Pizza Hut 2004 Annual Report Download

Download and view the complete annual report

Please find the complete 2004 Pizza Hut annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 85

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85

power฀
฀yum!
2004฀Annual฀Customer฀Mania฀Report
of
Alone฀we’re฀delicious.฀Together฀we’re฀

Table of contents

  • Page 1
    power฀ ฀ yum! 2004฀Annual฀Customer฀Mania฀Report of

  • Page 2
    ... $฀ 2.02฀ $฀1,053฀ AVERAGE฀U.S.฀SALES฀PER฀SYSTEM฀UNIT(a) (In฀thousands)฀ 2004฀ 2003฀ 2002฀ 2001฀ 2000฀ 5-year฀growth(b) KFC฀ Pizza฀Hut฀ Taco฀Bell฀ (a)฀Excludes฀license฀units. (b)฀Compound฀annual฀growth฀rate. $฀ 896฀ ฀ 794฀ ฀1,069...

  • Page 3
    ...power฀of฀ our฀global฀portfolio฀of฀leading฀ restaurant฀brands. Fueled฀ by฀ continued฀ profitable฀ international฀ expansion,฀ dynamic฀growth฀in฀China,฀and฀strong฀momentum฀at฀Taco฀Bell฀ and฀Pizza฀Hut฀in฀the฀United฀States,฀we฀achieved฀15...

  • Page 4
    ...฀to฀build฀dominant฀restaurant฀brands฀ in฀ every฀ significant฀ category.฀ So,฀ in฀ addition฀ to฀ KFC฀ and฀ Pizza฀ Hut฀ casual฀ dining,฀ we've฀ recently฀ developed฀ Pizza฀ Hut฀Home฀Service฀and฀our฀Taco฀Bell฀Grande฀dine-in฀format.฀ The...

  • Page 5
    ...฀ France.฀ Pizza฀ Hut฀ is฀ the฀ number฀ one฀ most฀ trusted฀brand฀in฀India฀with฀almost฀100฀units฀and฀we฀are฀ now฀developing฀KFC฀with฀an฀offering฀that฀includes฀a฀vegetarian฀menu.฀ KFC฀in฀France฀is฀generating฀huge฀sales฀volume...

  • Page 6
    ...delayed฀expansion฀ of฀ multibranding฀ in฀ company฀ stores฀ until฀ we฀ improve฀ our฀ operations.฀However,฀our฀best฀KFC฀franchise฀operators฀are฀ continuing฀to฀develop฀multibrand฀units. After฀seeing฀the฀power฀of฀multibranding,฀our฀Pizza฀Hut...

  • Page 7
    ...฀the฀basic฀expectations฀of฀our฀customers฀half฀of฀ the฀time. We฀realize฀consistent฀execution฀of฀our฀brand฀experience฀ is฀the฀cornerstone฀to฀consumer฀trust,฀which฀is฀critical฀to฀ consistent฀same฀store฀sales฀growth.฀So฀we're฀working...

  • Page 8
    ... my฀ number฀one฀priority. I'd฀like฀to฀thank฀our฀dedicated฀team฀members,฀restaurant฀ managers,฀franchise฀partners,฀and฀outstanding฀Board฀of฀ Directors฀ for฀ their฀ many฀ contributions฀ and฀ commitment฀ to฀ Customer฀ Mania.฀ I'd฀ particularly...

  • Page 9

  • Page 10
    ...power" 8 China The฀China฀business฀has฀come฀a฀long฀way฀since฀we฀started฀our฀ first฀KFC฀store฀in฀Beijing฀in฀1987.฀Today,฀we฀are฀by฀far฀the฀largest฀ restaurant฀company฀-฀฀and฀a฀pioneer฀of฀franchising฀-฀in฀China.฀ And฀we've...

  • Page 11
    OVER $1.1 BILLION IN REVENUE 1,900 SYSTEM RESTAURANTS OVER $200 MILLION IN OPERATING PROFIT AVERAGE SALES PER SYSTEM UNIT OF $1.0 MILLION (U.S. DOLLARS) OVER 85,000 EMPLOYEES IN OVER 280 CITIES!

