Pizza Hut 2009 Annual Report Download

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power
the of
Yum! Brands 2009 Annual Customer Mania Report
building the dening
global company
that feeds the world

Table of contents

  • Page 1
    the power of global company building the defining that feeds the world Yum! Brands 2009 Annual Customer Mania Report

  • Page 2
    ...1% - 3% Contents Dear Partners ...1 Winning Big in China! ...2-3 Building Strong Brands Everywhere ...4-5 Improving US Brand Positions ...6-8 Driving Long-Term Shareholder Value...9 Becoming the Defining Global Company ...10-12 About the pAper used for this report The inks used in the printing of...

  • Page 3
    ...first time we generated over $1 billion in net income and we generated $1.4 billion of cash from operations. Importantly, we continued to be an industry leader with Return On Invested Capital (ROIC) of 20%. We achieved all of our goals with the exception of our same store sales, driven in large part...

  • Page 4
    2

  • Page 5
    ... that emerges in China. With KFC and Pizza Hut, we have already established two of the most loved brands in the fast food and casual dining category and we are now successfully developing Pizza Hut Home Service, making pizza available with very efficient, low investment pizza carryout units. We...

  • Page 6
    4

  • Page 7
    ... in India. Today, we have 72 units, strong sales, good margins and are on the verge of rapid expansion. Five years ago all we could talk about was our checkered history with KFC in Brazil. Today, we have an outstanding local franchise partner committed to growing the business. Five years ago, South...

  • Page 8
    6

  • Page 9
    ... China, Yum! Restaurants International and Taco Bell US." In particular, we wanted to drive home the fact Taco Bell is our big US growth engine, accounting for over 60% of our US profits and consistent net unit growth with lots of potential. While Taco Bell is coming off a year when same store sales...

  • Page 10
    ... general and administrative expenses from company operations, we expect to generate at least as much profit with no capital expenditures by putting these restaurants in the hands of good franchise operators. US Brand Key Measures: business as an outstanding "value investment" with a tremendous asset...

  • Page 11
    ... cash flows. You should also know that we have a very strong balance sheet that gives us plenty of insulation from any unforeseen challenge. Bottom line, any way you look at it, Yum! Brands is in strong financial shape. 2009: ROIC 20%, EPS + 13% Yum! Stock Price +17% Shareholder & Franchisee Value...

  • Page 12
    ...per year. For 2010, new unit development outside the United States drives 6 percentage points and we expect the balance of our growth to come from our base business through overall global same store sales growth of 2%, productivity initiatives and expense leverage along with an expected benefit from...

  • Page 13
    ... dollars of our company's food to domestic food banks annually. As you can see, Yum! Brands and our franchise partners do a lot of good in the communities we serve. Check out our company's Corporate Responsibility Report which is published online at Yum.com. A Defining Global Company will always...

  • Page 14

  • Page 15

  • Page 16
    ...Chairman of the Board and Chief Executive Officer Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to Be Held on May 20, 2010-this Notice and proxy statement is available at www.yum.com/investors/investor_materials.asp and the Annual Report on Form 10-K is...

  • Page 17

  • Page 18
    ...Annual Report: A copy of our 2009 Annual Report on Form 10-K is included with this proxy statement. Web site: Proxy Statement Date of Mailing: This notice, the proxy statement and the form of proxy are first being mailed to shareholders on or about April 7, 2010. By Order of the Board of Directors...

  • Page 19
    ......Item 3: Shareholder Proposal Relating to Right to Call Special Shareowner Meetings ...STOCK OWNERSHIP INFORMATION ...EXECUTIVE COMPENSATION ...Compensation Discussion and Analysis ...Management Planning and Development Committee Report ...Summary Compensation Table ...All Other Compensation Table...

  • Page 20
    ... about our directors and most highly paid executive officers. GENERAL INFORMATION ABOUT THE MEETING What is the purpose of the Annual Meeting? At our Annual Meeting, shareholders will vote on several important Company matters. In addition, our management will report on the Company's performance over...

  • Page 21
    ... common stock as of the close of business on the record date, March 22, 2010. Each share of YUM common stock is entitled to one vote. As of March 22, 2010, YUM had 467,283,295 shares of common stock outstanding. How does the Board of Directors recommend that I vote? Our Board of Directors recommends...

  • Page 22
    ... must be received by 11:59 p.m., Eastern Daylight Saving Time, on May 19, 2010. Can I vote at the meeting? Shares registered directly in your name as the shareholder of record may be voted in person at the Annual Meeting. Shares held in street name may be voted in person only if you obtain a legal...

  • Page 23
    ... have the authority under the New York Stock Exchange rules to vote shares for which their customers do not provide voting instructions on certain ''routine'' matters. The proposal to ratify the selection of KPMG LLP as our independent auditors for fiscal year 2010 is considered a routine matter for...

  • Page 24
    ... matters discussed in this proxy statement. If any other matters properly come before the meeting and call for a vote of shareholders, validly executed proxies in the enclosed form returned to us will be voted in accordance with the recommendation of the Board of Directors, or, in the absence of...

  • Page 25
    ...whose terms expire at this Annual Meeting. Jackie Trujillo is retiring from the Board and is not standing for re-election. As discussed in more detail later in this section, the Board has determined that 10 of our 12 continuing directors are independent under the rules of the New York Stock Exchange...

  • Page 26
    ...and procedures for employees to report ethical or accounting concerns, misconduct or violations of the Code in a confidential manner. The Code of Conduct applies to the Board of Directors and all employees of the Company, including the principal executive officer, the principal financial officer and...

  • Page 27
    .... In 2009, Robert Walter served as the presiding director. For 2009, the primary responsibilities of the presiding director were to preside over executive sessions of the Board and facilitate communications between the Chairman and CEO and the non-management directors as appropriate. For 2010, based...

  • Page 28
    ... and shareholder return, emphasize long-term incentives and require executives to personally invest in Company stock. In 2010, the Management Planning and Development Committee of the Board of Directors oversaw the performance of a risk assessment of our compensation programs for all employees to...

  • Page 29
    • The annual incentive target setting process is closely linked to the annual financial planning process and supports the Company's overall strategic plan. • Compensation is primarily determined by results of the business. • Financial performance which determines employee rewards is closely ...

  • Page 30
    ... she deems appropriate. Directors may at any time review a log of all correspondence received by the Company that is addressed to members of the Board and request copies of any such correspondence. Written correspondence from shareholders relating to accounting, internal controls or auditing matters...

