Please fill in the excel document with the information attached.

Financial Statement AnalysisCase 3: YUM Brands Segments and Common-Size Analysis
Find the data for this case in the Excel file “3. YUM FY21 Data.xlsx”.
The Management Discussion and Analysis section (Item 7) of Yum Brands’ FY21 10-K reports the
following:
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
53,000 restaurants in 157 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, a concept we acquired in March 2020, is a fast-casual
restaurant concept specializing in made-to-order chargrilled burgers,
sandwiches and more. Of the over 53,000 restaurants, 98% are operated by
franchisees.
As of December 31, 2021, YUM 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
Yum completed its acquisition of Habit on March 18, 2020.
Use the data in the spreadsheet’s “Operating Segments” tab to answer the questions below.
Ignore the effect of taxes. (Solely for your reference, Yum’s balance sheet, income statement,
and statement of cash flow are also included in separate tabs in the spreadsheet.)
1. Of the “Yum overall” total, what percent of the following do each of the four Yum
operating segments represent in FY19, FY20, and FY21? (For example, the KFC segment
was 45% of Yum’s total FY19 revenue.) Present your results numerically, but also
present your results graphically in a way that, in your judgment, provides the most
informative visualization.
a. Total YUM revenue
b. Total YUM operating income
c. Total YUM capital spending
2. What is the FY18-FY21 CAGR in revenue, operating income, and capital spending for
KFC, Pizza Hut, Taco Bell, Habit, and Yum overall? What do you make of your findings?
3. For FY19, FY20, and FY21, compute the ratios below for KFC, Pizza Hut, Taco Bell, and
Habit segments. Present your results numerically and graphically, and note any trends.
Address how you handled computing Habit’s ratios for FY20 since Yum only acquired it
in March 2020.
a. Profit margin
i. Use “Operating Income” for your numerator since net income is not
available on a segment level.
b. Asset turnover
c. Return on assets
i. Use “Operating Income” for your numerator since net income is not
available on a segment level.
ii. Use average “Identifiable Assets” for your denominator since total assets
is not disclosed for each segment.
4. Based on your analysis above, answer the following about Yum’s segments in FY19,
FY20, and FY21:
a. Which segment is the largest?
b. In your judgment, which segment is performing the best? Justify your answer.
5. Yum discloses the following table in its Item 1 – Overview of Business:
The “System Sales” numbers reflect total sales made across company-owned and
franchised restaurants. For that reason, the system sales numbers are substantially
larger than the segment revenue numbers reported in the spreadsheet.
In light of Yum’s lower franchise percentage of its Habit Burger Grill Division compared
to its other divisions, how would you now assess the Habit division’s profit margin, asset
turnover, and return on assets differently? (A qualitative answer will suffice, but be
specific about how the lower franchise rate would impact your interpretation of each of
the three ratios.)
6. In its FY21 10-K footnote 3, Yum disclosed the following:
During the first quarter of 2020, the operations of substantially all Habit Burger
Grill restaurants were impacted by COVID-19. As a result, we performed an
interim impairment test of the Habit Burger Grill reporting unit goodwill as of
March 31, 2020. This test of impairment included comparing the estimated fair
value of the Habit Burger Grill reporting unit to its carrying value, including
goodwill, as originally determined through our preliminary purchase price
allocation. The fair value estimate of the Habit Burger Grill reporting unit was
based on the estimated price a willing buyer would pay for the reporting unit and
was determined using an income approach through a discounted cash flow
analysis using unobservable inputs (Level 3). The most impactful of these inputs
included future average unit volumes of Habit Burger Grill restaurants as well as
restaurant unit counts. The fair value was determined based upon a probabilityweighted average of three scenarios, which included assumed recovery of Habit
Burger Grill average unit volumes to a pre—COVID-19 level over periods ranging
from the beginning of 2021 to the end of 2022. Factors impacting restaurant unit
counts were near-term unit closures as the result of COVID-19 as well as the pace
of expected new unit development. Unit counts assumed were correlated with
the expected recoveries in average unit volumes. Based upon this fair value
estimate, we determined that the carrying value of our Habit Burger Grill
reporting unit exceeded its fair value. As a result, during the first quarter of 2020
we recorded a goodwill impairment charge of $139 million to Other (income)
expense and a corresponding income tax benefit of $32 million. As we continued
to refine our preliminary purchase price allocation in the quarter ended
September 30, 2020, the impairment charge was adjusted upward by $5 million,
which resulted in a corresponding income tax benefit of $1 million. Subsequent
to these 2020 goodwill impairment charges and the finalization during the
quarter ended March 31, 2021, of the allocation of consideration to the net
assets acquired (described above), the Habit Burger Grill reporting unit goodwill
was $60 million.
