-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NGJqtzjprm6yWAT8gP48L08eqUcQ/Ur4RD9DeLPZx9eO3hEdwihnsMEcwAglPQxP Ksr91mM73w1TXWsu9yMUKQ== 0001157523-05-008579.txt : 20051005 0001157523-05-008579.hdr.sgml : 20051005 20051005095205 ACCESSION NUMBER: 0001157523-05-008579 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20051005 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20051005 DATE AS OF CHANGE: 20051005 FILER: COMPANY DATA: COMPANY CONFORMED NAME: YUM BRANDS INC CENTRAL INDEX KEY: 0001041061 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 133951308 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13163 FILM NUMBER: 051123625 BUSINESS ADDRESS: STREET 1: 1441 GARDINER LANE CITY: LOUISVILLE STATE: KY ZIP: 40213 BUSINESS PHONE: 5028748300 MAIL ADDRESS: STREET 1: 1900 COLONEL SANDERS LANE CITY: LOUISVILLE STATE: KY ZIP: 40213 FORMER COMPANY: FORMER CONFORMED NAME: TRICON GLOBAL RESTAURANTS INC DATE OF NAME CHANGE: 19970627 FORMER COMPANY: FORMER CONFORMED NAME: GREAT AMERICAN RESTAURANT CO DATE OF NAME CHANGE: 19970618 8-K 1 a4987903.txt YUM! BRANDS, INC., 8-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) October 5, 2005 Commission file number 1-13163 ----------- YUM! BRANDS, INC. (Exact name of registrant as specified in its charter) North Carolina 13-3951308 - ---------------------------------------- --------------------- (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 1441 Gardiner Lane, Louisville, Kentucky 40213 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (502) 874-8300 Former name or former address, if changed since last report: N/A Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ Section 2 - Financial Information Item 2.02 Results of Operations and Financial Condition On October 5, 2005, YUM! Brands, Inc. issued a press release announcing financial results for the quarter ended September 3, 2005. A copy of the press release is attached hereto as Exhibit 99.1. Section 9 - Financial Statements and Exhibits Item 9.01 Financial Statements and Exhibits (c) Exhibits 99.1 Press Release dated October 5, 2005 from YUM! Brands, Inc. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. YUM! BRANDS, INC. ----------------- (Registrant) Date: October 5, 2005 /s/ Ted F. Knopf ----------------------------------- Senior Vice President of Finance and Corporate Controller (Principal Accounting Officer) EX-99.1 2 a4987903ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 Yum! Brands Inc. Reports 2005 Third-Quarter EPS of $0.71 Prior to Special Items, an 18% Increase; Increases Full-Year 2005 EPS Estimate by $0.02 to $2.64 Prior to Special Items or 12% Growth LOUISVILLE, Ky.--(BUSINESS WIRE)--Oct. 5, 2005--Yum! Brands Inc. (NYSE:YUM) today reported results for the third quarter ended September 3, 2005. The following are key points relative to the company's performance in the third quarter versus a year ago: -- Worldwide operating profit increased by 10% before special items credit. -- Worldwide system same-store sales grew by 2%. -- China Division system restaurants expanded by 23%. -- International Division system restaurants grew by 4%. -- Systemwide U.S. same-store sales increased 4%. -- U.S. multibrand restaurants expanded by 17%. The company also reported estimated Period 10 sales: -- International Division system sales increased 7% in U.S. dollar terms or 4% prior to foreign currency conversion. -- China Division system sales increased 16% in U.S. dollar terms or 13% prior to foreign currency conversion. -- U.S. blended same-store sales at company restaurants increased 3% (Taco Bell, +6%; Pizza Hut, (3)%; KFC, +6%). Consolidated Financial Highlights Third Quarter Year To Date ------------------------------------------------- 2005 2004 % Change 2005 2004 % Change ------- ------- -------- ------- ------- -------- System Restaurants 31,537 30,943 +2 31,537 30,943 +2 Revenues (million) $2,243 $2,179 +3 $6,450 $6,226 +4 EPS prior to Special Items $0.71 $0.61 +18 $1.86 $1.63 +14 Special Items EPS $0.01 $0.00 NM $0.01 $0.03 NM Reported EPS $0.72 $0.61 +18 $1.87 $1.66 +13 - ---------------------------------------------------------------------- David C. Novak, Chairman and CEO, said, "I am pleased to report that based on our third-quarter results we are again raising our 2005 full-year EPS estimate, now up to $2.64 or 12% growth prior to special items. We continue to aggressively expand outside the United States and expect to exceed our full-year target of over 1,100 new restaurants. This includes a record number of new-restaurant openings from our China Division where we fully expect to exceed our 2005 target of 375 openings. We are especially pleased that our third-quarter U.S. blended same-store sales increased 4%, lapping our strongest quarter last year, which is the best performance in five years. We expect 4% U.S. blended growth for the full-year 2005. "Looking forward to 2006, we are very confident we will continue to deliver our stated annual goal of at least 10% growth in EPS. Shareholders should expect us to continue to build value by executing the unique growth opportunities that make us anything but an ordinary restaurant company: Building dominant restaurant brands in China, driving profitable international expansion, running great restaurants, and multibranding category-leading brands. In doing so, we expect to maintain our industry leading ROIC (return on invested capital) of 18%." INTERNATIONAL DIVISION - ---------------------- Third Quarter Year to Date % Change % Change ------------- -------------- Reported Excl Reported Excl 2005 2004 F/x 2005 2004 F/x ------------------------------------------------------ Financial Measures Revenues(1) ($ million) $490 $509 (4) (8) $1,466 $1,485 (1) (6) Operating Profit ($ million) $89 $79 +12 +9 $273 $241 +14 +9 - ---------------------------------------------------------------------- Operating Metrics Est. System- Sales Growth +7 +4 +10 +6 System Restaurants 11,066 10,689 +4 NM 11,066 10,689 +4 NM - ---------------------------------------------------------------------- (1) Both third-quarter and year-to-date revenue comparisons were adversely affected by the refranchising of our Puerto Rico market in last year's fourth quarter. Excluding the impact of the change in ownership of the Puerto Rico market, revenues increased 1% for the third quarter and 3% year to date prior to foreign currency conversion. The transaction resulted in the sale of this company-operated market to a franchisee. A key growth driver for the Yum! Restaurants International (YRI) Division is new-restaurant openings across an array of international markets and leveraging our substantial infrastructure in place around the world. In the third quarter, continued new-restaurant expansion of KFC and Pizza Hut brands and positive system same-store-sales growth drove YRI system-sales and operating-profit growth. New restaurants opened in the quarter totaled 176. For both third-quarter and year-to-date 2005, YRI's operating profit growth outpaced revenue growth primarily due to strong performance from our highly