Pizza Hut 2005 Annual Report Download - page 3

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David฀C.฀Novak,฀฀
Chairman฀and฀Chief฀Executive฀Officer,฀฀
Yum!฀Brands,฀Inc.฀
The฀ world฀ of฀ Yum!฀ makes฀ a฀ world฀ of฀
difference฀when฀it฀comes฀to฀delivering฀
consistent฀growth.฀I’m฀pleased฀to฀report฀
2005฀ was฀ once฀ again฀ another฀ year฀
where฀we฀demonstrated฀the฀underlying฀
power฀of฀our฀global฀portfolio฀of฀leading฀
restaurant฀brands.฀
Fired฀ by฀ continued฀ profitable฀ international฀ expansion฀
featuring฀dramatic฀new฀unit฀growth฀in฀China,฀particularly฀
strong฀performance฀at฀Taco฀Bell฀and฀KFC฀in฀the฀United฀
States,฀and฀sound฀execution฀of฀financial฀strategies,฀Yum!฀
Brands฀ achieved฀ 13%฀ earnings฀ per฀ share฀ growth,฀ the฀
fourth฀straight฀year฀we฀have฀exceeded฀our฀+10%฀annual฀
target.฀This฀consistent฀growth฀was฀achieved฀in฀spite฀of฀a฀
challenging฀worldwide฀environment฀which฀included฀record฀
gasoline฀ prices,฀ Hurricane฀ Katrina฀ and฀ significant฀ con-
sumer฀concerns฀in฀China฀from฀the฀perceived฀threat฀of฀the฀
avian฀flu.
We’re฀proving฀year฀after฀year฀that฀the฀power฀of฀our฀
portfolio฀ enables฀ us฀ to฀ continue฀ to฀ weather฀ whatever฀
inevitable฀ups฀and฀downs฀come฀our฀way.฀Our฀diversified฀
worldwide฀business฀allows฀us฀to฀consistently฀deliver฀on฀
the฀three฀drivers฀of฀shareholder฀value฀in฀the฀retail฀cat-
egory:฀(1)฀solid฀and฀improving฀same฀store฀sales฀growth,฀
Dear฀Partners,฀
+4%฀in฀the฀U.S.,฀(2)฀consistent฀new฀unit฀expansion,฀set-
ting฀a฀record฀of฀1,554฀new฀openings฀around฀the฀world฀
and฀(3)฀best฀in฀class฀return฀on฀invested฀capital,฀maintain-
ing฀our฀industry฀leading฀ROIC฀of฀18%.
What’s฀ more,฀ we฀ are฀ now฀ a฀ demonstrated฀ cash฀
machine฀with฀a฀strong฀investment฀grade฀balance฀sheet.฀In฀
fact,฀after฀spending฀$609฀million฀in฀capital฀expenditures฀
to฀drive฀expansion฀and฀grow฀our฀core฀business,฀we฀had฀
record฀operating฀ cash฀ flow฀that฀allowed฀us฀ to฀ increase฀
our฀shareholder฀payout฀to฀over฀$1฀billion฀primarily฀through฀
share฀repurchases฀and฀by฀increasing฀our฀quarterly฀divi-
dend฀by฀15%.฀
Since฀I฀was฀quick฀to฀point฀out฀in฀my฀letter฀last฀year฀
that฀our฀share฀price฀had฀climbed฀37%฀in฀2004,฀I฀want฀to฀
be฀just฀as฀forthcoming฀to฀report฀the฀news฀that฀our฀shares฀
declined฀1%฀in฀2005.฀Nevertheless,฀our฀annual฀return฀is฀
24%฀for฀the฀first฀half฀of฀this฀decade.฀And฀the฀best฀news฀
of฀all฀is฀we฀are฀more฀confident฀than฀ever฀that฀we฀will฀con-
tinue฀our฀track฀record฀of฀growing฀earnings฀per฀share฀at฀
least฀10%฀each฀year฀going฀forward.฀By฀delivering฀on฀these฀
results,฀and฀delivering฀real฀cash฀flow฀and฀real฀earnings,฀we฀
are฀confident฀the฀stock฀will฀continue฀to฀take฀care฀of฀itself.฀
We฀simply฀are฀getting฀better฀and฀better฀at฀executing฀four฀
powerfully฀unique฀strategies฀that฀bolster฀our฀claim฀that฀we฀
are฀“Not฀Your฀Ordinary฀Restaurant฀Company.”฀Let฀me฀now฀
give฀you฀my฀perspective฀on฀our฀opportunities,฀and฀hope-
fully฀you’ll฀agree฀we฀are฀rightfully฀bullish฀about฀our฀future.
While฀we฀have฀grown฀our฀฀
core฀business,฀we฀have฀been฀฀
making฀targeted฀investments฀to฀
develop฀new฀emerging฀consumer฀
markets฀like฀Russia,฀India฀and฀
Continental฀Europe.
Yum!฀Brands,฀Inc.฀ ฀ ฀ |฀฀฀1.