SOMERS. N.Y. (TheStreet) — Pepsi’s(PEP Quote) purchase of Pepsi Bottling Group(PBG Quote) is looking like a better idea by the day.
The bottler posted a 10% jump in its third quarter, earning $254 million, or $1.14 a share. This compares with a profit of $231 million, or $1.06 a share, in the year-ago period.
The quarter included $17 million, or 8 cents per share, for a favorable tax audit settlement and some other items.
Analysts expected the company to earn $1.05 a share.
Sales slipped 5% to $3.63 billion from $3.81 billion.
Looking ahead, Pepsi Bottling forecasts full-year earnings
at the high end of its projected range of $2.30 to $2.40 per share.
On Monday, Pepsi announced the creation of a new bottling unit called PepsiCo Bottling North America, which will merge Pepsi Bottling Group and PepsiAmericas(PAS Quote). The new division will be led by Eric J. Foss, chairman and CEO of Pepsi Bottling.
In August the soft-drink maker said it would finally buy the two bottlers in a deal worth $7.8 billion.
— Reported by Jeanine Poggi in New York
LOUISVILLE, Ky.–(BUSINESS WIRE)–Yum! Brands Inc. (NYSE: YUM – News) today reported Earnings Per Share (EPS) of $0.69, or $0.70 excluding special items, for the third quarter ended September 5, 2009.
- nternational development continued at a strong pace with 267 new restaurants including 88 new units in mainland China and 165 new units in Yum! Restaurants International (YRI).
- System sales growth of +11% in mainland China and +4% in YRI was offset by a 5% decline in the U.S. resulting in flat worldwide system sales in local currency terms; worldwide system sales declined 4% after foreign currency translation.
- Worldwide restaurant margin improved over 3 percentage points driven by significant gains in both the U.S. and China.
- Worldwide operating profit growth of 15% was driven by China, +32%, and the U.S., +18%. YRI profit declined 13% due to negative foreign currency translation. Worldwide operating profit growth was 19% prior to foreign currency translation.
- Foreign currency translation negatively impacted EPS by $0.02 per share.
Note: All comparisons are versus the same period a year ago and exclude Special Items unless noted.
| Third Quarter | Year-to-Date | ||||||||||||
| 2009 | 2008 | % Change | 2009 | 2008 | % Change | ||||||||
| EPS Excluding Special Items | $0.70 | $0.58 | 21% | $1.67 | $1.45 | 16% | |||||||
| Special Items Gain/(Loss)1 | ($0.01 | ) | $0.00 | NM | $0.10 | $0.08 | NM | ||||||
| EPS | $0.69 | $0.58 | 19% | $1.77 | $1.53 | 16% | |||||||
1 See Reconciliation of Non-GAAP Measurements to GAAP Results for further detail of the 2009 and 2008 Special Items.
FULL-YEAR OUTLOOK
The Company raised its full-year 2009 EPS forecast from $2.10 to $2.14 per share or 12% growth prior to special items, driven by stronger-than-expected full year performance in China and a lower-than-expected full year effective tax rate.
David C. Novak, Chairman and CEO, said, “I’m pleased to report we are raising our full year 2009 EPS growth forecast to 12% based on our strong year-to-date profit performance. Our global portfolio delivered an impressive 15% operating profit growth this quarter, driven by 32% growth in China and 18% growth in our U.S. business. China and Yum! Restaurants International are on track to open over 1,400 international new units this year. We are confident our industry leading international new unit development will continue to be a key factor in our ability to drive future sales and profit growth.
“Our China business generated extraordinary operating profit growth of 32% in the third quarter. We leveraged our high-return, new unit development and increased restaurant margin over two points. We are especially pleased that our China team achieved margins near record levels with high average unit volumes. We are on track to open over 475 new units in mainland China. Importantly, KFC is the only Western QSR brand in the vast majority of the 600 cities in which we have a presence. Our U.S. business achieved strong operating profit growth of 18%. This can be attributed to substantial improvement to restaurant margin and significant G&A savings which offset a 6% same-store-sales decline. There’s no question the overall worldwide environment continues to be challenging. However, we are more confident than ever in the consistent earnings power of our global portfolio. We also continue to make major progress developing our significant, new sales layers which will better leverage our assets and drive future growth.
“Looking to 2010, we expect to deliver 10% EPS growth. This would be the ninth consecutive year we meet or exceed our annual target of at least 10% EPS growth. Our fundamental opportunities remain intact. We continue to have the unique ability to generate unparalleled international growth, increase sales in our existing assets and drive significant free cash flow while continuing to be an industry leader in return on invested capital.”
CHINA DIVISION
| Third Quarter | Year-to-Date | |||||||||||||||
| % Change | % Change | |||||||||||||||
| 2009 | 2008 | Reported | Ex F/X | 2009 | 2008 | Reported | Ex F/X | |||||||||
| System Sales Growth | +11 | +10 | +11 | +9 | ||||||||||||
| Restaurant Margin (%) | 23.2 | 20.9 | 2.3 | 2.3 | 21.5 | 19.7 | 1.8 | 1.7 | ||||||||
| Operating Profit ($MM) | 217 | 165 | +32 | +31 | 453 | 360 | +26 | +23 | ||||||||
- China Division system sales growth of 10% excluding foreign currency translation was driven by strong new unit development in mainland China while same-store-sales were flat.
