Exhibit 99.1
Yum! Brands Inc. Reports Strong 2006 Second-Quarter Earnings
Per Share of $0.68 or +15% Versus Last Year;
Raises Full-Year Forecast
LOUISVILLE, Ky.--(BUSINESS WIRE)--July 19, 2006--Yum! Brands Inc.
(NYSE: YUM) today reported financial results for the second quarter
ended June 17, 2006, and provided estimated Period 7 global sales
results.
In the second quarter, we and our franchise partners continued to
expand our brands around the world and grow same-store sales:
-- Yum! Restaurants International Division (YRI) system
restaurants grew by 4%.
-- Mainland China KFC and Pizza Hut restaurants increased by 21%.
-- Worldwide system same-store sales grew by 2%.
For the second quarter, key highlights are . . .
-- Worldwide operating profit increased 18%.
-- All three business segments reported operating-profit growth:
YRI, 2%; China, 136%; and U.S., 5%.
-- Worldwide franchise fees increased 7%.
-- China Division restaurant margin increased nearly 5 percentage
points.
-- U.S. multibrand restaurants in operation expanded 15%.
-- Average diluted shares outstanding were reduced by 7%.
-- Announced a 30% increase in the quarterly dividend to $0.15
per share, payable August 4, 2006.
Note: All preceding comparisons are versus the same period a year
ago.
FULL-YEAR OUTLOOK
The company raised its full-year earnings per share (EPS) outlook
to at least $2.83, or 11% growth, based on very strong second-quarter
results in our China Division and an expected strong second half of
2006 for YRI. The company expects solid full-year operating-profit
growth from each of its three divisions: China, YRI, and the U.S. The
company's prior EPS guidance for 2006 was at least $2.81.
CONSOLIDATED FINANCIAL HIGHLIGHTS
- ---------------------------------
Second Quarter Year To Date
------------------------- -------------------------
2006 2005 % Change 2006 2005 % Change
------- ------- --------- ------- ------- ---------
Traditional
Restaurants 32,022 31,434 +2 32,022 31,434 +2
System-Sales Growth +5% +7% NM +5% +7% NM
Earnings Per Share
(EPS) $0.68 $0.59 +15 $1.28 $1.09 +17
- ----------------------------------------------------------------------
Note: YUM has 34,165 restaurant locations around the world, which
includes 2,143 license units.
David C. Novak, Chairman and CEO, said, "I am pleased to report we
had another outstanding quarter. Our entire portfolio contributed to
the strong worldwide second-quarter operating profit growth of 18% and
EPS growth of 15%. Given the robust growth we expect from our China
and YRI Divisions, we are able to once again raise our full-year EPS
forecast from at least $2.81 to at least $2.83.
"Our China business is obviously experiencing booming growth. It's
particularly impressive that we are achieving record second-quarter
restaurant margin as we are on track to open another 400 new
restaurants this year. In addition, our Yum! Restaurants International
Division brings strong business trends into the second half and is
expected to exceed our target of opening at least 750 new restaurants
for 2006. This will be the sixth straight year of at least 1,000 new
restaurants opened outside the U.S., and we expect to maintain at
least that development pace going forward into 2007.
"In the U.S., significant improvement in commodity costs will more
than offset what we believe is short-term sales softness that Taco
Bell and KFC experienced during Period 7, as the brands lapped last
year's outstanding same-store-sales growth of +10% and +7%
respectively. We are confident of our positioning and programs for
these brands and expect to have overall positive same-store-sales
growth at both of them for the second half of 2006. At Pizza Hut, we
foresee a slow recovery as the brand begins to execute a turnaround
plan. Overall, we expect to grow the operating profit of our U.S.
business by 6%, our strongest performance in four years.
"This will be our fifth straight year where we demonstrate the
strength of our portfolio to deliver at least 10% EPS growth. The key
factor for the consistency of our growth is our global portfolio that
provides us the opportunity to build dominant restaurant brands in
China, drive profitable international expansion, improve U.S. brands
and operations, and multibrand category-leading brands."