  • Page 31
    What are the committees of the Board? The Board of Directors has standing Audit, Management Planning and Development, Nominating and Governance and Executive/Finance Committees. Name of Committee and Members Number of Meetings in Fiscal 2009 Functions of the Committee Audit: J. David Grissom, ...

  • Page 32
    ... of corporate goals set by the Committee • Reviews and approves the compensation of the chief executive officer and other senior executive officers • Reviews management succession planning 4 The Board has determined that all of the members of the Management Planning and Development Committee...

  • Page 33
    ... is not an executive officer of the other company. During fiscal 2009, affiliates of Harman Management Corporation (''Harman''), as KFC, Taco Bell, Pizza Hut, Long John Silver's and A&W All American Food franchisees, paid royalties of approximately $14.6 million and contingent store opening fees of...

  • Page 34
    ... demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to YUM and our Board. Finally, we value their significant experience on other public company boards of directors and board committees. Information about the number of shares of common stock...

  • Page 35
    ... co-founder of Icon Blue, Inc., a brand marketing company. She served as President and Chief Executive Officer of Times Mirror Foundation, a charitable foundation affiliated with the Tribune Company from 1997 to 2001 and Senior Vice President, Communications and Public Affairs, of the Los Angeles...

  • Page 36
    ...managing director of a consulting firm and chief executive officer of a consumer, branded business • Expertise in finance, marketing, business development and corporate governance • Public company directorship and committee experience • Independent of Company Kenneth G. Langone Age 74 Director...

  • Page 37
    ...and chief executive officer of a global travel-related services company • Expertise in finance, marketing and international business development • Public company directorship and committee experience • Independent of Company 21MAR201012032309 Proxy Statement Thomas C. Nelson Age 47 Director...

  • Page 38
    ...: • Operating and management experience, including as president of the Company's China division • Expertise in marketing and brand development • Expertise in strategic planning and international business development Robert D. Walter Age 64 Director since 2008 Founder and Retired Chairman/ CEO...

  • Page 39
    ... development, business integrations, financial reporting, compliance and controls • Public company directorship and committee experience • Independent of Company If elected, we expect that all of the aforementioned nominees will serve as directors and hold office until the 2011 Annual Meeting...

  • Page 40
    ... the Company's internal controls over financial reporting, statutory audits and services rendered in connection with the Company's securities offerings. (2) Audit-related fees for 2009 and 2008 included audits of financial statements of certain employee benefit plans, agreed upon procedures related...

  • Page 41
    ..., including actual services provided and associated fees, and must promptly report any non-compliance with the pre-approval policy to the Chairperson of the Audit Committee. Proxy Statement The complete policy is available on the Company's Web site at www.yum.com/governance/media/gov_auditpolicy...

  • Page 42
    ... to shareowners but not to management and/or the board. Supporting Statement Special meetings allow shareowners to vote on important matters, such as electing new directors, that can arise between annual meetings. If shareowners cannot call special meetings investor returns may suffer. Shareowners...

  • Page 43
    ... their service as a Board member for at least one year following their departure from the Board. • Communication with the Board. Shareholders may communicate with our Board of Directors, individually or as a group, by contacting the Company's corporate secretary. In addition, our senior executives...

  • Page 44
    ...This information is presented as of December 31, 2009, and is based on stock ownership reports on Schedule 13G filed by each of these shareholders with the SEC and provided to us. Name and Address of Beneficial Owner Number of Shares Beneficially Owned Percent of Class Southeastern Asset Management...

  • Page 45
    ... voting direction of each named person at the Annual Meeting: • Mr. Novak, 30,548 shares • all directors, director nominees and executive officers as a group, 33,019 shares (2) The amounts shown include beneficial ownership of shares that may be acquired within 60 days pursuant to stock options...

  • Page 46
    ...held in a margin account. (7) This amount includes 6,000 shares held in a trust. (8) All 353,094 of Mr. Allan's shares are pledged. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and...

  • Page 47
    ... used in the calculation of the annual bonus (page 33) • Our CEO's compensation (page 38) • Our stock ownership guidelines (page 41) Our Named Executive Officers (NEOs) for 2009: • David C. Novak, Chairman, Chief Executive Officer and President • Richard T. Carucci, Chief Financial Officer...

  • Page 48
    ... pay our restaurant general managers and executives like owners • design pay programs at all levels that align team and individual performance, customer satisfaction and shareholder return • emphasize long-term incentive compensation • require executives to personally invest in Company stock...

  • Page 49
    ... award values. The Committee reviews and establishes each executive's total compensation target for the current year which includes base salary, annual bonus opportunities and long-term incentive awards. The Committee's decisions impacting our CEO are also reviewed and ratified by the Board. In...

  • Page 50
    ... the company variable pay programs is reflective of business results and not competitive benchmarking. Comparative Compensation Data Revenue size often correlates to some degree with the market value of compensation for senior executive positions. For companies with significant franchise operations...

  • Page 51
    ... products group used for the benchmarking done at the end of 2008 were: 2007 Sales/ Revenues ($billions) 2007 Sales/ Revenues ($billions) Company Name Company Name 21MAR201012032309 Proxy Statement Lowe's Companies, Inc...Walgreen Co...PepsiCo, Inc...Kraft Foods, Inc...The Coca-Cola Company...

  • Page 52
    ...and the grant date fair value of long-term incentives. 2009 Executive Compensation Decisions Base Salary Base salary is designed to compensate our executive officers for their primary roles and responsibilities and to provide a stable level of annual compensation. Market data from the peer group was...

  • Page 53
    ... factors that drive individual and team performance, which will result in increased shareholder value over the long term. These measures are designed to align employee goals with the Company's individual divisions' current year objectives to grow earnings and sales, develop new restaurants, improve...

  • Page 54
    .... 2009 Annual Incentive Compensation Team Performance (TP) Factor Calculation TP Factor After Applying Weights\ NEO TP Measures TP Target TP based on leverage TP Actual formula TP Weight Novak and Carucci Operating Profit Growth (Before Tax) System Sales Growth System Net Builds System Customer...

  • Page 55
    ... US exceeding its profit plan, restaurant margin and customer service targets as well as Mr. Creed's strong leadership in driving product development. Based on this performance, the Committee approved a 135 Individual Performance Factor for Mr. Creed. Application of Annual Incentive Program Formula...

