting the changes in the associated EID liabilities. The fair value associated with the total return swaps as of March 31, 2022, was not significant.
See Note 12 for the fair value of our derivative assets and liabilities.
Note 12 - Fair Value Disclosures
17
| 3/31/2022 | 12/31/2021 | ||||||||||||||||||||||
| Carrying Value | Fair Value (Level 2) | Carrying Value | Fair Value (Level 2) | ||||||||||||||||||||
Securitization Notes(a) | $ | $ | $ | $ | |||||||||||||||||||
Subsidiary Senior Unsecured Notes(b) | |||||||||||||||||||||||
Term Loan A Facility(b) | |||||||||||||||||||||||
Term Loan B Facility(b) | |||||||||||||||||||||||
YUM Senior Unsecured Notes(b) | |||||||||||||||||||||||
(a) We estimated the fair value of the Securitization Notes using market quotes and calculations. The markets in which the Securitization Notes trade are not considered active markets.
(b) We estimated the fair value of the YUM and Subsidiary Senior Unsecured Notes, Term Loan A Facility and Term Loan B Facility using market quotes and calculations based on market rates.
Recurring Fair Value Measurements
The Company has interest rate swaps and other investments, all of which are required to be measured at fair value on a recurring basis (see Note 11 for discussion regarding derivative instruments). The following table presents fair values for those assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the measurements fall.
| Fair Value | ||||||||||||||||||||||||||
| Condensed Consolidated Balance Sheet | Level | 3/31/2022 | 12/31/2021 | |||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
Other Investments | Other assets | 1 | ||||||||||||||||||||||||
| Other Investments | Other assets | 3 | ||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
Interest Rate Swaps | Accounts payable and other current liabilities | 2 | ||||||||||||||||||||||||
Interest Rate Swaps | Other liabilities and deferred credits | 2 | ||||||||||||||||||||||||
The fair value of the Company’s interest rate swaps were determined based on the present value of expected future cash flows considering the risks involved, including nonperformance risk, and using discount rates appropriate for the duration based on observable inputs.
The other investments primarily include an approximate 5 % minority interest in Devyani International Limited (“Devyani”), an entity that operates KFC and Pizza Hut franchised units in India, with a fair value of Indian Rupee 9.3 billion (or approximately $122 million) and Indian Rupee 8.8 billion (or approximately $118 million) at March 31, 2022 and December 31, 2021, respectively. For the quarter ended March 31, 2022, we recognized pre-tax investment income of Indian Rupee 540 million (or approximately $7 million) related to changes in fair value of our investment in Devyani.
Note 13 - Contingencies
Internal Revenue Service Proposed Adjustment
18
Lease Guarantees
As a result of having assigned our interest in obligations under real estate leases as a condition to the refranchising of certain Company-owned restaurants, and guaranteeing certain other leases, we are frequently secondarily liable on lease agreements. These leases have varying terms, the latest of which expires in 2065 . As of March 31, 2022, the potential amount of undiscounted payments we could be required to make in the event of non-payment by the primary lessee was approximately $400 million. The present value of these potential payments discounted at our pre-tax cost of debt at March 31, 2022, was approximately $325 million. Our franchisees are the primary lessees under the vast majority of these leases. We generally have cross-default provisions with these franchisees that would put them in default of their franchise agreement in the event of non-payment under the lease. We believe these cross-default provisions significantly reduce the risk that we will be required to make payments under these leases, although such risk may not be reduced in the context of a bankruptcy or other similar restructuring of a large franchisee or group of franchisees. The liability recorded for our expected losses under such leases as of March 31, 2022, was not material.
Legal Proceedings
We are subject to various claims and contingencies related to lawsuits, real estate, environmental and other matters arising in the normal course of business. An accrual is recorded with respect to claims or contingencies for which a loss is determined to be probable and reasonably estimable.
Yum! Restaurants India Private Limited (“YRIPL”), a YUM subsidiary that operates KFC and Pizza Hut restaurants in India, is the subject of a regulatory enforcement action in India (the “Action”). The Action alleges, among other things, that KFC International Holdings, Inc. and Pizza Hut International failed to satisfy certain conditions imposed by the Secretariat for Industrial Approval in 1993 and 1994 when those companies were granted permission for foreign investment and operation in India. The conditions at issue include an alleged minimum investment commitment and store build requirements as well as limitations on the remittance of fees outside of India.
The Action originated with a complaint and show cause notice filed in 2009 against YRIPL by the Deputy Director of the Directorate of Enforcement (“DOE”) of the Indian Ministry of Finance following an income tax audit for the years 2002 and 2003. The matter was argued at various hearings in 2015, but no order was issued. Following a change in the incumbent official holding the position of Special Director of DOE (the “Special Director”), the matter resumed in 2018 and several additional hearings were conducted.
We are currently engaged in various other legal proceedings and have certain unresolved claims pending, the ultimate liability for which, if any, cannot be determined at this time. However, based upon consultation with legal counsel, we are of the opinion that such proceedings and claims are not expected to have a material adverse effect, individually or in the aggregate, on our Consolidated Financial Statements.
19
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction and Overview
The following Management's Discussion and Analysis (“MD&A”), should be read in conjunction with the unaudited Condensed Consolidated Financial Statements (“Financial Statements”), the Forward-Looking Statements and our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, (“2021 Form 10-K”). All Note references herein refer to the Notes to the Financial Statements. Tabular amounts are displayed in millions of U.S. dollars except per share and unit count amounts, or as otherwise specifically identified. Percentages may not recompute due to rounding.
Yum! Brands, Inc. and its Subsidiaries (collectively referred to herein as the “Company,” “YUM,” “we,” “us” or “our”) franchise or operate a system of over 54,000 restaurants in more than 155 countries and territories, primarily under the concepts of KFC, Taco Bell, Pizza Hut and The Habit Burger Grill (collectively, the “Concepts”). The Company’s KFC, Taco Bell and Pizza Hut brands are global leaders of the chicken, Mexican-style and pizza food categories, respectively. The Habit Burger Grill, is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more. Of the over 54,000 restaurants, 98% are operated by franchisees.
YUM currently consists of four operating segments:
•The KFC Division which includes our worldwide operations of the KFC concept
•The Taco Bell Division which includes our worldwide operations of the Taco Bell concept
•The Pizza Hut Division which includes our worldwide operations of the Pizza Hut concept
•The Habit Burger Grill Division which includes our worldwide operations of the Habit Burger Grill concept
Through our Recipe for Growth and Good we intend to unlock the growth potential of our Concepts and YUM, drive increased collaboration across our Concepts and geographies and consistently deliver better customer experiences, improved unit economics and higher rates of growth. Key enablers include accelerated use of technology and better leverage of our systemwide scale.
Our Recipe for Growth is based on four key drivers:
•Unrivaled Culture and Talent: Leverage our culture and people capability to fuel brand performance and franchise success
•Unmatched Operating Capability: Recruit and equip the best restaurant operators in the world to deliver great customer experiences
•Relevant, Easy and Distinctive Brands: Innovate and elevate iconic restaurant brands people trust and champion
•Bold Restaurant Development: Drive market and franchise expansion with strong economics and value
Our global citizenship and sustainability strategy, called the Recipe for Good, reflects our priorities for socially responsible growth, risk management and sustainable stewardship of our people, food and planet.
We intend for this MD&A to provide the reader with information that will assist in understanding our results of operations, including performance metrics that management uses to assess the Company's performance. Throughout this MD&A, we commonly discuss the following performance metrics:
•Same-store sales growth is the estimated percentage change in system sales of all restaurants that have been open and in the YUM system for one year or more, including those temporarily closed. From time-to-time restaurants may be temporarily closed due to remodeling or image enhancement, rebuilding, natural disasters, health epidemic or pandemic, landlord disputes or other issues. The system sales of restaurants we deem temporarily closed remain in our base for purposes of determining same-store sales growth and the restaurants remain in our unit count (see below). Throughout 2021 we had a significant number of restaurants that were temporarily closed including restaurants closed due to government and landlord restrictions as a result of COVID-19. Additionally, due to our decision in the quarter ended March 31, 2022, to suspend the operations of our 70 company-owned KFC stores in Russia, such restaurants are considered temporarily closed at March 31, 2022 for purposes of our same-store sales growth calculation and unit count presentation. We believe same-store sales growth is useful to investors because our results are heavily dependent on the results of our Concepts' existing store base. Additionally, same-store sales growth is reflective of the strength of our Brands, the effectiveness of our operational and advertising initiatives and local economic and consumer trends.
•Gross unit openings reflects new openings by us and our franchisees. Net new unit growth reflects gross unit openings offset by permanent store closures, by us and our franchisees. To determine whether a restaurant meets the definition of a
20
unit we consider whether the restaurant has operations that are ongoing and independent from another YUM unit, serves the primary product of one of our Concepts, operates under a separate franchise agreement (if operated by a franchisee) and has substantial and sustainable sales. We believe gross unit openings and net new unit growth are useful to investors because we depend on new units for a significant portion of our growth. Additionally, gross unit openings and net new unit growth are generally reflective of the economic returns to us and our franchisees from opening and operating our Concept restaurants.
•System sales and System sales excluding the impacts of foreign currency translation (“FX”) reflect the results of all restaurants regardless of ownership, including Company-owned and franchise restaurants. Sales at franchise restaurants typically generate ongoing franchise and license fees for the Company at a rate of 3% to 6% of sales. Increasingly, customers are paying a fee to a third party to deliver or facilitate the ordering of our Concepts' products. We also include in System sales any portion of the amount customers pay these third parties for which the third party is obligated to pay us a license fee as a percentage of such amount. Franchise restaurant sales and fees paid by customers to third parties to deliver or facilitate the ordering of our Concepts' products are not included in Company sales on the Condensed Consolidated Statements of Income; however, any resulting franchise and license fees we receive 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 our primary revenue drivers, Company and franchise same-store sales as well as net unit growth.
In addition to the results provided in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”), the Company provides the following non-GAAP measurements:
•Diluted Earnings Per Share excluding Special Items (as defined below);
•Effective Tax Rate excluding Special Items;
•Core Operating Profit. Core Operating Profit excludes Special Items and FX and we use Core Operating Profit for the purposes of evaluating performance internally;
•Company restaurant profit and Company restaurant margin as a percentage of sales (as defined below).
These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of these non-GAAP measurements provide additional information to investors to facilitate the comparison of past and present operations.
Special Items are not included in any of our Division segment results as the Company does not believe they are indicative of our ongoing operations due to their size and/or nature. Our chief operating decision maker does not consider the impact of Special Items when assessing segment performance.
Company restaurant profit is defined as Company sales less Company restaurant expenses, both of which appear on the face of our Condensed Consolidated Statements of Income. Company restaurant expenses include those expenses incurred directly by our Company-owned restaurants in generating Company sales, including cost of food and paper, cost of restaurant-level labor, rent, depreciation and amortization of restaurant-level assets and advertising expenses incurred by and on behalf of that Company restaurant. Company restaurant margin as a percentage of sales (“Company restaurant margin %”) is defined as Company restaurant profit divided by Company sales. We use Company restaurant profit for the purposes of internally evaluating the performance of our Company-owned restaurants and we believe Company restaurant profit provides useful information to investors as to the profitability of our Company-owned restaurants. In calculating Company restaurant profit, the Company excludes revenues and expenses directly associated with our franchise operations as well as non-restaurant-level costs included in General and administrative expenses, some of which may support Company-owned restaurant operations. The Company also excludes restaurant-level asset impairment and closures expenses, which have historically not been significant, from the determination of Company restaurant profit as such expenses are not believed to be indicative of ongoing operations. Company restaurant profit and Company restaurant margin % as presented may not be comparable to other similarly titled measures of other companies in the industry.
Certain performance metrics and non-GAAP measurements are presented excluding the impact of FX. These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the FX impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.
21
Results of Operations
Summary
All comparisons within this summary are versus the same period a year ago.
For the quarter ended March 31, 2022, GAAP diluted EPS was $1.36 per share, an increase from $1.07 per share in the quarter ended March 31, 2021, and diluted EPS, excluding Special Items, was $1.05 per share, a decrease from $1.07 per share in the quarter ended March 31, 2021.
Quarterly Financial highlights:
| % Change | |||||||||||||||||
| System Sales, ex FX | Same-Store Sales | Units | GAAP Operating Profit | Core Operating Profit | |||||||||||||
| KFC Division | +9 | +3 | +8 | (3) | +1 | ||||||||||||
| Taco Bell Division | +8 | +5 | +5 | +4 | +4 | ||||||||||||
| Pizza Hut Division | +3 | Even | +5 | Even | +2 | ||||||||||||
| Worldwide | +8 | +3 | +6 | (6) | (5) | ||||||||||||
Additionally:
•During the quarter, 997 gross units were opened contributing to the addition of 628 net new units.
•During the quarter, we repurchased 3.4 million shares totaling $407 million at an average price of $121.
•Foreign currency translation unfavorably impacted Divisional Operating Profit for the quarter by $14 million.
22
Worldwide
GAAP Results
| Quarter ended | |||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | % B/(W) | |||||||||||||||||||||||||||||||||||||||
| Company sales | $ | 470 | $ | 476 | (1) | ||||||||||||||||||||||||||||||||||||
| Franchise and property revenues | 714 | 658 | 9 | ||||||||||||||||||||||||||||||||||||||
| Franchise contributions for advertising and other services | 363 | 352 | 3 | ||||||||||||||||||||||||||||||||||||||
| Total revenues | 1,547 | 1,486 | 4 | ||||||||||||||||||||||||||||||||||||||
| Company restaurant expenses | 402 | 392 | (3) | ||||||||||||||||||||||||||||||||||||||
| G&A expenses | 253 | 206 | (23) | ||||||||||||||||||||||||||||||||||||||
| Franchise and property expenses | 32 | 23 | (42) | ||||||||||||||||||||||||||||||||||||||
| Franchise advertising and other services expense | 361 | 343 | (5) | ||||||||||||||||||||||||||||||||||||||
| Refranchising (gain) loss | (4) | (15) | (76) | ||||||||||||||||||||||||||||||||||||||
| Other (income) expense | (6) | (6) | NM | ||||||||||||||||||||||||||||||||||||||
| Total costs and expenses, net | 1,038 | 943 | (10) | ||||||||||||||||||||||||||||||||||||||
| Operating Profit | 509 | 543 | (6) | ||||||||||||||||||||||||||||||||||||||
| Investment (income) expense, net | (7) | — | NM | ||||||||||||||||||||||||||||||||||||||
| Other pension (income) expense | — | 3 | 83 | ||||||||||||||||||||||||||||||||||||||
| Interest expense, net | 118 | 131 | 11 | ||||||||||||||||||||||||||||||||||||||
| Income before income taxes | 398 | 409 | (3) | ||||||||||||||||||||||||||||||||||||||
| Income tax (benefit) provision | (1) | 83 | 101 | ||||||||||||||||||||||||||||||||||||||
| Net Income | $ | 399 | $ | 326 | 22 | ||||||||||||||||||||||||||||||||||||
Diluted EPS(a) | $ | 1.36 | $ | 1.07 | 27 | ||||||||||||||||||||||||||||||||||||
| Effective tax rate | (0.2) | % | 20.2 | % | 20.4 | ppts. | |||||||||||||||||||||||||||||||||||
(a)See Note 2 for the number of shares used in this calculation.
Performance Metrics
| Unit Count | 3/31/2022 | 3/31/2021 | % Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| Franchise | 52,990 | 49,714 | 7 | |||||||||||||||||||||||||||||||||||
| Company-owned | 1,062 | 1,074 | (1) | |||||||||||||||||||||||||||||||||||
| Total | 54,052 | 50,788 | 6 | |||||||||||||||||||||||||||||||||||
| Quarter ended | ||||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||||
| Same-store Sales Growth (Decline) % | 3 | 9 | ||||||||||||||||||||||||
| System Sales Growth (Decline) %, reported | 6 | 14 | ||||||||||||||||||||||||
| System Sales Growth (Decline) %, excluding FX | 8 | 11 | ||||||||||||||||||||||||
23
Our system sales breakdown by Company and franchise sales was as follows:
| Quarter ended | ||||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||||
| Consolidated | ||||||||||||||||||||||||||
Company sales(a) | $ | 470 | $ | 476 | ||||||||||||||||||||||
| Franchise sales | 13,676 | 12,909 | ||||||||||||||||||||||||
| System sales | 14,146 | 13,385 | ||||||||||||||||||||||||
Foreign Currency Impact on System sales(b) | (275) | N/A | ||||||||||||||||||||||||
| System sales, excluding FX | $ | 14,421 | $ | 13,385 | ||||||||||||||||||||||
| KFC Division | ||||||||||||||||||||||||||
Company sales(a) | $ | 126 | $ | 133 | ||||||||||||||||||||||
| Franchise sales | 7,607 | 7,140 | ||||||||||||||||||||||||
| System sales | 7,733 | 7,273 | ||||||||||||||||||||||||
Foreign Currency Impact on System sales(b) | (229) | N/A | ||||||||||||||||||||||||
| System sales, excluding FX | $ | 7,962 | $ | 7,273 | ||||||||||||||||||||||
| Taco Bell Division | ||||||||||||||||||||||||||
Company sales(a) | $ | 214 | $ | 208 | ||||||||||||||||||||||
| Franchise sales | 2,894 | 2,672 | ||||||||||||||||||||||||
| System sales | 3,108 | 2,880 | ||||||||||||||||||||||||
Foreign Currency Impact on System sales(b) | (5) | N/A | ||||||||||||||||||||||||
| System sales, excluding FX | $ | 3,113 | $ | 2,880 | ||||||||||||||||||||||
| Pizza Hut Division | ||||||||||||||||||||||||||
Company sales(a) | $ | 5 | $ | 14 | ||||||||||||||||||||||
| Franchise sales | 3,155 | 3,082 | ||||||||||||||||||||||||
| System sales | 3,160 | 3,096 | ||||||||||||||||||||||||
Foreign Currency Impact on System sales(b) | (41) | N/A | ||||||||||||||||||||||||
| System sales, excluding FX | $ | 3,201 | $ | 3,096 | ||||||||||||||||||||||
| Habit Burger Grill Division | ||||||||||||||||||||||||||
Company sales(a) | $ | 125 | $ | 121 | ||||||||||||||||||||||
| Franchise sales | 20 | 15 | ||||||||||||||||||||||||
| System sales | 145 | 136 | ||||||||||||||||||||||||
Foreign Currency Impact on System sales(b) | — | N/A | ||||||||||||||||||||||||
| System sales, excluding FX | $ | 145 | $ | 136 | ||||||||||||||||||||||
(a)Company sales represents sales from our Company-operated stores as presented on our Condensed Consolidated Statements of Income.
