Exhibit 99.1
Yum! Brands Inc. Reports 2005 First-Quarter
Earnings Per Share of $0.53 Prior to Special Items, an Increase of 14%
Business Editors
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LOUISVILLE, Ky.--(BUSINESS WIRE)--April 20, 2005--Yum! Brands Inc.
(NYSE: YUM):
-- Confirms full-year 2005 EPS estimate of at least $2.60 or 10%
growth.
-- Reports estimated Period 4 International Division system sales
increased 12% in U.S. dollar terms or 7% prior to foreign
currency conversion.
-- Reports estimated Period 4 China Division system sales
increased 11% in U.S. dollar terms or 10% prior to foreign
currency conversion.
-- Reports estimated Period 4 U.S. blended same-store sales at
company restaurants increased 4% (Taco Bell, +5%; Pizza Hut,
+4%; KFC, +4%).
Yum! Brands Inc. today reported results for the first-quarter
ended March 19, 2005.
The following are key points relative to the company's current
first-quarter and year-over-year performance:
-- Total International Division operating profit increased 8% or
4% prior to foreign currency conversion.
-- International Division system restaurants in operation at
quarter's end grew by 3% led by growth of 7% in the U.K. and
5% in international franchise-only businesses.
-- Total China Division operating profit increased 25%.
-- Total China Division system restaurants in operation at
quarter's end expanded by 20%.
-- U.S. multibrand restaurants in operation expanded by 23%.
-- Systemwide U.S. same-store sales increased 3%.
-- U.S. restaurant margin declined by 0.7 percentage points as
expected, primarily due to significantly higher commodity
costs, resulting in a 6% decline in U.S. operating profit.
Consolidated Financial Highlights
First Quarter
--------------------------------
2005 2004 % Change
--------- --------- ----------
System Restaurants 31,366 30,886 +2%
Worldwide System Same-Store-Sales
Growth +3% +3%
Revenues (million) $2,054 $1,970 +4%
EPS Prior to Special Items $0.53 $0.47 +14%
Special Items EPS $(0) $0
Reported EPS $0.53 $0.47 +13%
David C. Novak, Chairman and CEO, said: "I am pleased to report a
strong start to 2005 with first-quarter EPS growth of 14%.
Importantly, our entire portfolio, including China, International and
U.S. divisions, had robust sales growth for the quarter. We are
especially pleased with our U.S. same-store-sales growth of +4%,
including the continued turnaround of KFC with now its fifth
consecutive period of positive same-store sales in the United States.
"Given the underlying strength of the Yum! portfolio, we expect to
once again deliver against our annual target of at least 10% growth in
EPS for 2005. This growth will be delivered in spite of a significant
short-term KFC sales issue for the second quarter in mainland China.
This is related to adverse publicity associated with an isolated
ingredient issue that has been resolved. We are aggressively taking
every measure to rebuild sales in China and are confident sales will
rebound. We expect this short-term China KFC sales issue to be counter
balanced by a number of factors including strong sales performance in
our International Division and each of our three leading U.S. brands:
Taco Bell, Pizza Hut and KFC.
"We remain confident that our long-term, new-restaurant growth
opportunity in China is as strong as ever. In fact, we just opened our
111th new restaurant for 2005 last week, and we expect to open at
least 375 new restaurants in our China Division for the full year. KFC
and Pizza Hut are by far and away the leading brands in two popular
categories.
"In summary, we expect to deliver at least 10% EPS growth for the
fourth straight year based on the diversified strength of our unique
global portfolio and continued execution of our four key strategies:
building dominant restaurant brands in China; driving profitable
international expansion; improving restaurant operations and
multibranding category-leading brands."
INTERNATIONAL DIVISION
First Quarter
----------------------------------------------
Incr/(Decr)
------------------
2005 2004 Reported Excl F/x
----------------------------------------------
Financial Measures
Revenues ($ million) $484 $485 Even (4)%
Operating Profit
($ million) $94 $88 +8% +4%
- ----------------------------------------------------------------------
Operating Metrics
Est. System-Sales Growth +11% +7%
System Restaurants 10,933 10,604 3% NM
Note: These results exclude the China Division.
A key growth driver for this business segment is continued
new-restaurant openings across an array of international markets and
leveraging the substantial infrastructure in place around the world.
In the first quarter, continued new-restaurant expansion of our
key international brands -- KFC and Pizza Hut -- and positive system
same-store-sales growth drove International Division system-sales and
operating-profit growth. New restaurants opened in the quarter totaled
101 across more than 30 different countries and territories. Total
new-restaurant openings for the full year are expected to be at least
725.
First-quarter revenue, excluding the impact of refranchising the
Puerto Rico market in last year's fourth quarter, was up 8%. With this
market now included among our franchise businesses, reported revenues
were essentially even with last year.
First-quarter International Division system-sales growth prior to
foreign currency conversion was 7%. Overall, system restaurants in
operation grew 3%. In the U.K., a key market, system sales increased
6% in local currency terms driven primarily by 7% growth in KFC and
Pizza Hut system restaurants in operation. The company's international
franchise-only markets had 10% growth in system sales prior to
currency conversion and 5% growth in system restaurants in operation.
The restaurants in these markets represent 42% of International
Division system restaurants. Other major markets contributing
significantly to overall system-sales growth prior to foreign currency
conversion included Mexico and Japan.
