Pizza Hut 2006 Annual Report Download - page 8

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here in the U.S., and behind McDonald’s in most countries.
That’s why we continue to focus on Customer Mania. We
have improved our 100% CHAMPS scores from 45% to
57% the past 3 years, but that still means we don’t get it
completely right 43% of the time (CHAMPS stands for Clean-
liness, Hospitality, Accuracy, Maintenance, Product Quality
and Speed with Service). We can and must do better.
Going forward, we continue to be galvanized around building
what we call the Yum! Dynasty, with the result being one
of the world’s most consistent and highest performing
companies. On the next page, you can see the road map
we’ve laid out for Dynasty-like performance, along with
handwritten comments I always include in my New Year’s
letter to restaurant teams. I’m confident we will continue
our march toward greatness because of the powerful
culture we have created. It’s a diverse, results-oriented,
high-energy, people-capability-first environment, that is
centered on spirited recognition that drives performance.
Our culture allows us to retain and recruit the best and
the brightest. Additionally, we are building process and
discipline around the things that really matter in our res-
taurants, and are sharing our global best practices — and
getting better and better every year.
I’d like to thank our dedicated team members, restaurant
managers, franchise partners and outstanding board of
directors. Believe me, our people are focused on going for
greatness all around the globe.
Yum! to You!
David C. Novak
Chairman and Chief Executive Officer
Drive High ROIC & Strong
Shareholder Payout
Yum! has been able to generate an 18% Return On Invested
Capital (ROIC), which we believe is the best in the industry.
We have been able to do this by investing in our high-return
China and YRI businesses, while simultaneously exiting
low return businesses through refranchising. This capital
allocation strategy has allowed us to maintain our capital
expenditure within a steady range of $600–650 million
over the last three years.
Our businesses in China, YRI and the U.S. all generate
significant free cash flow, and in 2006 we generated over
$1.3 billion in cash from operations. We are committed to
returning significant cash to our shareholders. In 2006, we
reduced our outstanding shares by 6%, while also paying
a 1% dividend. In December, we announced we will double
our dividend yield to about 2% and expect to reduce our
shares outstanding through buybacks by another 3–4% in
2007. I think it’s safe to say there are not many compa-
nies doing this.
ROIC AND STRONG SHAREHOLDER PAYOUT KEY MEASURES:
18% ROIC; 3–4% REDUCTIONS OF SHARES OUTSTANDING; 2%
DIVIDEND TARGET.
Key to Global Greatness:
Our Customers Must See
Us as Great!!!
I’m proud of our over one million Customer Maniacs but
we’ll never be great until our customers think we truly run
great restaurants. As much as I hate to admit it, we rank
behind many of our competitors at making customers happy
Great
Results!
#4
Our formula for success
is working. When we put
people capability first,
then we satisfy more
customers — and profitability
will follow!
6