Kentucky Fried Chicken 2005 Annual Report Download

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yum!
world฀of
2005฀Annual฀Customer฀Mania฀Report
A

Table of contents

  • Page 1
    yum! 2005฀Annual฀Customer฀Mania฀Report world฀of A

  • Page 2
    ... 5% TABLE฀OF฀CONTENTS 1-6฀ 7฀ 8-11฀ Dear฀Partners The฀Yum!฀Dynasty฀Model A฀World฀of฀Opportunity:฀China 25-27฀ A฀World฀of฀Customer฀Mania 28-29฀ A฀World฀of฀Choice฀ 30-32฀ A฀World฀of฀Results:฀Financial฀Review 33-84฀ Financials 81฀ 82฀ 83...

  • Page 3
    ...฀value฀in฀the฀retail฀category:฀(1)฀solid฀and฀improving฀same฀store฀sales฀growth,฀ +4%฀in฀the฀U.S.,฀(2)฀consistent฀new฀unit฀expansion,฀setting฀a฀record฀of฀1,554฀new฀openings฀around฀the฀world฀ and฀(3)฀best฀in฀class฀return...

  • Page 4
    ... the฀ time฀ constrained฀ customer.฀We฀are฀on฀the฀forefront฀of฀this฀trend฀with฀our฀ pizza฀delivery฀service.฀Our฀team฀is฀also฀energized฀by฀the฀ early฀consumer฀acceptance฀of฀East฀Dawning,฀which฀is฀a฀ Chinese฀fast฀food฀concept฀we...

  • Page 5
    ...to฀develop฀ new฀ markets,฀ with฀ a฀ particular฀ focus฀ on฀ building฀ local฀ capability฀ in฀ India,฀ Russia฀ and฀ Continental฀ Europe.฀ In฀ India,฀we฀are฀already฀the฀fastest฀growing฀restaurant฀company.฀ Pizza฀ Hut฀ is฀ the฀ number฀ one...

  • Page 6
    ...฀ operating฀ capability฀ from฀one฀of฀Russia's฀top฀food฀service฀companies฀led฀by฀ Rostislav฀Ordovsky.฀By฀the฀way,฀it฀took฀us฀over฀10฀years฀ to฀ develop฀ 100฀ restaurants฀ in฀ China฀ and฀ India,฀ so฀ our฀ Russian฀move฀definitely...

  • Page 7
    ...Own฀ Variety฀Bucket.฀The฀team฀is฀dedicated฀to฀be฀the฀chicken฀ leader฀and฀bring฀more฀and฀more฀news฀to฀strengthen฀our฀ Chicken฀Capital฀U.S.A.฀position. Significantly,฀both฀Taco฀Bell฀and฀KFC฀achieved฀record฀ sales฀during฀a฀time฀of...

  • Page 8
    ...฀defined฀as฀delivering฀ our฀customers฀100%฀CHAMPS฀with฀a฀"Yes"฀attitude฀every฀ single฀time.฀We've฀made฀progress฀by฀investing฀more฀in฀ management฀ and฀ team฀ member฀ training,฀ new฀ point฀ of฀ sale฀and฀back฀of฀house฀systems,฀but...

  • Page 9

  • Page 10
    ...had฀to฀build฀everything฀from฀scratch. Today,฀the฀power฀of฀Yum!฀Restaurants฀China฀has฀never฀been฀฀ more฀evident.฀In฀2005฀we฀opened฀up฀a฀record฀400+฀new฀units.฀ This฀makes฀us,฀by฀far,฀the฀largest฀restaurant฀company฀with฀over...

  • Page 11
    ...any retailer in the world - that's the power of Yum! China. Our bold goal is clear: Build dominant restaurant brands in every significant category. In addition to KFC and Pizza Hut casual dining, we've developed Pizza Hut Home Service Delivery and our Chinese fast food concept, East Dawning. We have...

  • Page 12
    ... to unit expansion and partly to innovative marketing calendars which boosted sales across each of the brands. The consistent track record of growth, together with the broad base of our global business, inspires huge confidence for the future. This is the sixth successive year of 700+ new units and...

  • Page 13
    ... and the Middle East to emerging market s like Rus sia, India and Continental Europe, Yum ! Restaurant s International is driving profitable new unit development. In 2005, we opened 780 new unit s acros s six continent s and we're committed going for ward to adding 700 new unit s each year- and do...