YUM! RESTAURANTS INTERNATIONAL DIVISION (YRI)
- ---------------------------------------------
Second Quarter Year to Date
($ million, % %
except Change Change
restaurant -------- --------
counts and Excl Excl
percentages) 2006 2005 Reported F/x 2006 2005 Reported F/x
-------------------------------------------------------
Key Financial
Measures
Franchise &
License Fees 108 98 +10 +12 218 198 +10 +13
Franchisee
Sales 2,026 1,895 +7 +10 4,097 3,888 +5 +9
Company Sales 381 394 (3) (2) 740 778 (5) (3)
Operating
Margin 18.1% 17.7% +0.4 ppt NA 19.1% 18.3% +0.8 ppt NA
Operating
Profit 88 87 +2 +5 183 178 +3 +5
- ----------------------------------------------------------------------
Key Operating
Metrics
System-Sales
Growth (Local
Currency) +8 +7
System
Restaurants 11,438 10,978 +4 NA 11,438 10,978 +4 NA
Franchise & JV
Restaurants 10,087 9,539 +6 NA 10,087 9,539 +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 second quarter, franchise fees continued to grow as a
result of new-restaurant expansion, same-store-sales growth of 4%, and
the expansion of our franchise base due to the sale of company
restaurants to franchisees (refranchising). YRI opened 152 new
restaurants in the second quarter, 92% of those by franchise and
joint-venture partners, including 87 KFCs, 54 Pizza Huts, 9 A&Ws, and
2 Taco Bells. Strong same-store-sales-growth performance continued in
YRI's franchise-only markets of Asia, southern Africa, the Middle East
and the Caribbean/Latin America.
For the second quarter, company sales were negatively affected by
the refranchising of 103 company restaurants over the past year,
impacting company-sales growth by 5 percentage points. Company
same-store-sales growth was slightly positive, improving from a
decline in the first quarter.
In our emerging-markets category, we finalized the acquisition of
the Rostik's brand in Russia during the second quarter. As we convert
the existing Rostik's restaurants, we will add a substantial number of
new cobranded Rostik's/KFCs in Russia over the next 18 months. In
India, our scale continues to build with 125 Pizza Hut and 15 KFC
restaurants currently in operation.
Foreign currency conversion for the second quarter negatively
impacted YRI operating profit by $3 million and $5 million year to
date. Based on current foreign currency rates, we expect that the
balance-of-year conversion impact will be slightly favorable.
For YRI full-year 2006 in local-currency terms we expect:
-- System-sales growth of 7%, from at least 5% previously.
-- To exceed our target of 750 new restaurants.
-- Franchise-fee growth of at least 10%, from at least 8%
previously.
-- Operating-profit growth of 10%.
These full-year growth rates are on a like-for-like basis
excluding the fifty-third-week benefit in 2005.
CHINA DIVISION
- --------------
Second Quarter Year to Date
($ million, except % %
restaurant counts Change Change
and percentages) -------- --------
Excl Excl
2006 2005 Reported F/x 2006 2005 Reported F/x
----------------------------------------------------
Key Financial
Measures
Company Sales 352 268 +31 +28 621 495 +25 +23
Restaurant Margin 18.8% 13.9% +4.9 NA 20.1% 18.1% +2.0 NA
Operating Profit 57 25 +136 +130 115 77 +50 +46
- ----------------------------------------------------------------------
Key Operating
Metrics
MAINLAND CHINA:
KFC Restaurants 1,657 1,378 +20 NA 1,657 1,378 +20 NA
Pizza Hut
Restaurants 252 201 +25 NA 252 201 +25 NA
System-Sales
Growth (Local
Currency) +36 +26
- ----------------------------------------------------------------------
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 second quarter 2006, company sales for the China Division
increased 28% in local currency due to the continued strong expansion
of both our KFC and Pizza Hut brands in mainland China. Mainland China
system restaurants in operation grew 21% and system-same-store sales
grew 16%.
Second-quarter 2006 operating profit increased 130% in local
currency terms versus second quarter last year. The key contributing
factor to the significant increase was continued improvement in
mainland China KFC sales trends, lapping the negative sales impact
that KFC restaurants experienced during the second quarter last year
from an unapproved food ingredient issue. Importantly, second-quarter
restaurant margin was up solidly even against results from 2004.