  • Page 12
    KFC IS THE LARGEST AND FASTEST GROWING RESTAURANT CHAIN IN CHINA PIZZA HUT IS THE #1 CASUAL DINING BRAND IN CHINA RECENTLY INTRODUCED PIZZA HUT HOME SERVICE AND TACO BELL GRANDE DINE-IN 1,000 RGMs celebrating the 1,000th KFC with the world's largest "Yum!" cheer.

  • Page 13
    KFC RGM, Din Jing, celebrating with some of her smallest customers! P L EASE OP EN We served nearly a billion customers in China alone in 2004!

  • Page 14
    12 "global power"

  • Page 15
    ...฀ represents฀ the฀ combined฀ sales฀ of฀ Company,฀ franchise,฀ unconsolidated฀ affiliate฀ and฀ license฀restaurants. (b)฀Includes฀KFC฀Germany,฀KFC฀Netherlands,฀KFC฀France,฀ Brazil฀and฀India. (c)฀Includes฀Japan,฀Canada,฀PH฀France฀and฀Poland. We...

  • Page 16
    ...-inspired฀signature฀products.฀While Pizza฀Hut฀gave฀us฀even฀more฀reasons฀to฀ "Gather฀'Round฀the฀Good฀Stuff"฀creating฀dinner฀solutions฀that฀are฀pleasing฀the฀entire฀family.฀ KFC฀is฀inviting฀customers฀to฀visit฀"Chicken฀Capital฀USA"฀to...

  • Page 17
    "brand ฀ ฀฀฀power฀x5" 15

  • Page 18
    16

  • Page 19
    ...฀they฀can฀be฀great฀Customer฀Maniacs;฀ get฀better฀and฀better฀at฀Execution;฀and฀deliver฀that฀"Taco฀Bell฀taste"฀and฀spirit฀that฀keep฀our฀customers฀coming฀back฀for฀more!฀ ฀ *Major฀League฀Baseball฀trademarks฀and฀copyrights฀are฀used...

  • Page 20
    18

  • Page 21
    ...฀product฀launches฀in฀Pizza฀ Hut฀history,฀with฀the฀highest฀consumer฀awareness฀of฀any฀new฀product.฀This฀success฀was฀followed฀closely฀by฀ Buffalo฀Chicken฀Pizza฀and฀our฀unique฀Fit฀'N฀Delicious™฀line฀of฀"keep฀it฀balanced"฀products...

  • Page 22
    20

  • Page 23
    ...฀USA 2004฀ was฀ a฀ year฀ of฀ rebuilding฀ for฀ KFC.฀ The฀ KFC฀ team฀ was฀ aggressive฀ with฀ its฀ plan฀-฀installing฀ new฀ menuboards฀ in฀ every฀ restaurant,฀ adding฀ new฀ products฀ to฀ the฀ menu฀ and฀ launching฀ a฀ new฀ advertising...

  • Page 24
    ...-breaking฀Lenten฀season,฀achieving฀the฀highest฀weekly฀sales฀in฀the฀brand's฀history. While฀we฀still฀have฀work฀to฀do,฀we're฀getting฀better฀at฀satisfying฀our฀customers฀and฀employees.฀We've฀seen฀customer฀complaints฀ fall฀35%฀and฀we've...

  • Page 25
    23

  • Page 26
    ฀฀power " "multibrand

  • Page 27
    ...ts฀ and฀franchise฀fees฀(excluding฀G&A฀expenses),฀ or฀about฀17%฀of฀the฀U.S.฀total฀ ฀ Signifi ฀cant฀incremental฀average฀sales฀ per฀units,฀dramatically฀improving฀our฀unit฀ cash฀ï¬, ฀ows฀ 500+ new multibrand units฀in 2004 2,600+ multibranded...

  • Page 28
    C H M A

  • Page 29
    ... miss RGM Abul Azad making things happen - fast. Abul runs one of KFC's best restaurants! In 2004, he maintained a 97% CHAMPS average and a near-perfect 5.0 Balanced Scorecard. Abul constantly reinforces CHAMPS with a Yes! - serving up his special brand of Customer Mania - in a snap. Abul Azad, KFC...

  • Page 30
    26 ฀power" C Cleanliness฀ "customer ฀฀mania H Hospitality A Accuracy M Maintenance P Product฀ Quality S Speed฀of฀ Service

  • Page 31
    ...do,฀we're฀committed฀to฀continuing฀our฀efforts฀to฀satisfy฀ our฀customers฀better฀than฀anyone฀in฀the฀industry.฀It's฀that฀commitment฀ to฀Customer฀Mania฀that฀will฀take฀this฀company฀to฀the฀next฀level!฀ Please฀open฀this฀page฀to฀meet...