  • Page 56
    ... the Company common stock and the length of time a participant holds an award after vesting. In March 2009, the Committee modified our long term incentive compensation for our CEO, Chief Financial Officer and our division presidents by adding a Performance Share Plan and discontinuing the executives...

  • Page 57
    ... consumer products peer group in terms of total shareholder return (top quartile), return on net assets (top quartile), EPS growth (top 50%) and operating income growth (top 50%). Based on this sustained strong performance, the Committee determined that Mr. Novak's target total compensation for 2009...

  • Page 58
    ... year and that the Company's total shareholder return ranked in the top quartile of its peer group for the 5 and 10 year periods. The Committee also noted that development targets were exceeded in the China Division and met in the International Division, and that he was continuing to drive...

  • Page 59
    ... benefit is designed to provide income replacement of approximately 40% of salary and annual incentive compensation (less the company's contribution to social security on behalf of the employee) for employees with 20 years of service who retire after age 62. The annual change in pension value for...

  • Page 60
    ... times their current annual base salary depending upon their positions, within five years from the time the established targets become applicable. If an executive does not meet his or her ownership guideline, he or she is not eligible for a grant under the LTI Plan. In 2009, all executive officers...

  • Page 61
    ... periodically reviews these agreements or other aspects of the Company's change in control program. The Company's change in control agreements, in general, pay, in case of an executive's termination of employment for other than cause within two years of the change in control, a benefit of two times...

  • Page 62
    ... and benefits for terminated employees • access to equity components of total compensation after a change in control Future Severance Agreement Policy As recommended by shareholders in 2007, the Committee approved a new policy in 2007 to limit future severance agreements with our executives. The...

  • Page 63
    ... Company's three full fiscal years immediately preceding the fiscal year in which termination of employment occurs or, if higher, the executive's target bonus. Certain types of payments are excluded from this policy, such as amounts payable under arrangements that apply to classes of employees other...

  • Page 64
    MANAGEMENT PLANNING AND DEVELOPMENT COMMITTEE REPORT The Management Planning and Development Committee of the Board of Directors reports that it has reviewed and discussed with management the section of this proxy statement headed ''Compensation Discussion and Analysis,'' and, on the basis of that ...

  • Page 65
    ...,704 361,012 267,824 Name and Principal Position (a) David C. Novak Chairman, Chief Executive Officer and President Richard T. Carucci Chief Financial Officer Jing-Shyh S. Su Vice Chairman, President, China Division Year (b) Salary ($)(1) (c) Bonus($) Stock Awards ($)(2) (d) 739,989 8,342,345...

  • Page 66
    ...in actuarial present value of age 62 accrued benefits under all actuarial pension plans during the 2009 fiscal year (using interest rate and mortality assumptions consistent with those used in the Company's financial statements). See the Pension Benefits Table at page 53 for a detailed discussion of...

  • Page 67
    ... related to Company provided life insurance in excess of $50,000. The Company provides every salaried employee with life insurance coverage up to one times the employee's salary plus target bonus. (4) Except in the case of Mr. Creed, this column reports the total amount of other benefits provided...

  • Page 68
    ... Company's NEOs. The amount of these awards that were expensed is shown in the Summary Compensation Table at page 46. Name and Principal Position (a) Grant Date (b) Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) Threshold Target Maximum c) (d) (e) Estimated Future Payouts...

  • Page 69
    ... using the Black-Scholes value on the grant date of $7.29. For additional information regarding valuation assumptions of SARs/stock options, see the discussion of stock awards and option awards contained in Part II, Item 8, ''Financial Statements and Supplementary Data'' of the 2009 Annual Report...

  • Page 70
    ... PSUs held by the Company's NEOs on December 31, 2009. Option Awards(1) Stock Awards Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($)(3) (i) Name and Principal Position (a) Number of Securities Underlying Unexercised Options...

  • Page 71
    .... Novak in which the 194,877 RSUs represent a 2008 retention award (including accrued dividends) that vests after 4 years. (3) The market value of these awards are calculated by multiplying the number of shares covered by the award by $34.97, the closing price of YUM stock on the NYSE on December 31...

  • Page 72
    ... Plan'') or the YUM! Brands International Retirement Plan determined using interest rate and mortality rate assumptions consistent with those used in the Company's financial statements. 2008 Fiscal Year Pension Benefits Table Number of Present Value of Years of Accumulated Credited Service Benefit...

  • Page 73
    ... (subject to the limits under Internal Revenue Code Section 401(a)(17)) and service under the plan. Upon termination of employment, a participant's Normal Retirement Benefit from the plan is equal to A. 3% of Final Average Earnings times Projected Service up to 10 years of service, plus B. C. 1% of...

  • Page 74
    ...participant terminates employment, either voluntarily or involuntarily, prior to meeting eligibility for Early or Normal Retirement, benefits will be actuarially reduced from age 65 to his early commencement date using the mortality rates in the YUM! Brands Retirement Plan and an interest rate equal...

  • Page 75
    ... to by the Company or one or more of the group of corporations that is controlled by the Company. Benefits are payable under the same terms and conditions as the Retirement Plan without regard to Internal Revenue Service limitations on amounts of includible compensation and maximum benefits. 56

  • Page 76
    (4) Present Value of Accumulated Benefits For all plans, the Present Value of Accumulated Benefits (determined as of December 31, 2009) is calculated assuming that each participant is eligible to receive an unreduced benefit payable in the form of a single lump sum at age 62. Also, since none of the...

  • Page 77
    ... 500 index fund, bond market index fund and stable value fund are designed to track the investment return of like-named funds offered under the Company's 401(k) Plan. The YUM! Stock Fund and YUM! Matching Stock Fund track the investment return of the Company's common stock. Participants may transfer...

  • Page 78
    ... then ended-or at a time that begins at or after the executive's retirement or separation or termination of employment. Distributions can be made in a lump sum or up to 20 annual installments. Initial deferrals are subject to a minimum two year deferral. In general, with respect to amounts deferred...

  • Page 79
    ...are the year-end balances for each executive under the EID Program. As required under SEC rules, below is the portion of the year-end balance for each executive which has previously been reported as compensation to the executive in the Company's Summary Compensation Table for 2009 and prior years or...

