Exhibit 99.1
Yum! Brands Inc. Reports Strong
Full-Year 2006 EPS of $2.92, an Increase of 14%, Led by Powerful
Growth in China and International
LOUISVILLE, Ky.--(BUSINESS WIRE)--Feb. 12, 2007--Yum! Brands Inc.
(NYSE: YUM) today also reported results for the fourth quarter ended
December 30, 2006, and provided the company's latest outlook for 2007.
The sales, profit, and margin percentage highlights for the fourth
quarter and full year that follow are stated on a like-for-like basis
excluding the benefit of an extra week in the fourth quarter of 2005.
Highlights for the fourth quarter are . . .
-- EPS of $0.83, an increase of 8%.
-- Worldwide system sales increased by 7%.
-- Worldwide same-store sales grew 3%, and total worldwide
restaurants increased by 2%.
-- Worldwide restaurant margin improved 0.9 percentage points
with improvements in both international businesses, and U.S.
margin was even.
-- Worldwide operating profit grew 7%.
Highlights for the full year are . . .
-- Worldwide system sales grew by 5%.
-- Worldwide operating profit increased 12%.
-- Strong double-digit operating-profit growth from our
international divisions: China, 37% and YRI, 11%.
-- Mainland China restaurant unit growth of 18%.
-- Yum! Restaurants International Division (YRI) restaurant
growth of 3%, making this our eighth consecutive year with at
least 3% restaurant growth.
-- Worldwide franchise fees increased 7%.
-- Restaurant margin increased 1.2 percentage points worldwide
and improved in all three business segments.
-- Operating margin expanded 1.0 percentage points worldwide.
-- Average diluted shares outstanding were reduced by 6%.
Note: All preceding comparisons are versus the same period a year
ago.
FULL-YEAR 2007 OUTLOOK
The company continues to expect full-year 2007 EPS growth of at
least 10%, or at least $3.21 per share.
CONSOLIDATED FINANCIAL HIGHLIGHTS
- -------------------------------------------
Fourth Quarter Full Year
-------------------------- --------------------------
2006 2005 % Change 2006 2005 % Change
------- ------- --------- ------- ------- ---------
Traditional
Restaurants 32,458 31,901 +2 32,458 31,901 +2
System-Sales
Growth +3% +7% NM +4% +7% NM
Excluding 53rd
Week +7% +4% NM +5% +6% NM
Reported EPS $0.83 $0.77 +8 $2.92 $2.55 +14
Note: YUM has 34,595 restaurant locations around the world, which
include 2,137 license units.
David C. Novak, Chairman and CEO, said, "I am pleased to report
that in 2006 we again demonstrated the power of Yum! with our
capability to consistently deliver double-digit EPS growth through our
global portfolio of leading restaurant brands. We achieved strong EPS
growth of 14%, led by continued profitable international growth,
including nearly 400 new restaurants in our China Division, despite a
disappointing fourth-quarter performance in the U.S. This marks the
fifth straight year of delivering on our annual commitment of at least
10% EPS growth.
"Importantly, we continued to return significant cash to
shareholders in 2006 while maintaining a strong balance sheet. In
fact, we returned $1.1 billion through share buy backs and dividends,
making this the second straight year that we returned more than $1
billion to our shareholders. Additionally, this past December we
announced the doubling of our quarterly dividend rate from $0.15 to
$0.30 per share after initiating a dividend only two years ago. This
new quarterly dividend rate is expected to generate an approximate 2%
yield for our shareholders beginning in our second quarter 2007.
"As we look ahead to our expectations for 2007, we remain
confident we can continue to build on our track record of growing EPS
at least 10% each year by generating 20% operating profit growth from
our China Division, 10% from our YRI Division and 5% from our U.S.
businesses.
"Shareholders should expect us to continue building consistent
value by focusing on executing YUM's unique growth opportunities --
building dominant restaurant brands in China, driving profitable
international growth, improving U.S. brand positioning and returns,
and driving high ROIC and strong shareholder payout -- that make us a
global growth company and allow us to generate substantial free cash
flow."
