Exhibit 99.1
Yum! Brands Inc. Reports First-Quarter
Earnings Per Share of $0.47, an Increase of 21%
LOUISVILLE, Ky.--(BUSINESS WIRE)--April 21, 2004--Yum! Brands Inc.
(NYSE: YUM) today reported results for the first-quarter ended March
20, 2004.
-- Raises full-year 2004 EPS guidance $0.03 to at least $2.30
prior to special items, an increase of 12%, and reported EPS
to at least $2.32.
-- Reports Period 4 estimated international system sales
increased 12% in U.S. dollar terms or 3% prior to U.S. dollar
conversion. The company estimates the avian-flu situation in
Asia adversely impacted Period 4 results by approximately 5 to
6 percentage points prior to U.S. dollar conversion;
currently, sales in all affected Asian markets, including
China, have recovered.
-- Reports Period 4 estimated U.S. blended same-store sales at
company restaurants increased 1% (Taco Bell, +6%; Pizza Hut,
+3%; KFC, -7%); excluding the timing impact of the Easter
holiday weekend, U.S. blended same-store sales at company
restaurants increased 2%.
Key points relative to first-quarter 2004 performance versus
first-quarter 2003:
-- International operating profit grew 36%.
-- International system restaurants in operation expanded by 5%,
the 15th consecutive quarter of at least 5% year-over-year
growth.
-- Growth of system restaurants in operation was +25% in China;
+8% in the U.K.; +6% in international franchise-only markets.
-- U.S. multibrand restaurants in operation expanded by 19%.
-- U.S. blended systemwide same-store sales increased 4%.
-- Worldwide restaurant margin increased 0.6 percentage points to
14.7%.
-- Higher U.S. commodity costs adversely impacted U.S. restaurant
margin by approximately 0.6 percentage points.
-- The company repurchased $216 million of its own shares.
Consolidated Financial Highlights
First Quarter
----------------------------
2004 2003 % Change
-------- -------- --------
System Restaurants 30,886 30,468 +1
Systemwide Same-Store-Sales Growth +3% (1)% NM
Revenues ($ million) $1,970 $1,802 +9
Reported EPS $0.47 $0.39 +21
David C. Novak, Chairman and CEO, said: "I am pleased to report we
are raising our full-year 2004 estimate to at least $2.30 or 12%
growth prior to special items. This reflects our confidence that we
will once again exceed our 10% annual EPS growth target. Our estimate
includes the impact of increased commodity inflation in the U.S.,
which has minimal effect on our largest and fastest growing division,
Yum! Restaurants International. In fact, international profits grew
36%, and system sales grew by 8% in local currency for the first
quarter, and we anticipate once again opening at least 1,000 new
system restaurants outside the U.S. this year.
"In the U.S., Taco Bell continues to generate strong, positive
same-store-sales results driven by product news and steady operations
improvement. Pizza Hut results were driven by the successful
introduction of the innovative 4forAll(TM) Pizza. As expected, KFC's
sales performance continues to be negative. However, we expect
positive same-store-sales growth in the second half of the year as KFC
executes a major brand relaunch including the roll out of a new menu
board, new advertising campaign and new products.
"It is also important to note that while second-quarter
international system-sales growth will be adversely affected by the
avian flu, China sales trends have fully recovered, and we expect this
key market will continue to report rapid growth in 2004.
"Shareholders should continue to expect us to execute against the
unique growth opportunities that make us anything but an ordinary
restaurant company: profitable international expansion, steady
improvement in operations, and multibranding category-leading brands."
INTERNATIONAL BUSINESS
- ----------------------
First Quarter
------------------------------------
(million, except restaurant Incr/(Decr)
counts and percentages) ------------------------------------
2004 2003 Reported Excl F/x
------------------------------------
Financial Measures
Revenues $673 $550 +22% +14%
Operating Profit $130 $95 +36% +28%
- ----------------------------------------------------------------------
Operating Metrics
Est. System-Sales Growth +18% +8%
System Restaurants 12,286 11,658 +5% NM
A key growth driver for this business segment is profitable
new-restaurant expansion.
In the first quarter, continued expansion of our key international
brands -- KFC and Pizza Hut -- and positive system same-store-sales
growth drove international revenue, system-sales and operating-profit
growth.
First-quarter international system-sales growth prior to foreign
currency conversion was 8%. Overall, system restaurants in operation
grew 5%, a significant contributing factor to this performance. Our
two most important markets, China and the U.K., increased system sales
in local currency terms by 40% and 10% respectively. Growth of system
restaurants in operation of 25% in China and 8% in the U.K. were key
factors. The company's international franchise-only markets,
representing 34% of international system restaurants, had 10% growth
in system sales prior to currency conversion and 6% growth of system
restaurants in operation.
Other markets contributing positively to overall system-sales
growth prior to foreign currency conversion included Australia and
Korea. Performance in Mexico, Canada, and Japan had an adverse impact
to overall international system-sales growth.
Restaurant margin as a percentage of sales increased 0.7
percentage points prior to the unfavorable impact from foreign
currency translation of 0.3 percentage points. The increase was
primarily driven by same-store-sales growth and the addition of new
restaurants with above-average margins, principally in China. The
increase was partially offset by the company operating Taco Bell and
Pizza Hut restaurants in Canada that were previously owned by the
Canada joint venture, which negatively impacted international
restaurant margin by 0.9 percentage points. For the balance of the
year, the company expects the adverse effect on margin of foreign
currency translation and the dissolution of the Canada joint venture
will continue to negatively impact international restaurant margin.