  • Page 80
    ... may be different. Factors that could affect these amounts include the timing during the year of any such event, the Company's stock price and the executive's age. Stock Options and SAR Awards. If one or more NEOs terminated employment for any reason other than retirement, death, disability...

  • Page 81
    ... the years of credited service and the present value of the annuity payable to each NEO assuming termination of employment as of December 31, 2009. The table on page 53 provides the present value of the lump sum benefit payable to each NEO when they attain eligibility for Early Retirement (i.e., age...

  • Page 82
    .... Generally, pursuant to the agreements, a change of control is deemed to occur: (i) if any person acquires 20% or more of the Company's voting securities (other than securities acquired directly from the Company or its affiliates); (ii) if a majority of the Directors as of the date of the agreement...

  • Page 83
    ... Statements and Supplementary Data'' of the 2009 Annual Report in Notes to Consolidated Financial Statements at Note 16, ''Stock Options and Stock Appreciation Rights.'' (2) At December 31, 2009, the aggregate number of options and SARs awards outstanding for non-management directors was: Name...

  • Page 84
    ... The directors' requirements provide that directors will not sell any of the Company's common stock received as compensation for service on the Board until the director has ceased being a member of the Board for one year. Matching Gifts. To further YUM's support for charities, non-employee directors...

  • Page 85
    ... the Management Planning and Development Committee of the Board of Directors. The exercise price of a stock option grant or SAR under the 1999 Plan may not be less than the average market price of our stock on the date of grant for years prior to 2008 or the closing price of our stock on the date of...

  • Page 86
    ... RGMs. In addition, the Plan provides incentives to Area Coaches, Franchise Business Leaders and other supervisory field operation positions that support RGMs and have profit and loss responsibilities within a defined region or area. While all non-executive officer employees are eligible to receive...

  • Page 87
    ... Web site at www.yum.com/investors/governance. What are the responsibilities of the Audit Committee? The Audit Committee assists the Board in fulfilling its responsibilities for general oversight of the integrity of the Company's financial statements, the adequacy of the Company's system of internal...

  • Page 88
    ...PCAOB rules (for tax services), on the amount of fees and scope of audit, audit-related and tax services provided. Proxy Statement In addition, the Committee reviewed key initiatives and programs aimed at strengthening the effectiveness of the Company's internal and disclosure control structure. As...

  • Page 89
    ... to serve as directors? Under the rules of the SEC, if a shareholder wants us to include a proposal in our proxy statement and proxy card for presentation at our 2011 Annual Meeting of Shareholders, the proposal must be received by us at our principal executive offices at YUM! Brands, Inc., 1441...

  • Page 90
    ... item of business at an Annual Meeting of Shareholders. These procedures provide that nominations for director nominees and/or an item of business to be introduced at an Annual Meeting of Shareholders must be submitted in writing to our Corporate Secretary at our principal executive offices. We must...

  • Page 91
    (This page has been left blank intentionally.)

  • Page 92
    ... by nonaffiliates of the registrant as of June 13, 2009 computed by reference to the closing price of the registrant's Common Stock on the New York Stock Exchange Composite Tape on such date was $16,255,525,133. All executive officers and directors of the registrant have been deemed, solely for the...

  • Page 93
    ... of this Form 10-K and (ii) the factors described in the Management's Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of this Form 10-K. You should not place undue reliance on forward-looking statements, which speak only as of the date hereof. In...

  • Page 94
    ... the world's largest quick service restaurant ("QSR") company based on number of system units, with more than 37,000 units in more than 110 countries and territories. Through the five concepts of KFC, Pizza Hut, Taco Bell, LJS and A&W (the "Concepts"), the Company develops, operates, franchises and...

  • Page 95
    ..., the China Division achieved revenues of $3.7 billion and Operating Profit of $602 million. Restaurant Concepts Most restaurants in each Concept offer consumers the ability to dine in and/or carry out food. In addition, Taco Bell, KFC, LJS and A&W offer a drive-thru option in many stores. Pizza Hut...

  • Page 96
    ... franchise unit was opened. Today, Pizza Hut is the largest restaurant chain in the world specializing in the sale of ready-to-eat pizza products. Pizza Hut is based in Dallas, Texas.  x As of year end 2009, Pizza Hut was the leader in the U.S. pizza QSR segment, with a 14 percent market share...

  • Page 97
    ...and customs, covering all aspects of restaurant operations, including food handling and product preparation procedures, safety and quality issues, equipment maintenance, facility standards and accounting control procedures. The restaurant management teams are responsible for the day-to-day operation...

  • Page 98
    ... responsibilities under an existing agreement between Ameriserve Food Distribution, Inc. and the Company. This agreement extends through October 31, 2010 and generally restricts Concept-owned restaurants from using alternative distributors in the U.S. for most products. International and China...

  • Page 99
    ... and A&W franchise and license agreements. Under current law and with proper use, the Company's rights in its marks can generally last indefinitely. The Company also has certain patents on restaurant equipment which, while valuable, are not material to its business. Working Capital Information about...

  • Page 100
    ... to obtain required licenses or approvals. The Company and each Concept are also subject to federal and state laws governing such matters as employment and pay practices, overtime, tip credits and working conditions. The bulk of the Concepts' employees are paid on an hourly basis at rates related to...

  • Page 101
    ...Company operates. The Company considers its employee relations to be good. (d) Financial Information about Geographic Areas Financial information about our significant geographic areas (U.S., International Division and China Division) is incorporated herein by reference from Selected Financial Data...

  • Page 102
    ... operations in China and the value of our Chinese assets are affected by fluctuations in currency exchange rates, which may favorably or adversely affect reported earnings. There can be no assurance as to the future effect of any such changes on our results of operations, financial condition or cash...

  • Page 103
    ... not have access to the financial or management resources that they need to open or continue operating the restaurants contemplated by their franchise agreements with us. In addition, franchisees may not be able to find suitable sites on which to develop new restaurants or negotiate acceptable lease...

  • Page 104
    ... with the sale of our restaurants, and whether the resulting ownership mix of Company-operated and franchisee-operated restaurants allows us to meet our financial objectives. In addition, refranchising activity could vary significantly from quarter-toquarter and year-to-year and that volatility...

  • Page 105
    ... our franchisees to obtain financing to develop new restaurants, our planned growth could slow and our future revenue and cash flows could be adversely impacted. Our business may be adversely impacted by general economic conditions. Our results of operations are dependent upon discretionary spending...