For the first quarter, restaurant margin as a percentage of sales
decreased 0.3 percentage points. The decrease was primarily driven by
the impact from a decline in same-store sales in the South Korea
market and the refranchising of the Puerto Rico market last year,
which was partially offset by substantially stronger performance in
Mexico. For the full year, restaurant margin is expected to increase
slightly versus 2004 driven primarily by strong business performance
in Mexico.
For the first quarter, excluding the refranchising of the Puerto
Rico market, operating profit would have grown 9% prior to foreign
currency conversion.
Overall, for the first quarter, foreign currency conversion added
$4 million to operating profit.
CHINA DIVISION
First Quarter
------------------------------------------------
Incr/(Decr)
------------------
2005 2004 Reported Excl F/x
------------------------------------------------
Financial Measures
Revenues ($ million) $235 $188 +25% +25%
Operating Profit
($ million) $53 $42 +25% +25%
- ----------------------------------------------------------------------
Operating Metrics
Est. System-Sales
Growth +20% +20%
System Restaurants 2,023 1,682 +20% NM
Note: The China Division includes mainland China, Thailand, and
KFC Taiwan. Please refer to "Notes and Definitions" at the end of this
release for explanation of estimated system-sales growth.
A key growth driver for the China Division is rapid new-restaurant
expansion of multiple Yum! restaurant brands.
In the first-quarter, continued expansion of KFC in mainland China
and positive system same-store-sales growth drove revenue, system
sales and operating profit growth.
China Division first-quarter system-sales growth was 20%. Overall,
system restaurants in operation grew 20%, a significant contributor to
this performance. During the first quarter, a total of 100 new
restaurants opened, including 84 KFCs, 14 Pizza Huts, 1 Pizza Hut Home
Delivery Unit and 1 Taco Bell Grande. The 100 new restaurants opened
included 74% company, 24% joint venture and 2% franchise restaurants.
First-quarter restaurant margin increased 0.9 percentage points
versus the prior year, driven by positive same-store-sales growth.
UNITED STATES BUSINESS
First Quarter
----------------------------------------
2005 2004 Incr/(Decr)
----------------------------------------
Financial Measures
Revenues ($ million) $1,335 $1,297 +3%
Operating Profit ($ million) $162 $172 (6)%
- ----------------------------------------------------------------------
Operating Metrics
System Restaurants 18,410 18,600 (1)%
Systemwide Same-Store-Sales
Growth +3% +4% NM
A key growth driver for this business segment is
same-store-sales growth.
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 associated with the closure of lower-volume restaurants.
Opening new restaurants with higher volumes than those restaurants
that were closed contributed 1 percentage point of revenue growth.
Operating profit for the first quarter declined by 6%, primarily
due to higher commodity costs.
Higher commodity (mainly meats and cheese) costs adversely
impacted restaurant margin by 2.0 percentage points or $22 million.
Other favorable factors such as same-store-sales growth partially
offset this impact. Overall, U.S. restaurant margin decreased 0.7
percentage points versus the prior year.
WORLDWIDE NEW-RESTAURANT DEVELOPMENT
System New-Restaurant Openings First Quarter
------------------
Worldwide 288
Key Markets
Mainland China 113
International Franchise-Only
Businesses 69
United States 68
U.K. 11
Australia/New Zealand 10
New-restaurant development of our brands around the world is a key
factor in year-to-year earnings growth for the company overall.
For the International Division franchise-only businesses,
new-restaurant growth continued across all regions; year-over-year
restaurant growth occurred in Asia, +6%; southern Africa, +6%; the
Middle East, +5%; and Caribbean/Latin America, +3%.
In the U.S. market, the majority of new-restaurant openings were
KFC and Pizza Hut restaurants. Over 72% of the U.S. new-restaurant
openings were franchised.
This discussion excludes changes in license-unit locations, which
are expected to have no material impact on the company's overall
profit performance in 2005. 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 Operation 2005 2004 Incr/(Decr)
------ ------ ---------------
U.S. Systemwide 2,726 2,221 +23%
% U.S. System Restaurants 15% 12% +3 ppts
In the first quarter, 104 multibrand restaurants were added in the
United States, bringing the total to 2,726 multibrand restaurants in
operation. Of the 104 U.S. multibrand additions, 67% were conversions
of existing single-brand restaurants, 21% were new-restaurant openings
and 12% were relocations -- building a completely new multibrand
restaurant in place of an older single-brand restaurant nearby. More
than 45% of the 2,726 U.S. multibrand restaurants in operation at the
end of the first quarter were franchised.
For the full-year 2005, the company expects the U.S. system to add
at least 550 multibrand restaurant locations, including more than 300
Pizza Hut and WingStreet combinations and more than 100 with Long John
Silver's in combination with either Taco Bell, KFC or A&W brands.
FRANCHISE GROWTH AND FEES
First
Quarter
------------
Franchise Net New-Restaurant Growth +1%
Total Franchise Fees ($ million) $244
Growth Vs. 2004 +9%
For the first quarter, favorable foreign currency conversion added
1 percentage point of franchise-fee growth. Excluding this factor,
franchise fees increased 8%. This growth was primarily driven by
worldwide franchise same-store-sales growth of 4%, net new-restaurant
development and refranchising.
Worldwide franchise fees were generated primarily in the United
States (56%) and the International Division (41%). The China Division
contributed the remaining 3% to worldwide franchise fees. The company
has more than 2,400 worldwide franchise partners including more than
1,800 in the United States, nearly 600 in the International Division
and 29 in the China Division.