CHINA DIVISION
- -----------------------------------------
Fourth Quarter Full Year
($ million, % %
except Change Change
restaurant -------------- --------------
counts and Excl Excl
percentages) 2006 2005 Reported F/x 2006 2005 Reported F/x
------ ------ -------- ----- ------ ------ -------- -----
Key Financial
Measures
System-Sales
Growth +27 +23 +26 +23
Mainland
China only +32 +29 +31 +28
Company Sales 521 411 +27 +23 1,587 1,255 +26 +23
Restaurant
Margin % 17.8 13.9 +3.9 +3.9 20.4 17.4 +3.0 +2.9
Operating
Profit 70 51 +36 +31 290 211 +37 +33
- ----------------------------------------------------------------------
Key
Development
Metrics
for Mainland
China
Total YUM
Restaurants 2,121 1,792 +18 NA 2,121 1,792 +18 NA
KFC 1,822 1,557 +17 NA 1,822 1,557 +17 NA
Pizza Hut
Casual
Dining 254 204 +25 NA 254 204 +25 NA
Pizza Hut
Home
Service 37 26 +42 NA 37 26 +42 NA
Note: China Division includes mainland China, Thailand and the KFC
Taiwan business.
For the fourth quarter 2006, company sales for the China Division
increased 23% in local-currency terms due to the continued strong
expansion of both our KFC and Pizza Hut brands in mainland China. In
particular, mainland China experienced strong fourth-quarter
system-same-store-sales growth of 12%, and restaurant unit growth of
18%.
Fourth-quarter 2006 reported operating profit increased 36% versus
last year. The key contributing factor was continued sales growth in
mainland China for both KFC and Pizza Hut.
YUM! RESTAURANTS INTERNATIONAL DIVISION (YRI)
- --------------------------------------------------------------------
Fourth Quarter
($ million, except restaurant counts and %
percentages) Change
--------------
Excl
F/x &
53rd
2006 2005 Reported Wk
------- ------- -------- -----
Key Financial Measures
System-Sales Growth +10 +11
Franchise & License Fees 157 147 +7 +8
Franchisee Sales 2,788 2,654 +5 +7
Company Sales 687 511 +34 +37
Operating Margin % 14.2 16.4 (2.2) (1.9)
Operating Profit 119 108 +11 +15
- ----------------------------------------------------------------------
Key Development Metrics
Traditional Restaurants 11,710 11,319 +3 NA
KFC 6,550 6,246 +5 NA
Pizza Hut 4,694 4,610 +2 NA
Franchise Restaurants 9,387 8,848 +6 NA
Full Year
($ million, except restaurant counts %
and percentages) Change
--------------
Excl
F/x &
53rd
2006 2005 Reported Wk
------- ------- -------- -----
Key Financial Measures
System-Sales Growth +7 +9
Franchise & License Fees 494 448 +10 +11
Franchisee Sales 9,072 8,499 +7 +8
Company Sales 1,826 1,676 +9 +10
Operating Margin % 17.6 17.5 +0.1 +0.2
Operating Profit 407 372 +9 +12
- ----------------------------------------------------------------------
Key Development Metrics
Traditional Restaurants 11,710 11,319 +3 NA
KFC 6,550 6,246 +5 NA
Pizza Hut 4,694 4,610 +2 NA
Franchise Restaurants 9,387 8,848 +6 NA
Note: Full year 2005 and Q4 2005 benefited from having an extra
week. The following discussion addresses 2006 performance on a
like-for-like basis or without this benefit in 2005.
Fourth-quarter 2006 operating profit increased 18% including the
positive impact of foreign exchange. In addition, system-sales
increased 11% in local currency terms, one of the best quarterly
performances ever for the division. The key contributing factors were
the strength of the franchise businesses around the world with strong
same-store-sales growth of 7% and the recovery of the KFC U.K.
business. Finally, YRI opened 333 and 785 new traditional restaurants
for the fourth quarter and full year 2006 respectively, of which 90%
were opened by franchisees.