Foreign currency conversion added approximately $2 million to
operating profit for the second quarter and $3 million year to date.
We expect similar favorable quarterly impacts from foreign currency
conversion for the balance of 2006.
For the China Division full-year 2006 in local currency terms, we
expect:
-- System-sales growth of at least 22%.
-- Operating-profit growth of at least 25%, from at least 20%
previously.
-- 375 new-restaurant openings in mainland China and 400 in total
for the Division.
UNITED STATES BUSINESS
- ----------------------
($ million, except Second Quarter Year to Date
restaurant counts % %
and percentages) 2006 2005 Change 2006 2005 Change
--------------------------------------------
Key Financial Measures
Franchisee Sales 2,967 2,849 +4 5,879 5,531 +6
Franchise & License Fees 151 145 +4 299 281 +6
Company Sales 1,179 1,240 (5) 2,370 2,439 (3)
Restaurant Margin 16.1% 14.4% +1.7 15.5% 13.8% +1.7
Operating Margin 14.6% 13.4% +1.2 14.3% 12.6% +1.7
Operating Profit 194 185 +5 382 342 +11
- ----------------------------------------------------------------------
Key Operating Metrics
Blended System
Same-Store-Sales Growth % +1 +3 NM +3 +3 NM
System Multibrand
Restaurants 3,224 2,813 +15 3,224 2,813 +15
Franchise Restaurants 13,603 13,508 +1 13,603 13,508 +1
- ----------------------------------------------------------------------
Key growth drivers: Positive blended same-store-sales growth,
improvements in restaurant and operating margins.
For the second quarter, franchise sales and fees continued to grow
as a result of adding new franchise restaurants and the expansion of
our franchise-system base across all brands due to the sale of 268
company-owned restaurants to franchisees (refranchising) over the past
year.
Company sales declined by 5% for the second quarter from the
impact of refranchising 268 company-owned restaurants the past 12
months.
The key driver of improvements in second-quarter restaurant and
operating margins was a much improved commodity-cost environment.
Overall, commodity costs declined by approximately $16 million versus
last year.
For the U.S. in 2006, we expect:
-- Approximately +1% U.S. blended same-store-sales growth, from
+2% to +3% previously.
-- Significantly lower commodity costs: approximately $40 million
favorable impact versus 2005, from $18 million favorable
impact previously expected.
-- Full-year operating-profit growth of 6% on a like-for-like
basis excluding the fifty-third-week benefit in 2005.
U.S. FRANCHISE OWNERSHIP UPDATE
As previously communicated, in the U.S. business we have targeted
to sell approximately 1,000 company restaurants to franchisees during
2006 and 2007. We are currently ahead of schedule in this plan and
remain fully confident of meeting or exceeding our original two-year
plan.
For the full year 2006, we now expect cash proceeds of at least
$250 million versus the original target of $150 million. Year to date
2006, 107 company-owned U.S. restaurants have been sold to our
franchisees.
FREE CASH FLOW
For full-year 2006, we continue to expect to generate about $1.3
billion in Cash from Operating Activities. In addition, we are
lowering our full-year capital spending from $675 million to about
$625 million and increasing our expected cash proceeds from
refranchising by $100 million from the original target of $150 million
to $250 million. These are the key drivers to free cash available and
after including all changes to our forecasted sources and uses of
cash, we expect our free cash available for the full year 2006 to
increase by approximately $100 to $150 million. The reduction in
full-year capital spending reflects a mid-year fine tuning of our
global forecast, no major development changes. As we have previously
communicated, our objective is to return virtually all free cash
available to our shareholders through our share buybacks and quarterly
dividends.
During the second quarter of 2006, we purchased 3.2 million shares
for $158 million and announced an increase in our quarterly dividend
of 30% to $0.15 per share payable August 4, 2006. Year-to-date share
repurchases total $529 million.
PERIOD 7 SALES
- --------------
INTERNATIONAL DIVISION SYSTEM-SALES GROWTH (Estimated)
2006 2005
Local Currency Local Currency
-------------- --------------
Period 7 +8% +5%
- ----------------------------------------------------------------------
YRI Period 7 system-sales growth benefited by approximately 1 ppt.
from the inclusion of the Rostik's restaurants in Russia. On March 24,
2006, YUM acquired the Rostik's brand. We have just begun the two-year
process of cobranding the 94 Rostik's and the existing 18 franchise
KFCs into Rostik's/KFC restaurants.