CASH-FLOW
In the first quarter, the company generated $255 million in net
cash provided by operating activities, invested capital of $94 million
and repurchased $116 million of its own shares. As expected,
additional cash was generated from employee stock-option proceeds.
There were no material refranchising activities in the first quarter.
SECOND-QUARTER 2005 OUTLOOK
The company confirms its prior EPS forecast of $0.56 for the
second quarter prior to any special items. A number of factors are
expected to impact the quarter's results:
-- Continued strong sales performance in the United States and
International Division, lessening U.S. commodity-cost pressure
and slightly lower facility actions expense versus last year.
-- An operating profit decline for the quarter in the China
Division as a result of the isolated supplier ingredient issue
experienced in late March, which has adversely impacted sales
performance of our mainland China KFC restaurants. Sales in
our mainland China Pizza Hut restaurants were not impacted.
Based on currently available information, the company expects
this impact to be short term and sales to recover late in the
second quarter or during the third quarter. Period 5 (April)
China Division system sales are expected to decline by 5%. We
currently expect this will result in China Division's
operating profit levels being approximately $20 million to $25
million below our previous expectation. Updates will be
provided if there is a material change from these
expectations.
Additionally, there is a strong possibility of an IPO of our
Poland/Czech Republic joint venture. The joint-venture team has been
working on this possible transaction for a number of months, and this
transaction could occur in the next 10 days. This transaction would
generate a one-time gain of at least $15 million. As with all other
joint-venture income, this would be recorded in the "Other Income"
line. Assuming this IPO does occur, the company anticipates the
possibility of additional facility actions in the second quarter and
balance of the year, which would increase facility actions expense.
FULL-YEAR OUTLOOK
The company expects earnings per share to grow at least 10% each
year with the continued execution of four key strategies: (1) build
dominant restaurant brands in China, (2) profitable international
expansion, (3) run great restaurants and (4) develop and expand
multibranding.
Based on solid first-quarter results and information currently
available, the company expects full-year EPS of at least $2.60 prior
to special items. As noted earlier in the release, we expect China
Division's second-quarter operating profit will be impacted by $20 to
$25 million. We will provide an update on China Division's full-year
guidance in our next quarterly release and, as always, continue to
update shareholders each four-week period on current sales trends
worldwide.
The company believes that the projected factors contributing to
the company's annual 2005 full-year EPS of $2.60 prior to special
items guidance, which were originally published in the company's
December 2, 2004, press release, remain reasonable with the following
updated factors:
-- Capital spending for full-year 2005 is now expected to total
$720 million versus the original forecast of $780 million.
-- The company saw a benefit of $4 million from foreign currency
conversion on operating profit in the first quarter and expect
to see the same in the second quarter. We will update
shareholders on the possible impact on third- and
fourth-quarter results in the second-quarter 2005 earnings
release.
-- Slightly lower facility action expense versus prior forecast
of $50 to $55 million.
-- Tax rate for full year in a range of 28% to 29% versus
original forecast of 28% to 30%
Annual Outlook
Forecast Actual
2005 2004 Incr/(Decr)
---------- --------- ------------
EPS prior to Special Items $2.60 $2.36 +10%
Special Items EPS $0.00 $0.06 NM
Reported EPS $2.60 $2.42 +7%
PERIOD 4 SALES
INTERNATIONAL DIVISION SYSTEM-SALES GROWTH (Estimated)
2005 2005 2004
Reported (U.S. $) Local Currency Local Currency
------------------ ------------------ ----------------
Period 4 +12% +7% +5%
Note: These results exclude the China Division.
The company's annual target growth rate for International Division
system sales is at least +5% prior to foreign currency conversion.
CHINA DIVISION SYSTEM-SALES GROWTH (Estimated)
2005 2005 2004
Reported (U.S. $) Local Currency Local Currency
------------------ ------------------ ----------------
Period 4 +11% +10% +13%
Note: The China Division includes mainland China, Thailand, and
KFC Taiwan. For the purpose of this sales release, like calendar
months have been compared: March 2005 vs. March 2004.
As previously reported in the company's release dated March 24,
2005, sales at KFC restaurants in mainland China were adversely
impacted by an isolated issue with a seasoning supplier, but sales in
our mainland China Pizza Hut restaurants were not impacted. An
ingredient was included in a limited number of products that
necessitated temporarily withdrawing those products from restaurants
in that market. This supplier issue has been resolved, and the
products have been returned to the menu. Due to the interruption of
product offerings and adverse publicity, sales were negatively
impacted during the last two weeks of Period 4; however, the most
significant decline in sales occurred the last week of Period 4, which
ended March 31, 2005. We expect continued impact on sales results
during Period 5 and Period 6, the remainder of the second quarter.
Period 5 system sales are expected to be down about 5% from prior
year. Based on currently available information, the company expects
this impact to be short term and sales to recover late in the second
quarter or during the third quarter. Updates will be provided if there
is a material change from these expectations.
The company's annual target growth rate for China Division system
sales is at least +22% prior to foreign currency conversion.
U.S. COMPANY SAME-STORE-SALES GROWTH (Estimated)
Period 4, 2005 Period 4, 2004
------------------ ------------------
U.S. BLENDED +4% +1%
Taco Bell +5% +6%
Pizza Hut +4% +3%
KFC +4% (7)%
The company's annual target growth rate for U.S. same-store sales
is +1% to +2%.