(b) The foreign currency impact on System sales is presented in relation only to the immediately preceding year presented. When determining applicable System sales growth percentages, the System sales excluding FX for the current year should be compared to the prior year System sales.
| Non-GAAP Items | ||||||||||||||||||||||||||
| Non-GAAP Items, along with the reconciliation to the most comparable GAAP financial measure, as presented below. | ||||||||||||||||||||||||||
| Quarter ended | ||||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||||
| Core Operating Profit Growth (Decline) % | (5) | 33 | ||||||||||||||||||||||||
| Diluted EPS Growth (Decline) %, excluding Special Items | (1) | 67 | ||||||||||||||||||||||||
| Effective Tax Rate excluding Special Items | 20.3 | % | 20.2 | % | ||||||||||||||||||||||
24
| Quarter ended | ||||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||||
| Company restaurant profit | $ | 68 | $ | 84 | ||||||||||||||||||||||
| Company restaurant margin % | 14.5 | % | 17.6 | % | ||||||||||||||||||||||
| Quarter ended | ||||||||||||||||||||||||||
| Detail of Special Items | 2022 | 2021 | ||||||||||||||||||||||||
Refranchising gain (loss)(a) | $ | 4 | $ | 2 | ||||||||||||||||||||||
Profits from operations in Russia(b) | 7 | — | ||||||||||||||||||||||||
| Other Special Items Income (Expense) | (1) | — | ||||||||||||||||||||||||
| Special Items Income (Expense) - Operating Profit | 10 | 2 | ||||||||||||||||||||||||
Tax (Expense) Benefit on Special Items(c) | (2) | (1) | ||||||||||||||||||||||||
Tax Benefit - Newly issued U.S. foreign tax credit regulations(d) | 82 | — | ||||||||||||||||||||||||
| Special Items Income (Expense), net of tax | $ | 90 | $ | 1 | ||||||||||||||||||||||
| Average diluted shares outstanding | 294 | 305 | ||||||||||||||||||||||||
| Special Items diluted EPS | $ | 0.31 | $ | — | ||||||||||||||||||||||
(a)Due to their size and volatility, we have reflected as Special Items those refranchising gains and losses that were recorded in connection with our previously announced plans to have at least 98% franchise restaurant ownership by the end of 2018. As such, refranchising gains and losses recorded during 2022 and 2021 as Special Items are directly associated with restaurants that were refranchised prior to the end of 2018.
During the quarters ended March 31, 2022 and 2021, we recorded net refranchising gains of $4 million and $2 million, respectively, that have been reflected as a Special Item.
Additionally, we recorded net refranchising gains of less than $1 million and $13 million during the quarters ended March 31, 2022 and 2021, respectively, that have not been reflected as Special Items. These net gains relate to refranchising of restaurants in 2022 and 2021 that were not part of our aforementioned plans to achieve 98% franchise ownership and that we believe are now more indicative of our expected ongoing refranchising activity.
(b)Our operating results for the quarter ended March 31, 2022, continue to reflect revenues and expenses related to Russia within their historical financial statement line items and operating segments. However, we have reclassed net Operating Profit attributable to Russia subsequent to the date of our pledge to direct any future net profits from operations in Russia to humanitarian efforts that had not yet been directed to humanitarian efforts as of March 31, 2022, from the Division segment results in which they were earned to Corporate and unallocated. Such Operating Profit has been reflected within Other (income) expense and reflected as a Special Item. See further discussion of the situation in Russia within this Management's Discussion and Analysis.
(c)Tax (Expense) Benefit on Special Items was determined based upon the impact of the nature, as well as the jurisdiction of the respective individual components within Special Items.
(d)In January 2022, the U.S. Treasury published new regulations impacting foreign tax credit utilization beginning in the Company’s 2022 tax year. These regulations make foreign taxes paid to certain countries no longer creditable in the U.S. As a result, we reversed a valuation allowance associated with existing foreign tax credit carryforwards that we now believe will be used to offset these now non-creditable taxes in 2022 and future years. This valuation allowance reversal resulted in a one-time tax benefit of $82 million that was reflected as a Special Item.
25
| Reconciliation of GAAP Operating Profit to Core Operating Profit | Quarter ended | |||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||||
| Consolidated | ||||||||||||||||||||||||||
| GAAP Operating Profit | $ | 509 | $ | 543 | ||||||||||||||||||||||
| Special Items Income (Expense) | 10 | 2 | ||||||||||||||||||||||||
Foreign Currency Impact on Divisional Operating Profit(a) | (14) | N/A | ||||||||||||||||||||||||
| Core Operating Profit | $ | 513 | $ | 541 | ||||||||||||||||||||||
| KFC Division | ||||||||||||||||||||||||||
| GAAP Operating Profit | $ | 291 | $ | 300 | ||||||||||||||||||||||
Foreign Currency Impact on Divisional Operating Profit(a) | (12) | N/A | ||||||||||||||||||||||||
| Core Operating Profit | $ | 303 | $ | 300 | ||||||||||||||||||||||
| Taco Bell Division | ||||||||||||||||||||||||||
| GAAP Operating Profit | $ | 185 | $ | 178 | ||||||||||||||||||||||
Foreign Currency Impact on Divisional Operating Profit(a) | — | N/A | ||||||||||||||||||||||||
| Core Operating Profit | $ | 185 | $ | 178 | ||||||||||||||||||||||
| Pizza Hut Division | ||||||||||||||||||||||||||
| GAAP Operating Profit | $ | 102 | $ | 102 | ||||||||||||||||||||||
Foreign Currency Impact on Divisional Operating Profit(a) | (2) | N/A | ||||||||||||||||||||||||
| Core Operating Profit | $ | 104 | $ | 102 | ||||||||||||||||||||||
| Habit Burger Grill Division | ||||||||||||||||||||||||||
| GAAP Operating Profit (Loss) | $ | (8) | $ | — | ||||||||||||||||||||||
Foreign Currency Impact on Divisional Operating Profit(a) | — | N/A | ||||||||||||||||||||||||
| Core Operating Profit (Loss) | $ | (8) | $ | — | ||||||||||||||||||||||
| Reconciliation of Diluted EPS to Diluted EPS excluding Special Items | ||||||||||||||||||||||||||
| Diluted EPS | $ | 1.36 | $ | 1.07 | ||||||||||||||||||||||
| Special Items Diluted EPS | 0.31 | — | ||||||||||||||||||||||||
| Diluted EPS excluding Special Items | $ | 1.05 | $ | 1.07 | ||||||||||||||||||||||
| Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items | ||||||||||||||||||||||||||
| GAAP Effective Tax Rate | (0.2) | % | 20.2 | % | ||||||||||||||||||||||
| Impact on Tax Rate as a result of Special Items | (20.5) | % | — | % | ||||||||||||||||||||||
| Effective Tax Rate excluding Special Items | 20.3 | % | 20.2 | % | ||||||||||||||||||||||
(a) The foreign currency impact on reported Operating Profit is presented in relation only to the immediately preceding year presented. 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).
26
| Reconciliation of GAAP Operating Profit to Company Restaurant Profit | ||||||||||||||||||||||||||||||||||||||
| Quarter ended 3/31/2022 | ||||||||||||||||||||||||||||||||||||||
| KFC Division | Taco Bell Division | Pizza Hut Division | Habit Burger Grill Division | Corporate and Unallocated | Consolidated | |||||||||||||||||||||||||||||||||
| GAAP Operating Profit (Loss) | $ | 291 | $ | 185 | $ | 102 | $ | (8) | $ | (61) | $ | 509 | ||||||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||||||||||||||
| Franchise and property revenues | 383 | 179 | 151 | 1 | — | 714 | ||||||||||||||||||||||||||||||||
| Franchise contributions for advertising and other services | 151 | 124 | 88 | — | — | 363 | ||||||||||||||||||||||||||||||||
| Add: | ||||||||||||||||||||||||||||||||||||||
| General and administrative expenses | 84 | 36 | 50 | 12 | 71 | 253 | ||||||||||||||||||||||||||||||||
| Franchise and property expenses | 24 | 6 | 2 | — | — | 32 | ||||||||||||||||||||||||||||||||
| Franchise advertising and other services expense | 151 | 123 | 87 | — | — | 361 | ||||||||||||||||||||||||||||||||
| Refranchising (gain) loss | — | — | — | — | (4) | (4) | ||||||||||||||||||||||||||||||||
| Other (income) expense | 2 | — | (2) | — | (6) | (6) | ||||||||||||||||||||||||||||||||
| Company restaurant profit | $ | 18 | $ | 47 | $ | — | $ | 3 | $ | — | $ | 68 | ||||||||||||||||||||||||||
| Company sales | $ | 126 | $ | 214 | $ | 5 | $ | 125 | $ | — | $ | 470 | ||||||||||||||||||||||||||
| Company restaurant margin % | 14.1 | % | 21.9 | % | (0.7) | % | 3.0 | % | N/A | 14.5 | % | |||||||||||||||||||||||||||
| Quarter ended 3/31/2021 | ||||||||||||||||||||||||||||||||||||||
| KFC Division | Taco Bell Division | Pizza Hut Division | Habit Burger Grill Division | Corporate and Unallocated | Consolidated | |||||||||||||||||||||||||||||||||
| GAAP Operating Profit (Loss) | $ | 300 | $ | 178 | $ | 102 | $ | — | $ | (37) | $ | 543 | ||||||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||||||||||||||
| Franchise and property revenues | 354 | 162 | 141 | 1 | — | 658 | ||||||||||||||||||||||||||||||||
| Franchise contributions for advertising and other services | 138 | 118 | 96 | — | — | 352 | ||||||||||||||||||||||||||||||||
| Add: | ||||||||||||||||||||||||||||||||||||||
| General and administrative expenses | 73 | 31 | 40 | 12 | 50 | 206 | ||||||||||||||||||||||||||||||||
| Franchise and property expenses | 14 | 7 | 2 | — | — | 23 | ||||||||||||||||||||||||||||||||
| Franchise advertising and other services expense | 133 | 116 | 94 | — | — | 343 | ||||||||||||||||||||||||||||||||
| Refranchising (gain) loss | — | — | — | — | (15) | (15) | ||||||||||||||||||||||||||||||||
| Other (income) expense | (6) | (2) | — | — | 2 | (6) | ||||||||||||||||||||||||||||||||
| Company restaurant profit | $ | 22 | $ | 50 | $ | 1 | $ | 11 | $ | — | $ | 84 | ||||||||||||||||||||||||||
| Company sales | $ | 133 | $ | 208 | $ | 14 | $ | 121 | $ | — | $ | 476 | ||||||||||||||||||||||||||
| Company restaurant margin % | 16.6 | % | 24.1 | % | 6.7 | % | 8.8 | % | N/A | 17.6 | % | |||||||||||||||||||||||||||
Items Impacting Reported Results and Reasonably Likely to Impact Future Results
The following items impacted reported results in 2022 and/or 2021 and/or reasonably likely to impact future results. See also the Detail of Special Items section of this MD&A for other items similarly impacting results.
Russia Invasion of Ukraine
Given the Russian invasion of Ukraine, during the quarter ended March 31, 2022 we announced the suspension of all investment and restaurant development efforts in Russia as well as the operations of our 70 company-owned KFC restaurants in Russia and that we are finalizing an agreement with our Pizza Hut master franchisee to suspend all Pizza Hut restaurant
27
operations. Further, we pledged to direct any future net profits from operations in Russia subsequent to the invasion to humanitarian efforts. In addition to these actions, we have begun a process aimed at transferring ownership to local operators.
Our business in Russia consists of the aforementioned company-owned KFC restaurants, approximately 1,100 franchisee-owned KFC restaurants and 50 Pizza Hut restaurants that are operated under a master franchise agreement. Historically, our Russian business has constituted approximately 3% of our total operating profit and 2% of our total system sales. During the quarter ended March 31, 2022, our Core Operating Profits in Russia declined versus the first quarter of last year, negatively impacting consolidated YUM and KFC Division Core Operating Profit growth by one and two percentage points, respectively. On a full year basis, we expect that the year-over-year decline in Core Operating Profits in Russia will negatively impact YUM Core Operating Profit growth by three percentage points.
See Note 1 for a discussion regarding our net asset base in Russia.
COVID-19
In late 2019, a novel strain of coronavirus, COVID-19, was first detected and in March 2020, the World Health Organization declared COVID-19 a global pandemic. As a result of COVID-19, governmental authorities around the world implemented measures to reduce the spread of COVID-19, some of which remain in place today. These measures have included and in some instances continue to include restrictions on travel outside the home and other limitations on business and other activities as well as encouraging social distancing. As a result of COVID-19, we and our franchisees have experienced store closures and instances of reduced store-level operations, including reduced operating hours and dining-room closures. The impact on our sales in each of our markets has been dependent on the timing, severity and duration of the outbreak, measures implemented by government authorities to reduce the spread of COVID-19, as well as our reliance on dine-in sales in the market.
As we ended the first quarter of 2022, COVID-19 outbreaks and resulting government restrictions limiting mobility continued to impact sales in a few key markets, primarily in China. Excluding China, our YUM consolidated same-store sales growth was 6%, our KFC Division same-store sales growth was 10% and our Pizza Hut Division same-store sales growth was 2% for the quarter ended March 31, 2022.
The COVID-19 situation is ongoing, and its dynamic nature makes it difficult to forecast any impacts on the Company's results for the balance of 2022.
Investment in Devyani
In 2020, we received an approximate 5% minority interest in Devyani International Limited (“Devyani”), an entity that operates KFC and Pizza Hut franchised units in India. The minority interest was received in lieu of cash proceeds upon the refranchising of approximately 60 KFC restaurants in India. At the time of the refranchisings, the fair value of this minority interest was estimated to be approximately $31 million. On August 16, 2021, Devyani executed an initial public offering and subsequently the fair value of this investment became readily determinable. As a result, concurrent with the initial public offering we began recording changes in fair value in Investment (income) expense, net in our Condensed Consolidated Statements of Income and recognized pre-tax investment income of $7 million, in the quarter ended March 31, 2022.
KFC Division
The KFC Division has 27,372 units, 86% of which are located outside the U.S. Additionally, 99% of the KFC Division units were operated by franchisees as of March 31, 2022.
28
| Quarter ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| % B/(W) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | Reported | Ex FX | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| System Sales | $ | 7,733 | $ | 7,273 | 6 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Same-Store Sales Growth (Decline) % | 3 | 8 | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Company sales | $ | 126 | $ | 133 | (5) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Franchise and property revenues | 383 | 354 | 8 | 12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Franchise contributions for advertising and other services | 151 | 138 | 10 | 16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenues | $ | 660 | $ | 625 | 6 | 11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Company restaurant profit | $ | 18 | $ | 22 | (19) | (15) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Company restaurant margin % | 14.1 | % | 16.6 | % | (2.5) | ppts. | (2.4) | ppts. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| G&A expenses | $ | 84 | $ | 73 | (15) | (18) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Franchise and property expenses | 24 | 14 | (71) | (85) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Franchise advertising and other services expense | 151 | 133 | (14) | (20) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating Profit | $ | 291 | $ | 300 | (3) | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| % Increase (Decrease) | |||||||||||||||||||||||||||||
| Unit Count | 3/31/2022 | 3/31/2021 | |||||||||||||||||||||||||||
| Franchise | 27,081 | 25,002 | 8 | ||||||||||||||||||||||||||
| Company-owned | 291 | 290 | — | ||||||||||||||||||||||||||
| Total | 27,372 | 25,292 | 8 | ||||||||||||||||||||||||||
Company sales and Company restaurant margin %
Company sales, excluding the impacts of foreign currency translation, were flat including the impact of a company same-store sales decline of 1%.
The quarterly decrease in Company restaurant margin percentage was driven by commodity and wage inflation.
Franchise and property revenues
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.
G&A
The quarterly increase in G&A, excluding the impact of foreign currency translation, was driven by higher headcount and salaries and higher professional fees.
Operating Profit
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 current year bad debt expense lapping prior year net bad debt recoveries for past due franchise receivables and higher G&A.
Taco Bell Division
The Taco Bell Division has 7,831 units, 90% of which are in the U.S. The Company owned 7% of the Taco Bell units in the U.S. as of March 31, 2022.