  • Page 32
    ...฀and฀India. (b)฀Includes฀Japan,฀Canada,฀PH฀France฀and฀Poland. WORLDWIDE฀SALES ฀ (in฀billions)฀ UNITED฀STATES KFC Company฀sales฀ Franchisee฀sales฀(b)฀ Company฀sales฀ Franchisee฀sales฀(b)฀ Company฀sales฀ Franchisee฀sales฀(b)฀ TACO฀BELL PH...

  • Page 33
    .... BREAKDOWN฀OF฀WORLDWIDE฀SYSTEM฀UNITS ฀ 2004฀ UNITED฀STATES ฀ ฀ ฀ Company฀ Unconsolidated฀฀ Affiliate฀ Franchised฀ Licensed฀ Total 31 KFC฀ Pizza฀Hut฀ Taco฀Bell฀ Long฀John฀Silver's฀ A&W฀ Total฀U.S.฀ INTERNATIONAL ฀1,248฀฀ ฀1,741...

  • Page 34
    Yum!฀at฀a฀glance U.S.฀SALES฀฀ BY฀DAYPART฀ BY฀DISTRIBUTION฀CHANNEL Dinner฀59% Lunch฀35% Snacks/Breakfast฀6% Dine฀Out฀78% Dine฀In฀22% Dinner฀63% Lunch฀27% Snacks/Breakfast฀10% Dine฀...

  • Page 35
    ...฀of฀Operations INTRODUCTION฀AND฀OVERVIEW YUM!฀ Brands,฀ Inc.฀ and฀ Subsidiaries฀ (collectively฀ referred฀ to฀ as฀ "YUM"฀ or฀ the฀ "Company")฀ comprises฀ the฀ worldwide฀ operations฀of฀KFC,฀Pizza฀Hut,฀Taco฀Bell,฀Long฀John฀Silver's฀ ("LJS...

  • Page 36
    ...฀majority฀of฀Pizza฀Huts฀and฀Taco฀ Bells,฀while฀almost฀all฀KFCs฀are฀operated฀by฀franchisees.฀As฀ a฀result฀of฀operating฀certain฀restaurants฀that฀were฀previously฀ operated฀by฀the฀unconsolidated฀affiliate,฀our฀Company฀sales,฀ restaurant...

  • Page 37
    ... ฀ U.S.฀ RESTAURANT฀UNIT฀ACTIVITY ฀ ฀ Worldwide฀ ฀ Uncon-฀ ฀ Total฀ ฀ solidated฀ ฀ Excluding฀ Company฀ Affiliates฀ Franchisees฀ Licensees 2004 Inter-฀ national฀ Worldwide Decreased฀sales฀ Increased฀franchise฀fees฀ Decrease฀in฀total฀revenues...

  • Page 38
    ...฀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. In฀2004,฀the฀increase฀in฀Worldwide฀system฀sales฀was฀ driven฀by฀new...

  • Page 39
    ...in฀International฀franchise฀and฀license฀fees฀ was฀driven฀by฀new฀unit฀development,฀royalty฀rate฀increases฀and฀ same฀store฀sales฀growth,฀partially฀offset฀by฀store฀closures. COMPANY฀RESTAURANT฀MARGINS 2004฀ United฀States฀ International฀ Company...

  • Page 40
    ...฀doubtful฀franchise฀and฀license฀fee฀receivables,฀principally฀at฀Taco฀Bell. WORLDWIDE฀OTHER฀(INCOME)฀EXPENSE ฀ Equity฀income฀from฀investments฀฀ ฀ in฀unconsolidated฀affiliates฀ Foreign฀exchange฀net฀(gain)฀loss฀ Other฀(income)฀expense฀ 2004...

  • Page 41
    ... currency฀ translation,฀International฀operating฀profit฀increased฀17%฀in฀ 2004.฀The฀increase฀was฀driven฀by฀new฀unit฀development,฀the฀ impact฀of฀same฀store฀sales฀increases฀on฀restaurant฀profit฀and฀ franchise฀and฀license฀fees฀and฀higher...

