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Yum! Brands, Inc. (NYSE: YUM) today reported results for the fourth quarter ended December 28, 2013, including EPS growth of 4%, or $0.86, excluding Special Items. Reported EPS was $0.70 for the quarter and $2.36 for the year.
KFC China sales and profits were significantly impacted by the effects of the December 2012 poultry supply incident, as well as subsequent news of avian flu.
Worldwide system sales grew 2%, prior to foreign currency translation, including 5% growth at Yum! Restaurants International (YRI) and 1% growth in the U.S. System sales declined 4% in China.
Same-store sales declined 13% in China. Same-store sales grew 1% at YRI and were flat in the U.S.
Total international development was 1,952 new restaurants; 82% of this development occurred in emerging markets.
Worldwide restaurant margin declined 1.6 percentage points to 15.0%, including a decline of 2.7 percentage points in China. Restaurant margin was even at YRI and increased 0.6 percentage points in the U.S.
Worldwide operating profit declined 10%, prior to foreign currency translation, including a decline of 26% in China. Operating profit grew 10% at YRI and 3% in the U.S.
Worldwide effective tax rate, prior to Special Items, increased to 28.0% from 25.8% driven primarily by a tax reserve adjustment in the third quarter. This charge impacted reported EPS by 2 percentage points for the full year.
A non-cash, Special Items net charge of $258 million related to the write-down of Little Sheep intangible assets was recorded in the third quarter. This charge impacted reported EPS by 16 percentage points for the full year.
The company repurchased $550 million of outstanding debt in the fourth quarter and recorded a Special Items net charge of approximately $75 million, primarily due to premiums paid related to this transaction. This impacted reported EPS by 22 percentage points for the quarter and 5 percentage points for the full year.
Worldwide system sales grew 3%, prior to foreign currency translation, including 3% growth in China and 6% growth at YRI. System sales declined 1% in the U.S.
Same-store sales declined 4% in China and 2% in the U.S. Same-store sales grew 2% at YRI.
Worldwide restaurant margin declined 0.2 percentage points to 14.2%, including declines of 1.4 percentage points at YRI and 0.3 percentage points in the U.S. China restaurant margin increased 0.4 percentage points.
Worldwide operating profit grew 2%, prior to foreign currency translation, including 5% in China, 11% at YRI and 2% in the U.S.
EPS Excluding Special Items
Special Items Gain/(Loss) 1
1 See Reconciliation of Non-GAAP Measurements to GAAP Results for further detail of the Special Items. Special Items for 2013 are primarily related to the Little Sheep impairment, expenses related to the extinguishment of debt, U.S. refranchising gains and Yum! pension settlement charges. Special Items for 2012 comparable periods are primarily related to Yum! pension settlement charges, Little Sheep acquisition gain, U.S. refranchising gains and Pizza Hut UK refranchising.
Note: All comparisons are versus the same period a year ago and exclude Special Items unless noted.
DAVID NOVAK COMMENTS
David C. Novak, Chairman and CEO said, “While 2013 was a challenging year, I’m pleased to report continued progress as we enter 2014 with fourth-quarter EPS growth of 4%, excluding Special Items. More importantly, with the decisive actions we've taken to strengthen our company across the board, we are well positioned to deliver double-digit EPS growth in 2014 and the years ahead.