29
| Quarter ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| % B/(W) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | Reported | Ex FX | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| System Sales | $ | 3,108 | $ | 2,880 | 8 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Same-Store Sales Growth % | 5 | 9 | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Company sales | $ | 214 | $ | 208 | 3 | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Franchise and property revenues | 179 | 162 | 10 | 10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Franchise contributions for advertising and other services | 124 | 118 | 5 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenues | $ | 517 | $ | 488 | 6 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Company restaurant profit | $ | 47 | $ | 50 | (6) | (6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Company restaurant margin % | 21.9 | % | 24.1 | % | (2.2) | ppts. | (2.2) | ppts. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| G&A expenses | $ | 36 | $ | 31 | (17) | (17) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Franchise and property expenses | 6 | 7 | 10 | 11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Franchise advertising and other services expense | 123 | 116 | (6) | (6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating Profit | $ | 185 | $ | 178 | 4 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| % Increase (Decrease) | |||||||||||||||||||||||||||||
| Unit Count | 3/31/2022 | 3/31/2021 | |||||||||||||||||||||||||||
| Franchise | 7,367 | 7,019 | 5 | ||||||||||||||||||||||||||
| Company-owned | 464 | 474 | (2) | ||||||||||||||||||||||||||
| Total | 7,831 | 7,493 | 5 | ||||||||||||||||||||||||||
Company sales and Company restaurant margin %
The quarterly increase in Company sales was driven by company same-store sales growth of 5% and unit growth partially offset by refranchising.
The quarterly decrease in Company restaurant margin percentage was driven by commodity and wage inflation and partially offset by same-store sales growth.
Franchise and property revenues
The quarterly increases in Franchise and property revenues was driven by franchise same-store sales growth of 5% and unit growth.
G&A
The quarterly increase in G&A was driven by higher headcount and salaries and higher professional fees.
Operating Profit
The quarterly increase in Operating Profit was driven by same-store sales growth and unit growth partially offset by higher restaurant operating costs and higher G&A.
30
Pizza Hut Division
The Pizza Hut Division has 18,518 units, 65% of which are located outside the U.S. The Pizza Hut Division uses multiple distribution channels including delivery, dine-in and express (e.g. airports) and includes units operating under both the Pizza Hut and Telepizza brands. Additionally, over 99% of the Pizza Hut Division units were operated by franchisees as of March 31, 2022.
| Quarter ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| % B/(W) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | Reported | Ex FX | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| System Sales | $ | 3,160 | $ | 3,096 | 2 | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Same-Store Sales Growth (Decline) % | Even | 12 | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Company sales | $ | 5 | $ | 14 | (66) | (66) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Franchise and property revenues | 151 | 141 | 7 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Franchise contributions for advertising and other services | 88 | 96 | (8) | (8) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenues | $ | 244 | $ | 251 | (3) | (2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Company restaurant profit | $ | — | $ | 1 | NM | NM | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Company restaurant margin % | (0.7) | % | 6.7 | % | (7.4) | ppts. | (7.4) | ppts. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| G&A expenses | $ | 50 | $ | 40 | (22) | (22) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Franchise and property expenses | 2 | 2 | 3 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Franchise advertising and other services expense | 87 | 94 | 7 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating Profit | $ | 102 | $ | 102 | Even | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| % Increase (Decrease) | |||||||||||||||||||||||||||||
| Unit Count | 3/31/2022 | 3/31/2021 | |||||||||||||||||||||||||||
| Franchise | 18,496 | 17,657 | 5 | ||||||||||||||||||||||||||
| Company-owned | 22 | 53 | (58) | ||||||||||||||||||||||||||
| Total | 18,518 | 17,710 | 5 | ||||||||||||||||||||||||||
Company sales
The quarterly decrease in Company sales, excluding the impacts of foreign currency translation, was driven by the refranchising of stores in the United Kingdom.
Franchise and property revenues
The quarterly increase in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by the recognition of franchise fees related to unexercised development rights arising from a master franchise agreement and unit growth.
G&A
The quarterly increase in G&A, excluding the impacts of foreign currency translation, was driven by higher headcount and salaries and higher professional fees.
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Operating Profit
The quarterly increase in Operating Profit, excluding the impacts of foreign currency translation, was driven by the recognition of franchise fees related to unexercised development rights arising from a master franchise agreement and unit growth, partially offset by higher G&A.
Habit Burger Grill Division
The Habit Burger Grill Division has 331 units, the vast majority of which are in the U.S. The Company owned 90% of the Habit Burger Grill units in the U.S. as of March 31, 2022.
| Quarter ended | |||||||||||||||||||||||||||||||||||
| % B/(W) | |||||||||||||||||||||||||||||||||||
| 2022 | 2021 | Reported | Ex FX | ||||||||||||||||||||||||||||||||
| System Sales | $ | 145 | $ | 136 | 6 | 6 | |||||||||||||||||||||||||||||
Same-Store Sales Growth %(a) | 3 | 13 | N/A | N/A | |||||||||||||||||||||||||||||||
| Total revenues | $ | 126 | $ | 122 | 3 | 3 | |||||||||||||||||||||||||||||
| Operating Profit (Loss) | $ | (8) | $ | — | NM | NM | |||||||||||||||||||||||||||||
(a) Beginning with the quarter ended March 31, 2022, our Habit Burger Grill Division adopted a reporting calendar change as discussed in Note 1. The impact of this change in reporting calendar was not significant, and accordingly, prior year amounts in these Condensed Consolidated Financial Statements and accompanying Management's Discussion and Analysis have not been restated. System sales growth, excluding the impact of the reporting calendar change, was 17% for the quarter ended March 31, 2022.
| Unit Count | 3/31/2022 | 3/31/2021 | % Increase (Decrease) | ||||||||||||||||||||
| Franchise | 46 | 36 | 28 | ||||||||||||||||||||
| Company-owned | 285 | 257 | 11 | ||||||||||||||||||||
| Total | 331 | 293 | 13 | ||||||||||||||||||||
Corporate & Unallocated
| Quarter ended | ||||||||||||||||||||||||||||||||||||||||||||
| (Expense) / Income | 2022 | 2021 | % B/(W) | |||||||||||||||||||||||||||||||||||||||||
| Corporate and unallocated G&A | $ | ( | $ | ( | (42) | |||||||||||||||||||||||||||||||||||||||
| Unallocated Company restaurant expenses | NM | |||||||||||||||||||||||||||||||||||||||||||
| Unallocated Refranchising gain (loss) | (76) | |||||||||||||||||||||||||||||||||||||||||||
| Unallocated Other income (expense) | ( | NM | ||||||||||||||||||||||||||||||||||||||||||
| Investment income (expense), net (See Note 8) | NM | |||||||||||||||||||||||||||||||||||||||||||
Other pension income (expense) (See Note 9) | ( | 83 | ||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | ( | ( | 11 | |||||||||||||||||||||||||||||||||||||||||
| Income tax benefit (provision) (See Note 6) | 1 | (83) | 101 | |||||||||||||||||||||||||||||||||||||||||
| Effective tax rate (See Note 6) | ( | % | % | 20.4 | ppts. | |||||||||||||||||||||||||||||||||||||||
Corporate and unallocated G&A
The quarterly increase in Corporate and unallocated G&A expense was driven by higher headcount and salaries including personnel associated with our 2021 investments in digital and technology companies, higher meeting costs and higher professional fees.
Interest expense, net
The quarterly decrease in Interest expense, net was primarily driven by $12 million of previously unamortized debt issuance costs written off during the quarter ended March 31, 2021 due to the refinancing of our Credit Agreement.
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Consolidated Cash Flows
Net cash provided by operating activities was $253 million in 2022 versus $324 million in 2021. The decrease was largely driven by an increase in incentive compensation payments and a decrease in Operating profit before Special Items.
Net cash used in investing activities was $29 million in 2022 versus net cash provided by investing activities of $14 million in 2021. The change was primarily driven by the lapping of our prior year sale of certain mutual fund investments.
Net cash used in financing activities was $377 million in 2022 versus $563 million in 2021. The change was primarily driven by higher net borrowings in 2022, partially offset by higher share repurchases.
Liquidity and Capital Resources
We have historically generated substantial cash flows from our extensive franchise operations, which require a limited YUM investment, and from the operations of our Company-owned stores. Our annual operating cash flows have been in excess of $1.3 billion in each of the past three years and we expect that to continue to be the case in 2022. 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. 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 (see Note 10), of which $174 million was drawn as of March 31, 2022. We believe that our ongoing cash from operations, cash on hand, which was approximately $350 million at March 31, 2022, 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 2021 Form 10-K regarding our material cash requirements. Due to the ongoing significance of our debt obligations, we are providing the update below.
Debt Instruments
As of March 31, 2022, approximately 92%, including the impact of interest rate swaps, of our $11.4 billion of total debt outstanding, excluding finance leases, is fixed with an effective overall interest rate of approximately 4.3%. We are managing a capital structure which reflects consolidated leverage, net of available cash, in-line with our target of ~5.0x EBITDA, and which we believe provides an attractive balance between optimized interest rates, duration and flexibility with diversified sources of liquidity and maturities spread over multiple years. We have credit ratings of BB+ (Standard & Poor's)/Ba2 (Moody's) with a balance sheet consistent with highly-levered peer restaurant franchise companies.
The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and discounts, as of March 31, 2022.
| 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2037 | 2043 | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Securitization Notes | $ | 30 | $ | 39 | $ | 39 | $ | 39 | $ | 944 | $ | 875 | $ | 582 | $ | 565 | $ | 7 | $ | 682 | $ | 3,802 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit Agreement | 25 | 34 | 48 | 53 | 662 | 15 | 1,398 | 2,235 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subsidiary Senior Unsecured Notes | 750 | 750 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| YUM Senior Unsecured Notes | 325 | 600 | 800 | 1,050 | $ | 1,100 | $ | 325 | $ | 275 | 4,475 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revolving Facility | 174 | 174 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 55 | $ | 398 | $ | 87 | $ | 692 | $ | 1,780 | $ | 1,640 | $ | 1,980 | $ | 565 | $ | 807 | $ | 1,732 | $ | 1,100 | $ | 325 | $ | 275 | $ | 11,436 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See Note 10 for details on the Securitization Notes, the Credit Agreement, Subsidiary Senior Unsecured Notes and YUM Senior Unsecured Notes.
On February 23, 2022, Yum! Brands, Inc. issued a notice of redemption for the $600 million aggregate principal amount of 7.75% YUM Senior Unsecured Notes due April 1, 2025 (the “2025 Notes”). The 2025 Notes were redeemed subsequent to the first quarter, on April 1, 2022, at an amount equal to 103.875% of the aggregate principal amount of the 2025 Notes, reflecting a $23 million “call premium”, plus accrued and unpaid interest to the date of redemption.
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Also subsequent to the first quarter, on April 1, 2022, Yum! Brands, Inc. issued $1.0 billion aggregate principal amount of 5.375% YUM Senior Unsecured Notes due April 1, 2032 (the “April 2032 Notes”). The net proceeds from the April 2032 Notes were used to fund the redemption of the 2025 Notes discussed above and for general corporate purposes. The redemption of the 2025 Notes and issuance of the April 2032 Notes are not included in the table above.
New Accounting Pronouncements Not Yet Adopted
In March 2020, the FASB issued guidance related to reference rate reform. The pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022. We are currently evaluating the impact of the transition from LIBOR to alternative reference rates, including the impact on our interest rate swaps with notional amounts of $1.5 billion expiring in March 2025. These interest rate swaps are designated cash flow hedges. We do not anticipate the impact of adopting this standard will be material to our Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There were no material changes during the quarter ended March 31, 2022, to the disclosures made in Item 7A of the Company’s 2021 Form 10-K.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based on the evaluation, performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (the “CEO”) and the Chief Financial Officer (the “CFO”), the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by the report.
Changes in Internal Control
There were no changes with respect to the Company’s internal control over financial reporting or in other factors that materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the quarter ended March 31, 2022.
Forward-Looking Statements
Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and by the use of forward-looking words such as “expect,” “expectation,” “believe,” “anticipate,” “may,” “could,” “intend,” “belief,” “plan,” “estimate,” “target,” “predict,” “likely,” “seek,” “project,” “model,” “ongoing,” “will,” “should,” “forecast,” “outlook” or similar terminology. Forward-looking statements are based on our current expectations, estimates, assumptions and/or projections, our perception of historical trends and current conditions, as well as other factors that we believe are appropriate and reasonable under the circumstances. Forward-looking statements are neither predictions nor guarantees of future events, circumstances or performance and are inherently subject to known and unknown risks, uncertainties and assumptions that could cause our actual results to differ materially from those indicated by those statements. There can be no assurance that our expectations, estimates, assumptions and/or projections will be achieved. Factors that could cause actual results and events to differ materially from our expectations and forward-looking statements include (i) the factors described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part I, Item 2 of this report, (ii) any risks and uncertainties described in the Risk Factors included in Part II, Item 1A of this report, (iii) the factors described in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of our Form 10-K for the year ended December 31, 2021, and (iv) the risks and uncertainties described in the Risk Factors included in Part I, Item 1A of our Form 10-K for the year ended December 31, 2021. You should not place undue reliance on forward-looking statements, which speak only as of the date hereof. We are not undertaking to update any of these statements.
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Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Yum! Brands, Inc.:
Results of Review of Interim Financial Information
We have reviewed the condensed consolidated balance sheet of Yum! Brands, Inc. and Subsidiaries (YUM) as of March 31, 2022, the related condensed consolidated statements of income, comprehensive income, cash flows and shareholders’ deficit for the three-month periods ended March 31, 2022 and 2021, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of YUM as of December 31, 2021, and the related consolidated statements of income, comprehensive income, shareholders’ deficit, and cash flows for the year then ended (not presented herein); and in our report dated February 22, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
This consolidated interim financial information is the responsibility of YUM’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to YUM in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ KPMG LLP
Louisville, Kentucky
May 10, 2022
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PART II – OTHER INFORMATION AND SIGNATURES
Item 1. Legal Proceedings
Information regarding legal proceedings is incorporated by reference from Note 13 to the Company’s Condensed Consolidated Financial Statements set forth in Part I of this report.
Item 1A. Risk Factors
We face a variety of risks that are inherent in our business and our industry, including operational, legal, regulatory and product risks. Such risks could cause our actual results to differ materially from our forward-looking statements, expectations and historical trends. Information about our most recent risk factors is disclosed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021. At March 31, 2022, there have been no material changes to the information, except for the expanded discussion related to the Russian invasion of Ukraine, included below.
Our international operations subject us to risks that could negatively affect our business.
A significant portion of our Concepts’ restaurants are operated in countries and territories outside of the U.S., including in emerging markets, and we intend to continue expansion of our international operations. As a result, our business and the businesses of our Concepts’ franchisees are increasingly exposed to risks inherent in international operations. These risks, which can vary substantially by country, include political, financial or social instability or conditions, geopolitical events, corruption, anti-American sentiment, social and ethnic unrest, military conflicts and terrorism, as well as changes in economic conditions (including consumer spending, unemployment levels and wage and commodity inflation), the regulatory environment (including the risks of operating in developing or emerging markets in which there are uncertainties regarding the interpretation and enforceability of legal requirements and the enforceability of contract rights and intellectual property rights), income and non-income based tax rates and laws. Additional risks include the impact of import restrictions or controls, sanctions, foreign exchange control regimes (including restrictions on currency conversion), health guidelines and safety protocols related to the COVID-19 pandemic, labor costs and conditions, compliance with the U.S. Foreign Corrupt Practices Act, the UK Bribery Act and other similar applicable laws prohibiting bribery of government officials and other corrupt practices, consumer preferences and the laws and policies that govern foreign investment in countries where our Concepts’ restaurants are operated. For example, we have been subject to a regulatory enforcement action in India alleging violation of foreign exchange laws for failure to satisfy conditions of certain operating approvals, such as minimum investment and store build requirements as well as limitations on the remittance of fees outside of the country (see Note 13).
Following the Russian invasion of Ukraine, we announced the suspension of all investment and restaurant development efforts in Russia as well as the operations of company-owned KFC restaurants in Russia, and that we are finalizing an agreement with our Pizza Hut master franchisee to suspend restaurant operations in Russia. In addition to these actions, we have begun a process aimed at transferring ownership to local operators while, in the interim, we continue to redirect any net profits from Russia operations to humanitarian efforts. There can be no guarantee that our efforts to transfer ownership will be successful, and any transfer or failure to transfer could result in damage to our and our Concepts’ brand reputations. In addition, the Russian invasion of Ukraine has and may continue to adversely impact macroeconomic conditions, give rise to regional instability and result in heightened economic sanctions from the U.S. and the international community in a manner that adversely affects us and our Concepts’ restaurants located in Russia and Eastern Europe, including to the extent that any such sanctions restrict our ability in this region to conduct business with certain suppliers or vendors, and/or to utilize the banking system and repatriate cash. Given current conditions and our announced intention to transfer the business to local operators, there can be no assurance of any contribution to any component of our results of operations from the Russia business in the short or long term.
We and our franchisees do business in jurisdictions that may be subject to trade or economic sanction regimes and such sanctions could be expanded. Any failure to comply with such sanction regimes or other similar laws or regulations could result in the assessment of damages, the imposition of penalties, suspension of business licenses, or a cessation of operations at our or our franchisees’ businesses, as well as damage to our and our Concepts’ brand images and reputations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information as of March 31, 2022, with respect to shares of Common Stock repurchased by the Company during the quarter then ended:
36
| 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) | ||||||||||||||||||||||
| 1/1/22-1/31/22 | — | $— | — | $950 | ||||||||||||||||||||||
| 2/1/22-2/28/22 | 1,022 | $123.92 | 1,022 | $823 | ||||||||||||||||||||||
| 3/1/22-3/31/22 | 2,337 | $119.88 | 2,337 | $543 | ||||||||||||||||||||||
| Total | 3,359 | $121.11 | 3,359 | $543 | ||||||||||||||||||||||
In May 2021, our Board of Directors authorized share repurchases from July 1, 2021 through December 31, 2022, of up to $2 billion (excluding applicable transaction fees) of our outstanding Common Stock. All shares repurchased above were made pursuant to that authorization.
