Exhibit 99.1
Yum! Brands Inc. Reports 2006 First-Quarter Earnings
Per Share of $0.59 or +18% Versus Last Year; Raises Full-Year Forecast
LOUISVILLE, Ky.--(BUSINESS WIRE)--April, 24, 2006--Yum! Brands Inc.
(NYSE: YUM) today reported record EPS results for the first quarter ended March
25, 2006.
Note: All comparisons are versus the same period a year ago.
In the first quarter, the company and its franchisees continued to
expand its brands around the world and grow same-store sales:
-- Yum! Restaurants International Division (YRI) grew the number
of system restaurants by 4% led by franchise development.
-- Mainland China restaurant unit growth was a very strong 21%
driven by company expansion of the KFC and Pizza Hut brands.
-- U.S. blended system-same-store sales increased 5%.
For the first quarter, key highlights are:
-- Worldwide operating profit increased 12%.
-- All three business segments reported operating-profit growth:
YRI, +3%; China, +10%; and U.S., +19%.
-- Worldwide franchise fees increased 9%.
-- U.S. multibrand restaurants in operation expanded 16%.
-- U.S. operating margin increased 2.2 percentage points.
-- YRI operating margin increased 1.2 percentage points to 20.1%,
a new record.
-- Average diluted shares outstanding were reduced by 6%.
FULL-YEAR OUTLOOK
The company raised its full-year EPS outlook to at least $2.81,
11% growth prior to special items, based on a very strong first
quarter in the U.S. business. The company expects solid full-year
operating-profit growth from each of its three segments: China, YRI
and the U.S. The company's prior forecast for 2006 EPS was at least
$2.79.
CONSOLIDATED FINANCIAL HIGHLIGHTS
First Quarter
--------------------------------
2006 2005 % Change
---------- ---------- ----------
System Restaurants 31,963 31,366 +2
System-Sales Growth 5% 7% NM
Earnings Per Share (EPS) $0.59 $0.50 +18
- ------------------------------------------------------------------
David C. Novak, Chairman and CEO, said, "We had an outstanding
first quarter. Our entire portfolio contributed to the strong
worldwide first-quarter operating-profit growth of 12% and EPS growth
of 18%. This performance is particularly impressive given the immense
amount of global news coverage about avian flu. As a result, we are
encouraged by our ability to continue to overcome consumer perception
issues. Clearly, our customers are getting the message that fully
cooked chicken is safe to eat.
"Finally, we are pleased with the sales recovery of our mainland
China business, reporting system-sales growth of 35% in local currency
for March. This, in combination with our strong core profit growth in
the first quarter and a much better U.S. commodity outlook, gives us
confidence we will have another good year. As a matter of fact, we
have raised our full-year 2006 EPS estimate to at least $2.81 or 11%
growth. This would make the fifth straight year that we deliver
against our annual target of at least 10% EPS growth.
"Shareholders should continue to expect us to remain focused on
flawlessly executing our four key strategies: building dominant
restaurant brands in China, driving profitable international
expansion, improving restaurant operations and multibranding
category-leading brands."
WHAT'S NEW IN THIS RELEASE
For each of our business segments, YRI, China, and the U.S., we
have provided key financial and operating metrics that we believe are
tailored to what is important to each business segment. For YRI, where
our business is highly franchised, we have focused on the performance
of that aspect of the business and overall business profitability
commonly designated as operating margin. Operating margin is operating
profit dollars as a percentage of revenue dollars. This measure is
more important and relevant than our company restaurant margin as we
own only 12% of system restaurants. Conversely, for our China
Division, which is predominantly company owned, the business is very
much driven by company expansion in mainland China, therefore the key
measures target company-restaurant sales and profitability
performance. Company restaurant margin remains a key indicator.
Additionally, we have added sales-growth data specific to just the
mainland China portion of the business.
In the U.S., we have provided same-store-sales growth, restaurant
and operating margins to reflect a balanced view of the key drivers
for our current business. Additionally, we have also provided key
measures similar to YRI as that business transitions to a more
franchise-focused model during the next 24 months. We believe these
measures provide enhanced understanding and transparency with each of
our three business segments and allow you to track our progress and
performance.