Overall, foreign currency conversion added $8 million to operating
profit.
UNITED STATES BUSINESS
- ----------------------
First Quarter
(million, except restaurant --------------------------------
counts and percentages) 2004 2003 Incr/(Decr)
--------------------------------
Financial Measures
Revenues $1,297 $1,252 +4%
Operating Profit $172 $163 +6%
- ----------------------------------------------------------------------
Operating Metrics
System Restaurants 18,600 18,810 (1)%
Multibrand Restaurants 2,221 1,869 +19%
Systemwide
Same-Store-Sales Growth +4% (2)% NM
In the first quarter, the primary drivers of revenue growth were
higher same-store sales and continued development of new,
higher-volume restaurants, which, on average, more than offset reduced
revenues and profits associated with the closure of lower-volume
restaurants.
System restaurants declined by one percent due primarily to
closures of Pizza Hut dine-in restaurants and certain lower-volume A&W
single-brand mall restaurants. The U.S. restaurant portfolio continues
to be upgraded with new restaurants, which, on average, are higher
volume, and many are multibrand. Opening new restaurants with higher
volumes than those restaurants that were closed contributed 1
percentage point of revenue growth.
U.S. restaurant margin increased 0.6 percentage points versus the
prior year, driven by positive same-store sales partially offset by
higher occupancy and commodity (primarily cheese and beef) costs.
Occupancy costs increased, primarily due to higher utility costs and
the amendment of two Long John Silver's sale/lease-back agreements
that were previously accounted for as financings now being accounted
for as operating leases. As a result of these amendments in the third
quarter of 2003, the payments made under these agreements that were
previously recorded primarily as interest expense are now recorded as
rent expense.
WORLDWIDE NEW-RESTAURANT DEVELOPMENT
- ------------------------------------
System New-Restaurant Openings First Quarter
-------------------
Worldwide 280
Key Markets
United States 81
International Franchise-Only Markets 77
China 74
Australia/New Zealand 11
U.K. 8
Mexico 7
South Korea 3
System new-restaurant openings for the first quarter were
primarily driven by growth in new international KFC and Pizza Hut
restaurants in the key international markets noted in the preceding
table. Franchise and joint-venture partners opened more than 70% of
systemwide new international restaurants for the first quarter.
In key markets with a company operations presence, restaurant
counts increased 25% in China, 8% in the U.K., 8% in Mexico and 2% in
Korea versus the end of first-quarter 2003. In franchise-only markets,
year-over-year restaurant growth was 6%, specifically, Asia, 9%;
southern Africa, 6%; the Middle East, 5%; and Caribbean/Latin America,
4%.
In the U.S. market, the majority of new-restaurant openings were
KFC and Pizza Hut restaurants. Over 60% of the U.S. new-restaurant
openings were franchised. KFC new-restaurant openings were
approximately 60% multibrand restaurants.
This discussion excludes changes in license-unit locations, which
are expected to have no material impact on the company's overall
profit performance in 2004. License locations are typically
nontraditional sites, such as airports, that normally have
substantially lower average unit volumes than traditional restaurant
locations.
MULTIBRANDING EXPANSION
- -----------------------
First Quarter
Multibrand Restaurants in 2004 2003 Incr/(Decr)
Operation ------ ------ --------------
U.S. Systemwide 2,221 1,869 +19%
% U.S. System Restaurants 12% 10% +2 ppts
In the first quarter, 91 multibrand restaurants were added in the
U.S., bringing the total to 2,221 U.S. multibrand restaurants in
operation at the end of the first quarter. Of the 91 U.S. multibrand
additions, 53% were conversions of existing single-brand restaurants
including 9% that were rebuilds on existing sites. The remaining 47%
were new-restaurant openings including 13% that were relocations --
building a new restaurant in place of an older restaurant nearby. More
than 50% of the 2,221 U.S. multibrand restaurants in operation at the
end of the first quarter were franchised.
In the U.S., the company's principal multibrand focus will combine
Long John Silver's with A&W, Taco Bell or KFC. Additional multibrand
combinations will include KFC with A&W. Pizza Hut will expand testing
of multibrand combinations in delivery/carry-out restaurants with the
newly created brand WingStreet.
FRANCHISE GROWTH AND FEES
- -------------------------
First
Quarter
-----------
Franchise Net New-Restaurant Growth +1%
Total Franchise Fees ($ million) $223
Growth Vs. 2003 +9%
International markets contributing to +5% growth of international
franchise restaurants were Asia, southern Africa, the Middle East and
Caribbean/Latin America. In the U.S. market, overall franchise
restaurants declined 1%.
For the first quarter, favorable foreign currency conversion added
4 percentage points of franchise-fee growth. Excluding this factor,
franchise fees increased 5%. This growth was primarily driven by
international new-restaurant development and worldwide franchise
same-store-sales growth of 3%.
GENERAL AND ADMINISTRATIVE EXPENSES
Worldwide general and administrative (G&A) expenses increased $30
million, or 14%, in the first quarter prior to an unfavorable impact
from foreign currency conversion of $4 million. The company incurred
approximately $7 million of one-time charges related to the impairment
of corporate assets and increased reserves related to potential
development sites. The increase was also partially attributed to
approximately $3 million associated with the company operating
restaurants in Canada that were previously owned by our Canada joint
venture.