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Item 6. Exhibits
| (a) | Exhibit Index | ||||||||||||||||
| Exhibit No. | Exhibit Description | ||||||||||||||||
| 4.2.3 | |||||||||||||||||
10.13.5† | |||||||||||||||||
| 10.26.1 | |||||||||||||||||
| 15 | |||||||||||||||||
| 31.1 | |||||||||||||||||
| 31.2 | |||||||||||||||||
| 32.1 | |||||||||||||||||
| 32.2 | |||||||||||||||||
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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 | ||||||||||||||||
| † | Indicates a management contract or compensatory plan. | ||||||||||||||||
38
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized officer of the registrant.
| YUM! BRANDS, INC. | |||||
| (Registrant) | |||||
| Date: | May 10, 2022 | /s/ David E. Russell | ||||||
| Senior Vice President, Finance and Corporate Controller | ||||||||
| (Principal Accounting Officer) | ||||||||
39
YUM! BRANDS, INC. LONG TERM INCENTIVE PLAN
GLOBAL RESTRICTED STOCK UNIT AGREEMENT
Grant Date: February 11, 2022
Grantee: Name
Aggregate Number of Units Subject to Award: xxx
Vesting Schedule: 25% on each of the first, second, third and fourth year anniversaries of the Grant Date
This GLOBAL RESTRICTED STOCK UNIT AGREEMENT (“Agreement”) is made as of the 11th day of February, 2022 between YUM! BRANDS, INC., a North Carolina corporation (“YUM!”), and [insert] (“Participant”).
1.Award.
(a)Restricted Stock Units. Pursuant to the YUM! Brands, Inc. Long Term Incentive Plan (the “Plan”), Participant is hereby awarded the aggregate number of restricted stock units set forth above evidencing the right to receive an equivalent number of shares of Stock, subject to the conditions of the Plan and this Agreement (“Restricted Stock Units”).
(b)Plan Incorporated. Participant acknowledges receipt of a copy of the Summary Plan Description, and agrees that this award of Restricted Stock Units shall be subject to all of the terms and conditions set forth in the Plan and the Summary Plan Description, including future amendments thereto, if any, which Plan and Summary Plan Description are incorporated herein by reference as a part of this Agreement. Participant may make a written request for a copy of the Plan at any time. Except as defined herein, capitalized terms shall have the same meanings ascribed to them under the Plan.
2.Terms of Restricted Stock Units. Participant hereby accepts the Restricted Stock Units and agrees with respect thereto as follows:
(a)Assignment of Restricted Stock Units Prohibited. The Restricted Stock Units may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of, except by will or the applicable laws of inheritance.
(b)Vesting. Provided the Participant remains continuously employed by the Company through the applicable vesting date and subject to the terms and conditions of this Agreement including, without limitation, Subsection 2(c), the Restricted Stock Units shall vest as follows (i) one-fourth (1/4) on the one-year anniversary of the Grant Date (i.e., February 11, 2023, which is referred to as the “Initial Vesting Date”), and (ii) after the Initial Vesting Date, an additional one-fourth (1/4) shall vest at each of (1) the two-year anniversary of the Grant Date, (2) the three-year anniversary of the Grant Date, and (3) the four-year anniversary of the Grant Date, respectively.
1
Except as otherwise provided herein, as long as a separation from service from YUM!, its divisions and its Subsidiaries (collectively the “Company”) does not occur prior to the four year anniversary of the Grant Date (“Vesting Date”), then Participant shall become vested in all Restricted Stock Units credited to Participant under this Agreement on such Vesting Date and shares of Stock shall be issued to him or her as described in subparagraph (f) below.
(c)Effect of Termination of Employment, Death, Retirement and Special Termination.
(i)In the event the Participant’s employment with the Company is involuntarily terminated by the Company other than for cause, including, without limitation, as a result of (i) a disposition (or similar transaction) with respect to an identifiable Company business or segment (“Business”), and in accordance with the terms of the transaction, the Participant and a substantial portion of the other employees of the Business continue in employment with such Business or commence employment with its acquiror, (ii) the elimination of the Participant’s position within the Company, or (iii) the selection of the Participant for work force reduction (whether voluntary or involuntary), the Restricted Stock Units will pro rata vest on a monthly basis for the vesting period in which the termination occurs such that a portion of the Participant’s otherwise unvested Restricted Stock Units for the vesting period in which the termination occurs will vest based on the time the Participant was employed during such vesting period up to the last day of employment (as determined in accordance with Section 4(j) below) and all unvested Restricted Stock Units will be forfeited. In the event the Participant’s employment with the Company is terminated for cause, the Participant’s outstanding Restricted Stock Units will be forfeited upon such termination unless otherwise provided by the Committee. In the event the Participant voluntarily terminates his or her employment with the Company, all unvested Restricted Stock Units will be forfeited.
(ii)In the event the Participant’s employment with the Company is terminated by reason of Participant’s death, the Restricted Stock Units will immediately vest as of the date of Participant’s death.
(iii)In the event the Participant’s employment with the Company is terminated by reason of Retirement (as defined in Section 21), and such Participant is Retirement eligible on his or her date of Retirement, the Participant’s Restricted Stock Units will continue to vest following Participant’s Retirement through the fourth anniversary of the Grant Date, provided that Participant remains actively employed by YUM! through the one-year anniversary of the Grant Date.
(iv)In the event the Participant’s employment with the Company is terminated by reason of Special Termination (as defined in Section 21), the Restricted Stock Units will vest in accordance with the following: (i) if the Special Termination occurs as a result of a Special Termination as defined in Section 21(b)(i), pro rata on a monthly basis for the vesting period in which the termination occurs such that a portion of the Participant’s otherwise unvested Restricted Stock Units for the vesting period in which the termination occurs will vest based on the time the Participant was employed during the vesting period up to the last day of employment (as determined in accordance with Section 4(j) below) and all unvested Restricted
2
Stock Units will be forfeited and (ii) if the Special Termination occurs as a result of a Special Termination as defined in Section 21(b)(ii), in accordance with the vesting schedule otherwise applicable to the Restricted Stock Units as set forth in this Agreement as though employment with the franchisee were not terminated with the Company.
(d)Dividend Equivalent Units. Participant will be credited with additional units (“Dividend Equivalent Units”) equal to the amount of dividends that would have been paid on the Restricted Stock Units if Participant actually owned the same number of shares of Stock during the period between the Grant Date and the Vesting Date. Dividend Equivalent Units shall vest at the same time that the Restricted Stock Units vest; provided, however, that in the event the Restricted Stock Units are forfeited then any accumulated Dividend Equivalent Units will also be forfeited.
(e)No Rights as Stockholder. Participant shall not be a shareholder of record and therefore shall have no voting, dividend or other shareholder rights prior to the issuance of shares of Stock at vesting.
(f)Settlement and Delivery of Stock. Payment of vested Restricted Stock Units shall be made as soon as administratively practicable after the applicable Vesting Date but in no event later than 2-1/2 months following the year in which the Vesting Date occurs. Settlement will be made by payment in shares of Stock. Notwithstanding the foregoing, YUM! shall not be obligated to deliver any shares of Stock if counsel to YUM! determines that such sale or delivery would violate any applicable law or any rule or regulation of any governmental authority or any rule or regulation of, or agreement of YUM! with, any securities exchange or association upon which the Stock is listed or quoted. YUM! shall in no event be obligated to take any affirmative action in order to cause the delivery of shares of Stock to comply with any such law, rule, regulation or agreement.
Furthermore, Participant understands that the laws of the country in which he/she is working at the time of grant or vesting of the Restricted Stock Units or at the subsequent sale of Stock granted to Participant under this Award (including any rules or regulations governing securities, foreign exchange, tax, labor or other matters) may subject Participant to additional procedural or regulatory requirements he/she is solely responsible for and will have to independently fulfill in relation to ownership or sale of such Stock.
3.Withholding of Tax.
(a)Participant acknowledges that regardless of any action taken by YUM! or if different, Participant’s employer (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items arising out of Participant’s participation in the Plan and legally applicable to Participant (“Tax-Related Items”), is and remains Participant’s responsibility and may exceed the amount actually withheld by YUM! and/or the Employer. Participant further acknowledges that YUM! and/or the Employer (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Restricted Stock Units, including but not limited to, the grant, vesting or settlement of the Restricted Stock Units, the subsequent sale of Stock acquired under the Plan pursuant to such settlement and the receipt of any dividends or
3
Dividend Equivalent Units; and (b) do not commit and are under no obligation to structure the terms of the grant or any aspect of the grant or any aspect of the Restricted Stock Units to reduce or eliminate Participant’s liability for Tax-Related Items or achieve any particular tax result. Furthermore, if Participant is or becomes subject to tax in more than one jurisdiction between the Grant Date and the date of any relevant taxable event or tax withholding event, as applicable, Participant acknowledges that YUM! and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
(b)Prior to any relevant taxable or tax withholding event, as applicable, Participant shall pay or make adequate arrangements satisfactory to YUM! and/or the Employer to satisfy all Tax-Related Items. In this regard, Participant authorizes YUM! and/or the Employer, or their respective agents, at their discretion, to satisfy the obligations with respect to Tax-Related Items by one or a combination of the following (1) withholding from Participant’s wages or other cash compensation paid to Participant by YUM!, the Employer, or any Subsidiary of YUM!; or (2) withholding from the proceeds of the sale of shares of Stock acquired upon settlement of the Restricted Stock Units either through a voluntary sale or through a mandatory sale arranged by YUM! (on Participant’s behalf pursuant to this authorization); or (3) withholding in Stock to be issued upon settlement of the Restricted Stock Units.
(c)Depending on the withholding method, YUM! or the Employer may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding rates or other applicable withholding rates, including maximum applicable rates, in which case Participant will receive a refund of any over-withheld amount in cash and will have no entitlement to the Stock equivalent. If the obligation for the Tax-Related Items is satisfied by withholding in Stock, for tax purposes, Participant is deemed to have been issued the full number of shares of Stock subject to the vested Restricted Stock Units, notwithstanding that a number of shares of Stock are held back solely for the purpose of paying the Tax-Related Items.
(d)Participant shall pay to YUM! or the Employer any amount of Tax-Related Items that YUM! or the Employer may be required to withhold or account for as a result of Participant’s participation in the Plan that cannot be satisfied by the means previously described in this Paragraph 3. YUM! may refuse to issue or deliver the Stock or the proceeds from the sale of Stock, if Participant fails to comply with his or her obligations in connection with the Tax-Related Items.
4.Nature of Award. In accepting the Restricted Stock Units, Participant acknowledges, understands and agrees that:
(a)the Plan is established voluntarily by YUM!, it is discretionary in nature and may be modified, amended, suspended or terminated by YUM! at any time, to the extent permitted by the Plan;
(b)this Award of Restricted Stock Units is voluntary and occasional and does not create any contractual or other right to receive future grants of Restricted Stock Units, or benefits in lieu of Restricted Stock Units, even if Restricted Stock Units have been granted in the past;
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(c)the Restricted Stock Units and any shares acquired under the Plan are not part of normal or expected compensation or salary for any purpose;
(d)Participant acknowledges and agrees that neither YUM!, the Employer nor any Subsidiary shall be liable for any foreign exchange rate fluctuation between his or her local currency and the United States Dollar that may affect the value of the Restricted Stock Units or of any amounts due to Participant pursuant to the settlement of the Restricted Stock Units or the subsequent sale of any shares of Stock acquired upon settlement;
(e)all decisions with respect to future grants of Restricted Stock Units or other Awards, if any, will be at the sole discretion of YUM!;
(f)Participant’s participation in the Plan is voluntary;
(g)this Award of Restricted Stock Units and any Stock acquired under the Plan are not intended to replace any pension rights or compensation;
(h)the future value of the Stock underlying the Restricted Stock Units is unknown, indeterminable and cannot be predicted with certainty;
(i)no claim or entitlement to compensation or damages shall arise from termination of this Award of Restricted Stock Units or diminution in value of the Stock acquired upon settlement resulting from Participant’s separation from service (for any reason whatsoever whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any), and in consideration of this Award of Restricted Stock Units to which Participant is otherwise not entitled, Participant irrevocably agrees never to institute any claim against YUM!, any of its Subsidiaries and/or the Employer, waives Participant’s ability, if any, to bring any such claim, and releases YUM!, its Subsidiaries and/or the Employer from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Participant shall be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim;
(j)for purposes of the Restricted Stock Units, Participant’s employment or service relationship will be considered terminated as of the date Participant is no longer actively providing services to YUM! or one of its Subsidiaries (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any), and unless otherwise expressly provided in this Agreement or determined by YUM!, Participant’s right to vest in the Restricted Stock Units under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g., Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any); the Committee shall have the exclusive discretion to determine when Participant is no longer actively providing services for purposes of
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the Award (including whether Participant may still be considered to be providing services while on a leave of absence);
(k)by accepting the Restricted Stock Units covered by this Agreement, Participant agrees to an amendment to the terms of all prior Global Restricted Stock Unit Agreements between the Company and Participant pursuant to which there are currently unvested Restricted Stock Units outstanding, to add a new Section 13 to such Agreements which is identical to Section 13, Restrictive Covenants, of this Agreement; and
(l)unless otherwise provided in the Plan or by YUM! in its discretion, the Restricted Stock Units and the benefits evidenced by this Agreement do not create any entitlement to have the Restricted Stock Units or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the shares of Stock.
5.Compensation Recovery Policy.
(a)Participant acknowledges and agrees that the Restricted Stock Units granted to Participant under this Agreement shall be subject to the YUM! Brands, Inc. Compensation Recovery Policy, amended and restated January 1, 2015 (“Compensation Recovery Policy”), and as in effect on the date of this Agreement.
(b)This Agreement is a voluntary agreement, and each Participant who has accepted the Agreement has chosen to do so voluntarily. Participant understands that the Restricted Stock Units provided under the Agreement and all amounts paid to the individual under the Agreement are provided as an advance that is contingent on YUM!’s financial statements not being subject to a material restatement. As a condition of the Agreement, Participant specifically agrees that the Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict the Restricted Stock Units for any individual party to such an agreement due to a material restatement of YUM!’s financial statements, as provided in YUM!’s Compensation Recovery Policy. In the event that amounts have been paid to Participant pursuant to the Agreement and the Committee determines that Participant must repay an amount to YUM! as a result of the Committee’s cancellation, rescission, suspension, withholding or other limitation or restriction of rights, Participant agrees, as a condition of being awarded such rights, to make such repayments.
6.No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or sale of the Stock acquired upon vesting of the Restricted Stock Units. Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.
7.Adjustment for Change in Stock. As set forth in the Plan, in the event of any change in the outstanding shares of Stock by reason of any stock split, stock dividend, recapitalization, merger, consolidation, combination or exchange of shares or similar corporate change, the number of shares which Participant may receive upon settlement of the Restricted Stock Units shall be adjusted appropriately in the Committee’s sole discretion.
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8.Employment Relationship. For purposes of this Agreement, Participant shall be considered to be in the employment of the Company as long as Participant remains an employee of YUM! or any of its Subsidiaries or a corporation or a subsidiary of YUM! assuming or substituting a new award for this Award of Restricted Stock Units. Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall be determined by the Committee, or its delegate, as appropriate, and its determination shall be final.
Nothing contained in this Agreement is intended to constitute or create a contract of service or employment, nor shall it constitute or create the right to remain associated with or in the service or employ of YUM!, the Employer or any other Subsidiary or related company for any particular period of time. This Agreement shall not interfere in any way with the right of YUM!, the Employer or any Subsidiary or related company, as applicable, to terminate Participant’s service or employment at any time. Furthermore, this Agreement, the Plan, and any other Plan documents are not part of Participant’s employment contract, if any, and do not guarantee either Participant’s right to receive any future grants of Awards or benefits in lieu thereof under this Agreement or the Plan. The Restricted Stock Units and any Stock acquired under the Plan and the income and value of same are not part of normal or expected compensation for any purposes of calculating any severance, resignation, termination, redundancy, end-of-service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments.
9.Data Privacy. Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data as described in this Agreement and any other Award materials (“Data”) by and among, as applicable, the Employer, YUM! and its Subsidiaries for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan.
Participant understands that YUM! and the Employer may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Stock or directorships held in YUM!, details of all Awards of Restricted Stock Units or any other entitlement to Stock awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor, for the exclusive purpose of implementing, administering and managing the Plan.
Participant understands that Data will be transferred to Merrill Lynch, which is assisting YUM! with the implementation, administration and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections from Participant’s country. Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. Participant authorizes YUM!, Merrill Lynch and any other possible recipients which may assist YUM! (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing his or her participation in the Plan. Participant understands that Data will be held only as long as is necessary to implement,
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administer and manage Participant’s participation in the Plan. Participant understands that if he or she resides outside the United States, he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her employment status or service and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing his or her consent is that YUM! would not be able to grant Participant Restricted Stock Units or other Awards or administer or maintain such Awards. Therefore, Participant understands that refusing or withdrawing his or her consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local human resources representative.
10.Mode of Communications. Participant agrees, to the fullest extent permitted by law, in lieu of receiving documents in paper format, to accept electronic delivery of any documents that YUM! or related company may deliver in connection with this grant and any other grants offered by YUM!, including prospectuses, grant notifications, account statements, annual or quarterly reports, and other communications. Electronic delivery of a document may be made via YUM!’s email system or by reference to a location on YUM!’s intranet or website or website of YUM!’s agent administering the Plan.