2005 Period 4 End Dates
- -------------------------------------
International Division 3/21/2005
China Division 3/31/2005
U.S. Business 4/16/2005
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 21, 2005.
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
21, at 12:15 p.m. EDT through Friday, May 6, at midnight EDT. To
access the playback, dial 800/642-1687 in the United States and
706/645-9291 internationally. The playback pass code is 4666768.
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."
NOTES & DEFINITIONS FOR TERMS USED THROUGHOUT THIS DOCUMENT
China Division system-sales growth explanation:
Estimated system-sales growth differs from the 26% reported in the
Period 3 sales release, which compared like calendar months. For 2005,
we have moved forward the mainland China business reporting calendar
one month to more closely align the timing of reporting that
business's results of operations with our U.S. business.
Notes:
Sales results for Period 5 (the four-week period ending May 14,
2005) are scheduled to be released May 18, 2005, before market hours.
Sales and profit information included in the release is rounded to
the nearest million; however, percentage-point change calculations are
based on numbers that are not rounded.
Definitions:
Excl F/x represents the percentage change excluding the impact of
foreign currency translation. These amounts are calculated by
translating current-year results at prior-year average exchange rates.
We believe elimination of the foreign currency translation impact
provides better year-to-year comparability without the distortion of
foreign currency fluctuations.
Franchise Fees include fees from unconsolidated affiliates (joint
ventures) and franchise and license restaurants. Fees include ongoing
royalty and license fees, initial fees for new restaurants and
contract-renewal fees.
Franchise Restaurants include unconsolidated affiliates (joint
ventures) and franchise restaurants and exclude license restaurants.
Franchise Net New-Restaurant Growth is the year-over-year total of
franchise restaurant and unconsolidated affiliates (JV) openings less
franchise restaurant and unconsolidated affiliates (JV) closings
divided by the prior year's franchise and unconsolidated affiliates
(JV) restaurant total.
New-Restaurant Openings include unconsolidated affiliates (joint
ventures), company-owned and franchise restaurants and exclude license
restaurants.
Special Items include AmeriServe and other charges (credits) and
Wrench litigation.
System Restaurants include unconsolidated affiliates (joint
ventures), company-owned and franchise restaurants but 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 (joint ventures), franchise and license
restaurants generate franchise and license fees for the company
(typically at a rate of 4% to 6% of sales). Unconsolidated affiliates
(joint ventures), franchise and license restaurant sales are not
included in company sales we present on the Condensed Consolidated
Statements of Income; however, the franchise fees previously defined
are included in the company's revenues. We believe system-sales growth
is useful to investors as a significant indicator of the overall
strength of our business as it incorporates all our revenue drivers,
company and franchise same-store sales as well as new-restaurant
development.
System 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 (joint ventures),
company-owned, franchise and license restaurants.
Systemwide U.S. Same-Store Sales include all company, franchise
and license restaurants that have been open one year or more. U.S.
same-store sales include KFC, Pizza Hut, Taco Bell, Long John Silver's
and A&W restaurants.
U.S. Same-Store Sales include only company restaurants that have
been open one year or more. U.S. blended same-store sales include KFC,
Pizza Hut, and Taco Bell company-owned restaurants only. U.S.
same-store sales for Long John Silver's and A&W restaurants are not
included.
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. Accordingly, you are cautioned not to
place undue reliance on forward-looking statements. Factors that can
cause actual results to differ materially include, but are not limited
to, 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 or perceptions concerning the products
of the company and/or our competitors, 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 marketing, advertising and promotional efforts;
new-product and concept development by Yum! Brands and other
food-industry competitors; the success of our strategies for
refranchising and international development and operations; the
ongoing business viability of our franchise and license operators; our
ability to secure distribution to our restaurants at competitive rates
and to ensure adequate supplies of restaurant products and equipment
in our stores; unexpected disruptions in our supply chain; publicity
that may impact our business and/or industry; severe weather
conditions; effects and outcomes of pending or future legal claims
involving the company; changes in effective tax rates; our actuarially
determined casualty loss estimates; new legislation and governmental
regulations or changes in legislation and regulations and the
consequent impact on our business; 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 2,900 multibrand restaurants. Outside the United States in 2004,
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.
For the past two years, the company has been 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
Quan Nghe, 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
-----------------
3/19/05 3/20/04 B/(W)
-------- -------- ---------
Total revenues $2,054 $1,970 4
Costs and expenses
Company restaurant expenses 1,548 1,491 (4)
General and administrative expenses 237 237 -
Franchise and license expenses 8 2 NM
Facility actions 11 9 NM
Other (income) expense (14) (12) 27
Wrench litigation (income) expense - - -
AmeriServe and other charges (credits) - - -
-------- --------
Total costs and expenses 1,790 1,727 (4)
-------- --------
Operating profit 264 243 8
Interest expense, net 28 35 19
-------- --------
Income before income taxes 236 208 13
Income tax provision 75 66 (12)
-------- --------
Net income $161 $142 13
======== ========
Basic EPS Data
- --------------
EPS $0.55 $0.49 13
======== ========
Average shares outstanding 291 291 -
======== ========
Diluted EPS Data
- ----------------
EPS $0.53 $0.47 13
======== ========
Average shares outstanding 305 305 -
======== ========
Dividends declared per common share $0.10 $- NM
======== ========
See accompanying notes.