The acquisition of the remaining 50% ownership of the Pizza Hut
U.K. joint venture from Whitbread was completed during the fourth
quarter 2006, which impacted certain fourth-quarter and full-year
financial measures. Excluding the impact of the acquisition and
foreign exchange, the growth rates for the following fourth-quarter
and full-year measures would have been: franchise fees, 13% and 13%,
and company sales, +4% and even. Additionally, operating margin would
have been 17.3% and 18.9% respectively.
UNITED STATES BUSINESS
- --------------------------------------------------------------------
Fourth Quarter
($ million, except restaurant counts and %
percentages) Change
--------------
Excl
53rd
2006 2005 Reported Wk
------- ------- -------- -----
Key Financial Measures
Blended Same-Store-Sales Growth %
Company (2) +4 NM NM
System Even +3 NM NM
Franchisee Sales 3,877 3,898 (1) +3
Company Sales 1,437 1,616 (11) (8)
Franchise & License Fees 197 200 (1) +3
Restaurant Margin % 13.5 13.9 (0.4) 0.0
Operating Margin % 12.1 12.9 (0.8) (0.2)
Operating Profit 198 235 (15) (8)
- ----------------------------------------------------------------------
Key Development Metrics
Total Traditional Restaurants 18,117 18,291 (1) NA
System Multibrand Restaurants 3,433 3,096 +11 NA
Franchise Restaurants 13,905 13,605 +2 NA
Full Year
($ million, except restaurant counts and %
percentages) Change
-------------
Excl
53rd
2006 2005 Reported Wk
------- ------- -------- ----
Key Financial Measures
Blended Same-Store-Sales Growth %
Company Even +4 NM NM
System +1 +3 NM NM
Franchisee Sales 12,804 12,428 +3 +4
Company Sales 4,952 5,294 (6) (5)
Franchise & License Fees 651 635 +3 +4
Restaurant Margin % 14.6 13.8 0.8 0.9
Operating Margin % 13.6 12.8 0.8 1.0
Operating Profit 763 760 Even +3
- ----------------------------------------------------------------------
Key Development Metrics
Total Traditional Restaurants 18,117 18,291 (1) NA
System Multibrand Restaurants 3,433 3,096 +11 NA
Franchise Restaurants 13,905 13,605 +2 NA
Note: Full year 2005 and Q4 2005 benefited from having an extra
week. The following discussion addresses 2006 performance on a
like-for-like basis or without this benefit in 2005.
For the fourth quarter, operating profit was lower by 8% primarily
as a result of higher closure and impairment expenses. An additional
factor was a 2% decline in blended company same-stores sales. The
primary driver of the same-store sales decline was Taco Bell's decline
of 5%, lapping a very strong +7% in the fourth quarter last year. This
also reflects a very significant negative sales impact during the
month of December from adverse publicity related to a produce-sourcing
issue. The low point of the Taco Bell sales decline occurred during
the third week of December, and sales have begun to recover from that
point in time.
Refranchising company restaurants negatively impacted
fourth-quarter and full-year company-sales growth by 6 and 5
percentage points respectively.
For the fourth quarter, franchise sales and fees grew as a result
of the expansion of our franchise-restaurant base due to the sale of
452 company-owned restaurants to franchisees (refranchising) over the
past year.
TAX RATE
The tax rates for the full year and fourth quarter, 2006 were
better than anticipated. The low rate for the fourth quarter included
the reversal of tax reserves in connection with our regular U.S. audit
cycle, which we had communicated earlier this year, as well as other
adjustments to prior years' accruals and reserves.
U.S. FRANCHISE OWNERSHIP UPDATE
As previously communicated during our analyst meeting on December
6, 2006, we extended our original two-year plan to sell approximately
1,000 company restaurants to franchisees during 2006 and 2007. Our
current three-year plan, through 2008, is to sell approximately 1,500
company restaurants to franchisees, which will reduce company
ownership to approximately 17% of the U.S. system. For the full year
2006, 452 company-owned U.S. restaurants were sold to our franchisees.