YRI Period 7 system sales in U.S. dollars increased 10%.
CHINA DIVISION SYSTEM-SALES GROWTH (Estimated)
2006 2005
Local Currency Local Currency
------------------ ------------------
Period 7 +24% +5%
- ----------------------------------------------------------
Note: China Division includes mainland China, Thailand and the KFC
Taiwan business.
Including the positive impact of foreign currency conversion,
reported Period 7 system sales in U.S. dollars increased 28%.
System-sales growth for mainland China in Period 7 was +28% local
currency basis, +33% in U.S. dollars.
U.S. COMPANY SAME-STORE-SALES GROWTH (Estimated)
Period 7 Second Quarter
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
U.S. BLENDED (3)% +5% Even +5%
Taco Bell (3)% +10% +5% +5%
Pizza Hut (7)% (2)% (7)% +2%
KFC Even +7% +2% +8%
- -------------------------------------------------- -------------------
2006 Period 7 End Dates 2006 Period 8 End Dates
- ---------------------------------- ----------------------------------
International Division 6/19/2006 International Division 7/17/2006
China Division 6/30/2006 China Division 7/31/2006
U.S. Business 7/15/2006 U.S. Business 8/12/2006
- ---------------------------------- ----------------------------------
FULL-YEAR 2006 GUIDANCE
Within each reporting segment section previously in this release,
you can review our updated full-year expectations for key measures.
Please refer to the following link: http://media.corporate-ir.net/
media_files/irol/11/117941/06Guidance.pdf for the updated version of
our detailed full-year 2006 guidance. (Due to the length of this URL,
it may be necessary to copy and paste this hyperlink into your
Internet browser's URL address field.)
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
Thursday, July 20, 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 Thursday, July 20, through 5 p.m. Friday, July 28. To access the
playback, dial 800/642-1687 in the United States and 706/645-9291
internationally. The playback pass code is 2311004.
The call and the playback can be accessed via the Internet by
visiting Yum! Brands' Web site: www.yum.com and selecting "2nd 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 2
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: http://media.corporate-ir.net/media_files/
irol/11/117941/YumQ206Earnings.pdf. (Due to the length of this URL, it
may be necessary to copy and paste this hyperlink into your Internet
browser's URL address field.)
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, which includes over 2,000 licensed 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 3,400 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 "40 Best Companies
for Diversity" by Black Enterprise Magazine for the past two years,
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."
Yum! Brands, Inc.
Consolidated Summary of Results
(amounts in millions, except per share amounts)
Quarter % Year to date %
---------------- Change ---------------- Change
6/17/06 6/11/05 B/(W) 6/17/06 6/11/05 B/(W)
------- ------- ------ ------- ------- ------
Company sales $1,912 $1,902 1 $3,731 $3,712 1
Franchise and license
fees 270 251 7 536 495 8
------- ------- ------- -------
Total revenues 2,182 2,153 1 4,267 4,207 1
------- ------- ------- -------
Costs and expenses
Food and paper 583 600 3 1,140 1,174 3
Payroll and employee
benefits 492 506 3 969 992 2
Occupancy and other
operating expenses 536 530 (1) 1,037 1,021 (2)
------- ------- ------- -------
Company restaurant
expenses 1,611 1,636 2 3,146 3,187 1
General and
administrative
expenses 264 273 3 518 520 --
Franchise and license
expenses 9 4 (120) 17 12 (41)
Closures and
impairment expenses 18 17 NM 24 26 NM
Refranchising (gain)
loss (15) (13) NM (11) (11) NM
Other (income)
expense (12) (25) (53) (16) (39) (58)
Wrench litigation
(income) expense -- -- NM -- -- NM
AmeriServe and other
charges (credits) -- -- NM -- -- NM
------- ------- ------- -------
Total costs and
expenses 1,875 1,892 1 3,678 3,695 --
------- ------- ------- -------
Operating profit 307 261 18 589 512 15
Interest expense, net 36 30 (25) 71 58 (23)
------- ------- ------- -------
Income before income
taxes 271 231 17 518 454 14
Income tax provision 79 53 (47) 156 123 (26)
------- ------- ------- -------
Net income $ 192 $ 178 8 $ 362 $ 331 9
======= ======= ======= =======
Effective tax rate 29.0% 23.0% 30.1% 27.1%
- ------------------ ======= ======= ======= =======
Basic EPS Data
- --------------
EPS $ 0.71 $ 0.62 14 $ 1.32 $ 1.14 16
======= ======= ======= =======
Average shares
outstanding 272 288 6 274 290 5
======= ======= ======= =======
Diluted EPS Data
- ----------------
EPS $ 0.68 $ 0.59 15 $ 1.28 $ 1.09 17
======= ======= ======= =======
Average shares
outstanding 281 301 7 284 303 6
======= ======= ======= =======
Dividends declared
per common share $ 0.15 $0.115 30 $0.265 $0.215 23
======= ======= ======= =======
Please note that the results for all periods presented include the
negative impact of expensing stock options and stock appreciation
rights.