YUM! RESTAURANTS INTERNATIONAL DIVISION (YRI)
First Quarter
(million, except restaurant counts % Change
and percentages) -----------------
2006 2005 Reported Excl F/x
-------- -------- -------- --------
Key Financial Measures
Franchise & License Fees $110 $100 +10 +13
Franchisee Sales $2,071 $1,993 +4 +7
Company Sales $359 $384 (7) (5)
Operating Margin 20.1% 18.9% +1.2 pt NA
Operating Profit $95 $91 +3 +6
- ---------------------------------- -------- -------- -------- --------
Key Operating Metrics
Local Currency System-Sales Growth +6
System Restaurants 11,378 10,933 +4 NA
Franchise & JV Restaurants 10,012 9,444 +6 NA
- ---------------------------------- -------- -------- -------- --------
Key growth driver: Franchise-fee growth by opening new franchise
restaurants and leveraging our substantial infrastructure across an
array of international markets.
For the first quarter, franchise fees continued to grow as a
result of new-restaurant expansion (+8%), positive same-store-sales
growth, the renewal of franchise contracts at a higher rate, and the
expansion of our franchise base due to the sales of company
restaurants to franchisees (refranchising). The sale of 139
company-owned restaurants to franchisees took place over the past 12
months. Strong performance continued in YRI's franchise-only markets
of Asia, southern Africa, Middle East and Caribbean/Latin America,
despite some minor short-term impact to sales in various Middle East
and European franchise markets from the avian flu during the first
quarter. The franchise-only markets represent KFC and Pizza Hut
franchise businesses in more than 100 countries and territories.
For the first quarter, sales from company operations were
negatively impacted by the refranchising of 139 company restaurants
during the last year as previously mentioned. This impacted
company-sales growth by 6 percentage points. In addition, same-store
sales in the KFC U.K. and Pizza Hut South Korea company businesses
were down versus last year, which offset positive growth in other
company markets such as Mexico, Canada, France and Australia. As the
year progresses, we look for performance in the U.K. market to slowly
improve.
YRI opened 124 new restaurants in the first quarter, 98% of those
by franchise and joint-venture partners, including 59 KFCs, 59 Pizza
Huts, 4 A&Ws, and 2 Taco Bells.
For the first quarter of 2006, foreign currency conversion
negatively impacted YRI operating profit by $2 million. We expect
similar quarterly impacts for the balance of 2006.
For YRI full-year 2006, we expect:
-- System-sales growth to meet our annual target of at least 5%
in local currency terms.
-- 750 new restaurants, of which well over 80% should be by
franchise and joint-venture partners.
-- Franchise-fee growth of at least 8%.
-- Operating-profit growth of 10% in local currency terms.
All the full-year growth rates are on a like-for-like basis and
exclude the fifty-third week benefit in 2005.
CHINA DIVISION
First Quarter
(million, except restaurant counts % Change
and percentages) -----------------
2006 2005 Reported Excl F/x
------- ------- -------- --------
Key Financial Measures
Company Sales $269 $227 +18 +16
Restaurant Margin 21.8% 23.1% (1.3) NA
Operating Profit $58 $52 +10 +8
- ------------------------------------ ------- ------- -------- --------
Key Operating Metrics
Mainland China:
KFC Restaurants 1,602 1,335 +20 NA
Pizza Hut Restaurants 243 186 +31 NA
Local Currency System-Sales Growth +15
- ------------------------------------ ------- ------- -------- --------
Note: China Division includes mainland China, Thailand and the KFC
Taiwan business.
Key growth driver: Profitable expansion of new KFC and Pizza Hut
company restaurants in mainland China.
For the first quarter 2006, company sales for the China Division
increased 16% in local currency due to the continued strong expansion
of both our KFC and Pizza Hut brands in mainland China. KFC sales in
mainland China began to recover from consumer perception issues
relating to avian flu that peaked in the fourth quarter of 2005. For
the first quarter, system-same-store sales in mainland China decreased
only 3% versus a strong first quarter last year.
As sales trends improved in the first quarter, restaurant margin
is over 20% once again. Versus last year, it declined 1.3 percentage
points primarily as a result of higher labor costs and negative
same-store sales in company-operated mainland China KFC restaurants.
We are optimistic that both same-store sales and margin trends will
reverse beginning in the second quarter.
Overall, mainland China system restaurants in operation grew 21%
with a total of 63 new restaurants.