profitable franchise-only businesses. Revenues are lower due to refranchising of the Puerto Rico market in the fouth quarter of last year and lower sales this year in key company markets: South Korea and the U.K. Operating profit for the quarter and year-to-date is up primarily due to strong franchise same-store sales and unit growth. Year to date, 93% of restaurant openings have been by our franchise and joint-venture partners. International franchise-only markets led the way with 10% growth in system sales prior to currency conversion and 5% growth in system restaurants in operation during the third quarter. These businesses represent both KFC and Pizza Hut brands and cover more than 100 countries and territories. In the U.K., a key market with 7% growth in system restaurants, system sales decreased 1% prior to currency conversion, due in part to a very weak retail environment, recently compounded by the impact of terrorist activity. Overall, Mexico was the strongest performing company market. For the third quarter, restaurant margin as a percentage of sales decreased 0.8 percentage points. Excluding the Puerto Rico market, restaurant margin would have decreased 0.2 percentage points versus last year. Overall, foreign currency conversion added $3 million to operating profit for the third quarter and $11 million year to date. Full-year currency impact is estimated at $12 million. For the full-year 2005, Yum! Restaurants International Division is expected to produce revenue growth of approximately +4% in local currency terms prior to the impact of refranchising the Puerto Rico market, reported profit growth of 14%, and system-sales growth of 6% in local currency terms, including at least 725 new-restaurant openings. This would be the sixth straight year of at least 700 new-restaurant openings, and we expect our franchisees to open more than 80% of the new restaurants. CHINA DIVISION - -------------- Third Quarter Year to Date % Change % Change -------------- ------------- Reported Excl Reported Excl 2005 2004 F/x 2005 2004 F/x ------------------------------------------------------ Financial Measures Revenues ($ million) $360 $301 +20 +18 $871 $726 +20 +19 Operating Profit ($ million) $85 $64 +32 +31 $163 $141 +15 +14 - ---------------------------------------------------------------------- Operating Metrics Est. System- Sales Growth (fiscal-period basis) +18 +17 +17 +16 System Restaurants 2,159 1,759 +23 NM 2,159 1,759 +23 NM - ---------------------------------------------------------------------- Note: Please refer to "Notes and Definitions" at the end of this release for explanation of estimated system-sales growth. A key growth driver for the China Division is rapid new-restaurant expansion of multiple Yum! restaurant brands. Overall, system restaurants in operation grew 23%. During the third quarter, a total of 84 new restaurants opened, including 73 KFCs and 11 Pizza Huts. Operating profit for the third quarter benefited by $14 million of financial recovery from a major supplier, and we expect to recognize an additional meaningful financial recovery from the same supplier during the fourth quarter of 2005. Additionally, due to a fiscal-reporting calendar shift, third-quarter operating profit increased by $6 million. Conversely, this shift negatively impacts the fourth quarter by a similar amount. Third-quarter restaurant margin decreased 1.6 percentage points versus the prior year, driven primarily by negative same-store sales in company-operated KFC restaurants in mainland China. Foreign currency conversion added $1 million to operating profit for the third quarter and $2 million year to date. Full-year currency impact is estimated at $3 million. For the full-year 2005, the China Division in local currency terms is expected to produce system-sales growth of at least 15%, revenue growth in the range of 17% and profit growth of approximately 10%, and at least 375 new-restaurant openings (approximately 75% of new restaurants are company owned, and 25% are joint venture and franchise). UNITED STATES BUSINESS - ---------------------- Third Quarter Year to Date 2005 2004 % Change 2005 2004 % Change ------- ------- -------- ------- ------- --------- Financial Measures Revenues ($ million) $1,393 $1,369 +2 $4,113 $4,015 +2 Operating Profit ($ million) $189 $196 (4) $541 $567 (5) - ---------------------------------------------------------------------- Operating Metrics Systemwide Same-Store-Sales Growth % +4 +3 NM +4 +3 NM System Restaurants 18,312 18,495 (1) 18,312 18,495 (1) - ---------------------------------------------------------------------- A key growth driver for this business segment is positive same-store-sales growth. In the third quarter, the primary drivers of revenue growth were higher same-store sales and continued development of new, higher-volume restaurants, partially offset by 2 percentage points negative impact from refranchising. When company restaurants are refranchised, revenue from these restaurants changes from company sales to franchise fees, reducing the company's reported revenue. Operating profit increased 5% for the third quarter excluding the impact of higher facility action expenses primarily related to restaurant closures at KFC and Long John Silver's and one-time costs associated with Hurricane Katrina. For the fourth quarter, it is anticipated that U.S. operating profit will show growth of about 5% prior to the impact of higher facility action expenses and the benefit of the fifty-third week. This includes the adverse impact of an incremental $4 to $6 million from expected higher energy costs and lost profits related to closed restaurants as a result of Hurricane Katrina. For the full-year 2005, U.S. operating profit and restaurant margin are expected to be flat versus prior year. WORLDWIDE NEW-RESTAURANT DEVELOPMENT - ------------------------------------ System New-Restaurant Openings Third Quarter Year to Date -------------- ------------ Worldwide 347 874 Key Markets International Franchise-Only Businesses (more than 100 countries and territories) 107 237 Mainland China 77 235 United States 87 219 U.K. 19 50 Australia/New Zealand 7 25 - ---------------------------------------------------------------------- New-restaurant development of our brands around the world is a key factor in year-to-year earnings growth for the company overall. For the International Division franchise-only businesses, new-restaurant growth versus a year ago continued across all regions: in Asia, +6%; southern Africa, +7%; the Middle East, +7%; and Caribbean/Latin America, +3%. For the 237 new openings year to date from this group of markets, 119 were new KFCs and 93 were new Pizza Huts. In the U.S. market, the majority of new-restaurant openings were by Pizza Hut, KFC and Taco Bell franchisees. Year to date, over 73% of U.S. new-restaurant openings were franchised. U.S. MULTIBRANDING EXPANSION - ---------------------------- Third Quarter -------------------------- Incr/ Multibrand Restaurants in Operation 2005 2004 (Decr) -------- -------- -------- U.S. Systemwide 