  • Page 14
    .... With leadership positions in the chicken, pizza, Mexican-style food and quick-service seafood categories, we continue to show the world the power of our portfolio. We have individual management teams focused on making each brand more and more powerful every year by building even more relevance...

  • Page 15
    ...the history of Kentucky Fried Chicken! We ended the year with 14 consecutive periods of same store sales growth and three record-setting weeks. From Sunday dinner to tailgating parties and family picnics, we gave customers the great home-cooked taste of KFC no matter where they were. Early last year...

  • Page 16
    Think Outside the Bun!® Open

  • Page 17
    Gather 'Round the Good Stuff®

  • Page 18
    Chicken Capital USAâ„¢

  • Page 19
    Yarr, Genius!â„¢

  • Page 20
    Hometown Food Made Fun!â„¢

  • Page 21
    ...฀restaurant฀company฀-฀every฀ customer,฀every฀time. As฀Customer฀Maniacs,฀we're฀committed฀to฀executing฀฀ the฀basics฀-฀CHAMPS฀-฀our฀core฀program฀for฀training,฀ measuring฀and฀rewarding฀employee฀performance฀against฀ key฀customer฀metrics...

  • Page 22
    ...pays฀ off฀-฀delivering฀consistently฀high฀ CHAMPS฀averages฀and฀same฀store฀ sales฀growth฀of฀7%.฀Tim฀says฀he฀succeeds฀by฀"stressing฀FUN฀and฀taking฀ Customer฀Mania฀to฀the฀limit." A&W฀฀ ALL฀AMERICAN฀FOOD฀ North฀Aurora,฀Illinois Make...

  • Page 23
    ...฀ restaurant's฀business฀being฀drivethru,฀Lori฀has฀come฀up฀with฀"hints"฀ to฀help฀her฀team฀keep฀up฀its฀speed฀ of฀service฀-฀like฀only฀open฀the฀ drive-thru฀window฀once,฀with฀drink฀ in฀hand฀ready฀for฀the฀customer.฀ That฀type฀of...

  • Page 24
    ...:฀To฀be฀the฀best฀in฀the฀world฀at฀providing฀customers฀ branded฀restaurant฀choice฀and฀convenience.฀ Today,฀not฀only฀can฀we฀get฀higher฀unit฀volumes฀from฀our฀ multibranded฀restaurants,฀they฀allow฀us฀to฀open฀new฀฀ restaurants฀in...

  • Page 25
    3000+ multibrand฀units฀฀ in฀the฀U.S. Multibrand฀units฀฀ make฀up฀more฀฀ than฀17%฀of฀our฀total฀฀ restaurant฀base฀฀ in฀the฀U.S. NEW฀multibrand฀฀ units฀in฀2005 500+

  • Page 26
    ...demonstrated฀the฀power฀of฀Yum!'s฀global฀portfolio.฀In฀2005,฀we฀had฀sales฀issues฀in฀China฀and฀ high฀U.S.฀commodity฀cost฀increases฀during฀the฀first฀half฀of฀the฀year.฀Despite฀this,฀EPS฀grew฀13%.฀We฀ were฀able฀to฀achieve฀these...

  • Page 27
    ...'s฀ A&W฀ Total฀International฀ CHINA KFC฀ Pizza฀Hut฀ Taco฀Bell฀ Total฀China(a)฀ Total(a)฀ (a)฀Includes฀3฀units฀in฀2005฀for฀an฀Asian฀food฀concept฀in฀China. Company฀ ฀ Unconsolidated฀฀ Affiliate฀ Franchised฀ Licensed฀ Total 1,155...

  • Page 28
    Yum!฀at฀a฀glance U.S.฀SALES฀ BY฀DAYPART฀ BY฀DISTRIBUTION฀CHANNEL ฀Dinner฀55%฀ ฀Lunch฀37% ฀Snacks/Breakfast฀8% Dine฀Out฀80% Dine฀In฀20% ฀Dinner฀63%฀ ฀Lunch฀28% ฀Snacks/Breakfast฀9% Dine฀Out฀75% Dine฀In฀25% ฀Dinner฀40%฀ ฀...