Our latest estimate for 2007 is cash proceeds from U.S.
refranchising of $200 million. Operating-profit impact for the U.S. in
2007, due to refranchising activities, is expected to be about
neutral. Our three-year program is targeted to produce total cash
proceeds of $550 to $600 million, improvements in restaurant margin
and ROIC, and an approximate neutral impact on U.S. operating profit.
FREE CASH FLOW
For full-year 2006, we generated a record $1.3 billion in Cash
from Operating Activities and invested $614 million in capital in our
businesses. Additionally, we generated $456 million in cash from
refranchising, stock option proceeds and sale of excess properties. As
a result, total free cash available totaled over $1.1 billion. More
importantly, all three of our reporting segments continue to generate
free cash flow.
In 2006, we again returned virtually all free cash available to
our shareholders through share buy backs and quarterly dividends.
Specifically, we returned a total of over $1.1 billion to our
shareholders, that included significant share buy backs totaling $1.0
billion at an average price of $49.60, and $144 million returned
through the quarterly dividends.
For 2007, we expect similar total payout levels to our
shareholders through both significant share buy backs and dividends.
As we announced December 5, 2006, we have doubled our quarterly
dividend for the second-quarter 2007 payment from $0.15 to $0.30 per
share.
YUM GROWTH MODEL AND 2007 OUTLOOK
Earnings Growth Model:
-- China Division operating-profit growth of 20%. This growth is
driven largely by development in mainland China measured by
20% system-sales growth and 375 new-restaurant openings.
-- YRI Division operating-profit growth of 10%. This growth is
driven by system-sales growth of at least 5% (unit and
same-store-sales growth), with 750 new-restaurant openings.
-- U.S. operating-profit growth of 5%. This growth is driven by
2% to 3% same-store-sales growth.
-- EPS growth of at least 10%. This assumes operating profit from
our three lines of business as previously noted with
additional benefit from the reduction in shares outstanding
due to substantial share buy backs.
Full-Year Outlook:
-- Full-year 2007 EPS growth of at least 10%, or at least $3.21
per share.
-- Profit growth from our combined international businesses is
expected to be solidly double digit each quarter. In addition,
full-year targeted U.S. sales and profit growth is expected to
occur with solidly positive U.S. growth in the second half of
2007, offsetting a negative first quarter in the U.S.
2006 Fourth-Quarter End Dates 2007 First-Quarter End Dates
- ---------------------------------- ---------------------------------
International Division 12/4/2006 International Division 2/26/2007
China Division 12/31/2006 China Division 2/28/2007
U.S. Business 12/30/2006 U.S. Business 3/24/2007
CONFERENCE CALL
Yum! Brands Inc. will host a conference call to review the
company's financial performance and strategies at 9:15 a.m. EST
Tuesday, February 13, 2007.
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, February 13, through 5 p.m. Friday, February 23. To
access the playback, dial 800/642-1687 in the United States and
706/645-9291 internationally. The playback pass code is 5699345.
The call and the playback can be accessed via the Internet by
visiting Yum! Brands' Web site, www.yum.com, and selecting
"4th-Quarter Earnings Webcast."
For your added convenience . . . A podcast will be available
within 24 hours of the end of the call at www.yum.com/investors.
ADDITIONAL INFORMATION ONLINE
Fourth-quarter restaurant-count details and definitions of terms
are available online at
http://media.corporate-ir.net/media_files/irol/11/117941/
YumQ406Earnings.pdf. (Due to its length, this URL may need to be
copied/pasted into your Internet browser's address field. Remove the
extra space if one exists.)
Segment-results reconciliation is available online at
http://media.corporate-ir.net/media_files/irol/11/117941/
YumQ406Segment.pdf. (Due to its length, this URL may need to be
copied/pasted into your Internet browser's address field. Remove the
extra space if one exists.)