2,918 2,484 +17% % U.S. System Restaurants 16 13 +3 ppts - ---------------------------------------------------------------------- In the third quarter, of the 100 U.S. multibrand additions, 67% were conversions of existing single-brand restaurants (primarily Pizza Hut/WingStreet), 24% were new-restaurant openings and 9% were a new multibrand restaurant in place of a closed single-brand restaurant nearby. For the full-year 2005, the company expects the U.S. system to add at least 550 multibrand restaurant locations. FRANCHISE GROWTH AND FEES - ------------------------- Third Quarter Year to Date ------------- ------------- Franchise Net New-Restaurant Growth +1% +1% Total Franchise Fees ($ million) $268 $763 Growth Vs. 2004 +10% +9% - ---------------------------------------------------------------------- Franchise fees experienced across-the-board growth driven by worldwide franchise new-restaurant development, refranchising (primarily the Puerto Rico market) and same-store-sales growth. For the third quarter and year to date, favorable foreign currency conversion added 1 percentage point of franchise-fee growth. In the third quarter, worldwide franchise fees were generated primarily in the United States (58%) and the International Division (38%). The China Division contributed the remaining 4% to worldwide franchise fees. The company has more than 2,400 worldwide franchise partners including more than 800 in the United States, nearly 600 in the International Division and 29 in the China Division CASH FLOW Year to date, the company generated $1,041 million in net cash provided by operating activities, invested capital of $362 million and repurchased $678 million of its own shares. We expect full-year capital spending to be about $650 million versus the prior forecast of $720 million. Additionally, we now expect full-year share repurchases to total at least $800 million. STOCK-OPTION EXPENSING We will begin expensing all stock-based compensation, adopting SFAS123R retroactively to the beginning of 2005, in fourth-quarter 2005. Thus, our 2005 results will reflect a full-year impact of the adoption of SFAS123R. We currently estimate the impact of the adoption will reduce full-year and fourth-quarter EPS by $0.12 and $0.04 respectively. FOURTH-QUARTER 2005 OUTLOOK The company expects EPS of $0.78 for the fourth quarter, excluding the impact of adopting SFAS123R. A number of factors are expected to impact results: -- Higher facility-action expenses than last year. -- The tax rate will be approximately 4 percentage points higher than last year. -- Incremental post-hurricane expenses noted in the U.S. business section previously detailed (United States Business Section) in this release. -- Interest expense will increase $8 to $10 million versus last year. Updates will be provided if there is a material change to these expectations. FULL-YEAR OUTLOOK Based on year-to-date performance and information currently available, the company increased its full-year EPS expectations by $0.02 to $2.64 prior to special items. Projected factors contributing to the company's updated annual 2005 EPS guidance were published in the company's second-quarter earnings release dated July 13, 2005. Based on current information, the following is an update only on those full-year factors that have changed: -- Facility actions to include about $65 million of closure and impairment charges, an increase of approximately $30 million versus 2004. Refranchising gains are expected to be over $30 million for the full year versus $12 million last year. Annual Outlook Forecast Actual 2005 2004 Incr/(Decr) --------- ------- ----------- EPS prior to Special Items $2.64 $2.36 +12% Special Items EPS $0.01 $0.06 NM Reported EPS $2.65 $2.42 +10% - ---------------------------------------------------------------------- Note: This forecast is prior to the impact of adopting SFAS123R. FULL-YEAR 2006 OUTLOOK The company expects EPS growth of at least 10 percent, which is expected to be driven by new-restaurant expansion outside the U.S. and U.S. same-store-sales growth of +2% to +3%. PERIOD 10 SALES - --------------- INTERNATIONAL DIVISION SYSTEM-SALES GROWTH (Estimated) - ------------------------------------------------------ 2005 2005 2004 Reported (U.S. $) Local Currency Local Currency ------------------ -------------- ---------------- Period 10 +7% +4% +7% - ---------------------------------------------------------------------- Note: The company's annual target growth rate for International Division system sales is at least +5% prior to foreign currency conversion. CHINA DIVISION SYSTEM-SALES GROWTH (Estimated) - ---------------------------------------------- 2005 2005 2004 Reported (U.S. $) Local Currency Local Currency ------------------ -------------- --------------- Period 10 +16% +13% +21% - ---------------------------------------------------------------------- Note: For the purpose of the preceding period sales results, like calendar months have been compared. The company's annual target growth rate for China Division system sales is at least +22% prior to foreign currency conversion. U.S. COMPANY SAME-STORE-SALES GROWTH (Estimated) - ------------------------------------------------ Period 10, 2005 Period 10, 2004 ----------------- ----------------- U.S. BLENDED +3% +3% Taco Bell +6% +4% Pizza Hut (3)% +6% KFC +6% (1)% - ---------------------------------------------------------------------- Note: The company's annual target growth rate for U.S. same-store sales is +1% to +2%. 2005 Period 10 End Dates 2005 Period 11 End Dates - ----------------------------------- ---------------------------------- International Division 9/5/2005 International Division 10/3/2005 China Division 9/30/2005 China Division 10/31/2005 U.S. Business 10/1/2005 U.S. Business 10/29/2005 - ----------------------------------- ---------------------------------- CONFERENCE CALL Yum! Brands Inc. will host a conference call to review the company's financial performance and strategies at 11:00 a.m. EDT Wednesday, October 5, 2005. For U.S. callers, the number is 877/815-2029. For international callers, the number is 706/645-9271. The call will be available for playback beginning Wednesday, October 5, at 2:15 p.m. EDT through Friday, October 21. To access the playback, dial 800/642-1687 in the United States and 706/645-9291 internationally. The playback pass code is 8671817. The call and the playback can be accessed via the Internet by visiting Yum! Brands' Web site: www.yum.com and selecting "3rd Quarter Earnings Webcast." NOTES & DEFINITIONS FOR TERMS USED THROUGHOUT THIS DOCUMENT China Division system-sales growth explanation: Estimated system-sales growth differs from the 11% reported in the Period 9 sales release, which compared like calendar months. For 2005, we have moved forward the mainland China business reporting calendar one month to more closely align the timing of reporting that business's results of operations with our U.S. business. China Division third- and fourth-quarter operating profit explanation: As part of the