How, if at all, did the goodwill impairment affect the Habit segment’s profit
margin, asset turnover, and return on assets in FY20 and FY21? A qualitative
answer will suffice, but be sure to indicate any directional change on each ratio
and an explanation.
Segment Disclosures — $ in millions
Revenues
KFC Division
Taco Bell Division
Pizza Hut Division
Habit Burger Grill Division
Yum Overall
2018
2,644
2056
988
0
5,688
2019
2,491
2079
1,027
0
5,597
2020
2,272
2031
1,002
347
5,652
2021
2,793
2,238
1,028
525
6,584
Operating Profit
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)**
Yum Overall
2018
959
633
348
0
(171)
3
(8)
540
(8)
2,296
2019
1,052
683
369
0
(188)
0
(14)
37
(9)
1,930
2020
922
696
335
(22)
(312)
0
(4)
34
(146)
1,503
2021
1,230
758
387
2
(260)
0
1
35
(14)
2,139
Depreciation & Amortization
KFC Division
Taco Bell Division
Pizza Hut Division
Habit Burger Grill Division
Corporate
Yum Overall
2018
58
61
10
0
8
137
2019
30
59
15
0
8
112
2020
29
56
24
25
12
146
2021
28
53
32
28
23
164
Capital Spending
KFC Division
Taco Bell Division
Pizza Hut Division
Habit Burger Grill Division
Corporate
Yum Overall
2018
105
85
38
0
6
234
2019
81
76
33
0
6
196
2020
59
42
28
16
15
160
2021
60
62
18
56
34
230
Identifiable Assets*
KFC Division
Taco Bell Division
Pizza Hut Division
Habit Burger Grill Division
Corporate**
Yum Overall
2018
1,481
1,074
701
0
874
4,130
2019
2,042
1,330
801
0
1,058
5,231
2020
2,011
1,387
804
537
1,113
5,852
2021
2,313
1,397
850
586
820
5,966
Long-Lived Assets*
KFC Division
Taco Bell Division
Pizza Hut Division
Habit Burger Grill Division
Corporate
Yum Overall
2018
868
720
384
0
32
2,004
2019
1,179
938
427
0
42
2,586
2020
1,160
925
415
458
68
3,026
2021
1,069
904
423
516
120
3,032
*Amounts in 2020 include charitable contributions to Yum! Brands Foundation, Inc. of $50 million and $25 million
**Unallocated Other income (expense) in 2020 includes a charge of $144 million related to the impairment of Hab
*Indentifiable assets are assets closely associated with the segment
**Primarily includes cash and deferred tax assets.
*Includes PP&E, net, goodwill, intangible assets, net and Operating lease right-of-use assets.
f $50 million and $25 million related to our Unlocking Opportunity Initiative and COVID-19 employee relief, respectively. Addit
yee relief, respectively. Additionally, 2020 includes $36 million for charges associated with resource optimization
rce optimization
Consolidated Statements of Income — $ in millions
Revenues
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
Operating Profit
Investment (income) expense, net [1]
Other Pension (income) expense [1]
Interest Income (Expense), net [1]
Income (Loss) Attributable to Parent, before Tax, Total
Income tax provision
Net Income
Basic Earnings Per Common Share (in dollars per share)
Diluted Earnings Per Common Share (in dollars per share)
Dividends Declared Per Common Share (in dollars per
share)
[1] Amounts have not been allocated to any segment for
performance reporting purposes.
