Pizza Hut 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
    ... Shareholder฀Services A฀World฀of฀Giving฀Back 12-15฀ A฀World฀of฀International฀Growth 16-19฀ A฀World฀of฀Leading฀Brands 20฀ 21฀ 22฀ 23฀ 24฀ Taco฀Bell:฀Think฀Outside฀the฀Bun! Pizza฀Hut:฀Gather฀'Round฀the฀Good฀Stuff KFC:฀Chicken฀Capital...

  • Page 3
    ...drivers฀of฀shareholder฀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...

  • Page 4
    ...฀we฀already฀have฀the฀dominant฀brands฀in฀ quick฀service฀with฀over฀1,900฀KFCs,฀and฀in฀casual฀dining฀ with฀over฀300฀Pizza฀Huts,฀last฀year฀we฀featured฀our฀China฀ business฀on฀the฀cover฀of฀our฀annual฀report Well,฀have฀you฀ever...

  • Page 5
    ...and฀Pizza฀Hut฀opened฀730฀new฀units฀ across฀ six฀ continents,฀ with฀ very฀ little฀ capital฀ spending฀ on฀our฀part.฀We're฀focused฀on฀profitably฀driving฀international฀expansion฀in฀three฀global฀arenas฀-฀franchise-only฀ markets,฀established...

  • Page 6
    ...฀was฀driven฀by฀improving฀our฀value฀ ฀ perception฀ with฀ customers฀ by฀ introducing฀ the฀ 99-cent฀ We฀have฀individual฀฀ management฀teams฀focused฀฀ on฀making฀our฀brands฀more฀and฀฀ more฀powerful฀each฀year฀by฀building฀ even฀more...

  • Page 7
    ... the฀ power฀ of฀ multibranding,฀ Pizza฀ Hut฀ has฀ also฀ successfully฀ created฀ and฀ is฀ now฀ expanding฀ WingStreet,฀a฀tasty฀line฀of฀ï¬,avored฀bone-in฀and฀boneless฀ chicken฀ wings฀ for฀ its฀ home฀ delivery฀ units.฀ Pizza฀ Hut/ WingStreet...

  • Page 8
    ...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฀we฀recognize฀we฀ are฀not฀improving฀fast฀enough.฀We฀know...

  • Page 9

  • Page 10
    ... 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฀ 1,900฀KFCs฀and฀over฀300฀Pizza฀Hut...

  • Page 11
    ... development teams of 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...

  • Page 12
    ... over last year - and set a record with franchise sales of $8.5 billion along with franchise and license fees of $448 million. We also achieved $2 billion in revenues and opened 780 new restaurants. That brings us to our impressive 11,319 units outside of the U.S. and China Division, with a presence...

  • Page 13
    Around the world from Mexico to the United Kingdom, from Africa, A sia 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'...

  • Page 14
    ... company in the world has the underlying power of our global portfolio of leading restaurant brands. 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...

  • Page 15
    ... simple! We opened our second state-ofthe-art, stand-alone A&W restaurant in Kissimmee, Florida. Customers love the food and the feeling of these nostalgic new restaurants whether they are age 7 or 70. We've seen impressive improvement in our drive-thru service times, moving six places in 2005 to...

  • 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
    ...for฀training,฀ measuring฀and฀rewarding฀employee฀performance฀against฀ key฀customer฀metrics.฀We're฀starting฀to฀build฀an฀ emotional฀connection฀with฀our฀customers฀by฀bringing฀฀ our฀"brand฀essence"฀to฀life฀in฀each฀of฀our฀brands'฀service...

  • Page 22
    ...฀฀ LONG฀JOHN฀SILVER'S฀ Houston,฀Texas Tim฀Riley฀฀ Correct฀every฀time.฀RGM฀Bibi฀Ali฀ puts฀a฀strong฀focus฀on฀making฀ sure฀the฀order฀is฀perfect - ฀ every฀customer,฀every฀day.฀฀ "I฀train฀all฀of฀my฀new฀employees฀ on฀accuracy...