  • Page 29
    ...฀A&W฀All-American฀Food฀Restaurants฀("A&W")฀ (collectively฀"the฀Concepts")฀and฀is฀the฀world's฀largest฀quick฀ service฀restaurant฀("QSR")฀company฀based฀on฀the฀number฀of฀ system฀units.฀LJS฀and฀A&W฀were฀added฀when฀YUM฀acquired฀ Yorkshire...

  • Page 30
    ...฀all฀ quarters฀relative฀to฀actual฀number฀of฀days฀in฀the฀quarter. U.S.฀ Quarter฀ended฀March฀19,฀2005 Inter-฀ national฀ ฀ China฀ Unallo-฀ cated฀ Total Payroll฀and฀฀ ฀ employee฀benefits฀ General฀and฀฀ ฀ administrative฀ Operating...

  • Page 31
    ...week฀in฀December฀2005,฀and฀thus,฀there฀was฀ no฀53rd฀week฀benefit฀for฀this฀business.฀Additionally,฀all฀China฀ Mainland฀ China฀ Issues฀ Our฀ KFC฀ business฀ in฀ mainland฀ China฀was฀negatively฀impacted฀by฀the฀interruption฀of฀product...

  • Page 32
    ...฀ quarter฀ of฀ 2005,฀ Hurricane฀ Katrina฀ caused฀ significant฀ damage฀ to฀ several฀ company฀ and฀ franchised฀ stores.฀ This฀ storm฀ resulted฀ in฀ approximately฀$4฀million฀of฀one-time฀costs฀being฀recorded฀ in฀the฀full฀year฀from฀property...

  • Page 33
    ...฀of฀refranchising฀and฀Company฀store฀closures: ฀ ฀ 2005฀ Decreased฀sales฀฀ Increased฀franchise฀fees฀฀ Decrease฀in฀total฀revenues฀ ฀ ฀ ฀ Inter-฀ ฀ national฀฀ China฀฀ U.S.฀ Division฀ Division฀ World-฀ wide $฀(240)฀ $฀(263...

  • Page 34
    ...฀units฀at฀the฀ end฀of฀2005฀and฀2004,฀respectively. ฀ ฀ China฀Division฀ ฀ ฀ Company฀ Uncon-฀ ฀ Total฀ solidated฀ ฀ Excluding฀ Affiliates฀Franchisees฀ Licensees Balance฀at฀end฀of฀2003฀ New฀Builds฀ Acquisitions฀ Refranchising฀ Closures...

  • Page 35
    ...฀our฀business฀as฀it฀incorporates฀all฀of฀our฀revenue฀ drivers,฀Company฀and฀franchise฀same฀store฀sales฀as฀well฀as฀ net฀unit฀development. The฀increase฀in฀Worldwide฀system฀sales฀in฀2005฀and฀ 2004฀was฀driven฀by฀new฀unit฀development...

  • Page 36
    ...฀increase฀in฀China฀ Division฀franchise฀and฀license฀fees฀was฀primarily฀driven฀by฀ new฀unit฀development. 2004฀ Company฀sales฀ 100.0%฀ 100.0%฀ 100.0%฀ 100.0% Food฀and฀paper฀ 29.9฀ 33.8฀ 37.1฀ 31.8 Payroll฀and฀employee฀฀ ฀ benefits฀ 30...

  • Page 37
    ...฀by฀a฀68฀basis฀point฀unfavorable฀impact฀of฀operating฀certain฀restaurants฀in฀Canada,฀which฀is฀a฀market฀with฀ below฀average฀margins,฀that฀were฀previously฀operated฀by฀our฀ unconsolidated฀affiliate. In฀ 2005,฀ China฀ Division฀ restaurant...

  • Page 38
    ...฀sales฀growth฀on฀restaurant฀profit฀and฀franchise฀and฀ license฀fees,฀new฀unit฀development฀and฀higher฀income฀from฀ our฀investments฀in฀unconsolidated฀affiliates,฀partially฀offset฀ by฀higher฀general฀and฀administrative฀costs. China฀Division...

  • Page 39
    ...฀ recorded฀in฀the฀year฀ended฀December฀27,฀2003฀due฀to฀the฀ adoption฀of฀SFAS฀143. The฀2005฀effective฀tax฀rate฀decreased฀2.1฀percentage฀ points฀to฀25.8%.฀The฀decrease฀in฀the฀effective฀tax฀rate฀was฀ driven฀by฀a฀number฀of...