  • Page 106
    ...of food products, new product development, price, advertising levels and promotional initiatives, customer service, reputation, restaurant location, and attractiveness and maintenance of properties. If consumer or dietary preferences change, or our restaurants are unable to compete successfully with...

  • Page 107
    ... and research facilities in Shanghai, China. Additional information about the Company's properties is included in the Consolidated Financial Statements and footnotes in Part II, Item 8, pages 59 through 116. The Company believes that its properties are generally in good operating condition and...

  • Page 108
    ... on a number of issues, including, but not limited to, compliance with product specifications and terms of procurement and service requirements. Employees At any given time, the Company or its affiliates employ hundreds of thousands of persons, primarily in its restaurants. In addition, each year...

  • Page 109
    ...he served as Senior Vice President for YRI and also assisted Pizza Hut in asset strategy development. From November 1999 to July 2002, he was Chief Financial Officer of YRI. Christian L. Campbell, 59, is Senior Vice President, General Counsel, Secretary and Chief Franchise Policy Officer for YUM. He...

  • Page 110
    ...April 2008, he served as Chief Operating and Development Officer - Designate. From 2000 until January 2008, he was Senior Vice President/Managing Director of YUM! Restaurants International South Pacific. Graham D. Allan, 54, is the President of YRI. He has served in this position since November 2003...

  • Page 111
    ... Securities. The Company's Common Stock trades under the symbol YUM and is listed on the New York Stock Exchange ("NYSE"). The following sets forth the high and low NYSE composite closing sale prices by quarter for the Company's Common Stock and dividends per common share. 2009 Quarter First Second...

  • Page 112
    ... Stock to the cumulative total return of the S&P 500 Stock Index and the S&P 500 Consumer Discretionary Sector, a peer group that includes YUM, for the period from December 23, 2004 to December 25, 2009, the last trading day of our 2009 fiscal year. The graph assumes that the value of the investment...

  • Page 113
    ...except per share and unit amounts) Fiscal Year 2007 2009 Summary of Operations Revenues Company sales Franchise and license fees and income Total Closures and impairment income (expenses)(a) Refranchising gain (loss)(a) Operating Profit(b) Interest expense, net Income before income taxes Net Income...

  • Page 114
    ... overall strength of our business as it incorporates all our revenue drivers, Company and franchise same store sales as well as net unit development. Same store sales growth includes the results of all restaurants that have been open one year or more. Local currency represents the percentage change...

  • Page 115
    ... our revenue drivers, Company and franchise same store sales as well as net unit development.  x Same store sales is the estimated growth in sales of all restaurants that have been open one year or more.  x Company restaurant profit is defined as Company sales less expenses incurred directly by...

  • Page 116
    ... testing the additional restaurant concepts of Pizza Hut Home Service (pizza delivery) and East Dawning (Chinese food). Our ongoing earnings growth model in mainland China is driven by new unit development each year and modest same store sales growth, which we expect to drive annual Operating Profit...

  • Page 117
    ... same store sales growth of 2%, modest restaurant margin improvement and leverage of our G&A infrastructure. Drive Industry-Leading, Long-Term Shareholder and Franchisee Value - The Company is focused on delivering high returns and returning substantial cash flows to its shareholders via dividends...

  • Page 118
    ... of 1% prior to foreign currency translation. Worldwide revenue declined 4% driven by foreign currency translation and refranchising. International development of 1,467 new restaurants including 509 in mainland China and 898 in YRI. Worldwide Operating Profit growth of 9% prior to foreign currency...

  • Page 119
    ... of Operations Amount 2009 Company sales Franchise and license fees and income Total revenues Company restaurant profit % of Company sales Operating Profit Interest expense, net Income tax provision Net Income - including noncontrolling interest Net Income - noncontrolling interest Net Income - YUM...

  • Page 120
    ... China Loss as a result of our offer to refranchise an equity market outside the U.S. Gain upon the sale of our interest in our Japan unconsolidated affiliate Total Special Items Income (Expense) Tax Benefit (Expense) on Special Items Special Items Income (Expense), net of tax Average diluted shares...

  • Page 121
    ... non-cash charge of $26 million, which resulted in no related income tax benefit, in the fourth quarter of 2009 to write-off goodwill associated with these businesses. In connection with our G&A productivity initiatives and realignment of resources (primarily severance and early retirement costs) we...

  • Page 122
    ... the China Division's Company sales by approximately $100 million, decrease Franchise and license fees and income by approximately $6 million and provide a modest increase to Operating Profit during the first half of 2010. Refranchising of an International Equity Market In the third quarter of 2009...

  • Page 123
    .... The 2009 improvement was largely driven by commodity deflation of $61 million offsetting Company same store sales declines 1%. Commodity inflation of $78 million and higher labor costs partially offset by Company same store sales growth of 7% drove the 2008 restaurant margin decline. Form 10...

  • Page 124
    ...26, 2009. In the year ended December 27, 2008 our Operating Profit in our International and China Divisions was positively impacted by $9 million and $42 million, respectively, by changes in foreign currency exchange rates. Pizza Hut South Korea Goodwill Impairment As a result of a decline in future...

  • Page 125
    ... our Income tax provision and Operating Profit in the year ended December 29, 2007 were not significant. Store Portfolio Strategy From time to time we sell Company restaurants to existing and new franchisees where geographic synergies can be obtained or where franchisees' expertise can generally be...

  • Page 126
    ...Total revenues and on Operating Profit from stores that were operated by us for all or some portion of the respective previous year and were no longer operated by us as of the last day of the respective current year. In these tables, Decreased Company sales and Decreased Restaurant profit represents...

  • Page 127
    ... Unconsolidated Affiliates 1,314 89 Total Excluding Licensees(a) 33,236 1,858 1 Worldwide Balance at end of 2007 New Builds Acquisitions Refranchising Closures Other(b)(c) Balance at end of 2008 New Builds Acquisitions Refranchising Closures Other(d) Balance at end of 2009 % of Total Company 7,625...

  • Page 128
    ... Licensees(a) 3,086 571 - - (75) - 3,582 569 China Division Balance at end of 2007 New Builds Acquisitions Refranchising Closures Other(c) Balance at end of 2008 New Builds Acquisitions Refranchising Closures Other(d) Balance at end of 2009 % of Total (a) Company 2,087 447 7 (4) (54) 182 2,665 476...