See accompanying notes
Yum! Brands, Inc.
Segment Results
(amounts in millions)
Corporate
Quarter Ended United International China and
6/17/06 States Division Division Unallocated Consolidated
------- ------------- -------- ----------- ------------
Total revenues $1,330 $ 489 $ 363 $ -- $ 2,182
------- ------------- -------- ----------- ------------
Company restaurant
expenses 990 335 286 -- 1,611
General and
administrative
expenses 125 64 26 49 264
Franchise and
license
expenses 7 2 -- -- 9
Closures and
impairment
expenses 14 3 1 -- 18
Refranchising
(gain) loss -- -- -- (15) (15)
Other (income)
expense -- (3) (7) (2) (12)
------- ------------- -------- ----------- ------------
1,136 401 306 32 1,875
------- ------------- -------- ----------- ------------
Operating profit
(loss) $ 194 $ 88 $ 57 $ (32) $ 307
======= ============= ======== =========== ============
Corporate
Quarter Ended United International China and
6/11/05 States Division Division Unallocated Consolidated
------- ------------- -------- ----------- ------------
Total revenues $1,385 $ 492 $ 276 $ -- $ 2,153
------- ------------- -------- ----------- ------------
Company restaurant
expenses 1,062 343 231 -- 1,636
General and
administrative
expenses 121 65 21 66 273
Franchise and
license
expenses 3 1 -- -- 4
Closures and
impairment
expenses 14 1 2 -- 17
Refranchising
(gain) loss -- -- -- (13) (13)
Other (income)
expense -- (5) (3) (17) (25)
------- ------------- -------- ----------- ------------
1,200 405 251 36 1,892
------- ------------- -------- ----------- ------------
Operating profit
(loss) $ 185 $ 87 $ 25 $ (36) $ 261
======= ============= ======== =========== ============
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 presented
include the negative impact of expensing stock options and stock
appreciation rights.
See accompanying notes
Yum! Brands, Inc.
Segment Results
(amounts in millions)
Corporate
Year to Date United International China and
Ended 6/17/06 States Division Division Unallocated Consolidated
------- ------------- -------- ----------- ------------
Total revenues $2,669 $ 958 $ 640 $ -- $ 4,267
------- ------------- -------- ----------- ------------
Company restaurant
expenses 2,002 648 496 -- 3,146
General and
administrative
expenses 251 122 41 104 518
Franchise and
license
expenses 11 6 -- -- 17
Closures and
impairment
expenses 15 7 2 -- 24
Refranchising
(gain) loss -- -- -- (11) (11)
Other (income)
expense 8 (8) (14) (2) (16)
------- ------------- -------- ----------- ------------
2,287 775 525 91 3,678
------- ------------- -------- ----------- ------------
Operating profit
(loss) $ 382 $ 183 $ 115 $ (91) $ 589
======= ============= ======== =========== ============
Corporate
Year to Date United International China and
Ended 6/11/05 States Division Division Unallocated Consolidated
------- ------------- -------- ----------- ------------
Total revenues $2,720 $ 976 $ 511 $ -- $ 4,207
------- ------------- -------- ----------- ------------
Company restaurant
expenses 2,103 678 406 -- 3,187
General and
administrative
expenses 244 129 35 112 520
Franchise and
license
expenses 9 3 -- -- 12
Closures and
impairment
expenses 22 2 2 -- 26
Refranchising
(gain) loss -- -- -- (11) (11)
Other (income)
expense -- (14) (9) (16) (39)
------- ------------- -------- ----------- ------------
2,378 798 434 85 3,695
------- ------------- -------- ----------- ------------
Operating profit
(loss) $ 342 $ 178 $ 77 $ (85) $ 512
======= ============= ======== =========== ============
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 years to date presented
include the negative impact of expensing stock options and stock
appreciation rights.