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 2006, 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 four 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 Black Enterprise Magazine's "30 Hottest Franchises for 2006,
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)
(unaudited)
% %
Quarter Change Year to date Change
------------------- -------------------
12/30/06 12/31/05 B/(W) 12/30/06 12/31/05 B/(W)
--------- --------- ------- --------- --------- -------
Company sales $ 2,645 $ 2,538 4 $ 8,365 $ 8,225 2
Franchise and
license fees 371 361 3 1,196 1,124 7
--------- --------- --------- ---------
Total revenues 3,016 2,899 4 9,561 9,349 2
--------- --------- --------- ---------
Costs and
expenses
Food and
paper 803 791 (1) 2,549 2,584 1
Payroll and
employee
benefits 681 678 -- 2,142 2,171 1
Occupancy
and other
operating
expenses 796 733 (9) 2,403 2,315 (4)
--------- --------- --------- ---------
Company
restaurant
expenses 2,280 2,202 (3) 7,094 7,070 --
General and
administrative
expenses 398 374 (6) 1,187 1,158 (2)
Franchise and
license
expenses 11 9 (25) 35 33 (8)
Closures and
impairment
expenses 34 19 NM 59 62 NM
Refranchising
(gain) loss (17) (22) NM (24) (43) NM
Other (income)
expense (18) (14) 23 (51) (80) (37)
Wrench
litigation
(income)
expense -- -- NM -- (2) NM
AmeriServe and
other charges
(credits) (1) (2) NM (1) (2) NM
--------- --------- --------- ---------
Total costs and
expenses 2,687 2,566 (5) 8,299 8,196 (1)
--------- --------- --------- ---------
Operating
profit 329 333 (1) 1,262 1,153 9
Interest
expense, net 49 41 (23) 154 127 (22)
--------- --------- --------- ---------
Income before
income taxes 280 292 (4) 1,108 1,026 8
Income tax
provision 48 66 27 284 264 (7)
--------- --------- --------- ---------
Net income $ 232 $ 226 3 $ 824 $ 762 8
========= ========= ========= =========
Effective tax
rate 17.2% 22.7% 25.6% 25.8%
- ---------------========= ========= ========= =========
Basic EPS Data
- ---------------
EPS $ 0.86 $ 0.80 8 $ 3.02 $ 2.66 13
========= ========= ========= =========
Average
shares
outstanding 268 281 5 273 286 5
========= ========= ========= =========
Diluted EPS
Data
- ---------------
EPS $ 0.83 $ 0.77 8 $ 2.92 $ 2.55 14
========= ========= ========= =========
Average
shares
outstanding 278 292 5 282 298 6
========= ========= ========= =========
Dividends
declared per
common share $ 0.60 $ 0.23 $ 0.865 $ 0.445
========= ========= ========= =========
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.
UNITED STATES Operating Results
(amounts in millions)
(unaudited)
% %
Quarter Change Year to date Change
------------------- -------------------
12/30/06 12/31/05 B/(W) 12/30/06 12/31/05 B/(W)
--------- --------- ------- --------- --------- -------
Company sales $ 1,437 $ 1,616 (11) $ 4,952 $ 5,294 (6)
Franchise and
license fees 197 200 (1) 651 635 3
--------- --------- --------- ---------
Revenues 1,634 1,816 (10) 5,603 5,929 (5)
--------- --------- --------- ---------
Company
restaurants
Food and paper 408 471 13 1,399 1,576 11
Payroll and
employee
benefits 434 495 12 1,489 1,600 7
Occupancy and
other
operating
expenses 400 425 6 1,340 1,385 3
--------- --------- --------- ---------
1,242 1,391 11 4,228 4,561 7
General and
administrative
expenses 166 171 4 546 536 (2)
Franchise and
license
expenses 8 8 (10) 23 26 9
Closures and
impairment
expenses 22 11 NM 37 46 NM
Other (income)
expense (2) -- NM 6 -- NM
--------- --------- --------- ---------
1,436 1,581 9 4,840 5,169 6
--------- --------- --------- ---------
Operating
profit $ 198 $ 235 (15) $ 763 $ 760 --
========= ========= ========= =========
Company sales 100.0% 100.0% 100.0% 100.0%
0.8 1.6
Food and paper 28.4 29.2 ppts. 28.2 29.8 ppts.