To the extent Participant has been provided with a copy of this Agreement, the Plan, or any other documents relating to this Award in a language other than English, the English language documents will prevail in case of any ambiguities or divergences as a result of translation.
11.Committee’s Powers. No provision contained in this Agreement shall in any way terminate, modify or alter, or be construed or interpreted as terminating, modifying or altering any of the powers, rights or authority vested in the Committee or, to the extent delegated, in its delegate pursuant to the terms of the Plan or resolutions adopted in furtherance of the Plan, including, without limitation, the right to make certain determinations and elections with respect to the Restricted Stock Units.
12.Severability. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
13.Restrictive Covenants. By accepting the Restricted Stock Units, and in consideration of these units and receipt of confidential information from the Company during his or her employment, Participant specifically agrees to the restrictive covenants contained in this Section 13 (the “Restrictive Covenants”) and agrees that the Restrictive Covenants and the remedies described herein are reasonable and necessary to protect the legitimate interests of the Company. Sections 13(b) and 13(c) apply to Participants who are Level 15 employees (or the equivalent of a Level 15 Employee) of the Company or above.
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(a)Confidentiality. In consideration for receiving the Restricted Stock Units, Participant acknowledges that the Company is engaged in a competitive business environment and has a substantial interest in protecting its confidential information. Participant agrees that he or she has received and continues to receive, by virtue of his or her position with the Company, access to confidential information (including trade secrets) related to the Company and its business, and Participant agrees, during his or her employment with the Company and thereafter, and in consideration of receiving such information to maintain the confidentiality of the Company’s confidential information and to use such confidential information for the exclusive benefit of the Company, except where disclosure is required to be made to a federal, state, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law or in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
(b)Competitive Activity. During Participant’s employment with the Company and for one year following the termination of Participant’s employment for any reason whatsoever, Participant agrees and covenants that: Participant shall not either directly or indirectly, alone or in conjunction with any other party or entity, perform any services, work or consulting for one or more Competitor Companies anywhere in the world. A “Competitor Company” shall be defined as: (i) any company or other entity engaged as a “quick service restaurant” (“QSR”) and (ii) any company or other entity that is a delivery-oriented restaurant; and (iii) any entity under common control with an entity included in (i) or (ii), above. Competitor Companies covered under this definition include, but are not limited to: McDonald’s, Domino’s Pizza, Starbucks, Wendy’s, Papa John’s, Restaurant Brands International (including Burger King, Tim Horton’s and Popeye’s Chicken), Culver’s, In-N-Out Burger, Sonic, Hardee’s, Arby’s, Jack-in-the-Box, Chick-fil-A, Chipotle, Q-doba, Panera Bread, Subway, Dunkin’ Brands, Five Guys, Bojangles, Church’s, Del Taco, Little Caesars, Subway, Dico’s, Jollibee, Blaze, MOD Pizza, Olive Garden, JAB Holding Company, Darden Restaurants, Inspire Brands and Focus Brands, and their respective organizations, partnerships, ventures, sister companies, franchisees, affiliates, franchisee organizations, cooperatives or any organization in which they have an interest and which are involved in the QSR restaurant industry anywhere in the world, or which otherwise compete with Yum Brands, Inc.
In the event that any portion of this Section 13(b) shall be determined by a court or arbitrator to be unenforceable because it is unreasonably restrictive in any respect, it shall be interpreted to extend over the maximum period of time for which it reasonably may be enforced and to the maximum extent for which it reasonably may be enforced in all other respects, and enforced as so interpreted, all as determined by such court or arbitrator in such action. Participant acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement is to be given the construction that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law.
Notwithstanding the forgoing, the provisions of this Section 13(b) are not applicable to a Participant who is a resident of California and provides the majority of his or her services to the Company within California.
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(c)Non-Solicitation. During Participant’s employment and for eighteen months following the later of (i) termination of Participant’s employment for any reason whatsoever or (ii) the last scheduled award vesting date, Participant shall not:
(i)induce or attempt to induce any employee of the Company to leave the employ of Company;
(ii)induce or attempt to induce any employee of the Company to work for, render services to, or provide advice to any third party;
(iii)induce or attempt to induce any current or former employee of the Company to supply confidential information of Company to any third party, except where disclosure is required to be made to a federal, state, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law or in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal;
(iv)employ, or otherwise pay for services rendered by, any employee of the Company in any business enterprise with which Participant may be associated, connected or affiliated;
(v)induce or attempt to induce any customer, franchisee, supplier, licensee, licensor or other business relation of Company to cease doing business with Company, or in any way interfere with the then existing business relationship between any such customer, franchisee, supplier, licensee, licensor or other business relation and Company; or
(vi)assist, solicit, or encourage any other third party, directly or indirectly, in carrying out any activity set forth above that would be prohibited by any of the provisions of this Agreement if such activity were carried out by Participant. In particular, Participant will not, directly or indirectly, induce any employee of Company to carry out any such activity.
Notwithstanding the forgoing, the provisions of this Section 13(c) are not applicable to a Participant who is a resident of California and provides the majority of his or her services to the Company within California.
The Company and Participant agree that the provisions of this Section 13 contain restrictions that are not greater than necessary to protect the interests of the Company.
(d)Partial Invalidity. If any portion of this Section 13 is determined by a court or arbitrator to be unenforceable in any respect, it shall be interpreted to be valid to the maximum extent for which it reasonably may be enforced, and enforced as so interpreted, all as determined by such arbitrator in such action. Participant acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement is to be given the construction that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law.
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(d)Clawback & Recovery. Participant agrees that a breach of any of the Restrictive Covenants set forth in this Section 13 would cause material and irreparable harm to the Company. Accordingly, Participant agrees that if the Committee, in its sole discretion, determines that Participant has violated any of the Restrictive Covenants contained in this Section 13, either during employment with the Company or after such employment terminates for any reason, the following rules shall apply:
(i)The Committee may (A) terminate such Participant’s participation in the Plan and/or (B) send a “Recapture Notice” that will (1) cancel all or a portion of this or any outstanding Restricted Stock Units, (2) require the return of any shares of Stock received upon settlement of this or any prior Restricted Stock Units and/or (3) require the reimbursement to the Company of any net proceeds received from the sale of any shares of Stock acquired as a result of such settlement.
(ii)Under this Section 13, the obligation to return shares of Stock received and/or to reimburse the Company for any net proceeds received pursuant to a Recapture Notice, shall be limited to shares and/or proceeds received by Participant within the period that is one year prior to and one year following the Participant’s termination of employment.
(iii)The Committee has sole and absolute discretion to take action or not to take action pursuant to this Section 13 upon determination of a breach of a Restrictive Covenant, and its decision not to take action in any particular instance shall not in any way limit its authority to send a Recapture Notice in any other instance.
(iv)Any action taken by the Committee pursuant to this Section 13(e) is without prejudice to any other action the Committee may choose to take upon determination that the Participant has violated a Restrictive Covenant contained herein.
(v)This Section 13(e) will cease to apply upon a Change in Control.
(f)Right of Set Off. By accepting the Restricted Stock Units, Participant agrees that any member of the Company Group may set off any amount owed to Participant (including wages or other compensation, fringe benefits or vacation pay) against any amounts Participant owes under this Section 13.
14.Binding Effect. This Agreement shall be binding upon and inure to the benefit of any successors to YUM! and all persons lawfully claiming under Participant.
15.Insider Trading Restrictions/Market Abuse Laws. Participant acknowledges that, depending on his or her country of residence, Participant may be subject to insider trading restrictions and/or market abuse laws, which may affect Participant’s ability to acquire or sell shares of Stock or rights to shares of Stock (e.g., Restricted Stock Units) under the Plan during such times as Participant is considered to have “inside information” regarding YUM! (as defined by the laws in Participant’s country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. Participant acknowledges that it is Participant’s responsibility to comply with any applicable restrictions, and Participant is advised to speak to his or her personal advisor on this matter.
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16.Governing Law and Forum. This Agreement shall be governed by, and construed in accordance with, the laws of the State of North Carolina. For purposes of resolving any dispute that may arise directly or indirectly from this Agreement, the parties hereby agree that any such dispute that cannot be resolved by the parties shall be submitted the Committee for resolution, and any decision by the Committee shall be final.
For purposes of litigating any dispute that arises under this grant, Participant’s participation in the Plan or this Agreement, the parties hereby submit to and consent to the jurisdiction of the State of Kentucky and agree that such litigation shall be conducted in the courts of Jefferson County, Kentucky, or the federal courts for the United States for the Western District of Kentucky, where this grant is made and/or to be performed.
17.Addendum. Notwithstanding any provisions in this Agreement, the Award of Restricted Stock Units shall be subject to any special terms and conditions set forth in any Addendum to this Agreement for Participant’s country. Moreover, if Participant relocates to one of the countries included in the Addendum, the special terms and conditions for such country will apply to Participant, to the extent YUM! determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Addendum constitutes part of this Agreement.
18.Imposition of Other Requirements. YUM! reserves the right to impose other requirements on Participant’s participation in the Plan, on the Restricted Stock Units and on any Stock acquired under the Plan, to the extent YUM! determines it is necessary or advisable for legal or administrative reasons, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
19.Waiver. Participant acknowledges that a wavier by the company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by Participant or any other Participant.
20.Section 409A Provisions. Notwithstanding anything in this Agreement (or the Plan) to the contrary:
(a)It is intended that any amounts payable under this Agreement shall either be exempt from or comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and all regulations, guidance and other interpretive authority issued thereunder (“Code Section 409A”) so as not to subject Participant to payment of any additional tax, penalty or interest imposed under Code Section 409A. The provisions of this Agreement shall be construed and interpreted to avoid the imputation of any such additional tax, penalty or interest under Code Section 409A yet preserve (to the nearest extent reasonably possible) the intended benefit payable to Participant. Notwithstanding the foregoing or any other provision of this Agreement, neither YUM! nor any Subsidiary guarantees the tax treatment of the award evidenced by this Agreement (or other awards under the Plan).
(b)If any payment hereunder (whether separately or together with any other payments) is subject to Code Section 409A, and if such payment or benefit is to be paid or provided on account of Participant’s termination of employment (or other separation from
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service or termination of employment) (i) and if Participant is a specified employee (within the meaning of Code Section 409A) and if any such payment is required to be made or provided prior to the first day of the seventh month following Participant’s separation from service or termination of employment, such payment shall be delayed until the first day of the seventh month following Participant’s separation from service or termination of employment, and (ii) the determination as to whether Participant has had a termination of employment (or separation from service) shall be made in accordance with the provisions of Code Section 409A without application of any alternative levels of reductions of bona fide services permitted thereunder.
21. Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:
(a)“Retirement” shall mean termination of employment by Participant on or after Participant’s attainment of age 55 and 10 years of service or age 65 and 5 years of service (and not for any other reason).
(b)“Special Termination” means, (i) with respect to a Participant who has been approved as a franchisee by YUM! or any of its affiliates, the Participant’s termination of employment with the Company (other than a termination by the Company for cause) to become, immediately following such termination, a franchisee of YUM! or one of its affiliates, and (ii) with respect to any Participant, the Participant’s termination of employment with the Company (other than a termination by the Company for cause) to become, immediately following such termination, an employee of a franchisee of YUM! or one of its Subsidiaries as approved by an officer of YUM!. Participants who do not meet the foregoing requirements may not have a Special Termination.
IN WITNESS WHEREOF, YUM! has caused this Agreement to be duly executed by an officer thereunto duly authorized as of the date first above written.
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ADDENDUM TO
YUM! BRANDS, INC. LONG TERM INCENTIVE PLAN
GLOBAL RESTRICTED STOCK UNIT AGREEMENT
FOR NON-U.S. PARTICIPANTS
Terms and Conditions
This Addendum includes additional terms and conditions that govern the Award of Restricted Stock Units granted to Participant under the Yum! Brands, Inc. Long Term Incentive Plan if Participant works and/or resides in one of the countries listed below. Certain capitalized terms used but not defined in this Addendum have the meanings set forth in the Restricted Stock Unit Agreement and the Plan.
Notifications
This Addendum also includes information regarding exchange controls and certain other issues of which Participant should be aware with respect to his or her participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the respective countries as of December 2014. Such laws are often complex and change frequently. As a result, YUM! strongly recommends that Participant not rely on the information in this Addendum as the only source of information relating to the consequences of Participant’s participation in the Plan because the information may be out of date at the time that Restricted Stock Units vest or Participant sells Stock acquired at vesting of the Restricted Stock Units under the Plan.
In addition, the information contained herein is general in nature and may not apply to Participant’s particular situation, and YUM! is not in a position to assure Participant of a particular result. Accordingly, Participant is advised to seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to his or her situation.
Finally, if Participant is a citizen or resident of a country other than the one in which he or she is currently working or transfers employment after the Grant Date, the information contained herein may not be applicable to Participant.
AUSTRALIA
Terms and Conditions
Australian Offer Document. Participant understands that the offering of the Plan in Australia is intended to qualify for exemption from the prospectus requirements under Class Order 14/1000 issued by the Australian Securities and Investments Commission. Participation in the Plan is subject to the terms and conditions set forth in the Australian Offer Document, the Plan and this Agreement provided to Participant.
Notifications
Securities Law Information. If Participant acquires Stock under the Plan pursuant to the vesting of the Restricted Stock Units and subsequently offers the Stock for sale to a person or entity resident in Australia, such an offer may be subject to disclosure requirements under Australian law, and Participant should obtain legal advice regarding any applicable disclosure requirements prior to making any such offer.
CANADA
Terms and Conditions
Vesting and Forfeiture. This provision supplements subparagraph 2(c) of the Agreement.
In the event of Participant’s involuntary separation from service (whether or not in breach of local labor laws), Participant’s right to receive and vest in the Restricted Stock Units under the Plan, if any, will terminate effective as of the date that is the earlier of: (1) the date Participant receives notice of termination of service from YUM! or if different, the Employer, or (2) the date Participant is no longer actively providing service to YUM! or the Employer regardless of any notice period or period of pay in lieu of such notice required under local law (including, but not limited to, statutory law, regulatory law and/or common law); the Committee shall have the exclusive discretion to determine when Participant no longer actively providing service for purposes of the Award of Restricted Stock Units.
The following provisions will apply if Participant is a resident of Quebec:
French Language Provision.
The parties acknowledge that it is their express wish that the Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.
Les parties reconnaissent avoir exigé la rédaction en anglais de la convention, ainsi que de tous documents exécutés, avis donnés et procédures judiciaries intentées, directement ou indirectement, relativement à ou suite à la présente convention.
Data Privacy. This provision supplements Paragraph 8 of the Agreement:
Participant hereby authorizes YUM! and YUM!'s representatives to discuss and obtain all relevant information from all personnel, professional or non-professional involved in the administration of the Plan. Participant further authorizes YUM!, the Employer and any Subsidiary to disclose and discuss such information amongst themselves and with their advisors. Participant also authorizes YUM!, the Employer and any Subsidiary to record such information and to keep such information in Participant's service or employment file.
Notifications
Securities Law Information. Participant is permitted to sell Stock acquired under the Plan through the designated broker appointed under the Plan, if any, provided the resale of the Stock acquired under the Plan takes place outside of Canada, which should be the case as the Stock is currently listed on the New York Stock Exchange.
Foreign Asset/Account Reporting Information. Participant is required to report any foreign property (including shares of Stock) on form T1135 (Foreign Income Verification Statement) if the total value of Participant's foreign property exceeds C$100,000 at any time in the year. The form must be filed by April 30th of the following year. Participant is advised to consult with his or her personal legal advisor to ensure compliance with applicable reporting obligations.
CHINA
Terms and Conditions
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The following provisions apply only to nationals of the People’s Republic of China (the “PRC”) residing in the PRC, unless otherwise determined by YUM! or required by the State Administration of Foreign Exchange (“SAFE”):
Mandatory Sale of Shares Upon Termination of Service. To ensure compliance with exchange control laws in China, Participant agrees that any Stock issued upon settlement of the RSUs and held by Participant at the time of his or her termination of service must be sold immediately upon such termination of service. Any Stock that is not sold by Participant will be sold on his or her behalf as soon as practicable after Participant's termination of service and in no event more than six months after his or her termination of service, pursuant to this authorization (i) to YUM! to instruct its designated broker to sell such Stock and (ii) to the designated broker to assist with the sale of such Stock. Participant acknowledges that YUM!’s designated broker is under no obligation to arrange for the sale of the Stock at any particular price. Upon the sale of the Stock, YUM! agrees to pay Participant the cash proceeds from the sale of the Stock, less any brokerage fees or commissions and subject to any obligation on YUM! or the Employer to satisfy any Tax-Related Items.
Broker Account. Any Stock issued to Participant upon settlement of the RSUs must be maintained in an account with Merrill Lynch or such other broker as may be designated by YUM! until the Stock is sold through that broker.
Repatriation. Pursuant to exchange control laws in China, when the Stock acquired at settlement of the RSUs are sold, whether immediately or thereafter, including on Participant's behalf after termination of his or her service, Participant will be required to immediately repatriate the cash proceeds from the sale of the Stock and any cash dividends paid on such Stock to China. Participant further understands that, under local law, such repatriation of his or her cash proceeds will need to be effectuated through a special exchange control account established in China by YUM! or any Subsidiary or the Employer, and Participant hereby consents and agrees that any proceeds from the sale of Stock will be transferred to such special account prior to being delivered to Participant. Unless YUM! in its sole discretion decides otherwise, the proceeds will be paid to Participant in local currency. The Company is under no obligation to secure any exchange conversion rate, and YUM! may face delays in converting the proceeds to local currency due to exchange control restrictions in China. Participant agrees to bear any currency fluctuation risk between the time the Stock is sold and the time the sale proceeds are distributed through such special exchange control account.