See accompanying notes
Yum! Brands, Inc.
UNITED STATES Operating Results
(amounts in millions)
Quarter % Year to date %
---------------- Change ---------------- Change
6/17/06 6/11/05 B/(W) 6/17/06 6/11/05 B/(W)
------- ------- ------ ------- ------- ------
Company sales $1,179 $1,240 (5) $2,370 $2,439 (3)
Franchise and license
fees 151 145 4 299 281 6
------- ------- ------- -------
Revenues 1,330 1,385 (4) 2,669 2,720 (2)
------- ------- ------- -------
Company restaurants
Food and paper 332 374 11 672 737 9
Payroll and employee
benefits 350 371 6 709 738 4
Occupancy and other
operating expenses 308 317 3 621 628 1
------- ------- ------- -------
990 1,062 7 2,002 2,103 5
General and
administrative
expenses 125 121 (4) 251 244 (3)
Franchise and license
expenses 7 3 (98) 11 9 (18)
Closures and
impairment expenses 14 14 NM 15 22 NM
Other (income)
expense -- -- NM 8 -- NM
------- ------- ------- -------
1,136 1,200 5 2,287 2,378 4
------- ------- ------- -------
Operating profit $ 194 $ 185 5 $ 382 $ 342 11
======= ======= ======= =======
Company sales 100.0% 100.0% 100.0% 100.0%
Food and paper 28.2 30.2 2.0 28.4 30.2 1.8
ppts. ppts.
Payroll and employee
benefits 29.6 29.9 0.3 29.9 30.3 0.4
ppts. ppts.
Occupancy and other
operating expenses 26.1 25.5 (0.6) 26.2 25.7 (0.5)
ppts. ppts.
------- ------- ------- -------
Restaurant margin 16.1% 14.4% 1.7 15.5% 13.8% 1.7
ppts. ppts.
======= ======= ======= =======
Operating margin 14.6% 13.4% 1.2 14.3% 12.6% 1.7
ppts. ppts.
======= ======= ======= =======
Please note that the results for all periods presented include the
negative impact of expensing stock options and stock appreciation
rights.
See accompanying notes
Yum! Brands, Inc.
INTERNATIONAL DIVISION Operating Results
(amounts in millions)
Quarter % Year to date %
---------------- Change ---------------- Change
6/17/06 6/11/05 B/(W) 6/17/06 6/11/05 B/(W)
------- ------- ------ ------- ------- ------
Company sales $ 381 $ 394 (3) $ 740 $ 778 (5)
Franchise and license
fees 108 98 10 218 198 10
------- ------- ------- -------
Revenues 489 492 (1) 958 976 (2)
------- ------- ------- -------
Company restaurants
Food and paper 126 128 2 246 256 4
Payroll and employee
benefits 94 96 3 178 188 5
Occupancy and other
operating expenses 115 119 4 224 234 5
------- ------- ------- -------
335 343 3 648 678 4
General and
administrative
expenses 64 65 3 122 129 6
Franchise and license
expenses 2 1 NM 6 3 NM
Closures and
impairment expenses 3 1 NM 7 2 NM
Other (income)
expense (3) (5) (42) (8) (14) (47)
------- ------- ------- -------
401 405 1 775 798 3
------- ------- ------- -------
Operating profit $ 88 $ 87 2 $ 183 $ 178 3
======= ======= ======= =======
Company sales 100.0% 100.0% 100.0% 100.0%
Food and paper 33.2 32.6 (0.6) 33.3 32.9 (0.4)
ppts. ppts.