  • Page 40
    ...million฀and฀sales฀ of฀ property,฀ plant฀ and฀ equipment฀ will฀ be฀ approximately฀ $50฀million. In฀November฀2005,฀the฀Board฀of฀Directors฀authorized฀฀ a฀new฀share฀repurchase฀program฀for฀up฀to฀$500฀million฀of฀ the฀Company's฀outstanding...

  • Page 41
    ...Company's฀ historical฀refranchising฀programs฀and,฀to฀a฀lesser฀extent,฀franchisee฀ development฀ of฀ new฀ restaurants฀ at฀ December฀31,฀ 2005...are฀self-insured.฀The฀majority฀of฀ our฀recorded฀liability฀for฀self-insured฀employee฀health,฀longterm฀...

  • Page 42
    ... price฀ a฀ willing฀ buyer฀ would฀ pay฀ for฀ the฀ reporting฀ unit,฀ and฀is฀generally฀estimated฀by฀discounting฀expected฀future฀ cash฀ï¬,ows฀from฀the฀reporting฀unit฀over฀twenty฀years฀plus฀an฀ expected฀terminal฀value. We฀ have฀ recorded...

  • Page 43
    ...฀given฀the฀composition฀of฀our฀plan฀assets฀ and฀historical฀market฀returns฀thereon,฀including฀those฀experienced฀in฀calendar฀year฀2005.฀This฀change฀did฀not฀impact฀ our฀reported฀pension฀expense฀for฀2005฀but฀will฀increase฀our฀ 2006...

  • Page 44
    ...with฀ interest฀ rates,฀ foreign฀ currency฀ exchange฀ rates฀ and฀ commodity฀ prices.฀ In฀ the฀ normal฀ course฀ of฀ business฀ and฀in฀accordance฀with฀our฀policies,฀we฀manage฀these฀risks฀ through฀a฀variety฀of฀strategies,฀which฀may฀include...

  • Page 45
    ...฀in฀laws฀and฀regulations฀and฀the฀consequent฀ impact฀on฀our฀business;฀new฀product฀and฀concept฀development฀by฀us฀and/or฀our฀food฀industry฀competitors;฀changes฀ in฀commodity,฀labor,฀and฀other฀operating฀costs;฀changes฀in฀ competition...

  • Page 46
    ...฀Standards฀Board's฀Statement฀of฀Financial฀Accounting฀Standards฀No.฀123R฀(Revised฀ 2004),฀"Share-Based฀Payment,"฀and฀changed฀its฀method฀for฀accounting฀for฀share-based฀payments. KPMG฀LLP Louisville,฀Kentucky March฀2,฀2006 50 Yum!฀Brands,฀Inc.

  • Page 47
    ...,฀included฀in฀the฀accompanying฀Management's฀Report฀on฀Internal฀ Control฀over฀Financial฀Reporting,฀appearing฀on฀page฀53฀of฀the฀Company's฀Annual฀Report฀for฀the฀fi ฀scal฀year฀ended฀ December฀31,฀2005,฀that฀YUM!฀Brands,฀Inc.฀and...

  • Page 48
    ...including฀an฀active฀Code฀of฀Conduct฀program฀ intended฀to฀ensure฀employees฀adhere฀to฀the฀highest฀standards฀of฀...and฀reported฀on฀by฀our฀independent฀auditors,฀ KPMG฀LLP,฀who฀were฀given฀free฀access฀to฀all฀fi ฀nancial฀records฀and฀...

  • Page 49
    ...฀July฀15,฀2005,฀David฀Novak,฀Yum฀Brands,฀Inc.฀Chairman฀and฀Chief฀Executive฀Officer฀submitted฀a฀certification฀ to฀the฀New฀York฀Stock฀Exchange฀(the฀NYSE)฀as฀required฀by฀Section฀303A.12(a)฀of฀the฀NYSE฀Listed฀Company฀ Manual.฀This...