Other. Participant further agrees to comply with any other requirements that may be imposed by YUM! in the future in order to facilitate compliance with exchange control requirements in China and to sign any agreements, forms and/or consents that may be reasonably requested by YUM! or its designated broker to effectuate any of the remittances, transfers, conversions or other processes affecting the proceeds.
Notifications
Foreign Asset and Account Reporting. Participant may be required to report to SAFE all details of their foreign financial assets and liabilities, as well as details of any economic transactions conducted with non-PRC residents. Participant should consult with his or her personal advisor in order to ensure compliance with applicable reporting requirements.
FRANCE
Term and Conditions
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Language Consent. By accepting the Award of Restricted Stock Units, Participant confirms having read and understood the documents relating to this grant (the Plan and the Agreement, including this Addendum) which were provided in English language. Participant accepts the terms of those documents accordingly.
En acceptant l’attribution, vous confirmez ainsi avoir lu et compris les documents relatifs à cette attribution (le Plan et le contrat, y compris cette Annexe) qui ont été communiqués en langue anglaise. Vous acceptez les termes en connaissance de cause.
Notifications
Foreign Asset/Account Reporting Information. Participant must declare all foreign bank and brokerage accounts (including any accounts that were opened or closed during the tax year) in his or her annual income tax return.
GERMANY
Notifications
Exchange Control Information. If Participant remits proceeds in excess of €12,500 out of or into Germany, Participant must report such cross-border payment(s) to the German Federal Bank (Bundesbank). In case of payments in connection with securities (such as proceeds from the sale of shares of Stock acquired under the Plan), the report must be made electronically by the 5th day of the month following the month in which the payment was received. The form of the report (Allgemeine Meldeportal Statistik) can be obtained via the Bundesbank's website (www.bundesbank.de) in English and German.
HONG KONG
Terms and Conditions
Warning: The Restricted Stock Units and Stock acquired at vesting do not constitute a public offering of securities under Hong Kong law and are available only to directors of YUM! and employees of YUM! or a Subsidiary. The Agreement, including this Addendum, the Plan and other incidental communication materials have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong Kong nor have the documents been reviewed by any regulatory authority in Hong Kong. If Participant is in any doubt about any of the contents of the Agreement, including this Addendum, or the Plan, Participant should obtain independent professional advice.
INDIA
Notifications
Exchange Control Information. Participant must repatriate the proceeds from the sale of Stock received in relation to the Stock to India within 90 days after receipt. Participant must also repatriate any dividends received in relation to the Stock to India within 180 days after receipt. Participant must maintain the foreign inward remittance certificate received from the bank where the foreign currency is deposited in the event that the Reserve Bank of India or the Employer requests proof of repatriation. It is Participant’s responsibility to comply with applicable exchange control laws in India.
Foreign Asset/Account Reporting Information. Participant understands that he or she is required to declare foreign bank accounts and any foreign financial assets (including shares of Stock held outside
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India) in his or her annual tax return. Participant is advised to consult with his or her personal tax advisor to ensure compliance with this requirement.
ISRAEL
Definitions. This Agreement and the Israeli Addendum shall apply only to a Participant who is an Eligible 102 Participant as such term is defined under the Israeli Appendix / Sub-Plan, attached hereto as Exhibit A. Capitalized terms not otherwise defined herein and / or in the Plan shall have the meaning assigned to them in the Israeli Appendix / Sub-Plan.
Terms of Restricted Stock Units. Certain specific terms of the Restricted Stock Units granted hereunder are set forth in Exhibit B attached hereto.
Acceptance of Award and Acknowledgments. The Participant hereby (a) accepts the Restricted Stock Units granted under the Plan, the Israeli Appendix / Sub-Plan, and this Agreement, (b) acknowledges to have received, read and understood the Plan, the Israeli Appendix / Sub-Plan and this Agreement and (c) agrees to be bound by the terms and provisions of the Plan, the Israeli Appendix / Sub-Plan, as amended from time to time, this Agreement and the Israeli Addendum, and any tax ruling which was approved by the Israel Tax Authority with respect to the Plan and the Israeli Appendix / Sub-Plan.
Vesting. The following provision supplements Section 2(b) of the Agreement:
The Company shall notify the Participant in writing that upon the Vesting Date, shares of Stock shall be issued to him or her without consideration, all as described in subparagraph 2(f) of the Agreement.
Dividend Equivalent Units. The following provision supplements Section 2(d) of the Agreement:
Any Dividend Equivalent Units shall be held by a global stock plan administrator or the Trustee, and any Stock allocated or issued upon the vesting of the Dividend Equivalent Units shall only be transferred and held by the Trustee in trust for the benefit of the Participant. The Trustee shall be entitled to withhold taxes according to any requirement under applicable laws, rules, tax rulings and regulations.
Taxation. The following provision supplements Section 3 of the Agreement:
Notwithstanding the above, a Participant who was granted a Restricted Stock Unit under Section 102, declares and acknowledges that:
(a)The Participant accepts and agrees that with respect to any 102 Trustee Grant granted to him or her, subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, he or she shall not sell or release from trust any Stock received by him or her upon vesting of any Restricted Stock Unit or any share received subsequently following any realization of rights, including without limitation, bonus shares and Dividend Equivalent Units until the lapse of the Required Holding Period under Section 102 of the Ordinance. Notwithstanding the above, the Participant is aware that if any such sale or release occurs during the Required Holding Period (and such sale or release is not allowed by Section 102 of the Ordinance), the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedures promulgated thereunder shall apply to him or her and shall be borne solely by him or her.
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(b)With respect to 102 Trustee Grant, the Participant hereby acknowledges that he or she is familiar with the provisions of Section 102 and the regulations and rules promulgated thereunder, including without limitations the type of Restricted Stock Unit granted to him or her hereunder and the tax implications applicable to such grant.
(c)Should any Non-Trustee Grant be granted to the Participant, the Participant hereby agrees that should he or she cease to be employed by the Company or any Affiliate the Participant shall extend to the Company and/or its Affiliate a security or guarantee for the payment of tax due at the time of sale of the Stock, all in accordance with the provisions of Section 102 and the rules, regulation or orders promulgated thereunder.
(d)By signing this Agreement the Participant acknowledges that he or she is aware and agree that any tax consequences arising from the grant of any Restricted Stock Unit (or Dividend Equivalent Units), from the vesting thereof, from the payment for Stock or from any other event or act (of the Company and/or its Affiliates, the Trustee, or the Participant himself) hereunder, shall be borne solely by him or her. The Company and/or its Affiliates and/or the Trustee shall be entitled to withhold taxes according to any requirement under applicable laws, rules, tax rulings and regulations. Furthermore, the Participant hereby agrees and undertakes to indemnify and reimburse the Company and/or its Affiliates and/or their respective employees, officers, directors or any person acting on their behalf, and/or the Trustee, as the case may be, and hold each of them harmless against and from any and all liability for any tax (including, without limitation, income tax, national insurance and health tax), interest, linkage differentials and penalties thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to such Participant.
(e)The Participant will not be entitled to receive from the Company any Stock allocated or issued upon the vesting of his or her Restricted Stock Units prior to the full payments of his or her tax liabilities arising from Restricted Stock Units which were granted to him or her and/or Stock issued upon the vesting of the Restricted Stock Units. For the avoidance of doubt, neither the Company nor the Trustee shall be required to affect or complete any registration or recordation in its corporate books and records in respect of any Stock issuable upon the vesting of Restricted Stock Units by the Participant nor release any share certificate to the Participant until all payments required to be made by the Participant have been fully satisfied.
(f)The Participant hereby undertakes not to have any claim against the Company or any of its directors, employees, shareholders or advisors if it emerges, at the time of grant, vesting or recipient of the Restricted Stock Units, that the Participant’s investment in the Stock was not worthwhile, for any reason whatsoever.
(g)With respect to the Restricted Stock Units, by signing this Agreement the Participant hereby confirms the following:
(i)He or she has been notified that the receipt of the Restricted Stock Units, the Dividend Equivalent Units, and the disposition of the Stock to be issued upon the vesting of the Restricted Stock Units and Dividend Equivalent Units may result in tax consequences to the Participant, and that the Participant has been advised by the Company to consult a tax adviser in this respect;
(ii)Neither the Company nor any of its employees, officers, directors or any other person acting on its behalf (including representatives, legal counsels and tax advisers) have or shall be deemed to have provided the Participant
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any advice with respect to the grant of any Restricted Sotck Units, the terms of this Agreement (including the Israeli Addendum), or any other document, or with respect to any tax consequences.
Trustee.
(a)With respect to the Restricted Stock Units granted pursuant hereto, by signing and delivering this Agreement, the Participant hereby confirms that he or she read the provisions of the Trust Agreement, a copy of which is attached hereto as Exhibit C, and that the terms and conditions thereof are hereby agreed and acknowledged and it is agreed that a condition to the grant of the Restricted Stock Units is the Participant’s agreement to be bound by, and comply with, its provisions.
(b)The grant of the Restricted Stock Units is conditioned upon the Participant signing all documents requested by the Company, the Trustee and the ITA (if required).
(c)The Company may replace the Trust Agreement or amend, cancel, renew or replace the terms of the Agreement at any time, at its sole discretion, subject to the provisions of Section 102.
(d)By signing and delivering this Agreement, the Participant hereby confirms that he or she is aware that the Restricted Stock Units and Dividend Equivalent Units may be held by a global stock plan administrator other than the Trustee, and that any Stock allocated or issued upon the vesting of his or her Restricted Stock Units shall only be transferred and held by the Trustee in trust for the benefit of the Participant. In any event, any Restricted Stock Units, Dividend Equivalent Units (or any Stock allocated or issued upon the vesting of his or her Restricted Stock Units and Dividend Equivalent Units) shall not be transferred directly from the global stock plan administrator to the Participant or any other person other than the Trustee.
Data Protection. The following provision supplements Section 9 of the Agreement:
The Participant acknowledges that he/she is not obligated by law to provide any personal data under this Agreement, and that any such provision of personal data is subject to his/her own free will.
Exhibits. Exhibits A-C attached hereto shall be considered an integral part of this Israeli Addendum.
Participant Confirmation
I, the undersigned, hereby acknowledge receipt of a copy of the Plan and the Israeli Appendix / Sub-Plan and accept the grant of the Restricted Stock Units subject to all of the terms and provisions thereof and herein.
I have reviewed the Plan, the Israeli Appendix / Sub-Plan and this Agreement (including the Israeli Addendum) in its entirety, have had an opportunity to obtain the advice of counsel prior to executing this Agreement, and fully understand all provisions of this Agreement.
I agree to notify the Company immediately upon any change in the email address indicated below.
I, THE UNDERSIGNED, ACKNOWLEDGE THAT I AM FAMILIAR WITH THE ENGLISH
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LANGUAGE AND DO NOT REQUIRE TRANSLATION OF THIS APPROVAL AND ANY ANNEXED DOCUMENTS TO ANY OTHER LANGUAGE. I FURTHER ACKNOWLEDGE THAT I HAVE BEEN ADVISED BY THE COMPANY THAT I SHOULD CONSULT AN ATTORNEY WITH RESPECT TO, AND BEFORE EXECUTING, THIS GRANT LETTER APPROVAL AND THAT I HAVE BEEN AFFORDED AN OPPORTUNITY TO DO SO.
אני, הח"מ, מצהיר/ה בזאת כי השפה האנגלית מוכרת לי וכי איני זקוק/ה לתרגום של אישור זה והמסמכים המצ"ב לשפה אחרת. אני גם מצהיר/ה ומודיע/ה כי הומלץ בפניי על ידי החברה לקבל ייעוץ משפטי בקשר למכתב הענקה ואישור זה בטרם החתימה עליו וכי ניתנה לי הזדמנות נאותה לעשות כן.
ITALY
Terms and Conditions
Data Privacy. This provision replaces Paragraph 8 of the Agreement:
Participant understands that the Employer and YUM! and any Subsidiary may hold certain personal information about him or her, including, but not limited to, Participant's name, home address, telephone number, date of birth, social insurance or other identification number, salary, nationality, job title, any Stock or directorships held in YUM!, details of all Restricted Stock Units and other awards or entitlements to Stock awarded, canceled, exercised, vested, unvested, settled or outstanding in Participant's favor (“Data”), for the purpose of implementing, managing and administering the Plan.
Participant also understands that providing YUM! with Data is necessary for the performance of the Plan and that his or her refusal to provide such Data would make it impossible for YUM! to perform its contractual obligations and may affect Participant's ability to participate in the Plan. The controller of personal data processing is YUM! with registered offices at 1441 Gardiner Lane, Louisville, Kentucky 40213, United States and, pursuant to Legislative Decree no. 196/2003, its representative in Italy for privacy purposes is KFC Italy S.r.l., with registered offices at c/o Cocuzza & Associati, Via San Giovanni Sul Muro 18, Milan.
Participant understands that Data will not be publicized or used for direct marketing purposes. Participant further understand that the Employer and YUM! and any Subsidiary will transfer Data among themselves as necessary for the purposes of implementing, administering and managing Participant's participation in the Plan, and that the Employer and YUM! and any Subsidiary may each further transfer Data to Merrill Lynch or such other stock plan service provider as may be selected by YUM!, which is assisting YUM! with the implementation, administration and management of the Plan. Data may also be transferred to certain other third parties assisting YUM! with the implementation, administration and management of the Plan, including any transfer of such Data as may be required to a broker or other third party with whom Participant may elect to deposit any Stock acquired under the Plan subject to the terms of the Agreement. Such recipients may receive, possess, use, retain, and transfer Data in electronic or other form, for the purposes of implementing, administering, and managing Participant's participation in the Plan. Participant understands that these recipients may be located inside or outside of the European Economic Area, such as in the United States or elsewhere. Should YUM! exercise its discretion in suspending all necessary legal obligations connected with the administration and management of the Plan, it will delete Data as soon as it has completed all of the necessary legal obligations connected with such administration and management of the Plan.
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Participant understands that Data processing related to the purposes specified above shall take place under automated or non-automated conditions, anonymously when possible, that comply with the purposes for which Data is collected and with confidentiality and security provisions, as set forth by applicable laws and regulations, with specific reference to Legislative Decree no. 196/2003.
The use, processing and transfer of Data abroad, including outside of the European Economic Area, as herein specified and pursuant to applicable laws and regulations, does not require Participant's consent thereto, as such use, processing and transfer is necessary to performance of contractual obligations related to implementation, administration, and management of the Plan, as discussed above. Participant understands that, pursuant to Section 7 of the Legislative Decree no. 196/2003, Participant has the right, including but not limited to, access, delete, update, correct, or terminate, for legitimate reason, the use, processing and transfer of Data. For more information on the collection, use, processing and transfer set forth in this document, Participant understands that he or she may contact the human resources representative designated by the Employer and/or YUM!.
Grant Document Acknowledgment. In accepting the Restricted Stock Units, Participant acknowledges that he or she has received a copy of the Plan, the Summary Plan Description and the Agreement and has reviewed the documents in their entirety and fully understand and accept all provisions contained therein. Participant acknowledges, further, that he or she may request a written copy of the Plan at any time.
Participant further acknowledges that he or she has read and specifically and expressly approves the following provisions of the Agreement: subparagraph 2(c) Vesting and Forfeiture; Paragraph 3 Withholding of Tax; Paragraph 4 Nature of Award; Paragraph 5 Compensation Recovery Policy; Paragraph 7 Employment Relationship; Paragraph 14 Governing Law and Forum; and the Data Privacy section of this Addendum (above).
Notifications
Foreign Asset/Account Reporting Information. If Participant holds investments abroad or foreign financial assets (e.g., Stock acquired under the Plan or cash from the sale of such Stock, etc.) that may generate income taxable in Italy, Participant is required to report them on his or her annual tax returns (UNICO Form, RW Schedule) or on a special form if no tax return is due, irrespective of their value.
Foreign Asset Tax Information. The value of the financial assets (e.g., Stock acquired under the Plan or cash from the sale of such Stock, etc.) held outside of Italy by Italian residents is subject to a foreign asset tax levied at an annual rate of 0.2%. The taxable amount will be the fair market value of the financial assets assessed at the end of the calendar year.
JAPAN
Notifications
Foreign Asset/Account Reporting Information. Participant is required to report details of assets held outside of Japan as of December 31st, including shares of Stock acquired under the Plan, to the extent such assets have a total net fair market value exceeding €50,000. The report will be due by March 15th each year. Participant is advised to consult with his or her personal tax advisor to ensure compliance with this requirement.
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KOREA
Notifications
Exchange Control Information. Exchange control laws require Korean residents who realize US$500,000 or more from the sale of Stock or the receipt of dividends to repatriate the proceeds to Korea within 18 months of the sale.
Foreign Asset/Account Reporting Information. Korean residents must declare all foreign financial accounts (i.e., non-Korean bank accounts, brokerage accounts, etc.) to the Korean tax authority and file a report with respect to such accounts if the value of such accounts exceeds KRW 1 billion (or an equivalent amount in foreign currency). Participant is advised to consult with his or her personal tax advisor to ensure compliance with this requirement.
NETHERLANDS
No country-specific requirements apply.
RUSSIA
Terms and Conditions
U.S. Securities Transaction. Participant understands that this Award of Restricted Stock Units shall be valid and the Agreement shall be concluded and become effective only when the Agreement is received electronically or otherwise by YUM! in the United States.
Notifications
Securities Law Information. This Addendum, the Agreement, the Plan and all other materials that Participant may receive regarding participation in the Plan do not constitute advertising or an offering of securities in Russia. The issuance of securities pursuant to the Plan has not and will not be registered in Russia; hence, the securities described in any Plan-related documents may not be used for offering or public circulation in Russia. In no event will Stock be delivered to Participant in Russia; instead, all Stock acquired upon vesting of the Restricted Stock Units will be maintained on Participant’s behalf in the United States.