Wrench litigation and AmeriServe and other charges (credits) have been
summed and referred to as "Special Items" throughout this press
release. See further discussion in the accompanying notes.
Yum! Brands, Inc.
WORLDWIDE Operating Results
(amounts in millions)
Quarter % Change
-----------------
3/19/05 3/20/04 B/(W)
-------- -------- ------------
Company sales $1,810 $1,747 4
Franchise and license fees 244 223 9
-------- --------
Revenues 2,054 1,970 4
-------- --------
Company restaurant expenses
Food and paper 574 540 (6)
Payroll and employee benefits 483 480 (1)
Occupancy and other operating
expenses 491 471 (4)
-------- --------
1,548 1,491 (4)
General and administrative expenses 237 237 -
Franchise and license expenses 8 2 NM
Facility actions 11 9 NM
Other (income) expense (14) (12) 27
-------- --------
1,790 1,727 (4)
-------- --------
Operating profit before special items 264 243 8
Interest expense, net 28 35 19
Income tax provision 75 66 (12)
-------- --------
Earnings before special items $161 $142 13
======== ========
Tax rate before special items 31.6% 31.8% 0.2 ppts.
======== ========
Diluted EPS before special items $0.53 $0.47 14
======== ========
Company sales 100.0% 100.0%
Food and paper 31.7 30.9 (0.8) ppts.
Payroll and employee benefits 26.7 27.5 0.8 ppts.
Occupancy and other operating expenses 27.1 26.9 (0.2) ppts.
-------- --------
Restaurant margin 14.5% 14.7% (0.2) ppts.
======== ========
Reconciliation of Segment Operating
Profit to Reported Operating Profit
- ------------------------------------
U.S. operating profit $162 $172 (6)
International Division operating profit 94 88 8
China Division operating profit 53 42 25
Unallocated and corporate expenses (42) (48) 11
Unallocated other income (expense) (1) (3) NM
Unallocated facility actions (2) (8) NM
-------- --------
Operating profit before special items 264 243 8
Wrench litigation (income) expense - - -
AmeriServe and other (charges) credits - - -
-------- --------
Reported operating profit $264 $243 8
======== ========
See accompanying notes.
Yum! Brands, Inc.
UNITED STATES Operating Results
(amounts in millions)
Quarter % Change
-----------------
3/19/05 3/20/04 B/(W)
-------- -------- ------------
Company sales $1,199 $1,166 3
Franchise and license fees 136 131 3
-------- --------
Revenues 1,335 1,297 3
-------- --------
Company restaurant expenses
Food and paper 363 333 (9)
Payroll and employee benefits 365 366 -
Occupancy and other operating
expenses 311 304 (2)
-------- --------
1,039 1,003 (4)
General and administrative expenses 120 120 -
Franchise and license expenses 6 1 NM
Facility actions 8 1 NM
-------- --------
1,173 1,125 (4)
-------- --------
Operating profit $162 $172 (6)
======== ========
Company sales 100.0% 100.0%
Food and paper 30.3 28.6 (1.7) ppts.
Payroll and employee benefits 30.5 31.4 0.9 ppts.
Occupancy and other operating expenses 25.9 26.0 0.1 ppts.
-------- --------
Restaurant margin 13.3% 14.0% (0.7) ppts.
======== ========
See accompanying notes.
Yum! Brands, Inc.
INTERNATIONAL DIVISION Operating Results
(amounts in millions)
Quarter % Change
-----------------
3/19/05 3/20/04 B/(W)
-------- -------- ------------
Company sales $384 $400 (4)
Franchise and license fees 100 85 17
-------- --------
Revenues 484 485 -
-------- --------
Company restaurant expenses
Food and paper 128 138 7
Payroll and employee benefits 91 94 4
Occupancy and other operating
expenses 115 115 -
-------- --------
334 347 4
General and administrative expenses 62 59 (6)
Franchise and license expenses 2 1 (11)
Facility actions 1 - NM
Other (income) expense (9) (10) 8
-------- --------
390 397 2
-------- --------
Operating profit $94 $88 8
======== ========
Company sales 100.0% 100.0%
Food and paper 33.2 34.3 1.1 ppts.
Payroll and employee benefits 23.8 23.6 (0.2) ppts.
Occupancy and other operating expenses 30.0 28.8 (1.2) ppts.
-------- --------
Restaurant margin 13.0% 13.3% (0.3) ppts.
======== ========
See accompanying notes.
Yum! Brands, Inc.
CHINA DIVISION Operating Results
(amounts in millions)
Quarter % Change
-----------------
3/19/05 3/20/04 B/(W)
-------- -------- ------------
Company sales $227 $181 25
Franchise and license fees 8 7 24
-------- --------
Revenues 235 188 25
-------- --------
Company restaurant expenses
Food and paper 83 69 (20)
Payroll and employee benefits 27 20 (38)
Occupancy and other operating
expenses 65 52 (24)
-------- --------
175 141 (24)
General and administrative expenses 13 10 (21)
Franchise and license expenses - - -
Facility actions - - -
Other (income) expense (6) (5) (1)
-------- --------
182 146 (26)
-------- --------
Operating profit $53 $42 25
======== ========
Company sales 100.0% 100.0%
Food and paper 36.6 38.2 1.6 ppts.