  • Page 42
    ...rate฀decreased฀1.9฀percentage฀ points฀to฀30.2%.฀The฀decrease฀in฀the฀effective฀tax฀rate...company฀stores฀ and฀from฀our฀franchise...term฀ debt฀balances.฀We฀expect฀these...฀12,฀2004฀our฀Board฀of฀...฀purchases฀and฀sales฀of฀shortterm฀investments...

  • Page 43
    ...outstanding฀Common฀Stock฀(excluding฀applicable฀transaction฀fees)฀under฀this฀program.฀In฀January฀2005,฀ the฀Board฀of฀Directors฀authorized฀a฀new฀share฀repurchase฀ program฀for฀up฀to฀$500฀million฀of฀the฀Company's฀outstanding฀ common฀stock...

  • Page 44
    ...฀Rico฀business฀on฀October฀4,฀2004,฀Company฀sales,฀ restaurant฀profit฀and฀general฀and฀administrative฀expenses฀ will฀ decrease฀ by฀ $159฀million,฀ $29฀million฀ and฀ $8฀million,฀ respectively,฀and฀we฀estimate฀franchise฀fees฀will฀increase...

  • Page 45
    ...฀the฀case฀of฀Company฀stores,฀or฀receive,฀in฀the฀case฀of฀franchise฀stores,฀due฀to฀our฀ownership฀of฀the฀trademarks/brands.฀ Thus,฀anticipated฀sales฀are฀the฀most฀important฀assumption฀ in฀valuing฀trademarks/brands.฀We฀limit฀assumptions...

  • Page 46
    ... the฀decrease฀in฀discount฀rates,฀have฀largely฀contributed฀to฀an฀ unrecognized฀actuarial฀loss฀of฀$225฀million฀in฀our฀plans฀as฀ of฀September฀30,฀2004.฀For฀purposes฀of฀determining฀2004฀ expense,฀ our฀ funded฀ status฀ was฀ such฀ that...

  • Page 47
    ...25,฀2004.฀ Operating฀ in฀ international฀ markets฀ exposes฀ the฀ Company฀ to฀ movements฀ in฀ foreign฀ currency฀ exchange฀ rates.฀ The฀ Company's฀primary฀exposures฀result฀from฀our฀operations฀in฀ Asia-Pacific,฀the฀Americas฀and฀Europe.฀Changes...

  • Page 48
    ...or฀perceptions฀concerning฀the฀products฀of฀the฀Company฀ and/or฀our฀competitors,฀spending฀patterns฀and฀demographic฀ trends;฀political฀or฀economic฀instability฀in฀local฀markets฀and฀ changes฀in฀currency฀exchange฀and฀interest฀rates;฀and฀the...

  • Page 49
    ...December฀27,฀2003฀and฀December฀28,฀2002 Yum!฀Brands,฀Inc. (in฀millions,฀except฀per฀share฀data)฀ REVENUES 2004฀ 2003฀ 2002 Company฀sales฀ Franchise฀and฀license฀fees $฀7,992฀ ฀1,019฀ ฀9,011฀ $฀7,441฀ ฀ 939฀ ฀8,380฀ $฀6,891...

  • Page 50
    ...฀millions)฀ CASH฀FLOWS฀-฀OPERATING฀ACTIVITIES 2004฀ 2003฀ 2002 Net฀income฀ ...franchisees฀ Short-term฀investments฀ Sales฀of฀property,฀plant฀and฀equipment฀...฀IN฀FINANCING฀ACTIVITIES฀ EFFECT฀OF฀EXCHANGE฀RATE฀ON฀CASH฀AND฀CASH฀EQUIVALENTS฀ ...

  • Page 51
    Consolidated฀Balance฀Sheets December฀25,฀2004฀and฀December฀27,฀2003 Yum!฀Brands,฀Inc. (in฀millions)฀ ASSETS 2004฀ 2003 Current฀Assets Cash฀and฀cash฀equivalents฀ Short-term฀investments,฀at฀cost฀ Accounts฀and฀notes฀receivable,฀less฀allowance...

  • Page 52
    ...Employee฀stock฀option฀exercises฀฀ ฀ (includes฀tax฀impact฀of฀$102฀million)฀ Compensation-related฀events฀ Balance฀at฀December฀25,฀2004฀ See฀accompanying฀Notes฀to฀Consolidated฀Financial฀Statements. 293 8)฀ 9฀ ฀ 294 9)฀ 7฀ ฀ 292 14)฀ 12...