calendar shift previously described, China Division third-quarter operating profit benefited by $6 million due to reporting the higher sales in mainland China in Period 9 2005 (month of August) as part of the third-quarter result versus last year, when August was reported as part of the fourth quarter. Therefore, the fourth quarter will be negatively impacted by a similar amount due to this shift. Mainland China Reporting Calendar 2005 2004 Quarter 1 Period 2 January December Period 3 February January Quarter 2 Period 4 March February Period 5 April March Period 6 May April Quarter 3 Period 7 June May Period 8 July June Period 9 August July Quarter 4 Period 10 September August Period 11 October September Period 12 November October Period 13 December November - ---------------------------------------------------------------------- Notes: Sales results for Period 11 (the four-week period ending October 29, 2005) are scheduled to be released Monday, November 7, 2005, before market hours. Sales and profit information included in the release is rounded to the nearest million; however, percentage-point-change calculations are based on numbers that are not rounded. Definitions: Excl F/x represents the percentage change excluding the impact of foreign currency translation. These amounts are calculated by translating current-year results at prior-year average exchange rates. We believe elimination of the foreign currency translation impact provides better year-to-year comparability without the distortion of foreign currency fluctuations. Franchise Fees include fees from unconsolidated affiliates (joint ventures) and franchise and license restaurants. Fees include ongoing royalty and license fees, initial fees for new restaurants and contract-renewal fees. Franchise Restaurants include unconsolidated affiliates (joint ventures) and franchise restaurants and exclude license restaurants. Franchise Net New-Restaurant Growth is the year-over-year total of franchise restaurant and unconsolidated affiliates (joint-venture) openings less franchise restaurant and unconsolidated affiliates (joint-venture) closings divided by the prior year's franchise and unconsolidated affiliates (joint-venture) restaurant total. New-Restaurant Openings include unconsolidated affiliates (joint ventures), company-owned and franchise restaurants and exclude license restaurants. Special Items include AmeriServe and other charges (credits) and Wrench litigation. System Restaurants include unconsolidated affiliates (joint ventures), company-owned and franchise restaurants but exclude license restaurants, which are typically nontraditional restaurants, such as airports, with substantially lower average unit volumes than traditional restaurant locations. System-Sales Growth includes the results of all restaurants regardless of ownership including unconsolidated affiliates (joint ventures), company-owned, franchise and license restaurants. Sales of unconsolidated affiliates (joint ventures), franchise and license restaurants generate franchise and license fees for the company (typically at a rate of 4% to 6% of sales). Unconsolidated affiliates (joint ventures), franchise and license restaurant sales are not included in company sales we present on the Condensed Consolidated Statements of Income; however, the franchise fees previously defined are included in the company's revenues. We believe system-sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates all our revenue drivers, company and franchise same-store sales as well as new-restaurant development. System Same-Store-Sales Growth is the estimated growth in sales of all restaurants that have been open one year or more regardless of ownership including unconsolidated affiliates (joint ventures), company-owned, franchise and license restaurants. Systemwide U.S. Same-Store Sales include all company, franchise and license restaurants that have been open one year or more. U.S. same-store sales include KFC, Pizza Hut, Taco Bell, Long John Silver's and A&W restaurants. U.S. Blended Same-Store Sales include only company restaurants that have been open one year or more. U.S. blended same-store sales include KFC, Pizza Hut, and Taco Bell company-owned restaurants only. U.S. same-store sales for Long John Silver's and A&W restaurants are not included. This announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include those identified by such words as may, will, expect, project, anticipate, believe, plan and other similar terminology. These "forward-looking" statements reflect management's current expectations regarding future events and operating and financial performance and are based on currently available data. However, actual results are subject to future events and uncertainties, which could cause actual results to differ from those projected in this announcement. Accordingly, you are cautioned not to place undue reliance on forward-looking statements. Factors that can cause actual results to differ materially include, but are not limited to, changes in global and local business, economic and political conditions in the countries and territories where Yum! Brands operates, including the effects of war and terrorist activities; changes in currency exchange and interest rates; changes in commodity, labor and other operating costs; changes in competition in the food industry, consumer preferences or perceptions concerning the products of the company and/or our competitors, spending patterns and demographic trends; the impact that any widespread illness or general health concern may have on our business and the economy of the countries in which we operate; the effectiveness of our operating initiatives and marketing, advertising and promotional efforts; new-product and concept development by Yum! Brands and other food-industry competitors; the success of our strategies for refranchising and international development and operations; the ongoing business viability of our franchise and license operators; our ability to secure distribution to our restaurants at competitive rates and to ensure adequate supplies of restaurant products and equipment in our stores; unexpected disruptions in our supply chain; publicity that may impact our business and/or industry; severe weather conditions; effects and outcomes of pending or future legal claims involving the company; changes in effective tax rates; our actuarially determined casualty loss estimates; new legislation and governmental regulations or changes in legislation and regulations and the consequent impact on our business; and changes in accounting policies and practices. Further information about factors that could affect Yum! Brands' financial and other results are included in the company's Forms 10-Q and 10-K, filed with the Securities and Exchange Commission. Yum! Brands Inc., based in Louisville, Kentucky, is the world's largest restaurant company in terms of system restaurants with nearly 34,000 restaurants in more than 100 countries and territories. Four of the company's restaurant brands -- KFC, Pizza