Other factors contributing to the increase include costs
associated with the implementation of new financial and human-resource
systems, increased compensation-related costs including pension and
costs associated with international expansion.
OTHER INCOME/EXPENSE
Following the unexpected death of Arthur Ho, the principal of our
Yan Can joint-venture, the company decided to dissolve this
partnership. The company plans to liquidate the business. The
financial impact of the dissolution was not material and is included
in unallocated other income (expense).
CASH-FLOW
In the first quarter, the company generated $189 million in net
cash provided by operating activities, spent capital of $103 million
and repurchased $216 million of its own shares. Additional cash was
generated from employee stock-option proceeds, proceeds from sales of
property, plant and equipment and refranchising restaurants.
SECOND-QUARTER 2004 OUTLOOK
The company is comfortable with the current consensus estimate of
$0.52 in EPS prior to special items in the second quarter.
In several Asian markets, avian flu impacted the company's sales
trends at KFC. Sales in all these Asian markets, including China, have
recovered.
It is important to note that the short-term adverse impact of the
avian-flu situation in Asia will be reflected in second-quarter
results (primarily in Period 4 with some continued impact in Period
5). The company estimates the avian-flu situation negatively impacted
Period 4 international system-sales results by 5 to 6 percentage
points prior to foreign currency conversion. The company estimates the
negative impact of the avian-flu situation to Period 5 international
system sales will be approximately 2 percentage points prior to
foreign currency conversion. As previously indicated, the
international period close is one period prior to the company's
period-end date to facilitate worldwide consolidated reporting. The
company has incorporated the impact of the avian-flu situation in its
annual EPS guidance of at least $2.30 before special items.
Additionally, the company expects to receive recoveries from the
AmeriServe bankruptcy estate that will result in a second-quarter net
special-items gain of $0.02 per share. It is our expectation that this
will substantially complete the company's AmeriServe recoveries.
FULL-YEAR OUTLOOK
The company expects earnings per share to grow at least 10% each
year with the continued execution of its three key strategies: (1)
profitable international expansion, (2) steady improvement in
operations and (3) multibranding category-leading brands.
Based on first-quarter results and information currently
available, including the short-term impact of the avian-flu situation
and higher commodity prices, the company expects full-year EPS of
$2.30 prior to special items. As always, the company will continue to
update shareholders each four-week period on current sales trends
worldwide.
Projected factors contributing to the company's annual 2004 EPS
guidance were published in the company's December 4, 2003, press
release when the company presented its full-year EPS forecast for 2004
of at least $2.23 prior to special items. Based on current
information, the company believes that those factors remain
reasonable, except that the company now expects 2004 EPS of at least
$2.30 prior to special items, which incorporates the following updated
factors:
-- Worldwide revenue growth of +6% to +7%: International, +13% to
+14%; U.S., +2% to +3%.
-- Franchise fees will exceed $1 billion, growth of +7% to +8%.
-- International restaurant margin will be adversely affected by
0.5 percentage points versus 2003 due to the full-year impact
of the company now operating restaurants in Canada.
-- General and administrative expenses will increase
approximately $50 million or 5% versus 2003. This forecast
includes the impact of the company now operating restaurants
in Canada and the foreign-currency-conversion impact for the
full year.
-- Interest expense will be down approximately $20 to $25 million
versus 2003.
-- A benefit of approximately $25 million from foreign currency
conversion on operating profit.
-- Average shares outstanding to be in a range of 304 to 307
million.
For 2004, the company currently expects reported EPS of at least
$2.32 including a special-items gain of approximately $0.02 per share.
Annual Outlook
Forecast Actual
2004 2003 Incr/(Decr)
--------- ---------- ------------
EPS prior to Special Items $2.30 $2.06 +12%
Special Items EPS $0.02 $(0.04) NM
Reported EPS $2.32 $2.02 +15%
PERIOD 4 SALES
Period 4 estimated international system sales increased 3% prior
to foreign currency conversion or 12% after conversion to U.S.
dollars. Estimated U.S. blended same-store sales at company
restaurants increased 1% versus last year for the comparable four-week
period ended April 17, 2004 (Period 4).
INTERNATIONAL SYSTEM Sales Growth (Estimated)
- ---------------------------------------------
Prior-Year
Reported (U.S.$) Local Currency Basis Local Currency Basis
---------------- -------------------- ---------------------
Period 4 +12% +3% +5%
The company estimates the avian-flu situation in several Asian
markets negatively impacted Period 4 international system-sales
results by 5 to 6 percentage points prior to foreign currency
conversion. The company estimates the negative impact of the avian-flu
situation to Period 5 international system sales will be approximately
2 percentage points prior to foreign currency conversion.
The timing of the Chinese New Year in 2004 negatively impacted
Period 4 international system-sales results by approximately 1
percentage point versus 2003. As previously communicated, this
positively impacted Period 3 international system-sales results by a
similar amount.