  • Page 129
    ... for two brands, results in just one additional unit count. System Sales Growth The following tables detail the key drivers of system sales growth for each reportable segment by year. Net unit growth represents the net impact of actual system sales growth due to new unit openings and historical...

  • Page 130
    ... net impact of new unit openings, acquisitions, refranchisings and store closures on Company Sales or Restaurant Profit. The impact of new unit openings and acquisitions represent the actual Company Sales or Restaurant Profit for the periods the Company operated the restaurants in the current year...

  • Page 131
    ... wage rate and salary increases) and higher occupancy costs. In 2008, the decrease in YRI Company Sales and Restaurant Profit associated with store portfolio actions was driven by refranchising and closures, partially offset by new unit development. Significant other factors impacting Company Sales...

  • Page 132
    ... was primarily driven by the development of new units and the acquisition of additional interest in and consolidation of a former China unconsolidated affiliate during 2009. Significant other factors impacting Company Sales and/or Restaurant Profit were Company same store sales declines of 1% and...

  • Page 133
    ... 2008 was positively impacted by 5% and 2%, respectively, due to the impact of refranchising. China Division Franchise and license fees and income for 2009 and 2008 was negatively impacted by 17% and 19%, respectively, related to the consolidation of two former China unconsolidated affiliates. See...

  • Page 134
    ... at KFC and LJS) and higher international franchise convention costs. Franchise and license expenses increased 67% in 2008. The increase was driven by higher marketing funding on behalf of franchisees, investments in our U.S. brands related to the U.S. business transformation measures and increased...

  • Page 135
    ...arising from the 2005 sale of our fifty 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. Fiscal year 2007 reflects financial recoveries from settlements with insurance carriers related to a lawsuit settled...

  • Page 136
    ...was driven by the impact of same store sales growth and net unit development on Restaurant Profit. The increase was partially offset by higher restaurant operating costs and higher G&A expenses. Unallocated Franchise and license fees and income for 2009 reflects our reimbursements to KFC franchisees...

  • Page 137
    ... to prior year. Interest expense, net increased $60 million or 36% in 2008. The increase was driven by an increase in borrowings in 2008 compared to 2007, partially offset by a decrease in interest rates on the variable portion of our debt. Income Taxes 2009 Reported Income taxes Effective tax rate...

  • Page 138
    ... will be realized in the future. Our 2007 effective income tax rate was positively impacted by valuation allowance reversals. In December 2007, the Company finalized various tax planning strategies based on completing a review of our international operations, distributed a $275 million intercompany...

  • Page 139
    ... is approximately one month earlier than our consolidated period close. Thus, consistent with our historical treatment of events occurring during the lag period, the pre-tax gain on the sale of this investment of $100 million was recorded in the first quarter of 2008. However, the cash proceeds from...

  • Page 140
    ...our Board of Directors approved cash dividends of $0.21 per share of Common Stock to be distributed on February 5, 2010 to shareholders of record at the close of business on January 15, 2010. The Company is targeting an ongoing annual dividend payout ratio of 35% - 40% of net income. The Company did...

  • Page 141
    ... the Company's balance sheet and cash flows we were able to comply with all debt covenant requirements at December 26, 2009 with a considerable amount of cushion. The majority of our remaining long-term debt primarily comprises Senior Unsecured Notes with varying maturity dates from 2011 through...

  • Page 142
    ... bond rates have a significant effect on our net funding position as they drive our asset balances and discount rate assumption. Future changes in investment performance and corporate bond rates could impact our funded status and the timing and amounts of required contributions beyond 2010. Form 10...

  • Page 143
    ... for interim and annual reporting periods beginning after December 15, 2010. In June 2009, the FASB issued guidance on transfers and servicing of financial assets, requiring more information about transfers of financial assets, eliminating the qualifying special purpose entity concept, changing...

  • Page 144
    ... of fair value are the after-tax cash flows and discount rate. The after-tax cash flows incorporate reasonable sales growth and margin improvement assumptions that would be used by a franchisee in the determination of a purchase price for the restaurant. Estimates of future cash flows are...

  • Page 145
    ... our business units internationally (typically individual countries). Fair value is the price a willing buyer would pay for the reporting unit, and is generally estimated using discounted expected future after-tax cash flows from company operations and franchise royalties. Future cash flow estimates...

  • Page 146
    ...obligations under operating leases, primarily as a condition to the refranchising of certain Company restaurants, 2) facilitating franchisee development and 3) equipment financing arrangements to facilitate the launch of new sales layers by franchisees. We recognize a liability for the fair value of...

  • Page 147
    ...increases in amortization of net loss and interest costs, partially offset by a higher expected return on plan assets due to increases in the plan assets balance during 2009. A 50 basis point change in our discount rate assumption at our measurement date would impact our 2010 U.S. pension expense by...

  • Page 148
    ... awards granted to above-store executives will be forfeited. Income Taxes At December 26, 2009, we had a valuation allowance of $187 million primarily to reduce our net operating loss and tax credit carryforward benefits of $230 million, as well as our other deferred tax assets, to amounts that will...

  • Page 149
    ...currency exchange rates would impact the translation of our investments in foreign operations, the fair value of our foreign currency denominated financial instruments and our reported foreign currency denominated earnings and cash flows. For the fiscal year ended December 26, 2009, Operating Profit...

  • Page 150
    ... Data. INDEX TO FINANCIAL INFORMATION Page Reference Consolidated Financial Statements Report of Independent Registered Public Accounting Firm Consolidated Statements of Income for the fiscal years ended December 26, 2009, December 27, 2008 and December 29, 2007 Consolidated Statements of Cash...

  • Page 151
    ... Registered Public Accounting Firm The Board of Directors and Shareholders YUM! Brands, Inc. We have audited the accompanying consolidated balance sheets of YUM! Brands, Inc. and Subsidiaries (YUM) as of December 26, 2009 and December 27, 2008, and the related consolidated statements of income, cash...

  • Page 152
    ... per share data) 2009 2008 Revenues Company sales 9,413 $ 9,843 $ Franchise and license fees and income 1,423 1,461 Total revenues 10,836 11,304 Costs and Expenses, Net Company restaurants Food and paper Payroll and employee benefits Occupancy and other operating expenses Company restaurant expenses...