Hut, Taco Bell and Long John Silver's -- are the global leaders of the chicken, pizza, Mexican-style food and quick-service seafood categories respectively. Yum! Brands is the worldwide leader in multibranding, which offers consumers more choice and convenience at one restaurant location from a combination of KFC, Taco Bell, Pizza Hut, A&W or Long John Silver's brands. The company and its franchisees today operate over 3,100 multibrand restaurants. Outside the United States in 2004, the Yum! Brands' system opened about three new restaurants each day of the year, making it one of the fastest growing retailers in the world. The company has been recognized in Black Enterprise Magazine as one of the "30 Best Companies for Diversity" and for the past three years in Fortune's "Top 50 Employers for Minorities." Yum! Brands, Inc. Consolidated Summary of Results (amounts in millions, except per share amounts) Quarter % Year to date % ----------------- Change ----------------- Change 9/3/05 9/4/04 B/(W) 9/3/05 9/4/04 B/(W) -------- -------- -------- -------- -------- -------- Total revenues $ 2,243 $ 2,179 3 $ 6,450 $ 6,226 4 Costs and expenses Company restaurant expenses 1,679 1,640 (2) 4,861 4,707 (3) General and administrative expenses 252 250 (1) 751 721 (4) Franchise and license expenses 12 8 (43) 24 16 (44) Facility actions 7 3 NM 22 22 NM Other (income) expense (27) (13) 98 (66) (35) 89 Wrench litigation income (expense) (2) - NM (2) - NM AmeriServe and other charges (credits) - - NM - (14) NM -------- -------- -------- -------- Total costs and expenses 1,921 1,888 (2) 5,590 5,417 (3) -------- -------- -------- -------- Operating profit 322 291 11 860 809 6 Interest expense, net 28 29 (2) 86 96 10 -------- -------- -------- -------- Income before income taxes 294 262 12 774 713 9 Income tax provision 80 77 (3) 212 208 (2) -------- -------- -------- -------- Net income $ 214 $ 185 16 $ 562 $ 505 11 ======== ======== ======== ======== Basic EPS Data - ---------------- EPS $ 0.75 $ 0.64 18 $ 1.95 $ 1.74 12 ======== ======== ======== ======== Average shares outstanding 285 291 2 288 290 1 ======== ======== ======== ======== Diluted EPS Data - ---------------- EPS $ 0.72 $ 0.61 18 $ 1.87 $ 1.66 13 ======== ======== ======== ======== Average shares outstanding 298 305 2 301 305 1 ======== ======== ======== ======== Dividends declared per common share $ - $ - - $ 0.215 $ 0.10 NM ======== ======== ======== ======== See accompanying notes. Wrench litigation and AmeriServe and other charges (credits) have been summed and referred to as "Special Items" throughout this press release. See further discussion in the accompanying Notes. Yum! Brands, Inc. WORLDWIDE Operating Results (amounts in millions) Quarter % Year to date % ----------------- Change ----------------- Change 9/3/05 9/4/04 B/(W) 9/3/05 9/4/04 B/(W) -------- -------- -------- -------- -------- -------- Company sales $ 1,975 $ 1,935 2 $ 5,687 $ 5,528 3 Franchise and license fees 268 244 10 763 698 9 -------- -------- -------- -------- Revenues 2,243 2,179 3 6,450 6,226 4 -------- -------- -------- -------- Company restaurants Food and paper 619 618 - 1,793 1,746 (3) Payroll and employee benefits 499 497 - 1,486 1,470 (1) Occupancy and other operating expenses 561 525 (7) 1,582 1,491 (6) -------- -------- -------- -------- 1,679 1,640 (2) 4,861 4,707 (3) General and administrative expenses 252 250 (1) 751 721 (4) Franchise and license expenses 12 8 (43) 24 16 (44) Facility actions 7 3 NM 22 22 NM Other (income) expense (27) (13) 98 (66) (35) 89 -------- -------- -------- -------- 1,923 1,888 (2) 5,592 5,431 (3) -------- -------- -------- -------- Operating profit before special items 320 291 10 858 795 8 Interest expense, net 28 29 (2) 86 96 10 Income tax provision 79 77 (2) 211 203 (4) -------- -------- -------- -------- Earnings before special items $ 213 $ 185 15 $ 561 $ 496 13 ======== ======== ======== ======== Tax rate before 2.4 1.8 special items 27.0% 29.4% ppts. 27.3% 29.1% ppts. ======== ======== ======== ======== Diluted EPS before special items $ 0.71 $ 0.61 18 $ 1.86 $ 1.63 14 ======== ======== ======== ======== Company sales 100.0% 100.0% 100.0% 100.0% Food and paper 0.6 0.1 31.3 31.9 ppts. 31.5 31.6 ppts. Payroll and employee 0.3 0.4 benefits 25.4 25.7 ppts. 26.2 26.6 ppts. Occupancy and other operating (1.2) (0.8) expenses 28.4 27.2 ppts. 27.8 27.0 ppts. -------- -------- -------- -------- Restaurant (0.3) (0.3) margin 14.9% 15.2% ppts. 14.5% 14.8% ppts. ======== ======== ======== ======== Reconciliation of Segment Operating Profit to Reported Operating Profit - ---------------------------------------------------------------------- U.S. operating profit $ 189 $ 196 (4) $ 541 $ 567 (5) International Division operating profit 89 79 12 273 241 14 China Division operating profit 85 64 32 163 141 15 Unallocated and corporate expense (52) (48) (7) (155) (140) (10) Unallocated other income (expense) (1) (1) NM 15 (4) NM Unallocated facility actions 10 1 NM 21 (10) NM -------- -------- -------- -------- Operating profit before special items 320 291 10 858 795 8 Wrench litigation income (expense) 2 - NM 2 - NM AmeriServe and other (charges) credits - - NM - 14 NM -------- -------- -------- -------- Reported operating profit $ 322 $ 291 11 $ 860 $ 809 6 ======== ======== ======== ======== See accompanying notes and reconciliations of non-GAAP measurements to GAAP results. Yum! Brands, Inc. UNITED STATES Operating Results (amounts in millions) Quarter % Year to date % ----------------- Change ----------------- Change 9/3/05 9/4/04 B/(W) 9/3/05 9/4/04 B/(W) -------- -------- -------- -------- -------- -------- Company sales $ 1,239 $ 1,225 1 $ 3,678 $ 3,599 2 Franchise and license fees 154 144 7 435 416 4 -------- -------- -------- -------- Revenues 1,393 1,369 2 4,113 4,015 2 -------- -------- -------- -------- Company restaurants Food and paper 368 371 1 1,105 1,069 (3) Payroll and employee benefits 365 366 - 1,099 1,099 - Occupancy and other operating expenses 332 314 (5) 960 917 (5) -------- -------- -------- -------- 1,065 1,051 (1) 3,164 3,085 (3) General and administrative expenses 117 115 (2) 355 347 (3) Franchise and license expenses 9 7 (31) 18 11 (59) Facility actions 13 - NM 35 5 NM -------- -------- -------- -------- 1,204 1,173 (3) 3,572 3,448 (4) -------- -------- -------- -------- Operating profit $ 189 $ 196 (4) $ 541 $ 567 (5) ======== ======== ======== ======== Company sales 100.0% 100.0% 100.0% 100.0% Food and paper 0.7 (0.3) 29.6 30.3 ppts. 30.0 29.7 ppts. Payroll and employee 0.3 0.6 benefits 29.6 29.9 ppts. 29.9 30.5 ppts. Occupancy and other operating (1.1) (0.6) expenses 26.8 25.7 ppts. 26.1 25.5 ppts. -------- -------- -------- -------- Restaurant (0.1) (0.3) margin 14.0% 14.1% ppts. 14.0% 14.3% ppts. ======== ======== ======== ======== See accompanying notes. Yum! Brands, Inc. INTERNATIONAL DIVISION Operating Results (amounts in millions) Quarter % Year to date % ----------------- Change ----------------- Change 9/3/05 9/4/04 B/(W) 9/3/05 9/4/04 B/(W) -------- -------- -------- -------- -------- -------- Company