U.S. Company Same-Store-Sales Growth (Estimated)
- ------------------------------------------------
Period 4 2004 Period 4 2003
------------------ ------------------
U.S. BLENDED +1% +1%
Taco Bell +6% +1%
Pizza Hut +3% (3)%
KFC (7)% +6%
The timing of the Easter holiday weekend in 2004 negatively
impacted Taco Bell and Pizza Hut Period 4 results by approximately 2
percentage points each versus 2003. This will positively impact Period
5 results by a similar amount.
CONFERENCE CALL
Yum! Brands Inc. will hold a conference call to review the
company's financial performance and strategies at 9:15 a.m. EDT
Thursday, April 22, 2004.
For U.S. callers, the number is 877/815-2029. For international
callers, the number is 706/645-9271.
The call will be available for playback beginning Thursday, April
22, at 12:15 p.m. EDT through Friday, May 7, at midnight EDT. To
access the playback, dial 800/642-1687 in the U.S.A. and 706/645-9291
internationally. The playback pass code is 6624636.
The call and the playback can be accessed via the Internet by
visiting Yum! Brands' Web site: www.yum.com and selecting "1st Quarter
Earnings Webcast." (Windows Media Player is required, which can be
downloaded at no charge from the following URL:
http://www.microsoft.com/windows/windowsmedia/players.asp. The process
could take several minutes.)
NOTES & DEFINITIONS FOR TERMS USED THROUGHOUT THIS DOCUMENT
Note: Sales results for Period 5 (the four-week period ending May
15, 2004) are scheduled to be released May 20, 2004.
Excl F/x is prior to foreign currency conversion to U.S. dollars.
Franchise Fees include fees from unconsolidated affiliates and
franchise and license restaurants. Fees include ongoing royalty and
license fees and initial fees.
Franchise Restaurants include unconsolidated affiliates and
franchise restaurants and exclude license restaurants.
Franchise Net New-Restaurant Growth is the year-over-year total of
franchise restaurant openings less franchise restaurant closings
divided by the prior year's franchise restaurant total.
New-Restaurant Openings include unconsolidated affiliates,
company-owned and franchise restaurants and exclude license
restaurants.
Special Items include AmeriServe and other charges (credits),
Wrench litigation and cumulative effect of accounting change, net of
tax. See attachments to this press release for reconciliations of
non-GAAP measurements to GAAP results.
System Restaurants include unconsolidated affiliates,
company-owned and franchise restaurants and exclude license
restaurants.
System-Sales Growth includes the results of all restaurants
regardless of ownership including unconsolidated affiliates,
company-owned, franchise and license restaurants. Sales of
unconsolidated affiliates, franchise and license restaurants generate
franchise and license fees for the company (typically at a rate of 4%
to 6% of sales). Unconsolidated affiliates, franchise and license
restaurant sales are not included in company sales we present on the
Condensed Consolidated Statements of Income; however, the fees are
included in the company's revenues.
Systemwide Same-Store-Sales Growth is the estimated growth in
sales of all restaurants that have been open one year or more
regardless of ownership including unconsolidated affiliates,
company-owned, franchise and license restaurants.
This announcement contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
statements include those identified by such words as may, will,
expect, project, anticipate, believe, plan and other similar
terminology. These "forward-looking" statements reflect management's
current expectations regarding future events and operating and
financial performance and are based on currently available data.
However, actual results are subject to future events and
uncertainties, which could cause actual results to differ from those
projected in this announcement. Factors that can cause actual results
to differ materially include changes in global and local business,
economic and political conditions in the countries and territories
where Yum! Brands operates, including the effects of war and terrorist
activities; changes in currency exchange and interest rates; changes
in commodity, labor and other operating costs; changes in competition
in the food industry, consumer preferences, spending patterns and
demographic trends; the impact that any widespread illness or general
health concern may have on our business and the economy of the
countries in which we operate; the effectiveness of our operating
initiatives and advertising and promotional efforts; new-product and
concept development by Yum! Brands and other food-industry
competitors; the success of our refranchising strategy; the ongoing
business viability of our franchise and license operators; our ability
to secure alternative distribution to our restaurants at competitive
rates and to ensure adequate supplies of restaurant products and
equipment in our stores; publicity that may impact our business and/or
industry; severe weather conditions; effects and outcomes of legal
claims involving the company; changes in effective tax rates; our
actuarially determined casualty loss estimates; changes in legislation
and governmental regulations; and changes in accounting policies and
practices. Further information about factors that could affect Yum!
Brands' financial and other results are included in the company's
Forms 10-Q and 10-K, filed with the Securities and Exchange
Commission.
Yum! Brands Inc., based in Louisville, Kentucky, is the world's
largest restaurant company in terms of system restaurants with more
than 33,000 restaurants in more than 100 countries and territories.
Four of the company's restaurant brands -- KFC, Pizza Hut, Taco Bell
and Long John Silver's -- are the global leaders of the chicken,
pizza, Mexican-style food and quick-service seafood categories
respectively. Yum! Brands is the worldwide leader in multibranding,
which offers consumers more choice and convenience at one restaurant
location from a combination of KFC, Taco Bell, Pizza Hut, A&W or Long
John Silver's brands. The company and its franchisees today operate
over 2,200 multibrand restaurants. Outside the United States in 2003,
the Yum! Brands' system opened about three new restaurants each day of
the year, making it one of the fastest growing retailers in the world.