Foreign currency conversion added approximately $1 million to
operating profit for the first quarter. We expect this quarterly trend
to continue for the balance of 2006, possibly at a slightly higher
rate.
For the China Division full-year 2006 in local currency terms, we
expect:
-- Company-sales growth of at least 22%.
-- System-sales growth of at least 22%.
-- Operating-profit growth of at least 20%.
-- 375 new-restaurant openings in mainland China and 400 in total
for the Division.
UNITED STATES BUSINESS
First Quarter
(million, except restaurant counts
and percentages) 2006 2005 % Change
------- ------- ---------
Key Financial Measures
Franchisee Sales $2,912 $2,682 +9
Franchise & License Fees $148 $136 +9
Company Sales $1,191 $1,199 (1)
Restaurant Margin 15.0% 13.1% +1.9
Operating Margin 14.0% 11.8% +2.2
Operating Profit $188 $157 +19
- ----------------------------------------------------------------------
Key Operating Metrics
Blended System
Same-Store-Sales Growth % +5 +3 NM
System Multibrand Restaurants 3,160 2,726 +16
Franchise Restaurants 13,630 13,447 +1
- ----------------------------------------------------------------------
Key growth drivers: Positive blended same-store-sales growth,
improvements in restaurant and operating margins.
For the first quarter, franchisee sales and fees continued to grow
as a result of strong same-store-sales growth, adding new restaurants
led by Taco Bell franchisees and the expansion of our franchise base
due to the sale of 308 company-owned restaurants to franchisees
(refranchising) over the past year.
Company sales declined by 1% for the first quarter as the impact
of refranchising 308 company-owned restaurants the past 12 months
offset solid same-store-sales growth.
Additionally, we have begun unit expansion of Taco Bell in the
U.S. Taco Bell units increased 1% compared to last year. We expect
this trend to continue and for the rate of growth to slowly increase
over time.
The primary driver of improvements in first-quarter restaurant and
operating margins was strong same-store-sales growth and a much
improved commodity-cost environment. Overall, commodity costs declined
by approximately $8 million versus last year.
For the U.S. in 2006, we expect:
-- +2% to +3% U.S. blended same-store-sales growth.
-- Additional 550 system multibrand restaurants.
-- Full-year operating-profit growth of at least 6%, raised from
5% previously.
-- U.S. revenue to decrease 1 to 2%, excluding the impact of
lapping the fifty-third week in 2005; including the impact of
lapping the fifty-third week in 2005, revenue to decrease 2 to
3%. This forecast incorporates the impact from our ongoing
refranchising of U.S. company restaurants.
FRANCHISE FEES & FRANCHISE OWNERSHIP
For the first quarter, worldwide franchise fees increased by 9% to
$266 million, a new record level. Franchise fees continue to be an
increasing source of worldwide operating profit. We have over 2,000
franchise partners in the U.S. and over 700 outside the U.S.
As previously communicated, the company is targeting to increase
franchise ownership from 75% currently in the U.S. business to about
80% over the next two years. This two-year plan in the U.S. business
calls for selling approximately 1,000 company restaurants to
franchisees. It is expected the impact to ongoing worldwide operating
profit will be neutral and refranchise gains/losses are expected to be
about break-even. Importantly, this action will put these restaurants
in the hands of experienced and highly capable local franchise
operators. During the first quarter of 2006, 75 company-owned U.S.
restaurants were sold to our franchisees.
Over the two years of the plan, we expect the transactions with
our franchisees will result in about $300 million of pretax cash
proceeds. Furthermore, we expect company capital requirements to be
reduced as a result of these transactions, U.S. restaurant margin to
improve by at least 0.50 percentage points and Yum! return on invested
capital (ROIC) to increase by at least 0.75 percentage points.
FREE CASH FLOW
For the past four quarters, including first-quarter 2006, free
cash flow continues at a substantial level; we generated $236 million
in free cash flow, defined as net cash provided by operating
activities ($297 million) less net cash used in investing activities
($61 million). As we have previously communicated, our objective is to
return virtually all free cash flow to our shareholders through our
quarterly dividend and share buybacks. For the first quarter, we
purchased 7.6 million shares for $371 million. For the full year 2006,
we expect free cash flow, as previously defined, to approximate $850
million.