Payroll and employee
benefits 24.6 24.5 (0.1) 24.1 24.1 --
ppts. ppts.
Occupancy and other
operating expenses 30.1 30.1 -- 30.1 30.1 --
ppts. ppts.
------- ------- ------- -------
Restaurant margin 12.1% 12.8% (0.7) 12.5% 12.9% (0.4)
ppts. ppts.
======= ======= ======= =======
Operating margin 18.1% 17.7% 0.4 19.1% 18.3% 0.8
ppts. ppts.
======= ======= ======= =======
Please note that the results for all periods presented include the
negative impact of expensing stock options and stock appreciation
rights.
See accompanying notes
Yum! Brands, Inc.
CHINA DIVISION Operating Results
(amounts in millions)
Quarter % Year to date %
---------------- Change ---------------- Change
6/17/06 6/11/05 B/(W) 6/17/06 6/11/05 B/(W)
------------------------------------------------------
Company sales $ 352 $ 268 31 $ 621 $ 495 25
Franchise and license
fees 11 8 34 19 16 21
------- ------- ------- -------
Revenues 363 276 32 640 511 25
------- ------- ------- -------
Company restaurants
Food and paper 125 98 (28) 222 181 (23)
Payroll and employee
benefits 48 39 (23) 82 66 (25)
Occupancy and other
operating expenses 113 94 (20) 192 159 (21)
------- ------- ------- -------
286 231 (24) 496 406 (22)
General and
administrative
expenses 26 21 (13) 41 35 (12)
Franchise and license
expenses -- -- NM -- -- NM
Closures and
impairment expenses 1 2 NM 2 2 NM
Other (income)
expense (7) (3) 104 (14) (9) 46
------- ------- ------- -------
306 251 (22) 525 434 (21)
------- ------- ------- -------
Operating profit $ 57 $ 25 136 $ 115 $ 77 50
======= ======= ======= =======
Company sales 100.0% 100.0% 100.0% 100.0%
Food and paper 35.5 36.4 0.9 35.7 36.5 0.8
ppts. ppts.
Payroll and employee
benefits 13.6 14.5 0.9 13.3 13.3 --
ppts. ppts.
Occupancy and other
operating expenses 32.1 35.2 3.1 30.9 32.1 1.2
ppts. ppts.
------- ------- ------- -------
Restaurant margin 18.8% 13.9% 4.9 20.1% 18.1% 2.0
ppts. ppts.
======= ======= ======= =======
Please note that the results for all periods presented include the
negative impact of expensing stock options and stock appreciation
rights.
See accompanying notes
China Division includes mainland China, Thailand and KFC Taiwan
Yum! Brands, Inc.
Condensed Consolidated Balance Sheets
(amounts in millions)
6/17/06 12/31/05
---------- ----------
ASSETS
Current Assets
Cash and cash equivalents $ 267 $ 158
Short-term investments 74 43
Accounts and notes receivable, less allowance:
$20 in 2006 and $23 in 2005 223 236
Inventories 84 85
Prepaid expenses and other current assets 100 75
Deferred income taxes 158 163
Advertising cooperative assets, restricted 97 77
---------- ----------
Total Current Assets 1,003 837
Property, plant and equipment, net of
accumulated depreciation and amortization of
$2,945 in 2006 and $2,830 in 2005 3,300 3,356
Goodwill 540 538
Intangible assets, net 341 330
Investments in unconsolidated affiliates 173 173
Other assets 507 464
---------- ----------
Total Assets $ 5,864 $ 5,698
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and other current liabilities $ 1,185 $ 1,238
Income taxes payable 64 79
Short-term borrowings 13 211
Advertising cooperative liabilities 97 77
---------- ----------
Total Current Liabilities 1,359 1,605
Long-term debt 2,027 1,649
Other liabilities and deferred credits 1,073 995
---------- ----------
Total Liabilities 4,459 4,249
---------- ----------
Shareholders' Equity
Preferred stock, no par value, 250 shares
authorized; no shares issued -- --
Common stock, no par value, 750 shares
authorized; 272 shares and 278 shares issued
in 2006 and 2005, respectively -- --
Retained earnings 1,548 1,619
Accumulated other comprehensive loss (143) (170)
---------- ----------
Total Shareholders' Equity 1,405 1,449
---------- ----------
Total Liabilities and Shareholders' Equity $ 5,864 $ 5,698
========== ==========
See accompanying notes on our web site: www.yum.com
Yum! Brands, Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in millions)
Year to date
----------------------
6/17/06 6/11/05
---------- ----------