In 2002, the company changed its name to Yum! Brands Inc. from Tricon
Global Restaurants Inc. to reflect its expanding portfolio of brands
and its ticker symbol on the New York Stock Exchange. In 2003 the
company was recognized in Fortune Magazine's top 50 "Best Companies
for Minorities," claiming the number-one spot for "managerial
diversity."
Analysts are invited to contact
Tim Jerzyk, Vice President Investor Relations, at 888/298-6986
Individual shareholders and analysts are invited to contact
Lynn Schweinfurth, Director Investor Relations, at 888/298-6986
Members of the media are invited to contact
Amy Sherwood, Vice President Public Relations, at 502/874-8200
YUM! Brands, Inc.
Consolidated Summary of Results
(amounts in millions, except per share amounts)
Quarter % Change
-----------------
3/20/04 3/22/03 B/(W)
-------- -------- ---------
Total revenues $1,970 $1,802 9
Costs and expenses
Company restaurant expenses 1,491 1,372 (9)
General and administrative expenses 237 203 (16)
Franchise and license expenses 2 7 56
Facility actions 9 9 NM
Other (income) expense (12) (6) 84
Wrench litigation - - NM
AmeriServe and other charges (credits) - - NM
-------- --------
Total costs and expenses 1,727 1,585 (9)
-------- --------
Operating profit 243 217 12
Interest expense, net 35 42 16
-------- --------
Income before income taxes and cumulative
effect of accounting change 208 175 19
Income tax provision 66 57 (16)
-------- --------
Income before cumulative effect of
accounting change 142 118 20
Cumulative effect of accounting change, net
of tax - (1) NM
-------- --------
Net income $142 $117 22
======== ========
Basic EPS Data
- --------------
EPS $0.49 $0.40 23
======== ========
Average shares outstanding 291 293 1
======== ========
Diluted EPS Data
- ----------------
EPS $0.47 $0.39 21
======== ========
Average shares outstanding 305 303 (1)
======== ========
See accompanying notes.
Wrench litigation, AmeriServe and other charges (credits) and
Cumulative effect of accounting change, net of tax have been summed
and referred to as "Special Items" throughout this press release. See
accompanying reconciliation of non-GAAP measurements to GAAP results.
YUM! Brands, Inc.
WORLDWIDE Operating Results
(amounts in millions)
Quarter % Change
-----------------
3/20/04 3/22/03 B/(W)
-------- -------- ------------
Company sales $1,747 $1,597 9
Franchise and license fees 223 205 9
-------- --------
Revenues 1,970 1,802 9
-------- --------
Company restaurants
Food and paper 540 492 (10)
Payroll and employee benefits 480 450 (7)
Occupancy and other operating
expenses 471 430 (10)
-------- --------
1,491 1,372 (9)
General and administrative expenses 237 203 (16)
Franchise and license expenses 2 7 56
Facility actions 9 9 NM
Other (income) expense (12) (6) 84
-------- --------
1,727 1,585 (9)
-------- --------
Operating profit before special items 243 217 12
Interest expense, net 35 42 16
Income tax provision 66 57 (15)
-------- --------
Earnings before special items $142 $118 20
======== ========
Tax rate before special items 31.8% 32.6% 0.8 ppts.
======== ========
Diluted EPS before special items $0.47 $0.39 19
======== ========
Company sales 100.0% 100.0%
Food and paper 30.9 30.8 (0.1) ppts.
Payroll and employee benefits 27.5 28.2 0.7 ppts.
Occupancy and other operating expenses 26.9 26.9 -
-------- --------
Restaurant margin 14.7% 14.1% 0.6 ppts.
======== ========
Reconciliation of Segment Operating Profit to Reported Operating
Profit
- ----------------------------------------------------------------------
U.S. operating profit $172 $163 6
International operating profit 130 95 36
Unallocated and corporate expenses (48) (35) (37)
Unallocated other income (expense) (3) 1 NM
Unallocated facility actions (8) (7) NM
-------- --------
Operating profit before special items 243 217 12
Wrench litigation - - -
AmeriServe and other (charges) credits - - -
-------- --------
Reported operating profit $243 $217 12
======== ========
See accompanying notes and reconciliations of non-GAAP measurements to
GAAP results.
YUM! Brands, Inc.
UNITED STATES Operating Results
(amounts in millions)
Quarter % Change
-----------------
3/20/04 3/22/03 B/(W)
-------- -------- ----------
Company sales $1,166 $1,126 4
Franchise and license fees 131 126 4
-------- --------
Revenues 1,297 1,252 4
-------- --------
Company restaurants
Food and paper 333 323 (3)
Payroll and employee benefits 366 359 (2)
Occupancy and other operating expenses 304 293 (4)
-------- --------
1,003 975 (3)
General and administrative expenses 120 109 (9)
Franchise and license expenses 1 4 78
Facility actions 1 1 NM
-------- --------
1,125 1,089 (3)
-------- --------
Operating profit $172 $163 6
======== ========
Company sales 100.0% 100.0%
Food and paper 28.6 28.7 0.1 ppts.
Payroll and employee benefits 31.4 31.9 0.5 ppts.
Occupancy and other operating expenses 26.0 26.0 -
-------- --------
Restaurant margin 14.0% 13.4% 0.6 ppts.
======== ========
See accompanying notes.
YUM! Brands, Inc.