12 Months Ended
Dec. 31,
Dec. 31, 2021
2020
$ 6,584
$ 5,652
1,725
1,060
117
1,576
(35)
2
2,139
(86)
7
544
1,674
99
$ 1,575
1,506
1,064
145
1,314
(34)
154
1,503
(74)
14
543
1,020
116
$ 904
$ 5.30
5.21
$ 2.99
2.94
$2
$ 1.88
nths Ended
Dec. 31,
2019
$ 5,597
1,235
917
180
1,368
(37)
4
1,930
67
4
486
1,373
79
$ 1,294
$ 4.23
4.14
$ 1.68
Consolidated Balance Sheets — $ in millions
Current Assets
Cash and cash equivalents
Accounts and notes receivable, net
Prepaid Expense and Other Assets, Current
Total Current Assets
Property, Plant and equipment, net
Goodwill [1]
Intangible assets, net
Other assets
Deferred Income Taxes
Total Assets [2]
Current Liabilities
Accounts payable and other current liabilities
Income taxes payable
Debt, Current
Total Current Liabilities
Long-term debt
Other Liabilities, Noncurrent
Total Liabilities
Shareholders’ Equity
Common stock, no par value, 750 shares authorized; 300 shares issued in 2020 and 2019
Accumulated Deficit
Accumulated other comprehensive income (loss)
Stockholders’ Equity, Including Portion Attributable to Noncontrolling Interest, Total
Total Liabilities, Redeemable Noncontrolling Interest and Shareholders’ Equity
[1] Goodwill, net includes $144 million of accumulated impairment loss recorded in the year ended Decem
[2] U.S. identifiable assets included in the combined Corporate and KFC, Taco Bell, Pizza Hut, and Habit
Dec. 31, 2021 Dec. 31, 2020
$ 486
596
450
1,532
1,207
657
359
1,487
724
5,966
$ 730
534
425
1,689
1,235
597
343
1,435
553
5,852
1,334
13
68
1,415
11,178
1,746
14,339
1,189
33
453
1,675
10,272
1,796
13,743
0
(8,048)
(325)
(8,373)
$ 5,966
0
(7,480)
(411)
(7,891)
$ 5,852
ecorded in the year ended December 31, 2020, related to our Habit Burger Grill segment and $17 million of accumul
, Taco Bell, Pizza Hut, and Habit Burger Grill Divisions totaled $2.8 billion and $3.0 billion in 2021 and 2020, respect
t and $17 million of accumulated impairment losses for each year presented related to our Pizza Hut segment.
Pizza Hut segment.
Consolidated Statements of Cash Flows — $ in millions
Cash Flows – Operating Activities
Net Income
Depreciation and amortization
Impairment and closure expense
Refranchising (gain) loss
Investment (income) expense, net
Deferred income taxes
Share-based compensation expense
Changes in Accounts and Notes Receivable
Changes in Prepaid Expense and Other 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
Payments to Acquire Businesses, Net of Cash Acquired
Payments for (Proceeds from) Investments
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 facilities, 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
Debt issuance costs
Other, net
Net Cash Used in Financing Activities
Effect of Exchange Rate on Cash and Cash Equivalents
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Period Increase (Decrease),
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Beginning Balance
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Ending Balance
[1] Amounts have not been allocated to any segment for performance reporting purposes.
12 Months Ended
Dec. 31, 2021 Dec. 31, 2020 Dec. 31, 2019
$ 1,575
164
19
(35)
(86)
(200)
75
(46)
(33)
122
(41)
192
1,706
$ 904
146
172
(34)
(74)
(65)
97
62
8
128
(110)
71
1,305
$ 1,294
112
5
(37)
67
(232)
59
(56)
(8)
(36)
23
124
1,315
(230)
0
0
85
(28)
(173)
(160)
(408)
206
19
8
(335)
(196)
0
0
110
(2)
(88)
4,150
(3,657)
0
1,650
(1,517)
0
800
(331)
0
0
0
0
(1,591)
(592)
(37)
(40)
(1,767)
95
(100)
0
(239)
(566)
(20)
(41)
(738)
130
(126)
0
(815)
(511)
(10)
(75)
(938)
(19)
24
5
(253)
1,024
$ 771
256
768
$ 1,024
294
474
$ 768