PERIOD 4 SALES
INTERNATIONAL DIVISION SYSTEM-SALES GROWTH (Estimated)
2006 2005
Local Currency Local Currency
------------------ ------------------
Period 4 +5% +7%
- ----------------------------------------------------------
Including the negative impact of foreign currency conversion,
reported Period 4 system sales in U.S. dollars increased 1%.
CHINA DIVISION SYSTEM-SALES GROWTH (Estimated)
2006 2005
Local Currency Local Currency
------------------ ------------------
Period 4 +25% +10%
- ----------------------------------------------------------
Note: China Division includes mainland China, Thailand and the KFC
Taiwan business.
Overall for the China Division, Period 4 system sales in U.S.
dollars increased 28%. This includes the positive impact of foreign
currency conversion.
The mainland China business represents the largest portion of our
Yum! China Division. Therefore, we have begun to provide results for
just mainland China in addition to the overall division results.
System-sales growth for mainland China in Period 4 was +35% local
currency basis.
U.S. COMPANY SAME-STORE-SALES GROWTH (Estimated)
Period 4, 2006 Period 4, 2005
------------------ ------------------
U.S. BLENDED +1% +4%
Taco Bell +6% +5%
Pizza Hut (5)% +4%
KFC +2% +4%
- --------------------------------------------------------
2006 Period 4 End Dates 2006 Period 5 End Dates
- --------------------------------- ---------------------------------
International Division 3/27/2006 International Division 4/24/2006
China Division 3/31/2006 China Division 4/30/2006
U.S. Business 4/22/2006 U.S. Business 5/20/2006
- --------------------------------- ---------------------------------
CONFERENCE CALL
Yum! Brands Inc. will host a conference call to review the
company's financial performance and strategies at 9:15 a.m. EDT
Tuesday, April 25, 2006.
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 at noon Eastern
Time Tuesday, April 25, through 5 p.m. Friday, May 5. To access the
playback, dial 800/642-1687 in the United States and 706/645-9291
internationally. The playback pass code is 6666915.
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."
New! For your added convenience . . . A podcast will be available
within 24 hours of the end of the call at www.yum.com/investors.
Yum! China Investor Conference II
September 7-8, 2006, the Yum! team will host the second China
Investor Conference in Shanghai, China.
Our investors and analysts are invited to attend this two-day
event with the Yum! China management team. Attendees will also visit
local KFC and Pizza Hut restaurants.
Please contact Yum! Investor Relations at 888/298-6986 and ask for
Donna to confirm that you plan to attend. We need to hear from you as
soon as possible to complete details for this unique opportunity.
DEFINITIONS FOR TERMS USED THROUGHOUT THIS DOCUMENT
All related definitions for terms used throughout this release can
be found on our Web site:
www.yum.com/investors/media/earnings/notes/q1_2006.pdf.
Worldwide restaurant count details by brand can be found online at
www.yum.com/investors/restcounts.asp.
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 over
34,000 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 3,300
multibrand restaurants. Outside the United States in 2005, 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 three years, the company has been recognized as one of
FORTUNE magazine's "Top 50 Employers for Minorities." It also has been
recognized as one of the "Top 50 Employers for Women" by FORTUNE, one
of the "Top 30 Best Companies for Diversity" by BLACK ENTERPRISE
Magazine, one of the "Corporate 100 Companies Providing Opportunities
for Hispanics" by Hispanic Magazine, one of the "Top 50 Corporations
for Supplier Diversity" by HISPANIC Trends Magazine and by
BusinessWeek as one of the "Top 15 Companies for In-Kind Corporate
Philanthropy."
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
3/25/06 3/19/05 B/(W)
-------- -------- ---------
Company sales $1,819 $1,810 1
Franchise and license fees 266 244 9
-------- --------
Total revenues 2,085 2,054 2
-------- --------
Costs and expenses
Food and paper 557 574 3
Payroll and employee benefits 477 486 2
Occupancy and other operating
expenses 501 491 (2)
-------- --------
Company restaurant expenses 1,535 1,551 1
General and administrative expenses 254 247 (3)
Franchise and license expenses 8 8 1
Closures and impairment expenses 6 9 NM
Refranchising (gain) loss 4 2 NM
Other (income) expense (4) (14) (68)
Wrench litigation (income) expense -- -- NM
AmeriServe and other charges(credits) -- -- NM
-------- --------
Total costs and expenses 1,803 1,803 --
-------- --------
Operating profit 282 251 12
Interest expense, net 35 28 (22)
-------- --------
Income before income taxes 247 223 11
Income tax provision 77 70 (10)
-------- --------
Net income $ 170 $ 153 11
======== ========
Effective tax rate 31.3% 31.4%
- ------------------ ======== ========
Basic EPS Data
- --------------
EPS $ 0.62 $ 0.52 17
======== ========
Average shares outstanding 276 291 5
======== ========
Diluted EPS Data
- ----------------
EPS $ 0.59 $ 0.50 18
======== ========
Average shares outstanding 286 304 6
======== ========
Dividends declared per common share $0.115 $ 0.10 NM
======== ========
Please note that the results for both fiscal quarters include the
negative impact of expensing our stock options.