  • Page 23
    ...฀average฀for฀product฀ quality,฀along฀with฀+11%฀same฀store฀ sales฀growth.฀ Linda฀Gardner฀฀ PIZZA฀HUT฀ Orlando,฀Florida If฀you฀blink฀you฀might฀miss฀฀ seeing฀Franchise฀RGM฀of฀the฀ Year,฀Lori฀Houser,฀making฀things฀ happen.฀Since...

  • 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
    ... Company฀sales฀ Franchisee฀sales(b)฀ A&W(C)฀ Company฀sales฀ Franchisee฀sales(b)฀ TOTAL฀INTERNATIONAL฀ Company฀sales฀ Franchisee฀sales(b)฀ CHINA฀ KFC฀ Company฀sales฀ Franchisee฀sales(b)฀ PIZZA฀HUT฀ Company฀sales฀ Franchisee฀sales(b)฀ TOTAL฀CHINA...

  • Page 27
    ...฀John฀Silver'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...

  • Page 28
    Yum!฀at฀a฀glance U.S.฀SALES฀ BY฀DAYPART฀ BY฀DISTRIBUTION฀CHANNEL ฀Dinner฀55%฀ ฀Lunch฀37% ...฀Lunch฀45% ฀Snacks/Breakfast฀20% 32.฀ ฀ ฀ |฀ ฀ ฀ Yum!฀Brands,฀Inc. Source:฀The฀NPD฀Group,฀Inc.;฀NPD฀Foodworld;฀CREST Dine฀Out฀51% Dine...

  • Page 29
    ...of฀our฀international฀operations. The฀Company's฀key฀strategies฀are: Building฀dominant฀restaurant฀brands฀in฀China Driving฀profi ฀table฀international฀expansion Improving฀restaurant฀operations Multibranding฀category-leading฀brands The฀ Company฀ is฀ focused...

  • Page 30
    ...฀is฀relatively฀consistent฀throughout฀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...

  • Page 31
    ...year฀ended฀December฀31,฀2005. Sale฀of฀an฀Investment฀in฀Unconsolidated฀Affiliate฀ During฀ the฀second฀quarter฀of฀2005,฀we฀sold฀our฀fifty฀percent฀interest฀ in฀the฀entity฀that฀operated฀almost฀all฀KFCs฀and฀Pizza฀Huts฀in฀ Poland฀and...

  • Page 32
    ...Katrina฀ During฀ the฀ third฀ 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...

  • Page 33
    ...). Store฀ Portfolio฀ Strategy฀ From฀ time฀ to฀ time฀ we฀ sell฀ Company฀ restaurants฀ to฀ existing฀ and฀ new฀ franchisees฀ where฀geographic฀synergies฀can฀be฀obtained฀or฀where฀their฀ expertise฀can฀generally฀be฀leveraged฀to฀improve฀our...

  • 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฀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฀and฀same฀store฀ sales฀growth,฀partially...

  • Page 36
    ...฀in฀Canada฀ which฀we฀now฀operate). In฀2005,฀the฀increase฀in฀China฀Division฀Company฀sales฀ was฀driven฀by฀new฀unit฀development,฀partially฀offset฀by฀the฀ impact฀of฀same฀store฀sales฀declines฀driven฀by฀the฀mainland฀ China฀ supplier...

  • 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
    ...฀ store฀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...

  • Page 39
    ... tax฀ rate฀ was฀driven฀by฀a฀number฀of฀factors,฀including฀the฀reversal฀ of฀reserves฀in฀the฀current฀year฀associated฀with฀audits฀that฀ were฀settled฀as฀well฀as฀the฀effects฀of฀certain฀international฀ tax฀planning฀strategies฀implemented...

  • Page 40
    ...฀ $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฀common฀stock฀(excluding฀applicable฀transaction฀fees)฀to฀be฀purchased฀through...

  • Page 41
    ...฀two฀franchisee฀loan฀pools฀related฀primarily฀to฀the฀Company's฀ historical฀refranchising฀programs฀and,฀to฀a฀lesser฀extent,฀franchisee฀ development฀ of฀ new฀ restaurants฀ at฀ December฀31,฀ 2005.฀In฀support฀of฀these฀guarantees,฀we฀posted...

  • Page 42
    ...฀base฀the฀expected฀useful฀ lives฀of฀our฀trademark/brand฀intangible฀assets฀on฀a฀number฀ of฀factors฀including฀the฀competitive฀environment,฀our฀future฀ development฀plans฀for฀the฀applicable฀Concept฀and฀the฀level฀ of฀franchisee฀commitment...