Payroll and employee benefits 11.9 10.8 (1.1) ppts.
Occupancy and other operating expenses 28.4 28.8 0.4 ppts.
-------- --------
Restaurant margin 23.1% 22.2% 0.9 ppts.
======== ========
See accompanying notes.
China Division includes mainland China, Thailand and KFC Taiwan.
Yum! Brands, Inc.
Condensed Consolidated Balance Sheets
(amounts in millions)
3/19/2005 12/25/04
---------- ---------
ASSETS
Current Assets
Cash and cash equivalents $118 $62
Short-term investments 74 54
Accounts and notes receivable, less allowance:
$24 in 2005 and $22 in 2004 200 192
Inventories 81 76
Prepaid expenses and other current assets 149 142
Deferred income taxes 147 156
Advertising cooperative assets, restricted 76 65
---------- ---------
Total Current Assets 845 747
Property, plant and equipment, net 3,433 3,439
Goodwill 553 553
Intangible assets, net 344 347
Investments in unconsolidated affiliates 208 194
Other assets 415 416
---------- ---------
Total Assets $5,798 $5,696
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and other current liabilities $1,184 $1,189
Income taxes payable 102 111
Short-term borrowings 16 11
Advertising cooperative liabilities 76 65
---------- ---------
Total Current Liabilities 1,378 1,376
Long-term debt 1,708 1,731
Other liabilities and deferred credits 1,004 994
---------- ---------
Total Liabilities 4,090 4,101
---------- ---------
Shareholders' Equity
Preferred stock, no par value, 250 shares
authorized; no shares issued - -
Common stock, no par value, 750 shares authorized;
291 shares and 290 shares issued in 2005 and
2004, respectively 628 659
Retained earnings 1,205 1,067
Accumulated other comprehensive loss (125) (131)
---------- ---------
Total Shareholders' Equity 1,708 1,595
---------- ---------
Total Liabilities and Shareholders' Equity $5,798 $5,696
========== =========
See accompanying notes.
Yum! Brands, Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in millions)
Quarter
-----------------
3/19/05 3/20/04
-------- --------
Cash Flows - Operating Activities
Net income $161 $142
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 97 95
Facility actions 11 9
Other liabilities and deferred credits 17 (10)
Deferred income taxes (5) 1
Other non-cash charges and credits, net 6 9
Changes in operating working capital, excluding
effects of acquisitions and dispositions:
Accounts and notes receivable (6) (11)
Inventories - (3)
Prepaid expenses and other current assets 31 (16)
Accounts payable and other current liabilities (44) (6)
Income taxes payable (13) (21)
-------- --------
Net change in operating working capital (32) (57)
-------- --------
Net Cash Provided by Operating Activities 255 189
-------- --------
Cash Flows - Investing Activities
Capital spending (94) (103)
Proceeds from refranchising of restaurants 4 2
Acquisition of restaurants from franchisees - (4)
Short-term investments (18) (10)
Sales of property, plant and equipment 3 9
Other, net - 3
-------- --------
Net Cash Used in Investing Activities (105) (103)
-------- --------
Cash Flows - Financing Activities
Revolving Credit Facility activity, by original maturity
Three months or less, net 3 -
Repayments of long-term debt (3) (3)
Short-term borrowings-three months or less, net (29) 7
Repurchase shares of common stock (116) (216)
Employee stock option proceeds 46 63
Dividends paid on common shares (29) -
-------- --------
Net Cash Used in Financing Activities (128) (149)
-------- --------
Effect of Exchange Rates on Cash and Cash Equivalents - -
-------- --------
Net Increase (Decrease) in Cash and Cash Equivalents 22 (63)
Net Increase in Cash and Cash Equivalents of
Mainland China for December 2004 34 -
Cash and Cash Equivalents - Beginning of Period 62 192
-------- --------
Cash and Cash Equivalents - End of Period $118 $129
======== ========
See accompanying notes.
Notes to the Consolidated Summary of Results, Condensed Consolidated
Balance Sheets and Condensed Consolidated Statements of Cash Flows
(amounts in millions, except per share amounts)
(a) Percentages may not recompute due to rounding.
(b) For the quarter ended March 19, 2005, we began reporting
information for our international business in two separate
operating segments as a result of changes to our management
structure. The China Division includes mainland China ("China"),
Thailand and KFC Taiwan, and the International Division includes
the remainder of our international operations. While this
reporting change did not impact our consolidated results, segment
information for previous periods has been restated to be
consistent with the current period presentation.
For the quarter ended March 19, 2005, we also changed the China
business reporting calendar to more closely align the timing of
the reporting of its results of operations with our U.S. business.
Previously our China business, like the rest of our international
businesses, closed one month (or one period for certain of our
international businesses) earlier than YUM's period end date to
facilitate consolidated reporting. To maintain comparability of
our consolidated results of operations, net income of the China
business of $6 million for the one month period ended December 31,
2004 was recognized as an adjustment to consolidated retained
earnings in the quarter ended March 19, 2005, as opposed to being
recorded in our Consolidated Statement of Income. Our consolidated
results of operations for the quarter ended March 19, 2005 include
the results of operations of the China business for the months of
January and February and the months to be included in future
quarterly reporting periods will begin one month later than in
previous years. Our consolidated results of operations for the
quarter ended March 20, 2004 continue to include the results of
operations of the China business for the months of December, 2003
and January, 2004 as previously reported.