Payroll and
employee 0.4 0.1
benefits 30.2 30.6 ppts. 30.1 30.2 ppts.
Occupancy and
other
operating (1.6) (0.9)
expenses 27.9 26.3 ppts. 27.1 26.2 ppts.
--------- --------- --------- ---------
Restaurant (0.4) 0.8
margin 13.5% 13.9% ppts. 14.6% 13.8% ppts.
========= ========= ========= =========
Operating (0.8) 0.8
margin 12.1% 12.9% ppts. 13.6% 12.8% 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)
(unaudited)
% %
Quarter Change Year to date Change
------------------- -------------------
12/30/06 12/31/05 B/(W) 12/30/06 12/31/05 B/(W)
--------- --------- ------- --------- --------- -------
Company sales $ 687 $ 511 34 $ 1,826 $ 1,676 9
Franchise and
license fees 157 147 7 494 448 10
--------- --------- --------- ---------
Revenues 844 658 28 2,320 2,124 9
--------- --------- --------- ---------
Company
restaurants
Food and paper 211 170 (23) 588 554 (6)
Payroll and
employee
benefits 175 124 (41) 448 404 (11)
Occupancy and
other
operating
expenses 224 163 (38) 566 515 (10)
--------- --------- --------- ---------
610 457 (33) 1,602 1,473 (9)
General and
administrative
expenses 106 92 (14) 293 284 (4)
Franchise and
license
expenses 3 1 NM 12 7 (69)
Closures and
impairment
expenses 8 3 NM 16 9 NM
Other (income)
expense (2) (3) (62) (10) (21) (54)
--------- --------- --------- ---------
725 550 (32) 1,913 1,752 (9)
--------- --------- --------- ---------
Operating
profit $ 119 $ 108 11 $ 407 $ 372 9
========= ========= ========= =========
Company sales 100.0% 100.0% 100.0% 100.0%
2.6 0.9
Food and paper 30.6 33.2 ppts. 32.2 33.1 ppts.
Payroll and
employee (1.2) (0.5)
benefits 25.5 24.3 ppts. 24.6 24.1 ppts.
Occupancy and
other
operating (0.8) (0.3)
expenses 32.6 31.8 ppts. 31.0 30.7 ppts.
--------- --------- --------- ---------
Restaurant 0.6 0.1
margin 11.3% 10.7% ppts. 12.2% 12.1% ppts.
========= ========= ========= =========
Operating (2.2) 0.1
margin 14.2% 16.4% ppts. 17.6% 17.5% 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)
(unaudited)
% %
Quarter Change Year to date Change
------------------- -------------------
12/30/06 12/31/05 B/(W) 12/30/06 12/31/05 B/(W)
--------- --------- ------- --------- --------- -------
Company sales $ 521 $ 411 27 $ 1,587 $ 1,255 26
Franchise and
license fees 17 14 27 51 41 25
--------- --------- --------- ---------
Revenues 538 425 27 1,638 1,296 26
--------- --------- --------- ---------
Company
restaurants
Food and paper 184 150 (23) 562 454 (24)
Payroll and
employee
benefits 72 59 (21) 205 167 (23)
Occupancy and
other
operating
expenses 172 145 (18) 497 415 (20)
--------- --------- --------- ---------
428 354 (21) 1,264 1,036 (22)
General and
administrative
expenses 48 32 (53) 119 92 (30)
Franchise and
license
expenses -- -- NM -- -- NM
Closures and
impairment
expenses 4 5 NM 6 7 NM
Other (income)
expense (12) (17) (26) (41) (50) (17)
--------- --------- --------- ---------
468 374 (25) 1,348 1,085 (24)
--------- --------- --------- ---------
Operating
profit $ 70 $ 51 36 $ 290 $ 211 37
========= ========= ========= =========
Company sales 100.0% 100.0% 100.0% 100.0%
1.0 0.8
Food and paper 35.5 36.5 ppts. 35.4 36.2 ppts.