  • Page 53
    ...data) NOTE฀1 Yum!฀Brands,฀Inc. DESCRIPTION฀OF฀BUSINESS฀ YUM!฀Brands,฀Inc.฀and฀Subsidiaries฀(collectively฀referred฀to฀ as฀"YUM"฀or฀the฀"Company")฀comprises฀the฀worldwide฀operations฀of฀KFC,฀Pizza฀Hut,฀Taco฀Bell฀and฀since฀May฀7,฀2002...

  • Page 54
    ....฀ Our฀ advertising฀ expenses฀ were฀ $458฀million,฀$419฀million฀and฀$384฀million฀in฀2004,฀2003฀ and฀2002,฀respectively. Research฀and฀Development฀Expenses฀ Research฀and฀development฀expenses,฀which฀we฀expense฀as฀incurred,฀are฀reported฀ in...

  • Page 55
    ... ฀ Effective฀ December฀29,฀ 2002,฀ the฀ Company฀ adopted฀ SFAS฀No.฀143,฀ "Accounting฀ for฀Asset฀Retirement฀Obligations"฀("SFAS฀143").฀SFAS฀143฀ addresses฀the฀financial฀accounting฀and฀reporting฀for฀legal฀ obligations฀associated฀with฀the...

  • Page 56
    ...annual...today...-in,฀first-out฀method)฀or฀net฀realizable฀...2004...sales...developed,฀any฀previously฀capitalized฀internal฀development฀ costs฀are฀expensed฀and฀included฀in฀G&A฀expenses. Goodwill฀ and฀ Intangible฀ Assets฀ The฀ Company...฀each฀ reporting฀ period฀...

  • Page 57
    ...annual฀impairment฀testing.฀ For฀2002,฀goodwill฀assigned฀to฀the฀Pizza฀Hut฀France฀reporting... the฀price฀a฀willing฀...sales฀growth฀to฀those฀that฀are฀supportable฀ based฀on฀our฀plans฀for฀the฀trademark/brand... included฀ interest฀ rate฀ swaps฀ and...

  • Page 58
    ...including฀royalty฀rates,฀that฀ differ฀from฀our฀current฀standard฀agreements฀for฀the฀applicable฀ Concept฀and...฀forma฀Company฀sales฀ and฀franchise฀and฀license฀fees฀would฀have฀been฀as฀follows: ฀ Company฀sales฀ Franchise฀and฀license฀fees฀ ...

  • Page 59
    ...the฀impairment฀ of฀the฀A&W฀trademark/brand฀(see฀further฀discussion฀at฀Note฀12).฀In฀2002,฀we฀ recorded฀a฀$5฀million฀charge฀in฀International฀related฀to฀the฀impairment฀of฀the฀ goodwill฀of฀the฀Pizza฀Hut฀France฀reporting฀unit. ฀ (39...

  • Page 60
    ...assets฀held฀for฀sale฀at฀December฀25,฀2004฀ and฀December...and฀hour฀litigation. 2004 Inter-฀ national฀ Worldwide NOTE฀8 SUPPLEMENTAL฀CASH฀FLOW฀DATA฀ ฀ 2004฀ Cash...affiliate฀in฀Canada฀ was฀ dissolved.฀ Upon฀ dissolution,฀ the฀ Company฀ assumed฀...

  • Page 61
    ...of฀Company฀stores,฀or฀receive,฀in฀the฀case฀of฀franchise฀ and฀licensee฀stores,฀for฀the฀use฀of฀the฀trademark/brand.฀...฀our฀2004฀ and฀2003฀annual฀impairment฀tests.฀The฀estimates฀of฀sales฀ attributable฀to฀the฀LJS฀trademark/brand฀at฀...

  • Page 62
    ...฀its฀remaining฀balance฀over฀a฀period฀of฀ thirty฀years.฀While฀we฀continue฀to฀incorporate฀development฀ of฀the฀A&W฀trademark/brand฀into฀our฀multibranding฀plans,฀ our฀decision฀to฀no฀longer฀operate฀the฀acquired฀stand-alone฀ Company-owned...