sales $ 387 $ 420 (8) $ 1,165 $ 1,229 (5) Franchise and license fees 103 89 16 301 256 17 -------- -------- -------- -------- Revenues 490 509 (4) 1,466 1,485 (1) -------- -------- -------- -------- Company restaurants Food and paper 128 141 10 384 416 8 Payroll and employee benefits 92 99 7 279 292 4 Occupancy and other operating expenses 118 123 3 352 357 1 -------- -------- -------- -------- 338 363 7 1,015 1,065 5 General and administrative expenses 60 67 10 184 186 1 Franchise and license expenses 3 1 NM 6 5 (9) Facility actions 4 4 NM 6 6 NM Other (income) expense (4) (5) (46) (18) (18) 5 -------- -------- -------- -------- 401 430 6 1,193 1,244 4 -------- -------- -------- -------- Operating profit $ 89 $ 79 12 $ 273 $ 241 14 ======== ======== ======== ======== Company sales 100.0% 100.0% 100.0% 100.0% Food and paper 0.7 0.9 33.1 33.8 ppts. 33.0 33.9 ppts. Payroll and employee (0.2) (0.2) benefits 23.7 23.5 ppts. 23.9 23.7 ppts. Occupancy and other operating (1.3) (1.1) expenses 30.5 29.2 ppts. 30.2 29.1 ppts. -------- -------- -------- -------- Restaurant (0.8) (0.4) margin 12.7% 13.5% ppts. 12.9% 13.3% ppts. ======== ======== ======== ======== See accompanying notes. Yum! Brands, Inc. CHINA DIVISION Operating Results (amounts in millions) Quarter % Year to date % ----------------- Change ----------------- Change 9/3/05 9/4/04 B/(W) 9/3/05 9/4/04 B/(W) -------- -------- -------- -------- -------- -------- Company sales $ 349 $ 290 20 $ 844 $ 700 20 Franchise and license fees 11 11 11 27 26 12 -------- -------- -------- -------- Revenues 360 301 20 871 726 20 -------- -------- -------- -------- Company restaurants Food and paper 123 106 (17) 304 261 (16) Payroll and employee benefits 42 32 (30) 108 79 (37) Occupancy and other operating expenses 111 88 (27) 270 217 (25) -------- -------- -------- -------- 276 226 (23) 682 557 (23) General and administrative expenses 23 20 (12) 57 48 (18) Franchise and license expenses - - - - - - Facility actions - - NM 2 1 NM Other (income) expense (24) (9) NM (33) (21) 47 -------- -------- -------- -------- 275 237 (16) 708 585 (22) -------- -------- -------- -------- Operating profit $ 85 $ 64 32 $ 163 $ 141 15 ======== ======== ======== ======== Company sales 100.0% 100.0% 100.0% 100.0% Food and paper 1.0 1.3 35.4 36.4 ppts. 36.0 37.3 ppts. Payroll and employee (0.9) (1.6) benefits 12.0 11.1 ppts. 12.8 11.2 ppts. Occupancy and other operating (1.7) (1.1) expenses 32.0 30.3 ppts. 32.0 30.9 ppts. -------- -------- -------- -------- Restaurant (1.6) (1.4) margin 20.6% 22.2% ppts. 19.2% 20.6% ppts. ======== ======== ======== ======== See accompanying notes. China Division includes mainland China, Thailand and KFC Taiwan. Yum! Brands, Inc. Condensed Consolidated Balance Sheets (amounts in millions) 9/3/05 12/25/04 -------- ---------- ASSETS Current Assets Cash and cash equivalents $ 263 $ 62 Short-term investments 89 54 Accounts and notes receivable, less allowance: $22 in 2005 and 2004 227 192 Inventories 74 76 Prepaid expenses and other current assets 81 142 Deferred income taxes 157 156 Advertising cooperative assets, restricted 76 65 -------- ---------- Total Current Assets 967 747 Property, plant and equipment, net of accumulated depreciation and amortization of $2,799 in 2005 and $2,618 in 2004 3,373 3,439 Goodwill 545 553 Intangible assets, net 337 347 Investments in unconsolidated affiliates 190 194 Other assets 462 416 -------- ---------- Total Assets $ 5,874 $ 5,696 ======== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable and other current liabilities $ 1,240 $ 1,189 Income taxes payable 136 111 Short-term borrowings 213 11 Advertising cooperative liabilities 76 65 -------- ---------- Total Current Liabilities 1,665 1,376 Long-term debt 1,590 1,731 Other liabilities and deferred credits 1,019 994 -------- ---------- Total Liabilities 4,274 4,101 -------- ---------- Shareholders' Equity Preferred stock, no par value, 250 shares authorized; no shares issued - - Common stock, no par value, 750 shares authorized; 284 shares and 290 shares issued in 2005 and 2004, respectively 174 659 Retained earnings 1,573 1067 Accumulated other comprehensive loss (147) (131) -------- ---------- Total Shareholders' Equity 1,600 1,595 -------- ---------- Total Liabilities and Shareholders' Equity $ 5,874 $ 5,696 ======== ========== See accompanying notes. Yum! Brands, Inc. Condensed Consolidated Statements of Cash Flows (amounts in millions) Year to date ----------------- 9/3/05 9/4/04 -------- -------- Cash Flows - Operating Activities Net income $ 562 $ 505 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 319 302 Facility actions 22 22 Other liabilities and deferred credits 25 (30) Deferred income taxes (66) 28 Other non-cash charges and credits, net (16) 22 Changes in operating working capital, excluding effects of acquisitions and dispositions: Accounts and notes receivable (22) (12) Inventories 7 (5) Prepaid expenses and other current assets 70 (19) Accounts payable and other current liabilities 54 27 Income taxes payable 86 (49) -------- -------- Net change in operating working capital 195 (58) -------- -------- Net Cash Provided by Operating Activities 1,041 791 -------- -------- Cash Flows - Investing Activities Capital spending (362) (383) Proceeds from refranchising of restaurants 79 14 Acquisition of restaurants from franchisees - (38) Short-term investments (32) (46) Sales of property, plant and equipment 25 32 Other, net 41 30 -------- -------- Net Cash Used in Investing Activities (249) (391) -------- -------- Cash Flows - Financing Activities Revolving Credit Facility activity, by original maturity Three months or less, net 78 - Repayments of long-term debt (11) (9) Short-term borrowings-three months or less, net (32) - Repurchase shares of common stock (678) (294) Employee stock option proceeds 113 127 Dividends paid on common shares (91) (29) -------- -------- Net Cash Used in Financing Activities (621) (205) -------- -------- Effect of Exchange Rates on Cash and Cash Equivalents (4) - -------- -------- Net Increase in Cash and Cash Equivalents 167 195 Net Increase in Cash and Cash Equivalents of the China Division for December 2004 34 - Cash and Cash Equivalents - Beginning of Period 62 192 -------- -------- Cash and Cash Equivalents - End of Period $ 263 $ 387 ======== ======== See accompanying notes. Reconciliation of Non-GAAP Measurements to GAAP Results (amounts in millions, except per share amounts) In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") throughout this document, the Company has provided non-GAAP measurements which present operating results on a basis before special items. Special items include the GAAP income statement captions of Wrench litigation and AmeriServe and other charges (credits). These amounts are described in (f) and (g) in the accompanying notes. The Company uses earnings before special items as a key performance measure of results of operations for purposes of evaluating performance internally. This non-GAAP measurement is