- We opened 88 new restaurants in mainland China for the third quarter for a total of 304 year to date.
| Mainland China Units | Q3 2009 | % Change | ||
| Traditional Restaurants | 3,281 | +16 | ||
| KFC | 2,729 | +16 | ||
| Pizza Hut Casual Dining | 442 | +11 | ||
| Pizza Hut Home Service | 87 | +24 |
- Restaurant margin increased 2.3 percentage points driven primarily by significant commodity deflation of $21 million in the third quarter. A similar benefit is expected in the fourth quarter.
- Foreign currency conversion benefited operating profit by $1 million.
- Operating profit growth of 32% overlapped growth of 22% in the third quarter of 2008.
YUM! RESTAURANTS INTERNATIONAL (YRI) DIVISION
| Third Quarter | Year-to-Date | |||||||||||||||||||
| % Change | % Change | |||||||||||||||||||
| 2009 | 2008 | Reported | Ex F/X | 2009 | 2008 | Reported | Ex F/X | |||||||||||||
| Traditional Restaurants | 12,895 | 12,489 | +3 | NA | 12,895 | 12,489 | +3 | NA | ||||||||||||
| System Sales Growth | (7 | ) | +4 | (7 | ) | +7 | ||||||||||||||
| Franchise & License Fees | 156 | 165 | (5 | ) | +5 | 442 | 467 | (5 | ) | +8 | ||||||||||
| Operating Profit ($MM) | 119 | 137 | (13 | ) | Flat | 342 | 393 | (13 | ) | +3 | ||||||||||
| Operating Margin (%) | 18.0 | 18.1 | (0.1 | ) | (0.6 | ) | 18.7 | 18.0 | +0.7 | (0.2 | ) | |||||||||
- System sales growth of 4%, excluding foreign currency translation, was driven by new unit development and same-store sales were flat. The table below provides further insight into key YRI markets.
- YRI opened 165 new restaurants with 93% coming from our franchise partners.
- Operating profit growth was negatively impacted by poor performance in two company markets, Mexico and South Korea, and timing related to overhead expenses.
- Foreign currency translation negatively impacted operating profit by $17 million.
| Key YRI Markets | System Sales Growth Ex F/X (%) |
|||
| Third Quarter | Year-to-Date | |||
| Franchise Only Markets | ||||
| Asia (ex China Division) | +4 | +7 | ||
| Continental Europe | Flat | +3 | ||
| Middle East | +6 | +8 | ||
| Latin America | +4 | +6 | ||
| Company/Franchise Markets | ||||
| Australia | +3 | +6 | ||
| UK | +9 | +10 | ||
| New Growth Markets | +20 | +18 | ||
|
Note: The markets listed above generate approximately 80% of YRI operating profit. New |
||||
U.S. DIVISION
| Third Quarter | Year-to-Date | |||||||||||||
| 2009 | 2008 | % Change | 2009 | 2008 | % Change | |||||||||
| Same-Store-Sales Growth (%) | (6 | ) | +3 | NM | (3 | ) | +3 | NM | ||||||
| Restaurant Margin (%) | 14.1 | 10.8 | +3.3 | 14.0 | 11.9 | +2.1 | ||||||||
| Operating Profit ($MM) | 171 | 146 | +18 | 497 | 447 | +11 | ||||||||
| Operating Margin (%) | 16.2 | 12.0 | +4.2 | 15.5 | 12.3 | +3.2 | ||||||||
- Same-store-sales declined 6% which included a 13% decline at Pizza Hut.
- Restaurant margin improved by 3.3 points due largely to commodity cost deflation of $16 million this quarter. Year-to-date commodity cost deflation has totaled $11 million. The full year benefit from commodity cost deflation is expected to be about $20 million.
- Third quarter operating profit growth of 18% and operating margin improvement of 4.2 points were driven by a $16 million decline in our U.S. G&A cost structure from actions initiated in the fourth quarter of 2008. For the full year, we continue to expect G&A cost savings of at least $60 million.
U.S. REFRANCHISING UPDATE
In the third quarter, 98 company-owned U.S. restaurants were sold to franchisees. Year to date, we have refranchised a total of 286 units, including 210 Pizza Huts, 50 KFCs and 26 Taco Bells. We continue to expect to refranchise 500 units in 2009. Full year proceeds from U.S. refranchising are expected to be about $175 million.
CONFERENCE CALL
Yum! Brands Inc. will host a conference call to review the company’s financial performance and strategies at 9:15 a.m. ET Wednesday, October 7, 2009.
The number is 877/815-2029 for U.S. callers and 706/645-9271 for international callers.
The call will be available for playback beginning at noon Eastern Time Wednesday, October 7, through midnight October 21, 2009. To access the playback, dial 800/642-1687 in the United States and 706/645-9291 internationally. The playback pass code is 29944595.
The webcast and the playback can be accessed via the Internet by visiting Yum! Brands’ Web site, www.yum.com/investors and selecting “Q3 2009 Earnings Call”.
For your added convenience . . . A podcast will be available within 24 hours of the end of the call at www.yum.com/investors.
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