  • Page 63
    ...were฀no฀longer฀reflected฀on฀ our฀Consolidated฀Balance฀Sheets฀at฀December฀25,฀2004฀or฀ December฀27,฀2003.฀There฀was฀no฀gain฀or฀loss฀recorded฀as฀a฀ result฀of฀this฀transaction. The฀ annual฀ maturities฀ of฀ long-term฀ debt฀ as฀ of...

  • Page 64
    ...฀a฀$300฀million฀ share฀repurchase฀program฀authorized฀by฀our฀Board฀of฀Directors฀ in฀May฀2004. Simultaneously,฀we฀entered฀into฀a฀forward฀contract฀with฀ the฀ investment฀ bank฀ that฀ was฀ indexed฀ to฀ the฀ number฀ of฀ shares฀repurchased...

  • Page 65
    ...number฀of฀franchisees฀ and฀licensees฀of฀each฀Concept฀and฀the฀short-term฀nature฀of฀ the฀franchise฀and฀license฀fee฀receivables. Fair฀ Value ฀ At฀ December฀25,฀ 2004...,฀certain฀U.S.฀hourly฀employees฀and฀ certain฀international฀employees.฀The...

  • Page 66
    ...53 58)฀ $฀(53) ฀ Discount฀rate฀ Rate฀of฀compensation฀increase฀ 2004฀ 2003฀ 2004฀ 2003 6.15%฀ 6.25%฀ ...annual฀cost฀per฀retiree฀will฀not฀increase. Assumed฀health฀care฀cost฀trend฀rates฀have฀a฀significant฀ effect฀on฀the฀amounts฀reported...

  • Page 67
    ...฀ funds฀ that฀ track฀ several฀ sub-categories฀ of฀ equity฀ and฀debt...2004,฀2003฀and฀2002฀as฀of฀the฀date฀of฀grant฀using฀ the฀ Black-Scholes฀ option-pricing฀ model฀ with฀ the฀ following฀ weighted-average฀assumptions: ฀ Risk-free฀interest฀rate...

  • Page 68
    ...of฀the฀ Board฀of฀Directors.฀...annual฀expense฀related฀to฀this฀award฀included฀in฀earnings฀ was฀$0.4฀million฀for฀2004,฀2003฀and฀2002. NOTE฀19 OTHER฀COMPENSATION฀AND฀BENEFIT฀PROGRAMS...annual฀ salary.฀ The฀ participant's฀ balances...฀ price฀at...

  • Page 69
    ... under฀ certain฀ In฀May฀2004,฀our฀Board฀of฀Directors฀authorized฀a฀share฀repurchase฀program.฀This฀program฀authorized฀us฀to฀repurchase,฀ through฀ November฀ 2005,฀ up฀ to฀ $300฀million฀ (excluding฀ applicable฀ transaction฀ fees)฀ of฀ our...

  • Page 70
    ...rates฀in฀various฀countries. The฀adjustments฀to฀reserves฀and฀prior฀years฀in฀2004...obligations฀฀ ฀ related฀to฀sale-leaseback฀agreements฀ Various฀liabilities...deferred฀tax฀(assets)฀liabilities฀ Reported฀in฀Consolidated฀Balance฀Sheets฀as: ฀ Deferred...

  • Page 71
    ... $฀4,339฀ $฀4,158฀ $฀3,886 NOTE฀23 REPORTABLE฀OPERATING฀SEGMENTS฀ We฀ are฀ principally฀ engaged฀ in฀ developing,฀ operating,฀ franchising฀and฀licensing฀the฀worldwide฀KFC,฀Pizza฀Hut฀and฀Taco฀ Bell฀ concepts,฀ and฀ since฀ May฀ 7,฀ 2002...

  • Page 72
    ...default฀of฀their฀franchise฀ agreement฀in฀...Company's฀historical฀refranchising฀programs฀and,฀to฀a฀ lesser฀extent,฀franchisee฀development฀of฀new฀restaurants,฀at฀ December฀25,฀2004...casualty฀ losses,฀we฀make฀annual฀decisions฀to฀self-insure฀the...

  • Page 73
    ...฀alleges฀that฀she฀and฀other฀current฀and฀former฀Pizza฀ Hut฀Restaurant฀General฀Managers฀("RGM's")฀were฀improperly฀ classified฀as฀exempt฀employees฀under฀the฀U.S.฀Fair฀Labor฀ Standards฀Act฀("FLSA").฀There฀is฀also฀a฀pendent฀state฀law...