Cash Flows - Operating Activities
Net income $ 362 $ 331
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 210 208
Closures and impairment expenses 24 26
Refranchising (gain) loss (11) (11)
Contributions to defined benefit pension
plans (18) --
Other liabilities and deferred credits 67 4
Deferred income taxes (58) (32)
Equity income from investments in
unconsolidated affiliates (21) (23)
Distributions of income received from
unconsolidated affiliates 15 17
Excess tax benefit from share-based
compensation (37) (51)
Share-based compensation expense 30 27
Other non-cash charges and credits, net 39 18
Changes in operating working capital, excluding
effects of acquisitions and dispositions:
Accounts and notes receivable 25 (4)
Inventories 1 4
Prepaid expenses and other current assets (24) 57
Accounts payable and other current
liabilities (66) --
Income taxes payable 20 --
---------- ----------
Net change in operating working capital (44) 57
---------- ----------
Net Cash Provided by Operating Activities 558 571
---------- ----------
Cash Flows - Investing Activities
Capital spending (186) (210)
Proceeds from refranchising of restaurants 48 41
Acquisition of restaurants from franchisees -- --
Short-term investments (31) (31)
Sales of property, plant and equipment 26 22
Other, net (16) 21
---------- ----------
Net Cash Used in Investing Activities (159) (157)
---------- ----------
Cash Flows - Financing Activities
Proceeds from Senior Unsecured Notes 300 --
Revolving Credit Facility activity
Three months or less, net 77 46
Repayments of long-term debt (203) (9)
Short-term borrowings-three months or less, net 4 (23)
Repurchase shares of common stock (529) (489)
Excess tax benefit from share-based compensation 37 51
Employee stock option proceeds 84 89
Dividends paid on common shares (63) (58)
---------- ----------
Net Cash Used in Financing Activities (293) (393)
---------- ----------
Effect of Exchange Rate on Cash and Cash
Equivalents 3 (4)
---------- ----------
Net Increase (Decrease) in Cash and Cash
Equivalents 109 17
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 $ 267 $ 113
========== ==========
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". Previously reported diluted EPS prior
to the adoption of SFAS 123R and this adjustment was $0.62 and
$1.15 in the quarter and year to date ended June 11, 2005,
respectively.
(c) Amounts presented as of and for the quarter and year to date ended
June 17, 2006 are preliminary.
(d) Other (income) expense primarily includes equity income from
investments in unconsolidated affiliates. In the quarter ended
March 25, 2006, we also recorded an $8 million charge associated
with the termination of a beverage agreement in the United States
segment as other expense. In the quarter ended June 11, 2005, we
recorded a $17 million gain associated with the IPO of our
Poland/Czech Republic business as other income.
(e) In the quarter ended June 17, 2006, the International Division
("YRI") and Rostiks Restaurant Ltd. ("RRL"), a franchisor and
operator of a chicken chain in Russia, finalized a five-year
partnership to develop fast-food restaurants in Russia and the
surrounding states. Under the terms of the agreement, YRI acquired
RRL's trademarks, patents, recipes, operating platform and
franchise fees rights for $10 million in the current quarter with
another $5 million due upon final registration and assignment of
the RRL trademark. This agreement did not have a material impact
on revenue or operating profit for the quarter ended June 17,
2006.
(f) For the quarter and year to date ended June 17, 2006, we
repurchased approximately 3.2 million shares and 10.7 million
shares of our Common Stock, respectively, at an average price of
$50 and $49 per share for the quarter and year to date,
respectively.
CONTACT: Yum! Brands, Inc., Louisville
Analysts:
Tim Jerzyk, VP Investor Relations, 888-298-6986
Quan Nghe, Director Investor Relations, 888-298-6986
or
Media:
Amy Sherwood, VP Public Relations, 502-874-8200
www.yum.com