Payroll and
employee 0.7 0.4
benefits 13.7 14.4 ppts. 12.9 13.3 ppts.
Occupancy and
other
operating 2.2 1.8
expenses 33.0 35.2 ppts. 31.3 33.1 ppts.
--------- --------- --------- ---------
Restaurant 3.9 3.0
margin 17.8% 13.9% ppts. 20.4% 17.4% 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.
Consolidated Balance Sheets
(amounts in millions)
(unaudited)
-----------
12/30/06 12/31/05
----------- ---------
ASSETS
Current Assets
Cash and cash equivalents $ 319 $ 158
Short-term investments 6 43
Accounts and notes receivable, less allowance:
$18 in 2006 and $23 in 2005 220 236
Inventories 93 85
Prepaid expenses and other current assets 132 75
Deferred income taxes 55 181
Advertising cooperative assets, restricted 74 77
----------- ---------
Total Current Assets 899 855
Property, plant and equipment, net of
accumulated depreciation and amortization of
$3,146 in 2006 and $2,830 in 2005 3,631 3,356
Goodwill 662 538
Intangible assets, net 347 330
Investments in unconsolidated affiliates 138 173
Other assets 363 308
Deferred income taxes 341 243
----------- ---------
Total Assets $ 6,381 $ 5,803
=========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and other current liabilities $ 1,387 $ 1,256
Income taxes payable 37 79
Short-term borrowings 227 211
Advertising cooperative liabilities 74 77
----------- ---------
Total Current Liabilities 1,725 1,623
Long-term debt 2,045 1,649
Other liabilities and deferred credits 1,174 1,082
----------- ---------
Total Liabilities 4,944 4,354
----------- ---------
Shareholders' Equity
Preferred stock, no par value, 250 shares
authorized; no shares issued -- --
Common stock, no par value, 750 shares
authorized; 265 shares and 278 shares issued
in 2006 and 2005, respectively -- --
Retained earnings 1,593 1,619
Accumulated other comprehensive loss (156) (170)
----------- ---------
Total Shareholders' Equity 1,437 1,449
----------- ---------
Total Liabilities and Shareholders' Equity $ 6,381 $ 5,803
=========== =========
See accompanying notes.
Yum! Brands, Inc.
Consolidated Statements of Cash Flows
(amounts in millions)
Year to date
----------------------
(unaudited)
----------------------
12/30/06 12/31/05
----------- ---------
Cash Flows - Operating Activities
Net income $ 824 $ 762
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 479 469
Closures and impairment expenses 59 62
Refranchising (gain) loss (24) (43)
Contributions to defined benefit pension
plans (43) (74)
Deferred income taxes (30) (101)
Equity income from investments in
unconsolidated affiliates (51) (51)
Distributions of income received from
unconsolidated affiliates 32 44
Excess tax benefit from share-based
compensation (62) (87)
Share-based compensation expense 65 62
Other non-cash charges and credits, net 101 78
Changes in operating working capital, excluding
effects of acquisitions and dispositions:
Accounts and notes receivable 24 (1)
Inventories (3) (4)
Prepaid expenses and other current assets (33) 78
Accounts payable and other current
liabilities (46) (10)
Income taxes payable 10 54
----------- ---------
Net change in operating working capital (48) 117
----------- ---------
Net Cash Provided by Operating Activities 1,302 1,238
----------- ---------
Cash Flows - Investing Activities
Capital spending (614) (609)
Proceeds from refranchising of restaurants 257 145
Acquisition of remaining interest in
unconsolidated affiliate, net of cash assumed (178) --
Acquisition of restaurants from franchisees (7) (2)
Short-term investments 39 12
Sales of property, plant and equipment 57 81
Other, net (30) 28
----------- ---------
Net Cash Used in Investing Activities (476) (345)
----------- ---------
Cash Flows - Financing Activities
Proceeds from issuance of long-term debt 300 --
Payments of long-term debt (211) (14)
Short-term borrowings by original maturity
More than three months - proceeds 236 --
More than three months - payments (54) --
Three months or less, net 4 (34)
Revolving credit facilities, three months or
less, net (23) 160
Repurchase shares of common stock (983) (1,056)
Excess tax benefit from share-based compensation 62 87
Employee stock option proceeds 142 148
Dividends paid on common shares (144) (123)
Other, net (2) --
----------- ---------
Net Cash Used in Financing Activities (673) (832)
----------- ---------
Effect of Exchange Rate on Cash and Cash
Equivalents 8 1
----------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents 161 62
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 $ 319 $ 158
=========== =========
See accompanying notes.