  • Page 153
    ... months or less, net Repurchase shares of Common Stock Excess tax benefit from share-based compensation Employee stock option proceeds Dividends paid on Common Stock Other, net Net Cash Used in Financing Activities Effect of Exchange Rates on Cash and Cash Equivalents Net Increase (Decrease) in Cash...

  • Page 154
    ... other current assets Deferred income taxes Advertising cooperative assets, restricted Total Current Assets Property, plant and equipment, net Goodwill Intangible assets, net Investments in unconsolidated affiliates Other assets Deferred income taxes Total Assets LIABILITIES AND SHAREHOLDERS' EQUITY...

  • Page 155
    ... shares of Common Stock Employee stock option and SARs exercises (includes tax impact of $40 million) Compensation-related events (includes tax impact of $6 million) Balance at December 27, 2008 Net Income Foreign currency translation adjustment Pension and post-retirement benefit plans (net of tax...

  • Page 156
    ... chicken wings concept we have developed. YUM consists of six operating segments: KFC-U.S., Pizza Hut-U.S., Taco Bell-U.S., LJS/A&W-U.S., YUM Restaurants International ("YRI" or "International Division") and YUM Restaurants China ("China Division"). For financial reporting purposes, management...

  • Page 157
    ... period end date. All of our international businesses except China close one period or one month earlier to facilitate consolidated reporting. Foreign Currency. The functional currency determination for operations outside the U.S. is based upon a number of economic factors, including but not limited...

  • Page 158
    ... included in Franchise and license expenses in 2009, 2008 and 2007, respectively. Revenue Recognition. Revenues from Company operated restaurants are recognized when payment is tendered at the time of sale. The Company presents sales net of sales tax and other sales related taxes. Income from our...

  • Page 159
    ... share-based payments to employees, including grants of employee stock options and stock appreciation rights ("SARs"), in the financial statements as compensation cost over the service period based on their fair value on the date of grant. This compensation cost is recognized over the service period...

  • Page 160
    ... the period held for sale or (b) its current fair value. This value becomes the store's new cost basis. We record any resulting difference between the store's carrying amount and its new cost basis to Closure and impairment (income) expense. When we decide to close a restaurant it is reviewed for...

  • Page 161
    ...financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences...

  • Page 162
    ...equivalents represent funds we have temporarily invested (with original maturities not exceeding three months) as part of managing our day-to-day operating cash receipts and disbursements, including short-term, highly liquid debt securities. Inventories. We value our inventories at the lower of cost...

  • Page 163
    ... value with its carrying value. Fair value is the price a willing buyer would pay for a reporting unit, and is generally estimated using discounted expected future after-tax cash flows from Company operations and franchise royalties. The discount rate is our estimate of the required rate of return...

  • Page 164
    ... status of our pension and post-retirement plans as an asset or liability in our Consolidated Balance Sheet as of our fiscal year end. The funded status represents the difference between the projected benefit obligation and the fair value of plan assets. The projected benefit obligation is the...

  • Page 165
    ... on multi-branding as a long-term growth strategy; G&A productivity initiatives and realignment of resources (primarily severance and early retirement costs); and investments in our U.S. Brands made on behalf of our franchisees such as equipment purchases. In the years ended December 26, 2009 and...

  • Page 166
    ... Sheep Group Limited ("Little Sheep") and obtain Board of Directors representation. We began reporting our investment in Little Sheep using the equity method of accounting and this investment is included in Investments in unconsolidated affiliates on our Consolidated Balance Sheet. The fair value of...

  • Page 167
    ... method of accounting, we previously reported our 51% share of the net income of the unconsolidated affiliate (after interest expense and income taxes) as Other (income) expense in the Consolidated Statements of Income. We also recorded a franchise fee for the royalty received from the stores owned...

  • Page 168
    ...Net income attributable to our partner's ownership percentage is recorded as Net Income - noncontrolling interest. For the year ended December 27, 2008 the consolidation of this entity increased the China Division's Company sales by approximately $300 million and decreased Franchise and license fees...

  • Page 169
    ... equity market. The sale of the market was consummated in the first quarter of 2010. Form 10-K (b) Store closure (income) costs include the net gain or loss on sales of real estate on which we formerly operated a Company restaurant that was closed, lease reserves established when we cease using...

  • Page 170
    ... expenses and other current assets in our Consolidated Balance Sheet. Note 6 - Supplemental Cash Flow Data 2009 Cash Paid For: Interest Income taxes Significant Non-Cash Investing and Financing Activities: Capital lease obligations incurred to acquire assets Net investment in direct financing leases...

  • Page 171
    ... income from investments in unconsolidated affiliates Gain upon consolidation of a former unconsolidated affiliate in China(a) Gain upon sale of investment in unconsolidated affiliate(b)(c) Wrench litigation income(d) Foreign exchange net (gain) loss and other Other (income) expense (a) (b) 2009...

  • Page 172
    ... for doubtful accounts Accounts and notes receivable, net Prepaid Expenses and Other Current Assets Income tax receivable Other prepaid expenses and current assets $ $ $ $ $ $ $ $ Property, Plant and Equipment Land Buildings and improvements Capital leases, primarily buildings Machinery and...

  • Page 173
    ... Pizza Hut South Korea reporting unit in the fourth quarter of 2009 as the carrying value of this reporting unit exceeded its fair value. The fair value of this reporting unit was based on the discounted expected after-tax cash flows from company operations and franchise royalties for the business...

  • Page 174
    ... representing the value of our KFC, LJS and A&W trademarks/brands. The value of a trademark/brand is determined based upon the value derived from the royalty we avoid, in the case of Company stores, or receive, in the case of franchise and licensee stores, for the use of the trademark/brand...

  • Page 175
    ... and Long-term Debt 2009 Short-term Borrowings Current maturities of long-term debt Other $ $ Long-term Debt Unsecured International Revolving Credit Facility, expires November 2012 Unsecured Revolving Credit Facility, expires November 2012 Senior, Unsecured Term Loan, due July 2011 Senior Unsecured...

  • Page 176
    ... the Company's balance sheet and cash flows we were able to comply with all debt covenant requirements at December 26, 2009 with a considerable amount of cushion. The majority of our remaining long-term debt primarily comprises Senior Unsecured Notes with varying maturity dates from 2011 through...