not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of earnings before special items provides additional information to facilitate the comparison of past and present operations, excluding items that the Company does not believe are indicative of our ongoing operations. Quarter Year to date ----------------- ----------------- 9/3/05 9/4/04 9/3/05 9/4/04 -------- -------- -------- -------- Detail of Special Items - ---------------------------------- Wrench litigation income (expense) $ 2 $ - $ 2 $ - AmeriServe and other (charges) credits - - - 14 -------- -------- -------- -------- Total special items 2 - 2 14 Tax on special items (1) - (1) (5) -------- -------- -------- -------- Special items, net of tax $ 1 $ - $ 1 $ 9 ======== ======== ======== ======== Average shares outstanding 298 305 301 305 ======== ======== ======== ======== Special items diluted EPS $ 0.01 $ - $ 0.01 $ 0.03 ======== ======== ======== ======== Reconciliation of Earnings Before Special Items to Net Income - ---------------------------------- Earnings before special items $ 213 $ 185 $ 561 $ 496 Special items, net of tax 1 - 1 9 -------- -------- -------- -------- Net income $ 214 $ 185 $ 562 $ 505 ======== ======== ======== ======== Reconciliation of EPS Before Special Items to Reported EPS - ---------------------------------- Diluted EPS before special items $ 0.71 $ 0.61 $ 1.86 $ 1.63 Special items EPS 0.01 - 0.01 0.03 -------- -------- -------- -------- Reported EPS $ 0.72 $ 0.61 $ 1.87 $ 1.66 ======== ======== ======== ======== 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) In 2005, we began reporting information for our international business in two separate operating segments as a result of changes to our management structure. The China Division includes mainland China ("China"), Thailand and KFC Taiwan, and the International Division includes the remainder of our international operations. While this reporting change did not impact our consolidated results, segment information for previous periods has been restated to be consistent with the current period presentation. In 2005, we also changed the China business reporting calendar to more closely align the timing of the reporting of its results of operations with our U.S. business. Previously our China business, like the rest of our international businesses, closed one month (or one period for certain of our international businesses) earlier than YUM's period end date to facilitate consolidated reporting. To maintain comparability of our consolidated results of operations, net income of the China business of $6 million for the one month period ended December 31, 2004 was recognized as an adjustment to consolidated retained earnings in the year to date ended September 3, 2005, as opposed to being recorded in our Consolidated Statement of Income. Our consolidated results of operations for the quarter and year to date ended September 3, 2005 include the results of operations of the China business for the months of June, 2005 through August, 2005 and January, 2005 through August, 2005, respectively, and the months to be included in future quarterly reporting periods will begin one month later than in previous years. Our consolidated results of operations for the quarter and year to date ended September 4, 2004 continue to include the results of operations of the China business for the months of May, 2004 through July, 2004 and December, 2003 through July, 2004, respectively. (c) Franchisee sales represent the combined estimated sales of unconsolidated affiliate, franchise and license restaurants. Franchisee sales, which are not included in the Company sales we present on the Consolidated Statements of Income, generate franchise and license fees (typically at a rate of 4% to 6% of sales) that are included in the Company's revenues. Quarter % Year to date % ----------------- Change ----------------- Change 9/3/05 9/4/04 B/(W) 9/3/05 9/4/04 B/(W) -------- -------- -------- -------- -------- -------- United States Company sales $ 1,239 $ 1,225 1 $ 3,678 $ 3,599 2 Franchisee sales 2,999 2,832 6 8,530 8,145 5 International Division Company sales $ 387 $ 420 (8) $ 1,165 $ 1,229 (5) Franchisee sales 1,959 1,767 11 5,841 5,153 13 China Division Company sales $ 349 $ 290 20 $ 844 $ 700 20 Franchisee sales 189 165 15 451 406 11 Worldwide Company sales $ 1,975 $ 1,935 2 $ 5,687 $ 5,528 3 Franchisee sales 5,147 4,764 8 14,822 13,704 8 (d) Facility actions included the following: Quarter Year to date ----------------- ----------------- 9/3/05 9/4/04 9/3/05 9/4/04 -------- -------- -------- -------- Store closure costs $ 5 $ 2 $ 4 $ (3) Asset impairment charges 12 2 39 15 Refranchising net loss (gain) (10) (1) (21) 10 -------- -------- -------- -------- Facility actions $ 7 $ 3 $ 22 $ 22 ======== ======== ======== ======== Asset impairment charges in the quarter ended September 3, 2005 primarily resulted from decisions to close certain KFC and LJS restaurants. (e) Other (income) expense includes equity income from investments in unconsolidated affiliates. In the quarter and year to date ended September 3, 2005 other (income) expense also includes a partial financial recovery of $14 million related to a China supplier ingredient issue. In the year to date ended September 3, 2005 other (income) expense also includes a $17 million gain associated with the IPO of our Poland/Czech Republic business. (f) Income of $2 million was recorded for the quarter and year to date ended September 3, 2005 from a settlement with an insurance carrier related to the legal judgment against Taco Bell Corp. on June 4, 2003, in Wrench v. Taco Bell Corp. (g) Amounts recorded as AmeriServe and other charges (credits) primarily result from cash recoveries related to the AmeriServe bankruptcy reorganization process, which were not significant for both the quarter and year to date ended September 3, 2005. (h) For the quarter and year to date ended September 3, 2005, we repurchased approximately 3.8 million shares and 13.6 million shares of our Common Stock, respectively, at an average price of $50 per share for both quarter and year to date. Yum! Brands, Inc. Restaurant Units Activity Summary Total Unconsolidated Excluding Company Affiliates Franchisees Licensees(a) ------- -------------- ----------- ------------ Total U.S. Beginning of Year 4,989 - 13,482 18,471 New Builds 58 - 161 219 Acquisitions - - - - Refranchising (128) - 126 (2) Closures (127) - (244) (371) Other (10) - 5 (5) ------- -------------- ----------- ------------ End of Quarter 4,782 - 13,530 18,312 ======= ============== =========== ============ % of Total 26% - 74% 100% Total International Division Beginning of Year 1,504 1,204 8,179 10,887 New Builds 27 28 348 403 Acquisitions - - - - Refranchising (77) (128) 205 - Closures (24) (24) (189) (237) Other (5) - 18 13 ------- -------------- ----------- ------------ End of Quarter 1,425 1,080 8,561 11,066 ======= ============== =========== ============ % of Total 13% 10% 77% 100% Total China Division Beginning of Year(b) 1,266 460 198 1,924 New Builds 184 60 8 252 