See accompanying notes on our web site: www.yum.com
Yum! Brands, Inc.
Segment Results
(amounts in millions)
Quarter Corporate
Ended United International China and
3/25/06 States Division Division Unallocated Consolidated
------- ------------- --------- ------------ ------------
Total
revenues $1,339 $469 $277 $ -- $2,085
------- ------------- --------- ------------ ------------
Company
restaurant
expenses 1,012 313 210 -- 1,535
General and
administrative
expenses 126 58 15 55 254
Franchise
and license
expenses 4 4 -- -- 8
Closures and
impairment
expenses 1 4 1 -- 6
Refranchising
(gain) loss -- -- -- 4 4
Other
(income)
expense 8 (5) (7) -- (4)
------- ------------- --------- ------------ ------------
1,151 374 219 59 1,803
------- ------------- --------- ------------ ------------
Operating
profit
(loss) $ 188 $ 95 $ 58 $(59) $ 282
======= ============= ========= ============ ============
Quarter Corporate
Ended United International China and
3/19/05 States Division Division Unallocated Consolidated
------- ------------- --------- ------------ ------------
Total
revenues $1,335 $484 $235 $ -- $2,054
------- ------------- --------- ------------ ------------
Company
restaurant
expenses 1,041 335 175 -- 1,551
General and
administrative
expenses 123 64 14 46 247
Franchise
and license
expenses 6 2 -- -- 8
Closures and
impairment
expenses 8 1 -- -- 9
Refranchising
(gain) loss -- -- -- 2 2
Other
(income)
expense -- (9) (6) 1 (14)
------- ------------- --------- ------------ ------------
1,178 393 183 49 1,803
------- ------------- --------- ------------ ------------
Operating
profit
(loss) $ 157 $ 91 $ 52 $(49) $ 251
======= ============= ========= ============ ============
The above table reconciles segment information, which is based on
management responsibility, with our Consolidated Summary of Results.
Corporate and unallocated expenses comprise general and administrative
expenses, refranchising (gains) and losses and other (income) expense
that are not allocated to segments for performance reporting purposes.
Please note that the results for both fiscal quarters include the
negative impact of expensing our stock options.
Yum! Brands, Inc.
UNITED STATES Operating Results
(amounts in millions)
Quarter
------------------ % Change
3/25/06 3/19/05 B/(W)
-------- -------- -------------
Company sales $1,191 $1,199 (1)
Franchise and license fees 148 136 9
-------- --------
Revenues 1,339 1,335 --
-------- --------
Company restaurant expenses
Food and paper 340 363 6
Payroll and employee benefits 359 367 2
Occupancy and other operating
expenses 313 311 (1)
-------- --------
1,012 1,041 3
General and administrative expenses 126 123 (3)
Franchise and license expenses 4 6 28
Closures and impairment expenses 1 8 NM
Other (income) expense 8 -- NM
-------- --------
1,151 1,178 2
-------- --------
Operating profit $ 188 $ 157 19
======== ========
Company sales 100.0% 100.0%
Food and paper 28.5 30.3 1.8 ppts.
Payroll and employee benefits 30.2 30.7 0.5 ppts.
Occupancy and other operating
expenses 26.3 25.9 (0.4) ppts.
-------- --------
Restaurant margin 15.0% 13.1% 1.9 ppts.
======== ========
Operating margin 14.0% 11.8% 2.2 ppts.
======== ========
Please note that the results for both fiscal quarters include the
negative impact of expensing our stock options.
See accompanying notes on our web site: www.yum.com
Yum! Brands, Inc.