Exchange Control Notification. Under current exchange control regulations, within a reasonably short time after sale of Stock acquired under the Plan, Participant must repatriate the sale proceeds to Russia. Such sale proceeds must be credited initially to Participant through a foreign currency account at an authorized bank in Russia. After the sale proceeds are initially received in Russia, the funds may be further remitted to foreign banks in accordance with Russian exchange control laws.
Participant should consult his or her personal advisor before remitting any sale proceeds to Russia, as exchange control requirements may change.
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SINGAPORE
Terms and Conditions
The following variation in the terms and conditions set forth in this Agreement only applies to Participants who are U.S. citizens, residents, or green card holders employed by a Subsidiary organized under the laws of Singapore.
Forfeiture of Restricted Stock Units. Notwithstanding subparagraph 2(c) of the Agreement, in the event of termination of Participant's service with the employing Subsidiary as the result of Retirement, Participant shall forfeit all Restricted Stock Units to the extent they are not fully vested at the time of such separation from service as determined in accordance with subparagraph 4(j) of this Agreement.
Notifications
Securities Law Information. The Restricted Stock Units are being granted to Participant pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Singapore Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore. Participant should note that such Award of Restricted Stock Units is subject to section 257 of the SFA and Participant will not be able to make any subsequent sale in Singapore, or any offer of such subsequent sale of Stock underlying the Restricted Stock Units unless such sale or offer in Singapore is made pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA (Cap 289, 2006 Ed.).
Director Notification Obligation. If Participant is a director, associate director or shadow director of YUM! or a Singaporean Subsidiary, Participant is subject to certain notification requirements under the Singapore Companies Act. Among these requirements is an obligation to notify the Singaporean Subsidiary in writing when Participant receives an interest (e.g., Restricted Stock Units, Stock) in YUM! or any related companies. Please contact YUM! to obtain a copy of the notification form. In addition, Participant must notify YUM! or Singaporean Subsidiary when Participant sells Stock of YUM! or any related company (including when Participant sell Stock acquired under the Plan). These notifications must be made within two days of acquiring or disposing of any interest in YUM! or any related company. In addition, a notification must be made of Participant’s interests in YUM! or any related company within two days of becoming a director.
SOUTH AFRICA
Terms and Conditions
Withholding of Tax. The following provision supplements Paragraph 3 of the Agreement:
By accepting the Restricted Stock Units, Participant agrees that, immediately upon settlement of the Restricted Stock Units, Participant will notify the Employer of the amount of any gain realized. If Participant fails to advise the Employer of the gain realized upon settlement, Participant may be liable for a fine. Participant will be solely responsible for paying any difference between the actual tax liability and the amount withheld by the Employer.
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SPAIN
Terms and Conditions
Labor Law Acknowledgement. The following provision supplements Paragraph 4 of the Agreement:
Participant understands that YUM! has unilaterally, gratuitously and in its sole discretion decided to grant Restricted Stock Units to select Eligible Individuals who meet the eligibility requirements set forth in the Plan. The decision is a limited decision, which is entered into upon the express assumption and condition that any Restricted Stock Units granted will not economically or otherwise bind YUM! or any of its Subsidiaries on an ongoing basis, other than as expressly set forth in the Agreement. Consequently, Participant understands that the Restricted Stock Units granted hereunder are given on the assumption and condition that they shall not become a part of any employment contract (either with YUM! or any of its Subsidiaries) and shall not be considered a mandatory benefit, salary for any purposes (including severance compensation) or any other right whatsoever. Further, Participant understands and freely accepts that there is no guarantee that any benefit whatsoever shall arise from any gratuitous and discretionary grant of Restricted Stock Units since the future value of the Restricted Stock Units and the underlying Stock is unknown and unpredictable. In addition, Participant understands that any Restricted Stock Units granted hereunder would not be made but for the assumptions and conditions referred to above; thus, Participant understands, acknowledges and freely accepts that, should any or all of the assumptions be mistaken or should any of the conditions not be met for any reason, then any grant of Restricted Stock Units or right to Restricted Stock Units shall be null and void.
Further, the vesting of the Restricted Stock Units is expressly conditioned on Participant's continued and active rendering of service, such that if his or her employment terminates for any reason whatsoever, the Restricted Stock Units may cease vesting immediately, in whole or in part, effective on the date of Participant's termination of employment except as otherwise specified in Paragraph 2 of the Agreement. This will be the case, for example, even if (1) Participant is considered to be unfairly dismissed without good cause; (2) Participant is dismissed for disciplinary or objective reasons or due to a collective dismissal; (3) Participant terminates service due to a change of work location, duties or any other employment or contractual condition; (4) Participant terminates service due to a unilateral breach of contract by YUM! or a Subsidiary; or (5) Participant's employment terminates for any other reason whatsoever. Consequently, upon termination of Participant's employment for any of the above reasons, Participant may automatically lose any rights to Restricted Stock Units that were not vested on the date of Participant's termination of employment unless otherwise provided in Paragraph 2 of the Agreement.
Participant acknowledges that he or she has read and specifically accept the conditions referred to in Paragraph 4 of the Agreement.
Notifications
Securities Law Information. No “offer of securities to the public,” as defined under Spanish law, has taken place or will take place in the Spanish territory. The Agreement, including this Addendum, has not been nor will it be registered with the Comisión Nacional del Mercado de Valores, and does not constitute a public offering prospectus.
Exchange Control Information. If Participant acquires Stock under the Plan, Participant must declare the acquisition to the Direccion General de Comercio e Inversiones (the “DGCI”). If Participant acquires the Stock through the use of a Spanish financial institution, that institution will automatically make the declaration to the DGCI; otherwise, Participant will be required to make the declaration by filing a D-6 form. Participant must declare ownership of any Stock with the DGCI each January while the Stock is
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owned and must also report, in January, any sale of shares of Stock that occurred in the previous year for which the report is being made, unless the sale proceeds exceed the applicable threshold, in which case the report is due within one month of the sale.
Foreign Asset/Account Reporting Information. Participant is required to declare electronically to the Bank of Spain any securities accounts (including brokerage accounts held abroad), as well as the shares held in such accounts if the value of the transactions during the prior tax year or the balances in such accounts as of December 31 of the prior tax year exceed €1,000,000.
Further, effective January 1, 2013, to the extent that Participant holds shares and/or have bank accounts outside Spain with a value in excess of €50,000 (for each type of asset) as of December 31 each year, Participant will be required to report information on such assets in his or her tax return (tax form 720) for such year. After such shares and/or accounts are initially reported, the reporting obligation will apply for subsequent years only if the value of any previously-reported shares or accounts increases by more than €20,000. If the value of such shares and/or accounts as of December 31 does not exceed €50,000, a summarized form of declaration may be presented.
SWITZERLAND
Notifications
Securities Law Information. The Award of Restricted Stock Units is considered a private offering in Switzerland; therefore, it is not subject to registration.
THAILAND
Notifications
Exchange Control Information. Participant must immediately repatriate the proceeds from the sale of Stock and any dividends to Thailand immediately upon receipt if the amount of received in a single transaction is US$50,000 or more. Participant must then either convert the funds to Thai Baht or deposit the amount in a foreign currency deposit account maintained by a bank in Thailand within 360 days of repatriating the amount to Thailand. If the repatriated amount is US$50,000 or more, Participant must report the inward remittance by submitting the Foreign Exchange Transaction Form to the authorized agent or the Bank of Thailand. Participant is solely responsible for complying with applicable exchange control rules in Thailand and is advised to consult with his or her personal advisor to ensure such compliance.
TURKEY
Notifications
Securities Law Information. Participant is not permitted to sell shares of Stock acquired under the Plan in Turkey. Participant must sell such shares outside of Turkey. The Stock is currently traded on the New York Stock Exchange under the ticker symbol “YUM” and shares of Stock may be sold on this exchange, which is located outside of Turkey.
Exchange Control Information. Pursuant to Decree No. 32 on the Protection of the Value of the Turkish Currency (“Decree 32”) and Communique No. 2008-32/34 on Decree 32, any activity related to investments in foreign securities (e.g., the sale of shares of Stock under the Plan, the receipt of cash dividends or any portion of Dividend Equivalent Units paid in cash) must be conducted through a bank or financial intermediary institution licensed by the Turkish Capital Markets Board and should be reported to
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the Turkish Capital Markets Board. Participant is solely responsible for complying with Turkish exchange control requirements and is advised to contact a personal legal advisor for further information regarding these requirements.
UNITED ARAB EMIRATES (DUBAI)
Terms and Conditions
The following variation in the terms and conditions set forth in this Agreement only applies to Participants who are U.S. citizens, residents, or green card holders employed by a Subsidiary organized under the laws of the UAE.
Forfeiture of Restricted Stock Units. Notwithstanding subparagraph 2(c) of the Agreement, in the event of termination of Participant's service with the employing Subsidiary as the result of Retirement, Participant shall forfeit all Restricted Stock Units to the extent they are not fully vested at the time of such separation from service as determined in accordance with subparagraph 4(j) of this Agreement.
Notifications
Securities Law Information. The offer of Restricted Stock Units under the Plan is made only to individuals who satisfy the definition of Eligible Individuals in the Plan, and constitutes an “exempt personal offer” of equity incentives to employees in the United Arab Emirates. This Agreement, the Plan and any other documents related to the Award of Restricted Stock Units are intended for distribution only to Eligible Individuals and must not be delivered to, or relied on, by any other person.
The Emirates Securities and Commodities Authority and/or the Central Bank have no responsibility for reviewing or verifying any documents in connection with this statement. The Ministry of Economy, the Dubai Department of Economic Development, the Emirates Securities and Commodities Authority, Central Bank and the Dubai Financial Securities Authority have not approved this statement, the Plan, this Agreement or any other documents related to the Award of Restricted Stock Units or taken steps to verify the information set out therein and have no responsibility for such documents.
If Participant does not understand the contents of this Agreement or the Plan, Participant should consult his or her personal financial advisor.
UNITED KINGDOM
Terms and Conditions
Withholding of Tax. The following provisions supplement Paragraph 3 of the Agreement:
Participant agrees that, if Participant does not pay or the Employer or YUM! does not withhold from Participant the full amount of Tax-Related Items that Participant owes at vesting of the Restricted Stock Units, or the release or assignment of the Restricted Stock Units for consideration, or the receipt of any other benefit in connection with the Restricted Stock Units (the “Taxable Event”) within 90 days after the end of the tax year in which the Taxable Event occurs, or such other period specified in section 222(1)(c) of the U.K. Income Tax (Earnings and Pensions) Act 2003 (the “Due Date”), then the amount that should have been withheld shall constitute a loan owed by Participant to the Employer, effective on the Due Date. Participant agrees that the loan will bear interest at Her Majesty’s Revenue & Custom’s (“HMRC’s”) official rate and will be immediately due and repayable by Participant, and YUM! and/or the
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Employer may recover it at any time thereafter by any of the means set forth in Paragraph 3 of the Agreement. Participant also authorizes YUM! to delay the delivery of Stock unless and until the loan is repaid in full.
Notwithstanding the foregoing, if Participant is an officer or executive director (as within the meaning of section 13(k) of the U.S. Securities and Exchange Act of 1934, as amended), the terms of the immediately foregoing provision will not apply. In the event that Participant is an officer or executive director and Tax-Related Items are not collected from or paid by Participant by the Due Date, the amount of any uncollected Tax-Related Items will constitute a benefit to Participant on which additional income tax and National Insurance Contributions (“NICs”) will be payable. Participant will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for reimbursing the Employer for the value of any NICs due on this additional benefit. Participant acknowledges that YUM! or the Employer may recover any such amounts by any of the means referred to in Paragraph 3 of the Agreement.
BY PARTICIPATING IN THE PLAN, I AM DEEMED TO ACCEPT THE GRANT BY YUM! BRANDS, INC. OF THE RESTRICTED STOCK UNITS, AND I HEREBY AGREE TO THE TERMS AND CONDITIONS SET FORTH IN THIS RESTRICTED STOCK UNIT AGREEMENT DATED February 11, 2022.
YUM! BRANDS, INC.
By: 
Tracy Skeans
YUM! Brands, Inc., Chief Operating Officer and Chief People Officer
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AMENDMENT NO. 1 TO MASTER LICENSE AGREEMENT
This Amendment No. 1 to Master License Agreement (“Amendment No. 1”), is entered into as of April 15, 2022, by and between YRI China Franchising LLC, as assignee of Yum! Restaurants Asia Pte. Ltd. (“Licensor”), and Yum! Restaurants Consulting (Shanghai) Company Limited (“Licensee”).
RECITALS
A. Licensor and Licensee are parties to that certain Master License Agreement, dated as of October 31, 2016 (the “Original Agreement”).
B. Licensor and Licensee desire to modify the Original Agreement as set forth in this Amendment No. 1.
In consideration of the foregoing and the mutual covenants and consideration set forth herein, the receipt and sufficiency of which are hereby acknowledged, Licensor and Licensee agree as follows:
1. AMENDMENT OF CERTAIN DEFINITIONS. The following terms shall have the following meanings as used in the Agreement (as defined in this Section 1 below) and shall replace the corresponding terms set forth in the Original Agreement. Capitalized terms used and not otherwise defined in this Amendment No. 1 shall have the respective meanings assigned to them in the Original Agreement.
“Agreement” means the Original Agreement as modified by Amendment No. 1.
“Taco Bell Brand Development Initiative” means the specific development initiative for the Taco Bell Brand in the Territory set forth in Exhibit A-1.
2. AMENDMENT OF EXHIBIT A-1. Exhibit A-1 to the Agreement is hereby amended and restated in its entirety to read as set forth on Exhibit A-1 to this Amendment No. 1.
3. CERTAIN AGREEMENTS REGARDING SGM CALCULATIONS.
(a) For the Measurement Period of January 1, 2018 through December 31, 2022, the Parties hereby agree that such Measurement Period shall in respect of the Pizza Hut Brand omit the calendar year 2020 and the average annual Gross Revenue for each such Measurement Period in respect of the Pizza Hut Brand shall be calculated on the basis of the four remaining years in such Measurement Period.
(b) For purposes of determining Licensee’s compliance with Section 2.1.3 of the Agreement for the Measurement Period that includes calendar years 2021 through 2025, the Parties agree that the Gross Revenue of the Pizza Hut Brand Restaurant Business for the Benchmark Year of 2020 shall be the average of the Gross Revenue such Brand Restaurant Business in each of 2019 and 2021.
(c) Section 2.1.3 of the Original Agreements is hereby deleted and replaced in its entirely as follows:
Pursuant to Item 601(b)(10)(iv) of Regulation S-X, this exhibit omits certain information, identified by [*], that is not material and that the registrant treats as private or confidential.
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“2.1.3 Without limitation of Section 2.1.2, subject to Sections 2.1.3.A, through 2.1.3.E, Licensee shall cause the average annual Gross Revenue for each Brand Restaurant Business for each Measurement Period to exceed the Gross Revenue of such Brand Restaurant Business for the applicable Benchmark Year (“Sales Growth Metric”).
A. Within thirty (30) days after the beginning of each calendar year during the Term, Licensee shall calculate the average annual Gross Revenue for the relevant Measurement Period and the Gross Revenue for the relevant Benchmark Year for each Brand Restaurant Business and prepare and deliver to Licensor a written statement setting forth in reasonable detail its determination of the average annual Gross Revenue for the relevant Measurement Period and the Gross Revenue for the relevant Benchmark Year with respect to each Brand Restaurant Business (each, an “SGM Calculation Statement”). In the event Licensee’s SGM Calculation Statement indicates a Brand Restaurant Business has failed to meet the Sales Growth Metric (an “SGM Breach”), Licensee may include with the SGM Calculation Statement a report setting forth specific factors, if any, beyond its reasonable control as the predominant cause for such SGM Breach (the “SGM Report”).
B. Without limitation of Licensor’s rights under Section 8.3, Licensor and its representatives shall have the right to inspect Licensee’s books and records with respect to each Brand Restaurant Business, upon reasonable prior notice to Licensee and for purposes reasonably related to the verification of the SGM Calculation Statement, the SGM Report, if any, and any additional information relating to the Sales Growth Metric.
C. In the event the SGM Calculation Statement indicates that the Sales Growth Metric has been satisfied and Licensor agrees with the SGM Calculation Statement, Licensor shall provide written notice to Licensee confirming that the Sales Growth Metric has been satisfied for that particular Measurement Period within fifteen (15) days after receipt of the SGM Calculation Statement.
D. In the event an SGM Breach has occurred and Licensee has not included an SGM Report with the SGM Calculation Statement, Licensor shall provide written notice to Licensee confirming such SGM Breach within fifteen (15) days after receipt of the SGM Calculation Statement. Failure to submit an SGM Report with the SGM Calculation Statement shall be deemed a waiver of Licensee’s right to submit an SGM Report for the relevant Measurement Period.
E. In the event an SGM Breach has occurred and Licensee has included an SGM Report with the SGM Calculation Statement, Licensor shall consider the SGM Report in good faith, while also taking into account factors within Licensee’s control, such as Licensee’s use of free cash and the amount of capital investments for Brand development, judged on both an historical and competitive basis. If Licensor, in its reasonable discretion, determines that the SGM Breach was predominantly caused by factors beyond Licensee’s reasonable control, Licensor shall waive the SGM Breach with respect to the relevant Brand Restaurant Business and shall provide written notice to Licensee so indicating within fifteen (15) days after receipt of the SGM Calculation Statement. If Licensor, in its reasonable discretion, determines that the SGM Breach was not predominantly caused by factors beyond Licensee’s reasonable control, Licensor shall provide written notice to Licensee confirming that an SGM Breach has occurred within fifteen (15) days after receipt of the SGM Calculation Statement.