  • Page 43
    ...expense.฀ Our฀ estimated฀ long-term฀ rate฀ of฀ return฀ on฀ plan฀ assets฀represents฀the฀weighted-average฀of฀historical฀returns฀ for฀ each฀ asset฀ category,฀ adjusted฀ for฀ an฀ assessment฀ of฀ current฀market฀conditions.฀Our฀expected฀long-term...

  • Page 44
    ...three฀quarters฀ of฀2005฀which฀we฀restated฀under฀the฀modified฀retrospective฀ transition฀method. QUANTITATIVE฀AND฀QUALITATIVE฀฀ DISCLOSURES฀ABOUT฀MARKET฀RISK The฀Company฀is฀exposed฀to฀financial฀market฀risks฀associated฀ with฀ interest฀ rates...

  • Page 45
    ...for฀international฀development฀and฀operations;฀volatility฀of฀actuarially฀determined฀ losses฀and฀loss฀estimates;฀and฀adoption฀of฀new฀or฀changes฀ in฀ accounting฀ policies฀ and฀ practices฀ including฀ pronouncements฀promulgated฀by฀standard฀setting...

  • Page 46
    ...,฀in฀accordance฀with฀the฀standards฀of฀the฀Public฀Company฀Accounting฀Oversight฀ Board฀(United฀States),฀the฀effectiveness฀of฀YUM's฀internal฀control฀over฀fi ฀nancial฀reporting฀as฀of฀December฀31,฀ 2005,฀based฀on฀criteria฀established...

  • Page 47
    ...฀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฀Subsidiaries...

  • Page 48
    ...function฀monitors฀and฀reports฀on฀the฀adequacy฀of฀ and฀compliance฀with฀the฀internal฀control฀system,฀and฀appropriate฀actions฀are฀taken฀to฀address฀signifi ฀cant฀control฀ defi ฀ciencies฀and฀other฀opportunities฀for฀improving฀the฀system...

  • Page 49
    ...฀herein. SUPPLEMENT฀TO฀YUM!฀BRANDS,฀INC.฀ANNUAL฀REPORT฀TO฀SHAREHOLDERS On฀July฀15,฀2005,฀David฀Novak,฀Yum฀Brands,฀Inc.฀Chairman฀and฀Chief฀Executive฀Officer฀submitted฀a฀certification฀ to฀the฀New฀York฀Stock฀Exchange฀(the฀NYSE...

  • Page 50
    ...฀25,฀2004฀and฀December฀27,฀2003 (in฀millions,฀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...

  • Page 51
    ... ฀ Contributions฀to฀defined฀benefit฀pension฀plans฀ ฀ ฀ Other฀liabilities฀and฀deferred฀credits฀ ฀ ฀ Deferred฀income฀taxes฀ ฀ ฀ Equity฀income฀from฀investments฀in฀unconsolidated฀affiliates฀ ฀ ฀ Distributions฀of฀income฀received฀from...

  • Page 52
    ...฀assets฀ Deferred฀income฀taxes฀ Advertising฀cooperative฀assets,฀restricted฀ ฀ ฀ Total฀Current฀Assets Property,฀plant฀and฀equipment,฀net฀ Goodwill฀ ฀ Intangible฀assets,฀net฀ Investments฀in฀unconsolidated฀affi ฀liates฀ Other฀assets฀ Total...

  • Page 53
    ...and฀Comprehensive฀Income YUM!฀Brands,฀Inc.฀and฀Subsidiaries ฀ Fiscal฀years฀ended฀December฀31,฀2005,฀฀ December฀25,฀2004฀...common฀share)฀ China฀December฀2004฀net฀income฀ Repurchase฀of฀shares฀of฀common฀stock฀฀ Employee฀stock฀option฀...

  • Page 54
    ...฀ Pizza฀Hut฀ and฀ WingStreet,฀ a฀ ï¬,avored฀chicken฀wings฀concept฀we฀have฀developed. In฀2005,฀we฀began฀reporting฀information฀for฀our฀international฀business฀in฀two฀separate฀operating฀segments฀as฀a฀ result฀of฀changes฀to฀our฀management...