INTERNATIONAL DIVISION Operating Results
(amounts in millions)
Quarter
------------------ % Change
3/25/06 3/19/05 B/(W)
-------- -------- -----------
Company sales $ 359 $ 384 (7)
Franchise and license fees 110 100 10
-------- --------
Revenues 469 484 (3)
-------- --------
Company restaurant expenses
Food and paper 120 128 6
Payroll and employee benefits 84 92 8
Occupancy and other operating
expenses 109 115 6
-------- --------
313 335 6
General and administrative expenses 58 64 9
Franchise and license expenses 4 2 (71)
Closures and impairment expenses 4 1 NM
Other (income) expense (5) (9) (50)
-------- --------
374 393 5
-------- --------
Operating profit $ 95 $ 91 3
======== ========
Company sales 100.0 % 100.0 %
Food and paper 33.5 33.2 (0.3) ppts.
Payroll and employee benefits 23.5 23.9 0.4 ppts.
Occupancy and other operating expenses 30.2 30.0 (0.2) ppts.
-------- --------
Restaurant margin 12.8 % 12.9 % (0.1) ppts.
======== ========
Operating margin 20.1 % 18.9 % 1.2 ppts.
======== ========
Please note that the results for both fiscal quarters include the
negative impact of expensing our stock options.
See accompanying notes on our web site: www.yum.com
Yum! Brands, Inc.
CHINA DIVISION Operating Results
(amounts in millions)
Quarter % Change
------------------
3/25/06 3/19/05 B/(W)
-------- -------- -------------
Company sales $ 269 $ 227 18
Franchise and license fees 8 8 8
-------- --------
Revenues 277 235 18
Company restaurant expenses
Food and paper 97 83 (16)
Payroll and employee benefits 34 27 (28)
Occupancy and other operating
expenses 79 65 (22)
-------- --------
210 175 (20)
General and administrative expenses 15 14 (12)
Franchise and license expenses -- -- NM
Closures and impairment expenses 1 -- NM
Other (income) expense (7) (6) 14
-------- --------
219 183 (20)
-------- --------
Operating profit $ 58 $ 52 10
======== ========
Company sales 100.0% 100.0%
Food and paper 36.0 36.6 0.6 ppts.
Payroll and employee benefits 12.8 11.9 (0.9) ppts.
Occupancy and other operating
expenses 29.4 28.4 (1.0) ppts.
-------- --------
Restaurant margin 21.8% 23.1% (1.3) ppts.
======== ========
Please note that the results for both fiscal quarters include the
negative impact of expensing our stock options.
See accompanying notes on our web site: www.yum.com
China Division includes mainland China, Thailand and KFC Taiwan
Yum! Brands, Inc.
Condensed Consolidated Balance Sheets
(amounts in millions)
3/25/06 12/31/05
-------- ---------
ASSETS
Current Assets
Cash and cash equivalents $ 134 $ 158
Short-term investments 61 43
Accounts and notes receivable, less allowance: $21
in 2006 and $23 in 2005 258 236
Inventories 84 85
Prepaid expenses and other current assets 95 75
Deferred income taxes 159 163
Advertising cooperative assets, restricted 102 77
-------- ---------
Total Current Assets 893 837
Property, plant and equipment, net of accumulated
depreciation and amortization of $2,876 in 2006
and $2,830 in 2005 3,295 3,356
Goodwill 540 538
Intangible assets, net 327 330
Investments in unconsolidated affiliates 157 173
Other assets 505 464
-------- ---------
Total Assets $5,717 $5,698
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and other current liabilities $1,208 $1,238
Income taxes payable 118 79
Short-term borrowings 223 211
Advertising cooperative liabilities 102 77
-------- ---------
Total Current Liabilities 1,651 1,605
Long-term debt 1,710 1,649
Other liabilities and deferred credits 1,026 995
-------- ---------
Total Liabilities 4,387 4,249
-------- ---------
Shareholders' Equity
Preferred stock, no par value, 250 shares
authorized; no shares issued -- --
Common stock, no par value, 750 shares authorized;
273 shares and 278 shares issued in 2006 and
2005, respectively -- --
Retained earnings 1,484 1,619
Accumulated other comprehensive loss (154) (170)
-------- ---------
Total Shareholders' Equity 1,330 1,449
-------- ---------
Total Liabilities and Shareholders' Equity $5,717 $5,698
======== =========
See accompanying notes on our web site: www.yum.com
Yum! Brands, Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in millions)
Quarter to date
------------------
3/25/06 3/19/05
-------- --------
Cash Flows - Operating Activities
Net income $ 170 $ 153
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 99 97
Closures and impairment expenses 6 9
