XML 20 R8.htm IDEA: XBRL DOCUMENT
v3.20.2

Habit Burger Acquisition (Notes) | 9 Months Ended
--- | ---
Sep. 30, 2020
Business Acquisition [Line Items] |
Business Combination Disclosure [Text Block] | Habit Burger Grill Acquisition On March 18, 2020, we completed the acquisition of all of the issued and outstanding common shares of The Habit Restaurants, Inc. As of the date of acquisition, The Habit Restaurants, Inc. operated 245 company-owned and 31 franchised Habit Burger Grill restaurants across the U.S. and in China, offering a flavor-forward variety of made-to-order items chargrilled over an open flame. We expect Habit Burger Grill to benefit from the global scale and resources of YUM and that the acquisition will accelerate and diversify YUM's growth. Total cash consideration paid in connection with the acquisition was $408 million, net of acquired cash of $20 million. This included $9 million for the settlement of existing share-based awards previously issued to The Habit Restaurants, Inc. employees and $53 million associated with an obligation to former shareholders of The Habit Restaurants, Inc. related to a tax receivable agreement entered into in connection with its initial public offering in 2014. The acquisition was accounted for as a business combination using the acquisition method of accounting. During the quarter ended September 30, 2020, we adjusted our preliminary estimate of the fair value of net assets acquired. The components of the preliminary purchase price allocation upon the March 18, 2020 acquisition, subsequent to the adjustments to the allocation in the quarter ended September 30, 2020, were as follows:
Total Current Assets |  | $ | 12 |
Property, plant and equipment, net |  | 112 |
Habit Burger Grill brand (included in Intangible assets, net) |  | 96 |
Operating lease right-of-use assets (included in Other assets) |  | 198 |
Other assets |  | 23 |
Total Assets |  | 441 |
Total Current Liabilities |  | (70) |
Operating lease liabilities (included in Other liabilities and deferred credits) |  | (170) |
Other liabilities |  | (1) |
Total Liabilities |  | (241) |
Total identifiable net assets |  | 200 |
Goodwill |  | 208 |
Net consideration transferred |  | $ | 408 |
The adjustments to the preliminary estimate of identifiable net assets acquired resulted in a corresponding $11 million decrease in estimated goodwill due to the following changes to the preliminary purchase price allocation.
Change in |  | Increase (Decrease) in Goodwill
Property, plant and equipment, net |  | $ | 17 |
Habit Burger Grill brand (included in Intangible assets, net) |  | 2 |
Operating lease right-of-use assets (included in Other assets) |  | (35) |
Other assets |  | (1) |
Total Current Liabilities |  | 2 |
Operating lease liabilities (included in Other liabilities and deferred credits) |  | 5 |
Other liabilities |  | (1) |
Total decrease in goodwill |  | $ | (11) |
The preliminary allocation of the purchase price was based on management's analysis as of March 18, 2020. We will continue to obtain information to assist in determining the fair value of net assets acquired during the remaining measurement period. The Habit Burger Grill brand, which includes the related trademarks, was valued by applying the income approach through a relief from royalty analysis and it has been assigned an indefinite life and, therefore, will not be amortized. The brand asset will be tested for impairment on an annual basis as of the beginning of our fourth quarter or more often if an event occurs or circumstances change that indicate impairment might exist. The excess of the purchase price over the preliminary estimated fair value of the net, identifiable assets acquired was recorded as goodwill. The factors contributing to the recognition of goodwill were several strategic and synergistic benefits that are expected to be realized by Habit Burger Grill from the acquisition. These benefits include leveraging YUM's scale and resources in unit development, primarily through franchising, supply chain and global brand-building. Goodwill determined through the purchase price allocation will be entirely allocated to the Habit Burger Grill Division and goodwill of approximately $200 million is expected to be deductible for tax purposes. Habit's total operating lease liabilities represent the present value of minimum lease payments, including rental payments for lease renewal options we are reasonably certain to exercise. The nominal value of these minimum lease payments as of September 30, 2020 approximated $225 million. Additionally, the nominal value of minimum lease payments associated with Habit leases that have not yet commenced approximated $45 million as of September 30, 2020. The pro forma impact on our results of operations if the acquisition had been completed as of the beginning of 2019 would not have been significant. 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 probability-weighted 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. The amount of the goodwill impairment charge and related tax benefit could change again as we finalize the purchase price allocation associated with the acquisition.

X
- Definition Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table. + References No definition available. + Details
Name: | us-gaap_BusinessAcquisitionLineItems
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration