Exhibit 99.1
Yum! Brands Inc. Reports Strong Second-Quarter 2007 EPS Growth of 15%
or $0.39 Per Share, Led by Consistent
Growth in China and International Divisions
Raises Full-Year EPS Growth Forecast to 12% from 11%
LOUISVILLE, Ky.--(BUSINESS WIRE)--July 11, 2007--Yum! Brands Inc.
(NYSE: YUM) today reported results for the second quarter ended June
16, 2007.
Note: Unless otherwise noted, all earnings per share (EPS) figures
discussed in this release are on a split-adjusted basis, giving effect
to the two-for-one stock split on June 26, 2007.
Highlights for the second quarter are...
-- Worldwide system-same-store sales grew by 2%, including 7%
growth in mainland China, 5% growth in Yum! Restaurants
International Division (YRI), and flat results in the U.S.
-- Strong double-digit system-sales growth from both our
international businesses: China Division, +25%; YRI, +15%.
-- Mainland China restaurant unit growth of 19%.
-- YRI unit growth of 4%, the eighteenth consecutive quarter of
at least 3% year-over-year unit growth, our ongoing growth
target.
-- Double-digit operating-profit growth from our international
divisions: China, +14%, and YRI, +15%.
-- Average diluted shares outstanding were reduced by 3%, the
twelfth consecutive quarter with year-over-year share
reduction as a result of substantial share buybacks.
-- An overall effective tax rate of 21.5%, which was 7.5
percentage points lower than last year's.
Note: All preceding comparisons are versus the same period a year
ago.
FULL-YEAR 2007 OUTLOOK
We have raised our full-year EPS growth forecast to 12% from 11%
based on the continued strong growth from our China and YRI divisions.
The new full-year EPS forecast is $1.63 per share. (Previously, our
guidance, pre-split, was for full-year EPS of $3.23. It is now 3 cents
higher at $3.26 on the "pre-split" basis. The two-for-one stock split
was effective on June 26, 2007.)
CONSOLIDATED FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------
Second Quarter Year To Date
----------------------- -----------------------
2007 2006 %Change 2007 2006 %Change
------- ------- ------- ------- ------- -------
Traditional
Restaurants 32,708 32,022 +2 32,708 32,022 +2
System-Sales Growth +7% +5% NM +6% +5% NM
Reported EPS $0.39 $0.34 +15 $0.74 $0.64 +17
- ----------------------------------------------------------------------
Note: YUM has 34,820 restaurant locations around the world, which
include 2,112 license units.
David C. Novak, Chairman and CEO, said, "I am pleased to report
that robust second-quarter sales in both our China and YRI divisions,
coupled with a reduction in our tax rate, helped drive strong EPS
growth of 15%. This quarter demonstrated once again the tremendous
growth potential of our global portfolio. In fact, we are raising our
full-year EPS growth rate, now +12% from +11%.
"Our mainland China business continues to generate strong top-line
growth with same-store-sales growth of +7%, while we are well on our
way to opening another 375 new restaurants for 2007. Furthermore, our
YRI Division had one of its best quarterly performances ever,
delivering system-sales growth of 11% and is on pace to open 800 new
YRI restaurants in 2007. This global growth will contribute to Yum!
Brands' seventh straight year of opening at least 1,000 new
restaurants outside the U.S. Importantly, we anticipate this pace of
development will be maintained into the future, reinforcing our
position as the leading international retail developer.
"In the U.S., we are making steady progress toward a full recovery
with improving sales results across our brands in the second quarter.
We continue to expect to generate positive growth in our second-half
results after a first-half decline in sales and profits. Overall for
the U.S., we expect full-year operating profit growth to be slightly
positive.
"There is no question that we are continuing to build our strong
global brand positions and demonstrate our track record for
consistency in spite of a challenging global environment from
commodity inflation. In summary, this will be the sixth straight year
that we demonstrate the strength of our global portfolio to beat our
target of at least 10% EPS growth. We expect to continue generating
substantial free cash flow in 2007, which allows us to return to our
shareholders another $1 billion through share buybacks, which will
reduce our reported share count by at least 3%. We are also providing
a meaningful dividend currently with a yield of nearly 2%. The key
factor behind these consistent results is the undeniable strength of
our global portfolio. Our shareholders should expect us to build on
our strong global position by continuing to execute our four key
strategies: (1) Build dominant restaurant brands in China; (2) Drive
profitable international expansion; (3) Improve U.S. brand positioning
and returns; and (4) Drive high ROIC and strong shareholder payout."
CHINA DIVISION
- ----------------------------------------------------------------------
Second Quarter Year To Date
($ million, except %Change %Change
restaurant counts -------------- -------------
and percentages) Excl Excl
2007 2006 Reported F/x 2007 2006 Reported F/x
----- ----- -------- ----- ----- ----- -------- ----
Key Financial
Measures
System-Sales
Growth +25 +19 +24 +19
MAINLAND CHINA
(MLC) ONLY +27 +22 +28 +23
Same-Store-Sales
Growth MLC ONLY NA +7 NA +8
Company Sales 439 352 +25 +19 770 621 +24 +19
Restaurant Margin% 18.2 18.8 (0.6) (0.6) 20.2 20.1 +0.1 +0.1
Operating Profit 65 57 +14 +9 141 115 +23 +18
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Key Development
Metrics for
MAINLAND CHINA
ONLY
Total YUM
Restaurants 2,281 1,915 +19 NA 2,281 1,915 +19 NA
KFC 1,940 1,657 +17 NA 1,940 1,657 +17 NA
Pizza Hut Casual
Dining 289 221 +31 NA 289 221 +31 NA
Pizza Hut Home
Service 41 31 +32 NA 41 31 +32 NA
- ----------------------------------------------------------------------
Note: China Division includes mainland China, Thailand and the KFC
Taiwan business.
For the second quarter and year to date, China Division results
were driven by strong system-sales growth from continued broad
development of our brands in terms of both unit expansion and
same-store-sales growth in mainland China. This is represented by 22%
growth of system sales in local currency for the second quarter and
23% for the year to date. For the second quarter, same-store-sales
growth in mainland China was a strong 7%.
Second-quarter 2007 reported operating profit for mainland China
increased 20% with same-store-sales growth and continued new-unit
development for both KFC and Pizza Hut as the key contributing
factors. Reported operating profit for the China Division overall
increased 14% versus last year, as weak performances in our Thailand
and KFC Taiwan markets impacted the division's growth rate. Increased
levels of commodity inflation for some food ingredients, including
chicken and higher labor costs moderated the overall growth of
operating profit and resulted in a decline in restaurant margin. We
expect these factors to continue, with the rate of commodity inflation
expected to increase during the second half of 2007.
YUM! RESTAURANTS INTERNATIONAL DIVISION (YRI)
- ----------------------------------------------------------------------
Second Quarter Year To Date
($ million, %Change %Change
except -------------- --------------
restaurant
counts and Excl Excl
percentages) 2007 2006 Reported F/x 2007 2006 Reported F/x
------ ------ -------- ----- ------ ------ -------- -----
Key Financial
Measures
System-Sales
Growth +15 +11 +14 +10
Franchise &
License Fees 122 108 +14 +11 243 218 +12 +9
Franchisee
Sales 2,185 2,026 +8 +5 4,371 4,097 +7 +5
Company Sales 574 381 +51 +44 1,134 740 +53 +47
Operating
Margin% 14.6 18.1 (3.5) (3.5) 16.0 19.1 (3.1) (2.9)
Operating
Profit 101 88 +15 +11 220 183 +20 +17
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Key Financial Measures Excluding Impact from Pizza Hut U.K.
Acquisition (October 2006)
Company Sales +8 +1 +8 +2
Operating
Profit +15 +11 +21 +17
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Key
Development
Metrics
Traditional
Restaurants 11,889 11,438 +4 NA 11,889 11,438 +4 NA
KFC 6,688 6,327 +6 NA 6,688 6,327 +6 NA
Pizza Hut 4,726 4,645 +2 NA 4,726 4,645 +2 NA
Franchise
Restaurants 9,607 9,000 +7 NA 9,607 9,000 +7 NA
- ----------------------------------------------------------------------
System-sales increased 11% in local currency terms, one of the
best quarterly performances ever for the division. In particular, the
KFC brand delivered strong system-sales growth of 14% in local
currency terms with strong performances across our franchise markets
as well as our KFC U.K. business. Overall, the vast majority of our
YRI markets generated solid same-store-sales growth, +5% for the
system, and we are continuing to add new KFC and Pizza Hut restaurants
around the world primarily through franchise development. YRI opened
178 new traditional restaurants for the second quarter 2007 and 322
year to date, of which 93% were opened by franchisees.
Second-quarter 2007 operating profit for YRI increased 15%
including the positive impact of foreign currency translation.
Restaurant margin declined slightly primarily due to the inclusion of
our Pizza Hut U.K. business as a company-owned business this year.
Excluding the impact of the acquisition of our Pizza Hut U.K.
business, restaurant and operating margins would have increased by 0.9
and 0.7 percentage points respectively.
UNITED STATES BUSINESS
- ----------------------------------------------------------------------
Second Quarter Year To Date
($ million, except
restaurant counts and
percentages) 2007 2006 %Change 2007 2006 %Change
------- ------ -------- ------- ------ --------
Key Financial Measures
Blended Same-Store-
Sales Growth%
Company (3) Even NM (5) +2 NM
System Even +1 NM (2) +3 NM
Franchisee Sales 3,097 2,967 +4 6,029 5,879 +3
Company Sales 1,060 1,179 (10) 2,111 2,370 (11)
Franchise & License
Fees 158 151 +5 307 299 +3
Restaurant Margin% 15.3 16.1 (0.8) 14.3 15.5 (1.2)
Operating Profit 191 194 (2) 356 382 (7)
Operating Margin% 15.6 14.6 1.0 14.7 14.3 0.4
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Key Development Metrics
Total Traditional
Restaurants 18,021 18,164 (1) 18,021 18,164 (1)
System Multibrand
Restaurants 3,518 3,224 +9 3,518 3,224 +9
Franchise Restaurants 13,984 13,603 +3 13,984 13,603 +3
- ----------------------------------------------------------------------
For the second quarter, U.S. system-same-store sales, which
includes franchisees' sales, were flat versus prior year as positive
franchise performance offset a 3% decline for company restaurants. The
primary driver of the 3% decline in company same-store-sales was a
decline of 7% at Taco Bell.
For the second quarter, franchise sales and fees grew as a result
of the expansion of our franchise-restaurant base due to the sale of
492 company-owned restaurants to franchisees (refranchising) over the
past four quarters. In the second quarter of 2007, 42 U.S. restaurants
were refranchised, resulting in a shift of revenues from Company Sales
to Franchise Fees. Company sales decreased by 10% in the second
quarter, with 8% of that reduction due to refranchising;
commensurately, franchisee fees grew by 5%.
For the second quarter, U.S. operating profit decreased 2% versus
last year due to a decline in restaurant margin. Furthermore,
restaurant margin declined primarily due to higher commodity and labor
costs, as well as operating deleverage from a drop in company
same-store sales. These factors were partially offset by lower
insurance expenses.
For the full year 2007, we expect U.S. operating profit growth to
be slightly positive based on improved second-half performance.
U.S. REFRANCHISE PLAN UPDATE
Our current three-year U.S. refranchising plan, through 2008, is
to sell approximately 1,500 company restaurants to franchisees, which
will increase U.S. franchise ownership to approximately 83% of the
system from 78% today. This will reduce the number of U.S.
company-owned restaurants from over 4,686, at the start of this
program in 2006, to approximately 3,200 by year-end 2008, a reduction
of more than 30% in restaurant count. This is a result of our regular
review of company operations and our "Earn the Right to Own"
principle.
Since the beginning of 2006, a total of 599 company-owned U.S.
restaurants were sold to franchisees, including 42 U.S. restaurants in
the second quarter 2007.
FREE CASH FLOW UPDATE
For 2007, we expect to again return over $1 billion to
shareholders through both significant share buybacks and dividends.
This would be the third consecutive year that we have returned more
than 100% of the company's net income to our shareholders. As
announced December 5, 2006, we doubled our quarterly dividend with the
second-quarter 2007 payment.
During the second-quarter 2007, we purchased 7.2 million shares at
an average split-adjusted purchase price of $31.97, or a total of $231
million.
FOREIGN CURRENCY IMPACTS
- ----------------------------------------------------------------------
(operating profit $ million) 2007
Division Second Quarter Year To Date
------------------------------------------
YRI +4 +6
China +3 +6
- ----------------------------------------------------------------------
YUM ONGOING EARNINGS GROWTH MODEL
-- China Division operating-profit growth of 20%. This growth is
driven largely by new-unit development in mainland China. Our
key metric for mainland China is system-sales growth with an
annual target of +20% driven by at least 375 new-restaurant
openings.
-- YRI Division operating-profit growth of 10%. This growth is
driven mainly by new-unit development measured by system-sales
growth of at least 5% (at least 3% unit growth and 2% to 3%
same-store-sales growth) including 750 new-restaurant
openings.
-- U.S. operating-profit growth of 5% with same-store-sales
growth of +2% to +3% and leverage of the G&A infrastructure.
-- EPS growth of at least 10%. This assumes operating profit
performance from our three lines of business as previously
noted with additional benefit from reduction in shares
outstanding due to substantial share buybacks.
FULL-YEAR 2007 UPDATE
-- EPS growth is increased to at least 12%, or at least $1.63 per
share, from prior EPS guidance of at least $1.62 or 11% growth
(split-adjusted).
-- China Division's operating profit growth is expected to be
20%, driven by higher than expected revenue growth partially
offset by higher commodity and labor costs.
-- YRI Division's operating-profit growth is expected to meet or
exceed the targets set forth in the long-term earnings growth
model.
-- U.S. operating profit growth is expected to be slightly
positive driven by better results during the second half of
2007.
For the updated version of our detailed full-year 2007 guidance
table, please refer online to
http://investors.yum.com/phoenix.zhtml?c=117941&p=irol-newsEarnings.
2007 Second-Quarter End Dates 2007 Third-Quarter End Dates
- ---------------------------------- ----------------------------------
International Division 5/21/2007 International Division 8/13/2007
China Division 5/31/2007 China Division 8/31/2007
U.S. Business 6/16/2007 U.S. Business 9/8/2007
- ---------------------------------- ----------------------------------
CONFERENCE CALL
Yum! Brands Inc. will host a conference call to review the
company's financial performance and strategies at 9:15 a.m. ET
Thursday, July 12, 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 Thursday, July 12, through 5 p.m. Friday, July 20. To access the
playback, dial 800/642-1687 in the United States and 706/645-9291
internationally. The playback pass code is 5793810.
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."
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
The updated version of our detailed full-year 2007 guidance table
is available online at
http://investors.yum.com/phoenix.zhtml?c=117941&p=irol-newsEarnings.
Second-quarter restaurant-count details, definitions of terms, and
segment-results reconciliation are available online at
http://investors.yum.com/phoenix.zhtml?c=117941&p=irol-newsEarnings.
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 3,500 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 three 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
----------------- -----------------
6/16/07 6/17/06 B/(W) 6/16/07 6/17/06 B/(W)
-------- -------- -------- -------- -------- --------
Company sales $2,073 $1,912 8 $4,015 $3,731 8
Franchise and
license fees 294 270 9 575 536 7
-------- -------- -------- --------
Total revenues 2,367 2,182 9 4,590 4,267 8
-------- -------- -------- --------
Costs and
expenses
Food and
paper 638 583 (9) 1,224 1,140 (7)
Payroll and
employee
benefits 527 492 (7) 1,041 969 (7)
Occupancy and
other
operating
expenses 598 536 (12) 1,152 1,037 (11)
-------- -------- -------- --------
Company
restaurant
expenses 1,763 1,611 (10) 3,417 3,146 (9)
General and
administrative
expenses 287 264 (9) 549 518 (6)
Franchise and
license
expenses 10 9 (7) 18 17 (4)
Closures and
impairment
expenses 9 18 NM 13 24 NM
Refranchising
(gain) loss (4) (15) NM (5) (11) NM
Other (income)
expense (8) (12) (28) (28) (16) 73
-------- -------- -------- --------
Total costs and
expenses 2,057 1,875 (10) 3,964 3,678 (8)
-------- -------- -------- --------
Operating profit 310 307 1 626 589 7
Interest
expense, net 38 36 (4) 74 71 (5)
-------- -------- -------- --------
Income before
income taxes 272 271 1 552 518 7
Income tax
provision 58 79 25 144 156 7
-------- -------- -------- --------
Net income $214 $192 12 $408 $362 13
======== ======== ======== ========
Effective tax
rate 21.5% 29.0% 26.1% 30.1%
- ---------------- ======== ======== ======== ========
Basic EPS Data
- ----------------
EPS $0.41 $0.35 15 $0.77 $0.66 17
======== ======== ======== ========
Average shares
outstanding 528 544 3 530 548 3
======== ======== ======== ========
Diluted EPS Data
- ----------------
EPS $0.39 $0.34 15 $0.74 $0.64 17
======== ======== ======== ========
Average shares
outstanding 547 563 3 549 567 3
======== ======== ======== ========
Dividends
declared per
common share $0.15 $0.075 $0.15 $0.1325
======== ======== ======== ========
See accompanying notes.
Yum! Brands, Inc.
UNITED STATES Operating Results
(amounts in millions)
(unaudited)
Quarter %Change Year to date %Change
--------------- ---------------
6/16/07 6/17/06 B/(W) 6/16/07 6/17/06 B/(W)
------- ------- ------- ------- ------- -------
Company sales $1,060 $1,179 (10) $2,111 $2,370 (11)
Franchise and license
fees 158 151 5 307 299 3
------- ------- ------- -------
Revenues 1,218 1,330 (8) 2,418 2,669 (9)
------- ------- ------- -------
Company restaurants
Food and paper 310 332 7 610 672 9
Payroll and employee
benefits 314 350 10 640 709 10
Occupancy and other
operating expenses 275 308 11 560 621 10
------- ------- ------- -------
899 990 9 1,810 2,002 10
General and
administrative
expenses 117 125 6 239 251 5
Franchise and license
expenses 7 7 (4) 12 11 (8)
Closures and
impairment expenses 4 14 NM 4 15 NM
Other (income) expense -- -- NM (3) 8 NM
------- ------- ------- -------
1,027 1,136 10 2,062 2,287 10
------- ------- ------- -------
Operating profit $191 $194 (2) $356 $382 (7)
======= ======= ======= =======
Company sales 100.0% 100.0% 100.0% 100.0%
(1.0) (0.5)
Food and paper 29.2 28.2 ppts. 28.9 28.4 ppts.
Payroll and employee -- (0.4)
benefits 29.6 29.6 ppts. 30.3 29.9 ppts.
Occupancy and other 0.2 (0.3)
operating expenses 25.9 26.1 ppts. 26.5 26.2 ppts.
------- ------- ------- -------
(0.8) (1.2)
Restaurant margin 15.3% 16.1% ppts. 14.3% 15.5% ppts.
======= ======= ======= =======
1.0 0.4
Operating margin 15.6% 14.6% ppts. 14.7% 14.3% ppts.
======= ======= ======= =======
See accompanying notes.
Yum! Brands, Inc.
INTERNATIONAL DIVISION Operating Results
(amounts in millions)
(unaudited)
Quarter %Change Year to date %Change
---------------- ----------------
6/16/07 6/17/06 B/(W) 6/16/07 6/17/06 B/(W)
------- ------- ------- ------- ------- -------
Company sales $574 $381 51 $1,134 $740 53
Franchise and
license fees 122 108 14 243 218 12
------- ------- ------- -------
Revenues 696 489 43 1,377 958 44
------- ------- ------- -------
Company
restaurants
Food and paper 171 126 (36) 338 246 (37)
Payroll and
employee
benefits 152 94 (62) 297 178 (66)
Occupancy and
other operating
expenses 183 115 (60) 358 224 (60)
------- ------- ------- -------
506 335 (51) 993 648 (53)
General and
administrative
expenses 84 64 (33) 155 122 (28)
Franchise and
license expenses 3 2 (15) 6 6 3
Closures and
impairment
expenses 3 3 NM 7 7 NM
Other (income)
expense (1) (3) (63) (4) (8) (43)
------- ------- ------- -------
595 401 (49) 1,157 775 (49)
------- ------- ------- -------
Operating profit $101 $88 15 $220 $183 20
======= ======= ======= =======
Company sales 100.0% 100.0% 100.0% 100.0%
3.3 3.5
Food and paper 29.9 33.2 ppts. 29.8 33.3 ppts.
Payroll and
employee (1.8) (2.1)
benefits 26.4 24.6 ppts. 26.2 24.1 ppts.
Occupancy and
other operating (1.7) (1.4)
expenses 31.8 30.1 ppts. 31.5 30.1 ppts.
------- ------- ------- -------
(0.2) --
Restaurant margin 11.9% 12.1% ppts. 12.5% 12.5% ppts.
======= ======= ======= =======
(3.5) (3.1)
Operating margin 14.6 % 18.1% ppts. 16.0% 19.1% ppts.
======= ======= ======= =======
See accompanying notes. As discussed further at note (e), Company
sales increased $164 million and $337 million, restaurant profit
increased $15 million and $33 million, franchise fees decreased $6
million and $12 million and general and administrative expenses
increased $9 million and $19 million compared to the quarter and year
to date ended June 16, 2007, respectively, due to the ownership
structure change of the Pizza Hut United Kingdom business.
Yum! Brands, Inc.
CHINA DIVISION Operating Results
(amounts in millions)
(unaudited)
Quarter %Change Year to date %Change
---------------- ----------------
6/16/07 6/17/06 B/(W) 6/16/07 6/17/06 B/(W)
------- ------- ------- ------- ------- -------
Company sales $439 $352 25 $770 $621 24
Franchise and
license fees 14 11 29 25 19 29
------- ------- ------- -------
Revenues 453 363 25 795 640 24
------- ------- ------- -------
Company
restaurants
Food and paper 157 125 (25) 276 222 (24)
Payroll and
employee
benefits 61 48 (29) 104 82 (26)
Occupancy and
other operating
expenses 140 113 (25) 234 192 (22)
------- ------- ------- -------
358 286 (26) 614 496 (24)
General and
administrative
expenses 35 26 (33) 55 41 (32)
Franchise and
license expenses -- -- NM -- -- NM
Closures and
impairment
expenses 2 1 NM 2 2 NM
Other (income)
expense (7) (7) 13 (17) (14) 27
------- ------- ------- -------
388 306 (27) 654 525 (24)
------- ------- ------- -------
Operating profit $65 $57 14 $141 $115 23
======= ======= ======= =======
Company sales 100.0% 100.0% 100.0% 100.0%
(0.2) (0.2)
Food and paper 35.7 35.5 ppts. 35.9 35.7 ppts.
Payroll and
employee (0.4) (0.2)
benefits 14.0 13.6 ppts. 13.5 13.3 ppts.
Occupancy and
other operating -- 0.5
expenses 32.1 32.1 ppts. 30.4 30.9 ppts.
------- ------- ------- -------
(0.6) 0.1
Restaurant margin 18.2% 18.8% ppts. 20.2% 20.1% ppts.
======= ======= ======= =======
See accompanying notes.
China Division includes mainland China, Thailand and KFC Taiwan
Yum! Brands, Inc.
Condensed Consolidated Balance Sheets
(amounts in millions)
(unaudited)
-----------
6/16/07 12/30/06
----------- ---------
ASSETS
Current Assets
Cash and cash equivalents $436 $319
Accounts and notes receivable, less allowance:
$20 in 2007 and $18 in 2006 252 220
Inventories 98 93
Prepaid expenses and other current assets 152 138
Deferred income taxes 90 57
Advertising cooperative assets, restricted 76 74
----------- ---------
Total Current Assets 1,104 901
Property, plant and equipment, net of
accumulated depreciation and amortization of
$3,206 in 2007 and $3,146 in 2006 3,552 3,631
Goodwill 656 662
Intangible assets, net 340 347
Investments in unconsolidated affiliates 118 138
Other assets 395 369
Deferred income taxes 265 305
----------- ---------
Total Assets $6,430 $6,353
=========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and other current liabilities $1,264 $1,386
Income taxes payable 49 37
Short-term borrowings 306 227
Advertising cooperative liabilities 76 74
----------- ---------
Total Current Liabilities 1,695 1,724
Long-term debt 2,088 2,045
Other liabilities and deferred credits 1,190 1,147
----------- ---------
Total Liabilities 4,973 4,916
----------- ---------
Shareholders' Equity
Preferred stock, no par value, zero shares and
250 shares authorized in 2007 and 2006,
respectively; no shares issued -- --
Common stock, no par value, 750 shares
authorized; 521 shares and 530 shares issued in
2007 and 2006, respectively -- --
Retained earnings 1,579 1,593
Accumulated other comprehensive loss (122) (156)
----------- ---------
Total Shareholders' Equity 1,457 1,437
----------- ---------
Total Liabilities and Shareholders' Equity $6,430 $6,353
=========== =========
See accompanying notes.