  • Page 55
    ...scal฀year฀consist฀of฀12฀weeks฀and฀ the฀fourth฀quarter฀consists฀of฀16฀weeks฀in฀fiscal฀years฀with฀ 52฀weeks฀and฀17฀weeks฀in฀fiscal฀years฀with฀53฀weeks.฀In฀ fiscal฀year฀2005,฀the฀53rd฀week฀added฀$96฀million฀to฀total...

  • Page 56
    ... is฀ tendered฀ at฀ the฀time฀of฀sale.฀We฀recognize฀initial฀fees฀received฀from฀a฀ franchisee฀or฀licensee฀as฀revenue฀when฀we฀have฀performed฀ substantially฀all฀initial฀services฀required฀by฀the฀franchise฀or฀ license฀agreement,฀which฀is...

  • Page 57
    ...฀accrue.฀We฀generally฀do฀not฀ receive฀leasehold฀improvement฀incentives฀upon฀opening฀a฀ store฀that฀is฀subject฀to฀a฀lease.฀We฀capitalize฀rent฀associated฀with฀leased฀land฀or฀buildings฀while฀we฀are฀constructing฀ a฀restaurant฀even฀if...

  • Page 58
    ....฀Amortizable฀intangible฀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...

  • 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
    ...฀initial฀franchise฀fees฀in฀the฀U.S.฀of฀$7฀million฀in฀2005,฀$2฀million฀in฀ 2004฀and฀$3฀million฀in฀2003,฀and฀in฀International฀Division฀of฀$3฀million฀in฀2005,฀ $8฀million฀in฀2004฀and฀$1฀million฀in฀2003฀and฀China฀Division...

  • Page 61
    ...ï¬, ฀ects฀a฀gain฀related฀to฀the฀2005฀sale฀of฀our฀fi ฀fty฀percent฀interest฀in฀the฀entity฀ that฀operated฀almost฀all฀KFCs฀and฀Pizza฀Huts฀in฀Poland฀and฀the฀Czech฀Republic฀ to฀our฀then฀partner฀in฀the฀entity,฀principally฀for...

  • Page 62
    ... 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฀assumed฀less฀development...

  • Page 63
    ...af...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...quarterly.฀In฀ 2005,฀2004฀and฀2003,฀we฀expensed฀facility฀fees...semi-annually฀...

  • Page 64
    ...into฀ new฀pay-fixed฀interest฀rate฀swaps฀with฀offsetting฀notional฀ amounts฀and฀terms.฀Gains฀or฀losses฀due฀to฀changes฀in฀the฀ fair฀value฀of฀the฀pay-variable฀swaps฀were฀recognized฀in฀the฀ results฀of฀operations฀through฀May฀2005฀but...

  • 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
    ...plan.฀Employees฀hired฀prior฀to฀September฀30,฀2001฀are฀ eligible฀for฀benefi ฀ts฀if฀they฀meet฀age฀and฀service...฀in฀plan฀assets Fair฀value฀of฀plan฀assets฀ ฀ at฀beginning฀of฀year฀ $฀ 518฀ ฀ ฀ Actual฀return฀on฀plan assets฀...

  • Page 67
    ...benefit฀obligation. Plan฀Assets฀ Our฀pension฀plan฀weighted-average฀asset฀allocations฀at฀September฀30,฀by฀asset฀category฀are฀set฀forth฀below: Asset฀Category฀ ฀ (a)฀Prior฀ service฀ costs฀ are฀ amortized฀ on฀ a฀ straight-line฀ basis฀ over...

  • Page 68
    ...฀include฀ benefits฀attributable฀to฀estimated฀further฀employee฀service. 15.฀ STOCK฀OPTIONS At฀year-end฀2005,฀we฀had฀four฀stock฀option฀plans฀in฀effect:฀the฀ YUM!฀Brands,฀Inc.฀Long-Term฀Incentive฀Plan฀("1999฀LTIP"),฀ the฀1997฀Long-Term...

  • Page 69
    ...2005,฀2004฀and฀2003฀totaled฀ $94฀million,฀$102฀million฀and฀$26฀million,฀respectively. The฀Company฀has฀a฀policy฀of฀repurchasing฀shares฀on฀the฀ open฀market...In฀2005,฀we฀added฀ two฀new฀phantom฀investment฀options฀to฀the฀plan,฀a฀Stock...