INTERNATIONAL Operating Results
(amounts in millions)
Quarter % Change
-----------------
3/20/04 3/22/03 B/(W)
-------- -------- ------------
Company sales $581 $471 24
Franchise and license fees 92 79 16
-------- --------
Revenues 673 550 22
-------- --------
Company restaurants
Food and paper 207 169 (22)
Payroll and employee benefits 114 91 (25)
Occupancy and other operating
expenses 167 137 (22)
-------- --------
488 397 (23)
General and administrative expenses 69 59 (17)
Franchise and license expenses 1 3 41
Facility actions - 1 NM
Other (income) expense (15) (5) NM
-------- --------
543 455 (19)
-------- --------
Operating profit $130 $95 36
======== ========
Company sales 100.0% 100.0%
Food and paper 35.5 35.8 0.3 ppts.
Payroll and employee benefits 19.6 19.4 (0.2) ppts.
Occupancy and other operating expenses 28.8 29.1 0.3 ppts.
-------- --------
Restaurant margin 16.1% 15.7% 0.4 ppts.
======== ========
See accompanying notes.
YUM! Brands, Inc.
Condensed Consolidated Balance Sheets
(amounts in millions)
3/20/04 12/27/03
-------- ---------
ASSETS
Current Assets
Cash and cash equivalents $129 $192
Short-term investments, at cost 25 15
Accounts and notes receivable, less allowance:
$21 in 2004 and $28 in 2003 204 169
Inventories 71 67
Assets classified as held for sale 104 96
Prepaid expenses and other current assets 118 102
Deferred income taxes 165 165
-------- ---------
Total Current Assets 816 806
Property, plant and equipment, net 3,281 3,280
Goodwill 527 521
Intangible assets, net 355 357
Investments in unconsolidated affiliates 204 184
Other assets 511 472
-------- ---------
Total Assets $5,694 $5,620
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and other current liabilities $1,236 $1,213
Income taxes payable 209 238
Short-term borrowings 17 10
-------- ---------
Total Current Liabilities 1,462 1,461
Long-term debt 2,054 2,056
Other liabilities and deferred credits 986 983
-------- ---------
Total Liabilities 4,502 4,500
-------- ---------
Shareholders' Equity
Preferred stock, no par value, 250 shares
authorized; no shares issued - -
Common stock, no par value, 750 shares authorized;
290 shares and 292 shares issued in 2004 and 2003,
respectively 802 916
Retained earnings 556 414
Accumulated other comprehensive income (loss) (166) (210)
-------- ---------
Total Shareholders' Equity 1,192 1,120
-------- ---------
Total Liabilities and Shareholders' Equity $5,694 $5,620
======== =========
See accompanying notes.
YUM! Brands, Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in millions)
Quarter
-----------------
3/20/04 3/22/03
-------- --------
Cash Flows - Operating Activities
Net income $142 $117
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of accounting change, net of taxes - 1
Depreciation and amortization 95 87
Facility actions 9 9
Other liabilities and deferred credits (10) 7
Deferred income taxes 1 (13)
Other non-cash charges and credits, net 9 17
Changes in operating working capital, excluding
effects of acquisitions and dispositions:
Accounts and notes receivable (11) 12
Inventories (3) (7)
Prepaid expenses and other current assets (16) (25)
Accounts payable and other current liabilities (6) (80)
Income taxes payable (21) 4
-------- --------
Net change in operating working capital (57) (96)
-------- --------
Net Cash Provided by Operating Activities 189 129
-------- --------
Cash Flows - Investing Activities
Capital spending (103) (112)
Proceeds from refranchising of restaurants 2 2
Acquisition of restaurants from franchisees (4) -
Short-term investments (10) (11)
Sales of property, plant and equipment 9 11
Other, net 3 (9)
-------- --------
Net Cash Used In Investing Activities (103) (119)
-------- --------
Cash Flows - Financing Activities
Revolving Credit Facility activity
Three months or less, net - 97
Repayments of long-term debt (3) (2)
Short-term borrowings-three months or less, net 7 (23)
Repurchase shares of common stock (216) (48)
Employee stock option proceeds 63 10
-------- --------
Net Cash (Used In) Provided by Financing Activities (149) 34
-------- --------
Effect of Exchange Rates on Cash and Cash Equivalents - 1
-------- --------
Net (Decrease) Increase in Cash and Cash Equivalents (63) 45
Cash and Cash Equivalents - Beginning of Period 192 130
-------- --------
Cash and Cash Equivalents - End of Period $129 $175
======== ========
See accompanying notes.
Reconciliation of Non-GAAP Measurements to GAAP Results
(amounts in millions, except per share amounts)
In addition to the results provided in accordance with U.S. Generally
Accepted Accounting Principles ("GAAP") throughout this document, the
Company has provided non-GAAP measurements which present operating
results on a basis before special items. Special items include the
GAAP income statement captions of Wrench litigation, AmeriServe and
other charges (credits) and, in 2003, the Cumulative effect of
accounting change, net of tax. These amounts are described in (d), (e)
and (f) in the accompanying notes.
The Company uses earnings before special items as a key performance
measure of results of operations for purposes of evaluating
performance internally. This non-GAAP measurement is not intended to
replace the presentation of our financial results in accordance with
GAAP. Rather, the Company believes that the presentation of earnings
before special items provides additional information to facilitate the
comparison of past and present operations, excluding items that the
Company does not believe are indicative of our ongoing operations.