Yum! Brands, Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in millions)
(unaudited)
Year to date
-----------------
6/16/07 6/17/06
-------- --------
Cash Flows - Operating Activities
Net income $408 $362
Depreciation and amortization 233 210
Closures and impairment expenses 13 24
Refranchising (gain) loss (5) (11)
Contributions to defined benefit pension plans -- (18)
Deferred income taxes (12) (58)
Equity income from investments in unconsolidated
affiliates (21) (21)
Distributions of income received from unconsolidated
affiliates 20 15
Excess tax benefit from share-based compensation (30) (37)
Share-based compensation expense 29 30
Changes in accounts and notes receivable (16) 25
Changes in inventories (4) 1
Changes in prepaid expenses and other current assets 1 (24)
Changes in accounts payable and other current
liabilities (64) (50)
Changes in income taxes payable 24 20
Other non-cash charges and credits, net 17 90
-------- --------
Net Cash Provided by Operating Activities 593 558
-------- --------
Cash Flows - Investing Activities
Capital spending (217) (186)
Proceeds from refranchising of restaurants 65 48
Short-term investments 5 (31)
Sales of property, plant and equipment 25 26
Other, net 6 (16)
-------- --------
Net Cash Used in Investing Activities (116) (159)
-------- --------
Cash Flows - Financing Activities
Proceeds from long-term debt -- 300
Repayments of long-term debt (7) (203)
Revolving credit facilities, three months or less,
net 315 77
Short-term borrowings by original maturity
More than three months - proceeds 1 --
More than three months - payments (183) --
Three months or less, net 11 4
Repurchase shares of common stock (477) (529)
Excess tax benefit from share-based compensation 30 37
Employee stock option proceeds 63 84
Dividends paid on common shares (119) (63)
-------- --------
Net Cash Used in Financing Activities (366) (293)
-------- --------
Effect of Exchange Rate on Cash and Cash Equivalents 6 3
-------- --------
Net Increase in Cash and Cash Equivalents 117 109
Cash and Cash Equivalents - Beginning of Period 319 158
-------- --------
Cash and Cash Equivalents - End of Period $436 $267
-------- --------
See accompanying notes.
Notes to the Consolidated Summary of Results,
Condensed Consolidated Balance Sheets
and Condensed Consolidated Statements of Cash Flows
(amounts in millions, except per share amounts)
(unaudited)
(a) Percentages may not recompute due to rounding.
(b) Amounts presented as of and for the quarter and year to date ended
June 16, 2007 are preliminary.
(c) On May 17, 2007, the Company announced that its Board of Directors
approved a two-for-one split of the Company's outstanding shares of
Common Stock. The stock split was effected in the form of a stock
dividend and entitled each shareholder of record at the close of
business on June 1, 2007 to receive one additional share for every
outstanding share of Common Stock held. The stock dividend was
distributed on June 26, 2007, with approximately 261 million shares
of Common Stock distributed. All per share and share amounts in the
accompanying Consolidated Summary of Results and Condensed
Consolidated Balance Sheets have been adjusted to reflect the stock
split.
(d) Other (income) expense primarily includes equity income from our
investments in unconsolidated affiliates in our China and
International Divisions. In the quarter ended March 24, 2007, other
(income) expense also included recognition of income of $5 million
associated with receipt of payment for a note receivable arising from
the 2005 sale of our fifty percent interest in the entity that
operated almost all KFCs and Pizza Huts in Poland and the Czech
Republic to our then partner in the entity. In the quarter ended
March 25, 2006, other (income) expense also included an $8 million
charge associated with the termination of a beverage agreement in the
United States segment.
(e) During the fourth quarter of 2006, we completed the acquisition of
the remaining fifty percent ownership interest of our Pizza Hut
United Kingdom ("PHUK") 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. In 2007, our financial statements are presented consolidating
the PHUK's results of operations and cash flows. As a result of this
acquisition, Company sales increased $164 million and $337 million,
restaurant profit increased $15 million and $33 million, franchise
fees decreased $6 million and $12 million and general and
administrative expenses increased $9 million and $19 million compared
to the quarter and year to date ended June 17, 2006, respectively.
The impacts on operating profit and net income were not significant.
CONTACT: Yum! Brands Inc.
Analysts:
Tim Jerzyk
Senior Vice President, Investor Relations/Treasurer
502-874-8006
or
Quan Nghe
Director Investor Relations
502-874-8918
or
Media:
Amy Sherwood
Vice President Public Relations
502-874-8200