Acquisitions - - - - Refranchising - - - - Closures (16) (5) - (21) Other - - 4 4 ------- -------------- ----------- ------------ End of Quarter(c) 1,434 515 210 2,159 ======= ============== =========== ============ % of Total 66% 24% 10% 100% Total Worldwide Beginning of Year 7,759 1,664 21,859 31,282 New Builds 269 88 517 874 Acquisitions - - - - Refranchising (205) (128) 331 (2) Closures (167) (29) (433) (629) Other (15) - 27 12 ------- -------------- ----------- ------------ End of Quarter 7,641 1,595 22,301 31,537 ======= ============== =========== ============ % of Total 24% 5% 71% 100% (a) The total excludes 2,177 U.S. and 194 International Division licensee units. There are no licensed units in the China Division. The U.S. licensee unit count includes 1,270 Pizza Huts, 822 Taco Bells and 85 KFCs. The International Division licensee unit count includes 92 Pizza Huts, 60 KFCs, 41 Taco Bells and 1 Long John Silver's. (b) Beginning of the year balances have been adjusted to include December activity in mainland China due to the change in its reporting calendar. The net change was an addition of 16, 2, 1 and 19 units for company, unconsolidated affiliates, franchisees and total excluding licensees, respectively. (c) The totals include 3 Company-owned Taco Bell Grandes and 2 Company-owned East Dawning units. Yum! Brands, Inc. Restaurant Units Activity Summary United States - ---------------------------------------------------------------------- Total Excluding Company Franchisees Licensees ------- ----------- --------- Pizza Hut Beginning of Year 1,741 4,565 6,306 New Builds 23 52 75 Acquisitions - - - Refranchising (60) 60 - Closures (32) (82) (114) Other - - - ------- ----------- --------- End of Quarter 1,672 4,595 6,267 ======= =========== ========= % of Total 27% 73% 100% KFC Beginning of Year 1,248 4,202 5,450 New Builds 6 55 61 Acquisitions - - - Refranchising (7) 7 - Closures (46) (77) (123) Other (10) 5 (5) ------- ----------- --------- End of Quarter 1,191 4,192 5,383 ======= =========== ========= % of Total 22% 78% 100% Taco Bell Beginning of Year 1,283 3,747 5,030 New Builds 12 43 55 Acquisitions - - - Refranchising (40) 38 (2) Closures (15) (42) (57) Other - - - ------- ----------- --------- End of Quarter 1,240 3,786 5,026 ======= =========== ========= % of Total 25% 75% 100% Long John Silver's Beginning of Year 700 500 1,200 New Builds 17 8 25 Acquisitions - - - Refranchising (21) 21 - Closures (32) (15) (47) Other - - - ------- ----------- --------- End of Quarter 664 514 1,178 ======= =========== ========= % of Total 56% 44% 100% A&W Beginning of Year 17 468 485 New Builds - 3 3 Acquisitions - - - Refranchising - - - Closures (2) (28) (30) Other - - - ------- ----------- --------- End of Quarter 15 443 458 ======= =========== ========= % of Total 3% 97% 100% Yum! Brands, Inc. Restaurant Units Activity Summary International Division - ---------------------------------------------------------------------- Total Unconsolidated Excluding Company Affiliates Franchisees Licensees ------- -------------- ----------- --------- KFC Beginning of Year 726 439 4,854 6,019 New Builds 21 13 178 212 Acquisitions - - - - Refranchising (1) (86) 87 - Closures (8) (12) (93) (113) Other (1) 1 6 6 ------- -------------- ----------- --------- End of Quarter 737 355 5,032 6,124 ======= ============== =========== ========= % of Total 12% 6% 82% 100% Pizza Hut Beginning of Year 766 765 2,903 4,434 New Builds 6 15 146 167 Acquisitions - - - - Refranchising (67) (42) 109 - Closures (16) (12) (78) (106) Other (4) (1) 9 4 ------- -------------- ----------- --------- End of Quarter 685 725 3,089 4,499 ======= ============== =========== ========= % of Total 15% 16% 69% 100% A&W Beginning of Year - - 209 209 New Builds - - 16 16 Acquisitions - - - - Refranchising - - - - Closures - - (13) (13) Other - - - - ------- -------------- ----------- --------- End of Quarter - - 212 212 ======= ============== =========== ========= % of Total - - 100% 100% Taco Bell Beginning of Year 12 - 180 192 New Builds - - 6 6 Acquisitions - - - - Refranchising (9) - 9 - Closures - - (3) (3) Other - - 3 3 ------- -------------- ----------- --------- End of Quarter 3 - 195 198 ======= ============== =========== ========= % of Total 2% - 98% 100% Long John Silver's Beginning of Year - - 33 33 New Builds - - 2 2 Acquisitions - - - - Refranchising - - - - Closures - - (2) (2) Other - - - - ------- -------------- ----------- --------- End of Quarter - - 33 33 ======= ============== =========== ========= % of Total - - 100% 100% Yum! Brands, Inc. Restaurant Units Activity Summary China Division - ---------------------------------------------------------------------- Total Unconsolidated Excluding Company Affiliates Franchisees Licensees ------- -------------- ----------- --------- KFC Beginning of Year 1,039 460 175 1,674 New Builds 140 60 7 207 Acquisitions - - - - Refranchising - - - - Closures (13) (5) - (18) Other - - 4 4 ------- -------------- ----------- --------- End of Quarter 1,166 515 186 1,867 ======= ============== =========== ========= % of Total 62% 28% 10% 100% Pizza Hut Beginning of Year 224 - 23 247 New Builds 41 - 1 42 Acquisitions - - - - Refranchising - - - - Closures (2) - - (2) Other - - - - ------- -------------- ----------- --------- End of Quarter 263 - 24 287 ======= ============== =========== ========= % of Total 92% - 8% 100% China Division includes mainland China, Thailand and KFC Taiwan. Yum! Brands, Inc. United States Multibrand Restaurants United States(a) ----------------------------------- Multibrand Restaurants in Operation at 9/3/05 ------------------------ Gross Additions Year to Date 9/3/05 Company Franchise Total ---------- ------- --------- ------ KFC Taco Bell 3 179 500 679 A&W 16 116 204 320 Long John Silver's 45 66 108 174 Pizza Hut - 96 47 143 Taco Bell/Pizza Hut 3 n 1 - 19 24 43 Wing Works - 25 1 26 ---------- ------- --------- ------ 64 501 884 1,385 Taco Bell Pizza Hut 2 315 270 585 Long John Silver's 21 68 42 110 A&W - 2 - 2 ---------- ------- --------- ------ 23 385 312 697 Pizza Hut WingStreet 209 512 27 539 ---------- ------- --------- ------ Long John Silver's A&W 29 183 114 297 ---------- ------- --------- ------ Total 325 1,581 1,337 2,918 ========== ======= ========= ====== Multibrand conversions increase the sales and points of distribution for the second brand added to a restaurant but do not result in an additional unit count. Similarly, a new multibrand restaurant, while increasing sales and points of distribution for two brands, results in just one additional unit count. (a) Amounts do not reflect 189 International Division multibrand units in operation at the end of the period. There are no multibrand units in the China Division. CONTACT: Yum! Brands Inc. Analysts are invited to contact: Tim Jerzyk, Vice President Investor Relations, 888-298-6986 or Quan Nghe, Director Investor Relations, 888-298-6986 or Members of the media are invited to contact: Amy Sherwood, Vice President Public Relations, 502-874-8200 -----END PRIVACY-ENHANCED MESSAGE-----