Quarter
-----------------
3/20/04 3/22/03
-------- --------
Detail of Special Items
- -----------------------------------------------------
Wrench litigation $- $-
AmeriServe and other (charges) credits - -
Cumulative effect of accounting change - (2)
-------- --------
Total special items - (2)
Tax on special items - 1
-------- --------
Special items, net of tax $- $(1)
======== ========
Average shares outstanding 305 303
======== ========
Special items diluted EPS $- $-
======== ========
Reconciliation of Earnings Before Special Items to
Net Income
- -----------------------------------------------------
Earnings before special items $142 $118
Special items, net of tax - (1)
-------- --------
Net income $142 $117
======== ========
Reconciliation of EPS Before Special Items to
Reported EPS
- -----------------------------------------------------
Diluted EPS before special items $0.47 $0.39
Special items EPS - -
-------- --------
Reported EPS $0.47 $0.39
======== ========
Notes to the Consolidated Summary of Results, Condensed Consolidated
Statements of Cash Flows and Condensed Consolidated Balance Sheets
(amounts in millions, except per share amounts)
(a) Percentages may not recompute due to rounding.
(b) Facility actions included the following:
Quarter
-----------------
3/20/04 3/22/03
-------- --------
Store closure costs $- $-
Asset impairment charges 1 2
Refranchising net loss (gain) 8 7
-------- --------
Facility actions $9 $9
======== ========
In the previous year's reporting of results for the quarter ended
March 22, 2003, store closure costs and asset impairment charges were
included in other (income) expense.
(c) Other (income) expense primarily includes equity income from
investments in unconsolidated affiliates.
(d) An insignificant amount of expense was recorded for the quarter
ended March 20, 2004 reflecting interest related to the yet to be
paid judgment against Taco Bell Corp. on June 4, 2003, in Wrench
v. Taco Bell Corp. Our total recorded liability for this judgment,
including interest, at March 20, 2004 was approximately $42
million.
(e) Amounts recorded as AmeriServe and other charges (credits) were
not significant for the quarters ended March 20, 2004 and March
22, 2003.
(f) Effective December 29, 2002, the Company adopted Statement of
Financial Accounting Standards No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS 143"). SFAS 143 addresses the
financial accounting and reporting for legal obligations
associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. As a result of obligations
under certain leases that are within the scope of SFAS 143, the
Company recorded a cumulative effect adjustment of $2 million ($1
million after tax).
(g) In the quarter ended March 20, 2004, we repurchased approximately
6 million shares of our common stock at an average price of $36
per share.
YUM! Brands, Inc.
Restaurant Units Activity Summary
For the Year to Date Ended March 20, 2004
Total
Unconsolidated Excluding
Company Affiliates(a) Franchisees Licensees(b)
------- -------------- ----------- ------------
Total U.S.
Beginning of Year 5,094 6 13,566 18,666
New Builds 32 - 49 81
Acquisitions 8 - (8) -
Refranchising &
Licensing - - - -
Closures &
Divestitures (49) (1) (100) (150)
Other - - 3 3
------- -------------- ----------- ------------
End of Quarter 5,085 5 13,510 18,600
======= ============== =========== ============
% of Total 27% - 73% 100%
Total International
Beginning of Year 2,760 1,506 7,905 12,171
New Builds 57 36 106 199
Acquisitions 1 (5) 4 -
Refranchising &
Licensing (3) - 3 -
Closures &
Divestitures (20) (8) (48) (76)
Other (1) (7) - (8)
------- -------------- ----------- ------------
End of Quarter 2,794 1,522 7,970 12,286
======= ============== =========== ============
% of Total 23% 12% 65% 100%
Total System
Beginning of Year 7,854 1,512 21,471 30,837
New Builds 89 36 155 280
Acquisitions 9 (5) (4) -
Refranchising &
Licensing (3) - 3 -
Closures &
Divestitures (69) (9) (148) (226)
Other (1) (7) 3 (5)
------- -------------- ----------- ------------
End of Quarter 7,879 1,527 21,480 30,886
======= ============== =========== ============
% of Total 26% 5% 69% 100%
(a) Total U.S. and Total System include 5 Yan Can units.
(b) The total excludes 2,132 U.S. and 210 International licensee
units. The U.S. licensee unit count includes 1,127 Pizza Huts, 942
Taco Bells and 63 KFCs. The International licensee unit count
includes 98 Pizza Huts, 66 KFCs, 44 Taco Bells, 1 Long John
Silver's and 1 A&W.
YUM! Brands, Inc.
Restaurant Units Activity Summary
For the Year to Date Ended March 20, 2004
United States
- ----------------------------------------------------------------------
Total
Excluding
Company Franchisees Licensees
------- ----------- ---------
Pizza Hut U.S.
Beginning of Year 1,776 4,624 6,400
New Builds 4 21 25
Acquisitions 7 (7) -
Refranchising & Licensing - - -
Closures & Divestitures (15) (39) (54)
Other - - -
------- ----------- ---------
End of Quarter 1,772 4,599 6,371
======= =========== =========
% of Total 28% 72% 100%
KFC U.S.
Beginning of Year 1,252 4,204 5,456
New Builds 13 14 27
Acquisitions - - -
Refranchising & Licensing - - -
Closures & Divestitures (8) (24) (32)
Other - - -
------- ----------- ---------
End of Quarter 1,257 4,194 5,451
======= =========== =========
% of Total 23% 77% 100%
Taco Bell U.S.