Refranchising (gain) loss 4 2
Contributions to defined benefit pension plans -- --
Other liabilities and deferred credits 24 17
Deferred income taxes (51) (10)
Equity income from investments in unconsolidated
affiliates (11) (15)
Distributions of income received from
unconsolidated affiliates -- --
Excess tax benefit from share-based compensation (20) (23)
Share-based compensation expense 16 13
Other non-cash charges and credits, net 19 21
Changes in operating working capital, excluding
effects of acquisitions and dispositions:
Accounts and notes receivable 8 (6)
Inventories 2 --
Prepaid expenses and other current assets (13) 31
Accounts payable and other current liabilities (28) (44)
Income taxes payable 72 (13)
-------- --------
Net change in operating working capital 41 (32)
-------- --------
Net Cash Provided by Operating Activities 297 232
-------- --------
Cash Flows - Investing Activities
Capital spending (72) (94)
Proceeds from refranchising of restaurants 22 4
Acquisition of restaurants from franchisees -- --
Short-term investments (17) (18)
Sales of property, plant and equipment 8 3
Other, net (2) --
-------- --------
Net Cash Used in Investing Activities (61) (105)
-------- --------
Cash Flows - Financing Activities
Revolving Credit Facility activity
Three months or less, net 71 3
Repayments of long-term debt (4) (3)
Short-term borrowings-three months or less, net 11 (29)
Repurchase shares of common stock (371) (116)
Excess tax benefit from share-based compensation 20 23
Employee stock option proceeds 44 46
Dividends paid on common shares (32) (29)
-------- --------
Net Cash Used in Financing Activities (261) (105)
-------- --------
Effect of Exchange Rate on Cash and Cash Equivalents 1 --
-------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents (24) 22
Net Increase in Cash and Cash Equivalents of
Mainland China for December 2004 -- 34
-------- --------
Cash and Cash Equivalents - Beginning of Period 158 62
-------- --------
Cash and Cash Equivalents - End of Period $ 134 $ 118
======== ========
See accompanying notes on our web site www.yum.com.
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) All periods presented reflect the Company's adoption of Statement
of Financial Accounting Standards ("SFAS") No. 123 (Revised 2004),
"Share-Based Payment" (SFAS 123R) effective September 4, 2005. The
Company adopted SFAS 123R by applying the modified retrospective
application transition method to the beginning of 2005, and as
such the first three fiscal quarters of 2005 were adjusted to
recognize the compensation cost for stock options previously
reported only in the financial statement proforma footnote
disclosures as required by SFAS No. 123, "Accounting for
Stock-Based Compensation".
(c) Amounts presented as of and for the quarter ended March 25, 2006
are preliminary.
(d) Other (income) expense primarily includes equity income from
investments in unconsolidated affiliates and, in the quarter ended
March 25, 2006, an $8 million charge associated with the
termination of a beverage agreement in the United States segment.
(e) For the quarter ended March 25, 2006, we repurchased approximately
7.6 million shares of our Common Stock at an average price of $49
per share.
(f) In addition to the results provided in accordance with U.S.
Generally Accepted Accounting Principles ("GAAP") throughout this
document, the Company has presented the non-GAAP measurement of
free cash flow. Free cash flow is defined as Net Cash Provided by
Operating Activities less Net Cash Used in Investing Activities.
We believe free cash flow is an important measure as it provides
an indication of amounts available to return to our shareholders,
through either share repurchases or dividends, or to pay down
long-term debt. Free cash flow for the past four quarters is
computed as follows:
Quarter Ended
----------------------------------- -------
3/25/06 12/31/05 9/3/05 6/11/05 Total
-------- --------- ------- -------- -------
Net Cash Provided by
Operating Activities $297 $243 $ 424 $339 $1,303
Net Cash used in Investing
Activities (61) (75) (113) (52) (301)
-------- --------- ------- -------- -------
Free Cash Flow $236 $168 $ 311 $287 $1,002
======== ========= ======= ======== =======
CONTACT: Yum! Brands Inc., Louisville
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