  • Page 70
    ...฀of฀this฀plan,฀of฀our฀... acquiring฀ company฀ having฀ a฀ value฀of฀twice...2005฀ share฀ repurchase฀program.฀Based฀on฀market฀conditions฀and฀other฀ factors,฀ additional฀ repurchases฀ may฀ be฀ made฀ from฀ time฀ to฀time฀in฀the฀open฀market...

  • Page 71
    ...฀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฀YGR.฀ KFC,฀Pizza฀Hut...

  • Page 72
    ... and/or฀ Pizza฀Hut฀ restaurants.฀ These฀ unconsolidated฀ affiliates฀operate฀in฀China,฀Japan฀and฀the฀United฀Kingdom. We฀identify฀our฀operating฀segments฀based฀on฀management฀responsibility.฀As฀noted฀in฀Note฀1,฀in฀2005฀we฀began฀ reporting...

  • Page 73
    ...฀franchisee฀ loan฀ pools฀ related฀ primarily฀ to฀ the฀ Company's฀ historical฀ refranchising฀programs฀and,฀to฀a฀lesser฀extent,฀franchisee฀ development฀ of฀ new฀ restaurants,฀ at฀ December฀31,฀ 2005฀ and฀December฀25,฀2004.฀In฀support฀of...

  • Page 74
    ...฀is฀to฀reduce฀the฀ number฀of฀FLSA฀class฀members฀to฀only฀approximately฀88฀(or฀ approximately฀2.5%฀of฀the฀eligible฀class฀members). In฀November฀2005,฀the฀parties฀agreed฀to฀a฀settlement.฀ Pizza฀Hut฀believes฀that฀definitive฀settlement...

  • Page 75
    ...฀ District฀Court฀for฀the฀Western฀District฀of฀Michigan.฀The฀lawsuit฀ alleged฀that฀Taco฀Bell฀Corp.฀misappropriated฀certain฀ideas฀ and฀concepts฀used฀in฀its฀advertising฀featuring฀a฀Chihuahua.฀ The฀plaintiffs฀sought฀to฀recover฀monetary...

  • Page 76
    ...฀review...ends฀ at฀ the฀ time฀ PepsiCo฀ is฀released...good฀faith,฀ use฀its฀best...QUARTERLY฀FINANCIAL฀DATA฀(UNAUDITED) First฀Quarter฀ Second฀Quarter฀ Third฀Quarter฀ Fourth฀Quarter฀ Total 2005฀ Revenues: ฀ Company฀sales฀ ฀ Franchise฀and฀license฀fees...

  • Page 77
    ...฀incorporates฀all฀our฀revenue฀drivers,฀Company฀and฀franchise฀same฀store฀ sales฀as฀well฀as฀net฀unit฀development.฀Additionally,฀as฀previously฀noted,฀we฀began฀reporting฀information฀for฀our฀international฀business฀in฀two฀separate฀operating...

  • Page 78
    ... ฀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฀F.฀Knopf฀55 Senior฀Vice฀President,฀Finance...

  • Page 79
    ...฀ Stock฀Option฀Plan฀Services฀ P.O.฀Box฀30446฀ New฀Brunswick,฀NJ฀08989-0446฀ Phone:฀฀ (800)฀637-2432฀(U.S.A.,฀Puerto฀Rico฀and฀Canada)฀฀ (732)฀560-9444฀(all฀other฀locations) In฀all฀correspondence฀or฀phone฀inquires,฀please฀provide...

  • Page 80
    ...฀Phone฀Line฀ (866)฀2YUMYUM฀(298-6986) International฀Franchising฀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...

  • Page 81
    ...the฀KFC฀China฀First฀Light฀Foundation฀is฀a฀ scholarship฀fund฀to฀help฀Chinese฀students฀in฀need.฀KFC฀U.K.฀supports฀ChildLine,฀a฀free,฀24-hour฀help฀line฀for฀children.฀KFC฀ and฀Pizza฀Hut฀Thailand฀are฀building฀new฀elementary฀schools...

  • Page 82