  • Page 74
    ...compliance฀with฀ applicable฀state฀and฀federal...Michigan.฀ The฀ lawsuit฀ alleged฀that฀Taco฀Bell฀Corp.฀misappropriated฀certain฀ideas฀ and฀concepts฀used฀in฀its฀advertising...businesses฀under฀which฀PepsiCo฀remains฀liable.฀As฀ of฀December฀25,฀2004...

  • Page 75
    Yum!฀Brands,฀Inc. NOTE฀25 SELECTED฀QUARTERLY฀FINANCIAL฀DATA฀(UNAUDITED)฀ 2004฀ Revenues: ฀ Company฀sales฀ ฀ Franchise฀and฀license฀fees฀ ฀ Total฀revenues฀ Wrench฀litigation฀(income)฀expense฀ AmeriServe฀and฀other฀charges฀(credits)฀ Total฀...

  • Page 76
    ...฀as฀of฀December฀25,฀2004.฀Our฀internal฀audit฀function฀monitors฀and฀reports฀on฀the฀adequacy฀of฀ and฀compliance฀with฀the฀internal฀control฀system,฀and฀appropriate฀actions฀are฀taken฀to฀address฀significant฀control฀deficiencies฀ and...

  • Page 77
    ...฀audited,฀in฀accordance฀with฀the฀standards฀of฀the฀Public฀Company฀Accounting฀Oversight฀Board฀(United฀States),฀ the฀effectiveness฀of฀YUM's฀internal฀control฀over฀financial฀reporting฀as฀of฀December฀25,฀2004,฀based฀on฀criteria฀established...

  • Page 78
    ...The฀Board฀of฀Directors฀and฀Shareholders฀ YUM!฀Brands,฀Inc.: We฀have฀audited฀management's฀assessment,฀included฀in฀Management's฀Report฀on฀Internal฀Control฀over฀Financial฀Reporting,฀ appearing฀on฀page฀74฀of฀the฀Company's฀Annual฀Report฀for...

  • Page 79
    ...฀growth฀includes฀the฀results฀of฀Company฀owned฀KFC,฀Pizza฀Hut฀and฀Taco฀Bell฀restaurants฀that฀have฀been฀open฀one฀year฀or฀more.฀฀LJS฀ and฀A&W฀are฀not฀included. (g)฀International฀system฀sales฀growth฀includes฀the฀results฀of฀all...

  • Page 80
    ...฀Operating฀Officer,฀Pizza฀Hut,฀U.S.A. Anne฀P.฀Byerlein฀46 Chief฀People฀Officer,฀Yum!฀Brands,฀Inc. Christian฀L.฀Campbell฀54 Senior฀Vice฀President,฀General฀Counsel,฀Secretary฀and฀ Chief฀Franchise฀Policy฀Officer,฀Yum!฀Brands,฀Inc. Richard...

  • Page 81
    ...will฀ be฀held฀at฀Yum!฀Brands'฀headquarters,฀Louisville,฀Kentucky,฀ at฀9:00฀a.m.฀(EDT),฀Thursday,฀May฀19,฀2005.฀Proxies฀for฀the฀ meeting฀will฀be฀solicited฀by฀an฀independent฀proxy฀solicitor.฀ This฀Annual฀Report฀is฀not฀part฀of฀the...

  • Page 82
    ...866)฀2YUMYUM฀(298-6986) International฀Franchising฀Inquiry฀Phone฀Line฀฀ (972)฀338-8100฀ext.฀4480 Online฀Franchise฀Information฀ http://www.yum.com/franchising/info.htm Yum!฀Brands'฀Annual฀Report฀contains฀many฀of฀the฀valuable฀trademarks฀owned฀and฀used...

  • Page 83
    ... to Yum! Brands, Inc. Annual Report to Shareholders On June 28, 2004, David Novak, Yum Brands, Inc. (the Company) 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 84
    ...฀to฀those฀most฀in฀ need,฀the฀underprivileged. Nourishing฀Young฀Minds:฀Pizza฀Hut's฀ BOOK฀IT!฀Program.฀For฀20฀years,฀children฀ have฀found฀reading฀a฀little฀more฀fun฀and฀ rewarding,฀as฀a฀result฀of฀participating฀in฀ BOOK฀IT!฀As฀the...

  • Page 85
    Alone฀we're฀delicious.฀Together฀we're฀