  • Page 50
    ...except฀per฀share฀data) 2005฀ 2004฀ 2003 Revenues Company฀sales฀ Franchise฀and฀license฀fees฀ $฀8,225฀ ฀1,124฀ ฀9,349฀ $฀7,992฀ ฀1,019฀ ฀9,011฀ $฀7,441 ฀ 939 ฀8,380 Costs฀and฀Expenses,฀net Company฀restaurants฀ ฀ Food฀and฀paper...

  • Page 51
    ...in฀operating฀working฀capital฀ Net฀Cash฀Provided฀by฀Operating฀Activities฀ Cash฀Flows-Investing฀Activities Capital฀spending฀ Proceeds฀from฀refranchising฀of฀restaurants฀ Acquisition฀of฀restaurants฀from฀franchisees฀ Short-term฀investments฀ Sales฀of...

  • Page 52
    Consolidated฀Balance฀Sheets฀ YUM!฀Brands,฀Inc.฀and฀Subsidiaries December฀31,฀2005฀and฀December฀25,฀2004 (in฀millions) 2005฀ 2004 ASSETS Current฀Assets Cash฀and฀cash฀equivalents฀ Short-term฀investments฀ Accounts฀and฀notes฀receivable,฀less฀...

  • Page 53
    ...common฀share)฀ China฀December฀2004฀net฀income฀ Repurchase฀of฀shares฀of฀common฀stock฀฀ Employee฀stock฀option฀exercises฀(includes฀tax฀impact฀ ฀ of฀$94฀million)฀฀ Compensation-related฀events฀ Balance฀at฀December฀31,฀2005 See฀accompanying...

  • Page 54
    ... opening฀a฀significant฀number฀of฀new฀stores฀in฀early฀2005฀ as฀well฀as฀increased฀advertising฀expense,฀all฀of฀which฀was฀ recorded฀in฀December's฀results฀of฀operations.฀Additionally,฀ the฀net฀increase฀in฀cash฀for฀the฀China฀business...

  • Page 55
    ...any฀franchise฀entities,฀purchasing฀cooperatives฀ or฀other฀entities. Fiscal฀Year฀ Our฀fiscal฀year฀ends฀on฀the฀last฀Saturday฀in฀ December฀and,฀as฀a฀result,฀a฀53rd฀week฀is฀added฀every฀five฀ or฀six฀years.฀Fiscal฀year฀2005฀included...

  • Page 56
    ...and฀amortization฀that฀ would฀have฀been฀recorded฀during฀the฀period฀held฀for฀sale฀ or฀(b)฀its฀current฀fair฀market฀value.฀This฀value฀becomes฀the฀ store's฀new฀cost฀basis.฀We฀record฀any฀difference฀between฀ the฀store's฀carrying฀amount...

  • Page 57
    ...-line฀basis฀over฀the฀ affiliate฀is฀similar฀to฀that฀for฀our฀restaurants฀except฀that฀we฀ estimated฀useful฀lives฀of฀the฀assets฀as฀follows:฀5฀to฀25฀ use฀discounted฀cash฀ï¬,ows฀after฀interest฀and฀taxes฀instead฀ years฀for฀buildings...

  • Page 58
    ...฀assets฀are฀amortized฀on฀ a฀straight-line฀basis.฀The฀weighted฀average฀useful฀life฀of฀our฀ amortizable฀franchise฀contract฀rights฀and฀our฀amortizable฀ trademarks/brands฀is฀33฀years฀and฀30฀years,฀respectively.฀ As฀ discussed฀ above,฀ we...

  • Page 59
    ...Net฀Income,฀as฀reported Add:฀Compensation฀expense฀included฀฀ ฀ in฀reported฀net฀income,฀net฀of฀related฀tax฀฀฀ Deduct:฀Total฀stock-based฀employee฀ ฀ compensation฀expense฀determined฀under฀฀ ฀ fair฀value฀based฀method฀for฀all฀awards...

  • Page 60
    ...the฀average฀market฀ price฀of฀our฀Common฀Stock฀during฀the฀year. The฀following฀table฀summarizes฀the฀2005฀and฀2004฀activity฀ related฀to฀reserves฀for฀remaining฀lease฀obligations฀for฀closed฀ stores. Estimate/฀ Beginning฀฀ Amounts฀฀ New...

