Pizza Hut 2003 Annual Report Download - page 38

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36.
is useful to investors as a significant indicator of the
overall strength of our business as it incorporates all of
our revenue drivers, company and franchise same store
sales as well as net unit development.
System sales increased 7% for 2003, after a 2% favor-
able impact from foreign currency translation. Excluding
the favorable impact of both foreign currency translation
and the YGR acquisition, system sales increased 3%. The
increase was driven by new unit development, partially
offset by store closures.
System sales increased 8% in 2002. The impact from
foreign currency translation was not significant. Excluding
the favorable impact of the YGR acquisition, system sales
increased 5%. The increase resulted from new unit devel-
opment and same store sales growth, partially offset by
store closures.
WORLDWIDE REVENUES
Company sales increased $550 million or 8% in 2003, after
a 1% favorable impact from foreign currency translation.
Excluding the favorable impact of both foreign currency
translation and the YGR acquisition, Company sales
increased 4%. The increase was driven by new unit develop-
ment, partially offset by store closures and refranchising.
Franchise and license fees increased $73 million
or 9% in 2003, after a 3% favorable impact from foreign
currency translation. Excluding the impact of foreign
currency translation and the favorable impact of the YGR
acquisition, franchise and license fees increased 5%. The
increase was driven by new unit development, royalty rate
increases and same store sales growth, partially offset by
store closures.
Company sales increased $753 million or 12% in
2002. The impact from foreign currency translation was
not significant. Excluding the favorable impact of the YGR
acquisition, Company sales increased 6%. The increase
was driven by new unit development and same store sales
growth. The increase was partially offset by refranchising
and store closures.
Franchise and license fees increased $51 million or 6%
in 2002. The impact from foreign currency translation was
not significant. Excluding the favorable impact of the YGR
acquisition, franchise and license fees increased 4%. The
increase was driven by new unit development and same
store sales growth, partially offset by store closures.
WORLDWIDE COMPANY RESTAURANT MARGIN
2003 2002 2001
Company sales 100.0% 100.0% 100.0%
Food and paper 30.9 30.6 31.1
Payroll and employee benefits 27.2 27.2 27.1
Occupancy and other
operating expenses 27.1 26.2 27.0
Company restaurant margin 14.8% 16.0% 14.8%
Restaurant margin as a percentage of sales decreased
approximately 120 basis points in 2003. U.S. restaurant
margin decreased approximately 140 basis points and
International restaurant margin decreased approximately
50 basis points.
Restaurant margin as a percentage of sales increased
approximately 120 basis points in 2002. The increase
included the favorable impact of approximately 50 basis
points from the adoption of SFAS 142, partially offset by
the unfavorable impact of approximately 15 basis points
from the YGR acquisition. U.S. restaurant margin increased
approximately 80 basis points and International restaurant
margin increased approximately 210 basis points.
The changes in U.S. and International restaurant
margin for 2003 and 2002 are discussed in the respec-
tive sections.
WORLDWIDE GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased $32 million
or 3% in 2003, including a 1% unfavorable impact from
foreign currency translation. Excluding the unfavorable
impact from both foreign currency translation and the YGR
acquisition, general and administrative expenses were flat
year to date. Lower management incentive compensation
costs were offset by increases in expenses associated with
international restaurant expansion and pension expense.
General and administrative expenses increased
$117 million or 15% in 2002. Excluding the unfavorable
impact of the YGR acquisition, general and administra-
tive expenses increased 10%. The increase was driven by
higher compensation-related costs and higher corporate
and project spending.
WORLDWIDE FRANCHISE AND LICENSE EXPENSES
Franchise and license expenses decreased $21 million or
42% in 2003. The decrease was primarily attributable to
lower allowances for doubtful franchise and license fee
receivables, primarily at Taco Bell.
Franchise and license expenses decreased $10 million
or 18% in 2002. The decrease was primarily attributable
to lower allowances for doubtful franchise and license fee
receivables and the favorable impact of lapping support
costs related to the financial restructuring of certain
Taco Bell franchisees in 2001. The decrease was partially
offset by higher marketing support costs in certain inter-
national markets.
WORLDWIDE OTHER (INCOME) EXPENSE
2003 2002 2001
Equity income from investments in
unconsolidated affiliates $ (39) $ (29) $ (26)
Foreign exchange net (gain) loss (2) (1) 3
Other (income) expense $ (41) $ (30) $ (23)