(c) Franchisee sales represents the combined estimated sales of
unconsolidated affiliate, franchise and license restaurants.
Franchisee sales, which are not included in the Company sales we
present on the Consolidated Statements of Income, generate
franchise and license fees (typically at a rate of 4% to 6% of
sales) that are included in the Company's revenues.
Quarter % Change
-----------------
3/19/05 3/20/04 B/(W)
-------- -------- ---------
United States
Company sales $1,199 $1,166 3
Franchisee sales 2,682 2,577 4
International Division
Company sales $384 $400 (4)
Franchisee sales 1,984 1,735 14
China Division
Company sales $227 $181 25
Franchisee sales 124 111 12
Worldwide
Company sales $1,810 $1,747 4
Franchisee sales 4,790 4,423 8
(d) Facility actions included the following:
Quarter
-----------------
3/19/05 3/20/04
-------- --------
Store closure costs $4 $-
Asset impairment charges 5 1
Refranchising net losses (gains) 2 8
-------- --------
Facility actions $11 $9
======== ========
(e) Other (income) expense primarily includes equity income from
investments in unconsolidated affiliates.
(f) 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 (income) expense and AmeriServe and other charges
(credits).
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 investors to facilitate the comparison of past and
present operations, excluding items that the Company does not
believe are indicative of our ongoing operations.
Amounts recorded as Wrench litigation (income) expense and
AmeriServe and other charges (credits) were not significant for
neither the quarter ended March 19, 2005 nor the quarter ended
March 20, 2004 and thus reconciliations of earnings before special
items to net income have not been presented.
(g) For the quarter ended March 19, 2005, we repurchased approximately
2.3 million shares of our Common Stock at an average price of $50
per share.
Yum! Brands, Inc.
Restaurant Units Activity Summary
For the Year to Date Ended March 19, 2005
Total
Unconsolidated Excluding
Company Affiliates Franchisees Licensees(a)
------- -------------- ----------- ------------
Total U.S.
Beginning of Year 4,989 - 13,482 18,471
New Builds 19 - 49 68
Acquisitions - - - -
Refranchising (11) - 7 (4)
Closures (29) - (91) (120)
Other (5) - - (5)
------- -------------- ----------- ------------
End of Quarter 4,963 - 13,447 18,410
======= ============== =========== ============
% of Total 27% - 73% 100%
Total International Division
Beginning of Year 1,504 1,204 8,179 10,887
New Builds 3 2 96 101
Acquisitions - - - -
Refranchising (3) - 3 -
Closures (11) (6) (46) (63)
Other (4) (1) 13 8
------- -------------- ----------- ------------
End of Quarter 1,489 1,199 8,245 10,933
======= ============== =========== ============
% of Total 14% 11% 75% 100%
Total China Division(b)(c)
Beginning of Year 1,250 458 197 1,905
New Builds 90 26 3 119
Acquisitions - - - -
Refranchising - - - -
Closures (3) (2) - (5)
Other - - 4 4
------- -------------- ----------- ------------
End of Quarter 1,337 482 204 2,023
======= ============== =========== ============
% of Total 66% 24% 10% 100%
Total Worldwide
Beginning of Year 7,743 1,662 21,858 31,263
New Builds 112 28 148 288
Acquisitions - - - -
Refranchising (14) - 10 (4)
Closures (43) (8) (137) (188)
Other (9) (1) 17 7
------- -------------- ----------- ------------
End of Quarter 7,789 1,681 21,896 31,366
======= ============== =========== ============
% of Total 25% 5% 70% 100%
(a) The total excludes 2,159 U.S. and 196 International Division
licensee units. There are no licensee units in the China Division.
The U.S. licensee unit count includes 1,224 Pizza Huts, 858 Taco
Bells and 77 KFCs. The International Division licensee unit count
includes 86 Pizza Huts, 63 KFCs, 46 Taco Bells and 1 Long John
Silver's.
(b) Total China Division reflects activity in December 2004 and
January and February 2005 for mainland China and activity in
December 2004 and January 2005 for Thailand and KFC Taiwan.
(c) The first quarter totals include 3 Company-owned Taco Bell Grandes
and 1 Company-owned East Dawning unit.
Yum! Brands, Inc.
Restaurant Units Activity Summary
For the Year to Date Ended March 19, 2005
United States
- ----------------------------------------------------------------------
Total
Excluding
Company Franchisees Licensees
------- ----------- ---------
Pizza Hut
Beginning of Year 1,741 4,565 6,306
New Builds 8 16 24
Acquisitions - - -
Refranchising (8) 8 -
Closures (12) (23) (35)
Other - - -
------- ----------- ---------
End of Quarter 1,729 4,566 6,295
======= =========== =========
% of Total 27% 73% 100%
KFC
Beginning of Year 1,248 4,202 5,450
New Builds 3 20 23
Acquisitions - - -
Refranchising (1) 1 -
Closures (5) (25) (30)
Other (5) - (5)
------- ----------- ---------
End of Quarter 1,240 4,198 5,438
======= =========== =========
% of Total 23% 77% 100%
Taco Bell
Beginning of Year 1,283 3,747 5,030
New Builds - 10 10
Acquisitions - - -
Refranchising - (4) (4)
Closures (2) (21) (23)
Other - - -
------- ----------- ---------
End of Quarter 1,281 3,732 5,013
======= =========== =========
% of Total 26% 74% 100%
Long John Silver's
Beginning of Year 700 500 1,200
New Builds 8 2 10
Acquisitions - - -
Refranchising (2) 2 -
Closures (8) (7) (15)
Other - - -
------- ----------- ---------
End of Quarter 698 497 1,195
======= =========== =========
% of Total 58% 42% 100%
A&W
Beginning of Year 17 468 485
New Builds - 1 1
Acquisitions - - -
Refranchising - - -
Closures (2) (15) (17)
Other - - -
------- ----------- ---------
End of Quarter 15 454 469
======= =========== =========
% of Total 3% 97% 100%
Yum! Brands, Inc.