  • Page 61
    ...the฀year฀ended฀December฀31,฀2005,฀$4฀million฀ of฀which฀was฀recognized฀through฀equity฀income฀from฀investments฀in฀unconsolidated฀affi ฀liates.฀Our฀KFC฀business฀in฀mainland฀China฀was฀negatively฀impacted฀ by฀the฀interruption฀of฀product...

  • Page 62
    ... the฀ remainder฀ of฀ our฀ Company-owned฀portfolio.฀Also,฀at฀that฀time฀we฀decided฀to฀ focus฀more฀on฀short-term฀development฀opportunities฀at฀LJS.฀ These฀decisions฀negatively฀impacted฀the฀fair฀value฀of฀the฀ A&W฀trademark/brand฀because฀we...

  • Page 63
    ...London฀Interbank฀Offered฀Rate฀("LIBOR")฀or฀ 0.00%฀to฀0.20%฀over฀an฀Alternate฀Base฀Rate,฀which฀is฀the฀ greater฀of฀the฀Prime฀Rate฀or฀the฀Federal฀Funds฀Effective฀Rate฀ plus... the฀ carrying฀ value฀ of฀ the฀ 2005฀ Notes,฀ including฀ ...

  • Page 64
    ...that฀debt.฀As฀ the฀swaps฀qualify฀for฀the฀short-cut฀method฀under฀SFAS฀133,฀ no฀ineffectiveness฀has฀been฀recorded.฀The฀net฀fair฀value฀of฀ these฀swaps฀as฀of฀December฀31,฀2005฀was฀a฀net฀liability฀of฀ approximately฀$5฀million,฀of...

  • Page 65
    ...฀mitigated,฀in฀part,฀by฀the฀large฀number฀ of฀franchisees฀and฀licensees฀of฀each฀Concept฀and฀the฀shortterm฀nature฀of฀the฀franchise฀and฀license฀fee฀receivables. Fair฀ Value฀ At฀ December฀31,฀ 2005฀ and฀ December฀25,฀ 2004,฀the฀fair...

  • Page 66
    ...73฀ Benefit฀obligation฀at฀ ฀ end฀of฀year฀ $฀ 815฀ Change฀in฀plan฀assets Fair฀value฀of฀plan฀assets฀ ฀ at฀beginning฀of฀year฀ $฀ 518฀ ฀ ฀ Actual฀return฀on฀plan assets฀ ฀ 63฀ ฀ ฀ Employer฀contributions฀ ฀ 64฀ ฀ ฀ Benefits...

  • Page 67
    ...cost฀for฀fiscal฀years: ฀ ฀ ฀ Pension฀Benefits฀ Postretirement฀ ฀Medical฀Benefits Discount฀rate฀ Long-term฀rate฀฀ ฀ of฀return฀on฀฀ ฀ plan฀assets฀ Rate฀of฀฀ ฀ compensation฀฀ ฀ increase฀ 2005฀ 2004฀ 2003฀ 2005฀ 2004฀ 2003...

  • Page 68
    ...fair฀value฀of฀each฀option฀grant฀made฀ during฀2005,฀2004฀and฀2003฀as฀of฀the฀date฀of฀grant฀using฀ the฀Black-Scholes฀option-pricing฀model฀with฀the฀following฀ weighted-average฀assumptions: ฀ Risk-free฀interest฀rate฀ Expected฀term฀(years...

  • Page 69
    ....฀In฀2005,฀we฀added฀ two฀new฀phantom฀investment฀options฀to฀the฀plan,฀a฀Stock...discount฀from฀the฀average฀market฀price฀at฀the฀date฀of฀ deferral฀ (the฀ "Discount฀ Stock฀ Account").฀ Deferrals฀ to฀the฀ 17.฀ SHAREHOLDERS'฀RIGHTS฀PLAN...

  • Page 70
    ... future฀ repurchases฀ under฀ our฀ November฀ 2005฀ share฀ repurchase฀program.฀Based฀on฀market฀conditions฀and฀other฀ factors,฀ additional฀ repurchases฀ may฀ be฀ made฀ from฀ time฀ to฀time฀in฀the฀open฀market฀or฀through฀privately฀negotiated...

  • Page 71
    ...฀are฀principally฀engaged฀in฀developing,฀operating,฀franchising฀ and฀ licensing฀ the฀ worldwide฀ KFC,฀ Pizza฀ Hut฀ and฀ Taco฀Bell฀ concepts,฀ and฀ since฀ May฀ 7,฀ 2002,฀ the฀ LJS฀ and฀ A&W฀concepts,฀which฀were฀added฀when฀we฀acquired...

