Pizza Hut 2007 Annual Report Download - page 80

84 YUM! BRANDS, INC.
23.
Selected Quarterly Financial Data (Unaudited)
First Second Third Fourth
2007 Quarter Quarter Quarter Quarter Total
Revenues:
Company sales $1,942 $2,073 $2,243 $2,842 $ 9,100
Franchise and license fees 281 294 321 420 1,316
Total revenues 2,223 2,367 2,564 3,262 10,416
Restaurant profit(a) 288 310 353 376 1,327
Operating profit 316 310 401 330 1,357
Net income 194 214 270 231 909
Diluted earnings per common share 0.35 0.39 0.50 0.44 1.68
Dividends declared per common share — 0.15 — 0.30 0.45
First Second Third Fourth
2006 Quarter Quarter Quarter Quarter Total
Revenues:
Company sales $1,819 $1,912 $1,989 $2,645 $ 8,365
Franchise and license fees 266 270 289 371 1,196
Total revenues 2,085 2,182 2,278 3,016 9,561
Restaurant profit(a) 284 301 321 365 1,271
Operating profit 282 307 344 329 1,262
Net income 170 192 230 232 824
Diluted earnings per common share 0.30 0.34 0.41 0.41 1.46
Dividends declared per common share 0.0575 0.075 — 0.30 0.4325
(a) Restaurant profit is defined as Company sales less expenses incurred directly by Company restaurants in generating Company sales. These expenses are presented as
subtotals on our Consolidated Statements of Income.
restaurants located in the northeast states implicated in the
outbreak. Discovery is in the preliminary stages. However, the
Company believes, based on the allegations, that the stores
identified in fourteen of the Complaints are in fact not owned by
the Company or any of its subsidiaries. As such, the Company
believes that at a minimum it is not liable for any losses at these
stores. Three of these Complaints have been dismissed without
prejudice pending settlement discussions with plaintiffs’ counsel.
A fourth was dismissed with prejudice as against the Company on
the ground that neither the Company nor any of its subsidiaries
owned or operated the store at issue.
Additionally, the Company has received a number of claims
from customers who have alleged injuries relating to the E.coli
outbreak, but have not filed lawsuits. Several of these claims
have been settled.
We have provided for the estimated costs of these claims
and litigation, based on a projection of potential claims and their
amounts as well as the results of settlement negotiations in simi-
lar matters. But in view of the inherent uncertainties of litigation,
there can be no assurance that the outcome of the litigation will
not result in losses in excess of those currently provided for in
our Consolidated Financial Statements.
On March 14, 2007, a lawsuit styled Boskovich Farms, Inc.
v. Taco Bell Corp. and Does 1 through 100 was filed in the Supe-
rior Court of the State of California, Orange County. Boskovich
Farms, a supplier of produce to Taco Bell, alleges in its Complaint,
among other things, that it suffered damage to its reputation and
business as a result of publications and/or statements it claims
were made by Taco Bell in connection with Taco Bell’s reporting of
results of certain tests conducted during investigations on green
onions used at Taco Bell restaurants. The Company believes that
the Complaint should properly be heard in an alternative dispute
resolution forum according to the contractual terms governing the
relationship of the parties. The Company filed a motion to compel
ADR and stay the litigation on May 1, 2007. The Court entered an
order granting this motion on June 14, 2007. Boskovich filed a
writ petition to set aside the trial court’s ruling compelling ADR;
the writ petition was denied in October 2007. The parties are
currently in the process of selecting a mediator. The Company
denies liability and intends to vigorously defend against all claims
in any arbitration and the lawsuit. However, in view of the inherent
uncertainties of litigation, the outcome of this case cannot be
predicted at this time. Likewise, the amount of any potential loss
cannot be reasonably estimated.
PROPOSED INTERNAL REVENUE SERVICE ADJUSTMENTS In
early 2007, the Internal Revenue Service (the “IRS”) informed the
Company of its intent to propose certain adjustments based on
its position that the Company did not file Gain Recognition Agree-
ments (“GRAs”) in connection with certain transfers of foreign
subsidiaries among its affiliated group. In the fourth quarter of
2007, prior to any adjustments being proposed, the Company and
the IRS settled this matter for an amount that was not significant
to the Company’s financial results or condition.