Notes to the Consolidated Summary of Results, Consolidated Balance
Sheets and Consolidated Statements of Cash Flows
(amounts in millions, except per share amounts)
(unaudited)
(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 and year to date ended
December 30, 2006 are preliminary.
(d) Foreign currency translation impacted the YRI Division's operating
profit by a positive $2 million in the quarter ended December 30,
2006 and by a negative $1 million in the year to date ended December
30, 2006. Foreign currency translation positively impacted the China
Division's operating profit by $2 million and $8 million in the
quarter and year to date ended December 30, 2006, respectively.
(e) The effective tax rate for the year to date ended December 30,
2006 was lower than originally forecasted due to the net impact of
several non-recurring items. The most significant of these items
included out-of-year adjustments to reserves and accruals (which
lowered our effective tax rate by approximately 2 percentage points)
and a state tax law change that resulted in the loss of certain net
operating loss carryforwards (which increased our effective tax rate
by approximately 1 percentage point).
(f) Other (income) expense primarily includes equity income from
investments in unconsolidated affiliates. In the year to date ended
December 30, 2006, other (income) expense also includes an $8 million
charge associated with the termination of a beverage agreement in the
United States segment recorded as other expense in the first quarter
of 2006. In the quarter and year to date ended December 31, 2005,
other (income) expense also includes a partial financial recovery of
$10 million and $24 million, respectively, related to a China
supplier ingredient issue. In the year to date ended December 31,
2005, other (income) expense also includes an $11 million gain
associated with the IPO of our Poland/Czech Republic business,
including a $6 million adjustment to the previously recorded gain in
the quarter ended December 31, 2005.
(g) During the fourth quarter of 2006, we completed the acquisition of
the remaining fifty percent ownership interest of our Pizza Hut
United Kingdom ("PH UK") unconsolidated affiliate. This
unconsolidated affiliate owned over 500 restaurants in the United
Kingdom. Prior to this acquisition, we accounted for our interest
under the equity method. From the acquisition date of September 12,
2006 through December 4, 2006 (the end of the fiscal year for PH UK),
our financial statements are presented consolidating the PH UK's
results of operations and cash flows. Additionally, our Consolidated
Balance Sheet at December 30, 2006 now reflects the individual assets
and liabilities of the PH UK, including the results of our initial
purchase price allocation, as opposed to the investment in
unconsolidated affiliate that was previously presented. As a result
of this acquisition, company sales and restaurant profit increased
$164 million and $16 million, respectively, franchise fees decreased
$7 million and general and administrative expenses increased $8
million compared to the quarter and year to date ended December 31,
2005. The impacts on operating profit and net income were not
significant.
CONTACT: Yum! Brands, Inc.
Analysts:
Tim Jerzyk, 502-874-8006
Senior Vice President, Investor Relations/Treasurer
or
Quan Nghe, 502-874-8918
Director Investor Relations
or
Media:
Amy Sherwood, 502-874-8200
Vice President Public Relations