In the event of two (2) consecutive SGM Breaches for a Brand Restaurant Business, Licensor shall be entitled to exercise its rights under Section 15.4.4.”
Pursuant to Item 601(b)(10)(iv) of Regulation S-X, this exhibit omits certain information, identified by [*], that is not material and that the registrant treats as private or confidential.
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4. NO OTHER AMENDMENTS. Except as expressly set forth herein, the Agreement shall remain in full force and effect and shall not be amended or modified. Nothing in this Amendment No. 1 shall affect or impair a Party’s future exercise of any right or remedy under the Agreement.
5. GOVERNING LAW. This Amendment No. 1 shall be interpreted and construed under the laws of the United States of America and the State of Texas, U.S.A. (without regard to, and without giving effect to, their conflict of laws rules). All disputes under this Amendment No. 1, will be resolved in accordance with Article 17 of the Agreement.
6. COUNTERPARTS. This Amendment No. 1 may be executed in a number of identical counterparts, each of which will be deemed an original for all purposes and all of which will constitute, collectively, one agreement. Delivery of an executed signature page to this Amendment No. 1 by electronic transmission will be effective as delivery of a manually signed counterpart of this Amendment No. 1.
IN WITNESS WHEREOF, the Parties have entered into this Amendment No. 1 as of the date first written above.
YRI CHINA FRANCHISING LLC
/s/ Jessica Holleran
By: Jessica Holleran
Title: President
By: Jessica Holleran
Title: President
YUM! RESTAURANTS CONSULTING (SHANGHAI) COMPANY LIMITED
/s/ Joseph Chan
By: Joseph Chan
Title: Chief Legal Officer
By: Joseph Chan
Title: Chief Legal Officer
Pursuant to Item 601(b)(10)(iv) of Regulation S-X, this exhibit omits certain information, identified by [*], that is not material and that the registrant treats as private or confidential.
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EXHIBIT A-1
TACO BELL BRAND DEVELOPMENT INITIATIVE
The Parties acknowledge and agree that the following provisions regarding the Taco Bell Brand are part of the Master License Agreement, as amended by Amendment No. 1 (the “Agreement”), and shall apply solely with respect to the Taco Bell Brand and solely in respect of the time periods below.
1. Certain Definitions.
For the avoidance of doubt, capitalized terms used and not otherwise defined in this Exhibit A-1 shall have the respective meanings assigned to such terms in the Agreement.
“2022 Measurement Condition” means that, as of the 2022 Measurement Date, there are at least 100 Taco Bell Restaurants that are (i) operated under the Taco Bell Brand by a Sublicensee in the Territory pursuant to a Sublicense and (ii) open to customers for business during regular business hours on a continuous basis (except as may be prohibited on a temporary basis by Government Authority due to COVID-19 or a similar epidemic or pandemic).
“2022 Measurement Date” means December 31, 2022; provided, however, that if, as of December 31, 2022, there are at least 90 (but less than 100) Taco Bell Restaurants that are operated under the Taco Bell Brand by a Sublicensee in the Territory pursuant to a Sublicense and that are open to customers for business during regular business hours on a continuous basis (except as may be prohibited temporary basis by Governmental Authority due to COVID-19 or a similar epidemic or pandemic), the 2022 Measurement Date shall be March 15, 2023.
“2025 Measurement Condition” means that, as of the 2025 Measurement Date, there are at least 225 Taco Bell Restaurants that are (i) operated under the Taco Bell Brand by a Sublicensee in the Territory pursuant to a Sublicense and (ii) open to customers for business during regular business hours on a continuous basis (except as may be prohibited on a temporary basis by Governmental Authority due to COVID-19 or a similar epidemic or pandemic).
“2025 Measurement Date” means (i) for purposes of determining whether the 2025 Measurement Condition has been satisfied, December 31, 2025, provided, however, that if, as of December 31, 2025 there are at least 220 (but less than 225) Taco Bell Restaurants that would satisfy the requirements set forth in clauses (i) and (ii) of the definition of 2025 Measurement Condition, the 2025 Measurement Date shall be extended to the end of the Grace Period, and (ii) for purposes of determining any amount payable pursuant to Section 5(a), the later of December 31, 2025 and the end of the Grace Period (if invoked by Licensee).
“Aggregate Investment Cap” means [*], reduced by [*] if there is a Net New Unit Shortfall for 2023 and reduced by [*] if there is a Net New Unit Shortfall for 2024 (it being understood that if there is a Net New Unit Shortfall for both 2023 and 2024, the aggregate reduction to the Aggregate Investment Cap shall be [*]).
“Grace Period” means, as to a date, the thirty (30) day period after such date.
“Net New Units” means, for any calendar year, the positive difference (if any) between (i) the number of Taco Bell Restaurants operated by a Sublicensee in the Territory that are open to customers for business during regular business hours on a continuous basis (except as may be prohibited on a temporary basis by Governmental Authority
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as a result of COVID-19 or a similar epidemic or pandemic) as of the end of such calendar year, and (ii) the number of Taco Bell Restaurants operated by a Sublicensee in the Territory that are open to customers for business during regular business hours on a continuous basis (except as may be prohibited on a temporary basis by Governmental Authority as a result of COVID-19 or a similar epidemic or pandemic) as of the end of the immediately prior calendar year. Notwithstanding anything to the contrary herein, if the 2022 Measurement Date is extended to March 15, 2023, Net New Units for calendar year 2023 will exclude any Taco Bell Restaurants that were opened in 2023 but that were required for Licensee to satisfy the 2022 Measurement Condition. Notwithstanding anything to the contrary herein, (1) if a Grace Period is invoked as contemplated by Section 5(a) in respect of calendar year 2023, Net New Units for calendar year 2024 will exclude any Taco Bell Restaurants that were opened during such Grace Period, and (2) if a Grace Period is invoked as contemplated by Section 5(a) in respect of calendar year 2024, Net New Units for calendar year 2025 will exclude any Taco Bell Restaurants that were opened during such Grace Period. In the event that a Grace Period has been invoked for a calendar year as contemplated by Section 5(a), “Net New Units” means, for that calendar year and for purposes of calculating any amount payable pursuant to Section 5(a), the positive difference (if any) between (x) the number of Taco Bell Restaurants operated by a Sublicensee in the Territory that are open to customers for business during regular business hours on a continuous basis (except as may be prohibited on a temporary basis by Governmental Authority as a result of COVID-19 or a similar epidemic or pandemic) as of the end of the Grace Period following such calendar year, and (y) the number of Taco Bell Restaurants operated by a Sublicensee in the Territory that are open to customers for business during regular business hours on a continuous basis (except as may be prohibited on a temporary basis by Governmental Authority as a result of COVID-19 or a similar epidemic or pandemic) as of the end of the immediately prior calendar year (or, if a Grace Period has been invoked for such immediately prior calendar year, as of the end of such Grace Period).
“Net New Unit Investment Amount” means:
(i)For calendar year 2023, (a) if Net New Units for calendar year 2023 are at least [*] but less than [*], [*] per Net New Unit, (b) if Net New Units for calendar year 2023 are at least [*] but less than [*], [*] per Net New Unit, and (c) if Net New Units for calendar year 2023 are at least [*], [*] per Net New Unit;
(ii)For calendar year 2024, (a) if Net New Units for calendar year 2024 are at least [*] but less than [*], [*] per Net New Unit, (b) if Net New Units for calendar year 2024 are at least [*] but less than [*], [*] per Net New Unit, and (c) if Net New Units for calendar year 2024 are at least [*], [*] per Net New Unit; and
(iii)For calendar year 2025, (a) if Net New Units for calendar year 2025 are at least [*] but less than [*], [*] per Net New Unit, (b) if Net New Units for calendar year 2025 are at least [*] but less than [*], [*] per Net New Unit, and (c) if Net New Units for calendar year 2025 are at least [*], [*] per Net New Unit.
“Net New Unit Shortfall” means (i) for 2023, that the Net New Units for 2023 are not at least [*]; (ii) for 2024, that the Net New Units for 2024 are not at least [*]; and (iii) for 2025, that the Net New Units for 2025 are not at least [*].
“NNU Narrow Shortfall” means a shortfall of [*] Net New Units or less from a NNU Milestone. For example, for calendar year 2024, there is a NNU Narrow Shortfall if the Net New Units for such calendar year are within [*] Net New Units or less of [*], [*], or [*].
“NNU Milestone” means for each calendar year, the milestone number of Net New Units to achieve an increase the US$ amount payable per Net New Unit, e.g., in calendar year 2024, the NNU Milestones are [*], [*] and [*] Net New Units.
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“Taco Bell Restaurant” means a Restaurant operated under the Taco Bell Brand.
“Up-front Investment” means [*].
2. Up-front Investment. Within seven (7) Business Days after execution and delivery of Amendment No. 1 by each of Licensor and Licensee, Licensor shall pay to Licensee the Up-front Investment by wire transfer of immediately available funds to an account designated by Licensee in writing to Licensor.
3. License and Term.
(a) Notwithstanding anything in the Agreement to the contrary, the continuation of the license granted with respect to the Taco Bell Brand and associated Brand System IP is expressly conditioned on Licensee’s fulfillment of each of the 2022 Measurement Condition and the 2025 Measurement Condition. If Licensee fails to satisfy the 2022 Measurement Condition or the 2025 Measurement Condition (each, a “Development Shortfall”), each of Licensee’s right to enter into new Taco Bell Sublicenses (including new single unit franchise agreements under any then-existing multi-unit development arrangement) and the territorial protections set forth in Section 2.2 of the Agreement with respect to the Taco Bell Brand shall terminate upon Licensor’s written notice to Licensee of such termination. However, in such event, Licensee would continue to have the right and obligation to support the Taco Bell Sublicenses in effect as of the effective date of the termination, in accordance with the terms of the Agreement and such Sublicenses. Licensee acknowledges and agrees that any multi-unit development rights for Taco Bell Restaurants granted to a Sublicensee shall be expressly contingent upon Licensee’s possession of development rights for Taco Bell Restaurants under the Agreement at the time the Sublicensee seeks to exercise its rights. If Licensee has a Development Shortfall, such Development Shortfall will not negatively affect the rights of Licensee under the Agreement with respect to the development or operation, or the territorial protections set forth in Section 2.2 of the Agreement, of the KFC or Pizza Hut Brand Restaurant Businesses in the Territory.
(b) If Licensee satisfies both the 2022 Measurement Condition and the 2025 Measurement Condition, the Initial Term solely as relates to the Taco Bell Brand shall be extended to the date that is fifty (50) years after the date of Amendment No. 1 (the “TB Initial Term”), unless sooner terminated as provided in the Agreement (it being understood that all other terms and conditions of the Agreement shall continue to apply without modification), and, for the avoidance of doubt, the term “Initial Term” as used in Section 13.2 of the Agreement in relation to the Taco Bell Brand shall be the TB Initial Term.
(c) For the avoidance of doubt, if Licensee satisfies the 2022 Measurement Condition, the territorial protections set forth in Section 2.2 of the Agreement with respect to the Taco Bell Brand shall apply until the 2025 Measurement Date.
4. Taco Bell Investment Reports.
(a) No later than thirty (30) Business Days after the 2022 Measurement Date, the end of the calendar year 2023 (plus any Grace Period invoked by Licensee), the end of the calendar year 2024 (plus any Grace Period invoked by Licensee), and the 2025 Measurement Date (or each 2025 Measurement Date if the 2025 Measurement Date for purposes of clause (i) of the definition thereof differs from the 2025 Measurement Date for purposes of clause (ii) of the definition thereof), Licensee shall provide Licensor with a written report (the “Taco Bell Investment Report”) setting forth (i) for calendar year 2022 (and, if the 2022 Measurement Date has been extended to March 15, 2023, for the period from January 1, 2023 and ending on March 15, 2023), information sufficient, in Licensor’s reasonable judgment, to enable Licensor to determine whether the 2022 Measurement Condition was satisfied, (ii) for each of calendar year 2023 and 2024 (plus any applicable Grace Period invoked by Licensee as contemplated by Section 5(a)) and for the calendar year 2025 (plus any applicable Grace Period invoked by Licensee as contemplated by Section 5(a)), and provided that the 2022 Measurement Condition has been satisfied, information sufficient, in Licensor’s reasonable judgment, to enable Licensor to determine the number of Net New Units for such period and (iii) as of December 31, 2025 (or, if applicable pursuant to clause (i) of the definition of 2025 Measurement Date, the end of the Grace Period), and provided that the 2022 Measurement Condition has been satisfied, information sufficient, in Licensor’s reasonable judgment, to enable Licensor to determine whether the
A-3
2025 Measurement Condition has been satisfied. Without limitation of Licensor’s rights under Section 8.3 of the Agreement, Licensor and its representatives shall have the right to inspect Licensee’s books and records with respect to the Taco Bell Brand Restaurant Business, upon reasonable notice to Licensee and for purposes reasonably related to the verification of the Taco Bell Investment Report and any information relating thereto.
(b) If Licensor agrees in writing with the Taco Bell Investment Report as provided by Licensee pursuant to the foregoing clause (a), such Taco Bell Investment Report shall be final and binding and thereafter be known as the “Final Taco Bell Investment Report” for the applicable period. If Licensor does not agree in writing with the Taco Bell Investment Report as provided by Licensee pursuant to the foregoing clause (a) within fifteen (15) Business Days after receipt thereof, the Parties shall resolve their dispute with respect thereto pursuant to Article XVII of the Agreement and the Taco Bell Investment Report as finally determined pursuant thereto shall be the “Final Taco Bell Investment Report” for the applicable period.
5. Investment Payments.
(a) If there is a NNU Narrow Shortfall for calendar year 2023, 2024 or 2025, Licensee may, at its option, invoke the application of a Grace Period in respect of such calendar year, in which case Licensee’s Taco Bell Investment Report for such calendar year shall measure Net New Units as contemplated by the final sentence of the definition thereof. Within seven (7) Business Days after the determination of the Final Taco Bell Investment Report for each of calendar year 2023, 2024 and 2025 (after giving effect to any applicable Grace Period), and provided that the 2022 Measurement Condition has been satisfied, there has been no Net New Unit Shortfall and Licensee and its Sublicensees are in substantial compliance with the applicable Brand Standards and have exercised commercially reasonable, good faith efforts to comply with such Brand Standards, Licensor shall pay to License an amount equal to (i) the number of Net New Units for the applicable calendar year, after giving effect to any applicable Grace Period, as set forth in the applicable Final Taco Bell Investment Report, multiplied by, (ii) the applicable Net New Unit Investment Amount, in each case in respect of the period covered in such Final Taco Bell Investment Report, after giving effect to any applicable Grace Period. Such payment shall be made by wire transfer of immediately available funds to an account designated by Licensee, such designation to be made in writing to Licensor no later than three (3) Business Days after the determination of the Final Taco Bell Investment Report for the applicable period.
(b) Notwithstanding anything to the contrary herein, in no event shall the amount Licensor is obligated to pay Licensee pursuant to Section 2 of this Exhibit A-1, together with the amount Licensor is obligated to pay Licensee pursuant to Section 5(a) of this Exhibit A-1, exceed the Aggregate Investment Cap.
(c) Notwithstanding anything to the contrary herein and for the avoidance of doubt, there will be no double counting of Net New Units across measurement periods.
A-4
6. Qualifying Units. Notwithstanding anything to the contrary in the Agreement, Licensee may operate mobile or temporary units, pop-up stores, vending machines or similar units as Taco Bell Restaurants, but such units will not count toward Net New Units or toward satisfaction of the 2022 Measurement Condition or 2025 Measurement Condition.
A-5
May 10, 2022
Yum! Brands, Inc.
Louisville, Kentucky
Re: Registration Statements (No. 333-248288) on Form S-3 and (No. 333-36877, 333-32050, 333-36955, 333-36961, 333-36893, 333-32048, 333-109300, 333-64547, 333-32052, 333-109299, 333-170929, and 333-223152) on Form S-8
With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated May 10, 2022 related to our review of interim financial information.
Pursuant to Rule 436 under the Securities Act of 1933 (the Act), such report is not considered part of a registration statement prepared or certified by an independent registered public accounting firm, or a report prepared or certified by an independent registered public accounting firm within the meaning of Sections 7 and 11 of the Act.
/s/ KPMG LLP
Louisville, Kentucky
Exhibit 31.1
CERTIFICATION
I, David W. Gibbs, certify that:
1.I have reviewed this report on Form 10-Q 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: | May 10, 2022 | /s/ David W. Gibbs | ||||||
| Chief Executive Officer | ||||||||
Exhibit 31.2
CERTIFICATION
I, Chris Turner, certify that:
1.I have reviewed this report on Form 10-Q 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: | May 10, 2022 | /s/ Chris Turner | ||||||
| Chief Financial Officer | ||||||||
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of YUM! Brands, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Periodic Report”), I, David W. Gibbs, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.the Periodic 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 Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: | May 10, 2022 | /s/ David W. Gibbs | ||||||
| Chief Executive Officer | ||||||||
A signed original of this written statement required by Section 906 has been provided to YUM! Brands, Inc. and will be retained by YUM! Brands, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of YUM! Brands, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Periodic Report”), I, Chris Turner, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.the Periodic 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 Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: | May 10, 2022 | /s/ Chris Turner | ||||||
| Chief Financial Officer | ||||||||
A signed original of this written statement required by Section 906 has been provided to YUM! Brands, Inc. and will be retained by YUM! Brands, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.