  • Page 72
    ...฀2005฀we฀began฀ reporting฀information฀for฀our฀international฀business฀in฀two฀ separate฀operating฀segments฀as฀a฀result฀of฀changes฀in฀our฀ management฀reporting฀structure.฀The฀China฀Division฀includes฀ mainland฀China,฀Thailand,฀KFC฀Taiwan...

  • Page 73
    ...฀of฀unconsolidated฀ affiliates฀and฀other฀third฀parties.฀Accordingly,฀our฀recorded฀ liability฀as฀of฀December฀31,฀2005฀and฀December฀25,฀2004฀ is฀not฀significant. Insurance฀Programs฀ We฀are฀self-insured฀for฀a฀substantial฀ portion...

  • Page 74
    ...฀treated฀as฀the฀equivalent฀of฀ hourly฀employees฀and฀thus฀were฀eligible฀under฀the฀FLSA฀for฀ overtime฀for฀any฀hours฀worked฀over฀40฀during฀all฀weeks฀in฀the฀ recovery฀period.฀In฀addition,฀Johnson฀claimed฀that฀the฀potential฀members...

  • Page 75
    ...wheelchairs฀or฀scooters฀for฀mobility฀by฀ failing฀to฀make฀its฀approximately฀220฀company-owned฀restaurants฀in฀California...฀that฀Taco฀Bell฀Corp.฀misappropriated฀certain฀ideas฀ and฀concepts฀used฀in฀its฀advertising฀featuring฀a฀Chihuahua.฀ The...

  • Page 76
    ...we฀would฀have฀ reached฀a฀different฀determination. 22.฀ SELECTED฀QUARTERLY฀FINANCIAL฀DATA฀(UNAUDITED) First฀Quarter฀ Second฀Quarter฀ Third฀Quarter฀ Fourth฀Quarter฀ Total 2005฀ Revenues: ฀ Company฀sales฀ ฀ Franchise฀and฀license฀fees฀ ฀ Total...

  • Page 77
    ...Reported฀ ฀ Local฀currency (i)฀ China฀Division฀system฀sales฀growth (h)฀฀ ฀ Reported฀ ฀ Local฀currency (i)฀ Shares฀outstanding฀at฀year฀end (e)฀ Cash฀dividends฀declared฀per฀common฀share฀ Market฀price฀per฀share฀at฀year฀end (e)฀ ฀ 2005...

  • Page 78
    ...Dedrick฀46 President฀and฀Chief฀Concept฀Offi ฀cer,฀KFC,฀U.S.A. Peter฀R.฀Hearl฀54 President฀and฀Chief฀Concept฀Offi ฀cer,฀Pizza฀Hut,฀U.S.A. Robert฀C.฀Kreidler฀42 Senior฀Vice฀President,฀Corporate฀Strategy and฀Treasurer,฀Yum!฀Brands,฀Inc. Ted...

  • Page 79
    ...637-2432฀(U.S.A.,฀Puerto฀Rico฀and฀Canada)฀฀ (732)฀560-9444฀(all฀other฀locations) In฀all฀correspondence฀or฀phone฀inquires,฀please฀provide฀your฀ name,฀your฀Social฀Security฀Number,฀and฀your฀YUM฀account฀ number฀if฀you฀know฀it. Registered...

  • Page 80
    ...฀Inquiry฀Phone฀Line฀ (972)฀338-8100฀ext.฀4480 Online฀Franchise฀Information http://www.yum.com/franchising/default.asp Yum!฀Brands'฀Annual฀Report฀contains฀many฀of฀the฀valuable฀ trademarks฀owned฀and฀used฀by฀Yum!฀Brands฀and฀subsidiaries฀and฀af...

  • Page 81
    ...฀฀ customers฀and฀their฀families. We฀commit฀ourselves฀to฀giving฀back฀to฀the฀communities฀we฀serve฀and฀to฀make฀a฀difference฀by฀financially฀supporting฀hundreds฀of฀charities฀across฀the฀globe.฀In฀2005,฀Business฀Week฀recognized฀Yum!฀as...

  • Page 82