Restaurant Units Activity Summary
For the Year to Date Ended March 19, 2005
International Division
- ----------------------------------------------------------------------
Total
Unconsolidated Excluding
Company Affiliates Franchisees Licensees
------- -------------- ----------- ---------
KFC
Beginning of Year 726 439 4,854 6,019
New Builds 2 2 47 51
Acquisitions - - - -
Refranchising (1) - 1 -
Closures (3) (2) (16) (21)
Other 1 - 1 2
------- -------------- ----------- ---------
End of Quarter 725 439 4,887 6,051
======= ============== =========== =========
% of Total 12% 7% 81% 100%
Pizza Hut
Beginning of Year 766 765 2,903 4,434
New Builds 1 - 40 41
Acquisitions - - - -
Refranchising (2) - 2 -
Closures (8) (4) (22) (34)
Other (5) (1) 9 3
------- -------------- ----------- ---------
End of Quarter 752 760 2,932 4,444
======= ============== =========== =========
% of Total 17% 17% 66% 100%
A&W
Beginning of Year - - 209 209
New Builds - - 8 8
Acquisitions - - - -
Refranchising - - - -
Closures - - (8) (8)
Other - - (1) (1)
------- -------------- ----------- ---------
End of Quarter - - 208 208
======= ============== =========== =========
% of Total - - 100% 100%
Taco Bell
Beginning of Year 12 - 180 192
New Builds - - - -
Acquisitions - - - -
Refranchising - - - -
Closures - - - -
Other - - 4 4
------- -------------- ----------- ---------
End of Quarter 12 - 184 196
======= ============== =========== =========
% of Total 6% - 94% 100%
Long John Silver's
Beginning of Year - - 33 33
New Builds - - 1 1
Acquisitions - - - -
Refranchising - - - -
Closures - - - -
Other - - - -
------- -------------- ----------- ---------
End of Quarter - - 34 34
======= ============== =========== =========
% of Total - - 100% 100%
Yum! Brands, Inc.
Restaurant Units Activity Summary
For the Year to Date Ended March 19, 2005
China Division
- ----------------------------------------------------------------------
Total
Unconsolidated Excluding
Company Affiliates Franchisees Licensees
------- -------------- ----------- ---------
KFC
Beginning of Year 1,025 458 174 1,657
New Builds 72 26 3 101
Acquisitions - - - -
Refranchising - - - -
Closures (2) (2) - (4)
Other - - 4 4
------- -------------- ----------- ---------
End of Quarter 1,095 482 181 1,758
======= ============== =========== =========
% of Total 62% 28% 10% 100%
Pizza Hut
Beginning of Year 223 - 23 246
New Builds 16 - - 16
Acquisitions - - - -
Refranchising - - - -
Closures (1) - - (1)
Other - - - -
------- -------------- ----------- ---------
End of Quarter 238 - 23 261
======= ============== =========== =========
% of Total 91% - 9% 100%
China Division includes mainland China, Thailand and KFC Taiwan.
Yum! Brands, Inc.
United States Multibrand Restaurants
For the Year to Date Ended March 19, 2005
United States(a)
----------------------------------------
Multibrand Restaurants
in Operation
at 3/19/05
------------------------
Gross Additions
Year to Date
3/19/05 Company Franchise Total
--------------- ------- --------- ------
KFC
Taco Bell 2 181 491 672
A&W 5 124 188 312
Pizza Hut - 98 42 140
Long John Silver's 10 63 76 139
Taco Bell/Pizza Hut 3n1 - 19 23 42
Wing Works - 26 - 26
--------------- ------- --------- ------
17 511 820 1,331
Taco Bell
Pizza Hut - 315 283 598
Long John Silver's 2 66 25 91
Backyard Burgers - 9 - 9
A&W - 2 - 2
--------------- ------- --------- ------
2 392 308 700
Pizza Hut
WingStreet 72 385 14 399
KFC - - 4 4
Pasta Bravo - 2 1 3
Taco Bell - - 1 1
Wing Works - 1 - 1
--------------- ------- --------- ------
72 388 20 408
Long John Silver's
A&W 13 171 116 287
--------------- ------- --------- ------
Total 104 1,462 1,264 2,726
=============== ======= ========= ======
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 184 International Division and 3 China
Division multibrand units in operation at the end of the period.
MULTIMEDIA AVAILABLE:
http://www.businesswire.com/cgi-bin/mmg.cgi?eid=4868817
CONTACT: Yum! Brands Inc.
Analysts:
Tim Jerzyk, Vice President Investor Relations
888-298-6986
or
Quan Nghe, Director Investor Relations
888-298-6986
or
Media:
Amy Sherwood, Vice President Public Relations
502-874-8200