Beginning of Year 1,284 3,743 5,027
New Builds 3 8 11
Acquisitions 1 (1) -
Refranchising & Licensing - - -
Closures & Divestitures - (16) (16)
Other - - -
------- ----------- ---------
End of Quarter 1,288 3,734 5,022
======= =========== =========
% of Total 26% 74% 100%
Long John Silver's U.S.
Beginning of Year 701 502 1,203
New Builds 12 4 16
Acquisitions - - -
Refranchising & Licensing - - -
Closures & Divestitures (6) (10) (16)
Other - 1 1
------- ----------- ---------
End of Quarter 707 497 1,204
======= =========== =========
% of Total 59% 41% 100%
A&W U.S.
Beginning of Year 81 493 574
New Builds - 2 2
Acquisitions - - -
Refranchising & Licensing - - -
Closures & Divestitures (20) (11) (31)
Other - 2 2
------- ----------- ---------
End of Quarter 61 486 547
======= =========== =========
% of Total 11% 89% 100%
YUM! Brands, Inc.
Restaurant Units Activity Summary
For the Year to date Ended March 20, 2004
International
- ----------------------------------------------------------------------
Total
Unconsolidated Excluding
Company Affiliates Franchisees Licensees
------- -------------- ----------- ---------
KFC International
Beginning of Year 1,685 773 4,835 7,293
New Builds 48 32 56 136
Acquisitions 1 (5) 4 -
Refranchising & Licensing (3) - 3 -
Closures & Divestitures (12) (6) (22) (40)
Other 3 - (10) (7)
------- -------------- ----------- ---------
End of Quarter 1,722 794 4,866 7,382
======= ============== =========== =========
% of Total 23% 11% 66% 100%
Pizza Hut International
Beginning of Year 1,021 733 2,708 4,462
New Builds 9 4 43 56
Acquisitions - - - -
Refranchising & Licensing - - - -
Closures & Divestitures (7) (2) (23) (32)
Other 1 (7) 9 3
------- -------------- ----------- ---------
End of Quarter 1,024 728 2,737 4,489
======= ============== =========== =========
% of Total 23% 16% 61% 100%
Taco Bell International
Beginning of Year 54 - 150 204
New Builds - - - -
Acquisitions - - - -
Refranchising & Licensing - - - -
Closures & Divestitures (1) - (1) (2)
Other (5) - 1 (4)
------- -------------- ----------- ---------
End of Quarter 48 - 150 198
======= ============== =========== =========
% of Total 24% - 76% 100%
A&W International
Beginning of Year - - 182 182
New Builds - - 6 6
Acquisitions - - - -
Refranchising & Licensing - - - -
Closures & Divestitures - - (2) (2)
Other - - - -
------- -------------- ----------- ---------
End of Quarter - - 186 186
======= ============== =========== =========
% of Total - - 100% 100%
Long John Silver's
International
Beginning of Year - - 30 30
New Builds - - 1 1
Acquisitions - - - -
Refranchising & Licensing - - - -
Closures & Divestitures - - - -
Other - - - -
------- -------------- ----------- ---------
End of Quarter - - 31 31
======= ============== =========== =========
% of Total - - 100% 100%
YUM! Brands, Inc.
United States Multibrand Restaurants
For the Year to Date Ended March 20, 2004
United States(a)
-----------------------------------
Multibrand Restaurants
in Operation
at 3/20/04
------------------------
Gross
Additions
Year to Company Franchise Total
Date
3/20/04
---------- ------- --------- ------
KFC
Taco Bell 4 180 483 663
Pizza Hut - 101 39 140
A&W 18 123 152 275
Taco Bell/Pizza Hut 3 n 1 - 20 25 45
Long John Silver's 15 40 34 74
Wing Works - 26 - 26
---------- ------- --------- ------
37 490 733 1,223
Taco Bell
Pizza Hut 1 313 286 599
Long John Silver's 7 42 12 54
Backyard Burgers 1 9 - 9
A&W - 2 - 2
---------- ------- --------- ------
9 366 298 664
Pizza Hut
KFC - - 5 5
Taco Bell - - 1 1
Wing Works - 1 - 1
Pasta Bravo - 2 2 4
WingStreet 28 87 - 87
---------- ------- --------- ------
28 90 8 98
Long John Silver's
A&W 17 137 99 236
---------- ------- --------- ------
Total 91 1,083 1,138 2,221
========== ======= ========= ======
Multibrand conversions increase the sales and points of distribution
for the second brand added to a restaurant but do not result in an
additional unit count. Similarly, a new multibrand restaurant, while
increasing sales and points of distribution for two brands, results in
just one additional unit count.
(a) Amounts do not reflect 180 International multibrand units in
operation at the end of the period. This balance includes a
decrease of 18 units primarily related to corrections to the 2003
year-end multibrand unit count for Canada.
CONTACT: YUM! Brands Inc., Louisville
Analysts:
Tim Jerzyk, Vice President Investor Relations
888/298-6986
or
Individual shareholders and analysts:
Lynn Schweinfurth, Director Investor Relations
888/298-6986
or
Members of the media:
Amy Sherwood, Vice President Public Relations
502/874-8200