  • Page 177
    ... for headquarters and support functions, as well as certain office and restaurant equipment. We do not consider any of these individual leases material to our operations. Most leases require us to pay related executory costs, which include property taxes, maintenance and insurance. Form 10-K 86

  • Page 178
    ...$ 535 492 446 409 369 2,424 $ 4,675 Lease Receivables Direct Financing Operating $ 13 $ 50 13 41 13 35 17 31 16 28 72 118 $ 144 $ 303 2010 2011 2012 2013 2014 Thereafter At December 26, 2009 and December 27, 2008, the present value of minimum payments under capital leases was $249 million and $234...

  • Page 179
    ... year ended December 26, 2009 were: Fair Value $ 44 6 (3) $ 47 Consolidated Balance Sheet Location Other assets Prepaid expenses and other current assets Accounts payable and other current liabilities Interest Rate Swaps Foreign Currency Forwards - Asset Foreign Currency Forwards - Liability Total...

  • Page 180
    ... are used to offset fluctuations in deferred compensation liabilities that employees have chosen to invest in phantom shares of a Stock Index Fund or Bond Index Fund. The other investments are classified as trading securities and their fair value is determined based on the closing market prices of...

  • Page 181
    ...based on market rates. Note 15 - Pension and Post-retirement Medical Benefits Pension Benefits. We sponsor noncontributory defined benefit pension plans covering certain full-time salaried and hourly U.S. employees. The most significant of these plans, the YUM Retirement Plan (the "Plan"), is funded...

  • Page 182
    ...U.S. Pension Plans 2009 2008 Change in benefit obligation Benefit obligation at beginning of year Measurement date adjustment Service cost Interest cost Participant contributions Plan amendments Acquisitions Curtailment gain Settlement loss Special termination benefits Exchange rate changes Benefits...

  • Page 183
    ... benefit liability - current Accrued benefit liability - non-current Amounts recognized as a loss in Accumulated Other Comprehensive Income: U.S. Pension Plans 2009 2008 $ 342 $ 371 4 3 $ 346 $ 374 International Pension Plans 2009 2008 $ 48 $ 41 - - $ 48 $ 41 Actuarial net loss Prior service cost...

  • Page 184
    ... benefit cost: U.S. Pension Plans Net periodic benefit cost Service cost Interest cost Amortization of prior service cost(a) Expected return on plan assets Amortization of net loss Net periodic benefit cost Additional loss recognized due to: Settlement(b) Special termination benefits(c) $ 2009...

  • Page 185
    ...% International Pension Plans 2009 2008 5.50% 5.50% 4.41% 4.10% Discount rate Rate of compensation increase Weighted-average assumptions used to determine the net periodic benefit cost for fiscal years: U.S. Pension Plans Discount rate Long-term rate of return on plan assets Rate of compensation...

  • Page 186
    ... Government Agencies(c) Fixed Income Securities - Non-U.S. Government(b)(c) Total fair value of plan assets (a) (b) (c) Short-term investments in money market funds Securities held in common trusts Investments held by the U.S. Plan are directly held International Pension Plans $ 7 $ 4 $ 39 271...

  • Page 187
    ... International Pension Plans $ 2 2 2 2 2 10 Year ended: 2010 2011 2012 2013 2014 2015 - 2019 Expected benefits are estimated based on the same assumptions used to measure our benefit obligation on the measurement date and include benefits attributable to estimated further employee service. Form...

  • Page 188
    ...-retirement plan to our fiscal year end. The weightedaverage assumptions used to determine benefit obligations and net periodic benefit cost for the post-retirement medical plan are identical to those as shown for the U.S. pension plans. Our assumed heath care cost trend rates for the following year...

  • Page 189
    ... of stock options and SARs to date, which vest over a period ranging from one to four years and expire no longer than ten years after grant. At year end 2009, approximately 24 million shares were available for future share-based compensation grants under the above plans. We estimated the fair value...

  • Page 190
    ... CEO, Chief Financial Officer and our operating segment Presidents. As part of these changes we granted 78,499 performance share units, with a total grant date fair value of $2.3 million, under the LTIPs. The awards vest after three years and are being expensed over this period. The ultimate number...

  • Page 191
    ...(k) Plan We sponsor a contributory plan to provide retirement benefits under the provisions of Section 401(k) of the Internal Revenue Code (the "401(k) Plan") for eligible U.S. salaried and hourly employees. Participants are able to elect to contribute up to 75% of eligible compensation on a pre-tax...

  • Page 192
    ... directly to shareholders' equity. Amounts included in accumulated other comprehensive loss for the Company's derivative instruments and unrecognized pension and post-retirement losses are recorded net of the related income tax effects. Refer to Note 15 for additional information about our pension...

  • Page 193
    ... in valuation allowances recorded against deferred tax assets generated during the year. The increase for 2008 includes a full valuation allowance for net operating losses generated by certain tax planning strategies implemented during the year. Total changes in valuation allowances, including the...

  • Page 194
    ... rate State income tax, net of federal tax benefit Foreign and U.S. tax effects attributable to foreign operations Adjustments to reserves and prior years Valuation allowance additions (reversals) Other, net Effective income tax rate Our 2009 effective tax rate was positively impacted by the year...

  • Page 195
    ...Net operating loss and tax credit carryforwards Employee benefits Share-based compensation Self-insured casualty claims Lease related liabilities Various liabilities Deferred income and other Gross deferred tax assets Deferred tax asset valuation allowances Net deferred tax assets Intangible assets...

  • Page 196
    ... state operating loss carryforwards totaling $1.4 billion at year end 2009 are being carried forward in jurisdictions where we are permitted to use tax losses from prior periods to reduce future taxable income. These losses will expire as follows: $10 million in 2010, $150 million between 2011 and...

  • Page 197
    ...Pizza Hut, Taco Bell, LJS and A&W concepts. KFC, Pizza Hut, Taco Bell, LJS and A&W operate in 108, 92, 20, 6 and 9 countries and territories, respectively. Our five largest international markets based on operating profit in 2009 are China, Asia Franchise, Australia, United Kingdom, and Latin America...

  • Page 198
    ... costs of ovens for the national launch of Kentucky Grilled Chicken. See Note 5. Amounts have not been allocated to the U.S., YRI or China Division segments for performance reporting purposes. Includes equity income of unconsolidated affiliates of $36 million, $40 million and $47 million in 2009...

  • Page 199
    ...and $651 million in mainland China for 2009, 2008 and 2007, respectively. (f) (g) (h) (i) (j) (k) See Note 5 for additional operating segment disclosures related to impairment, store closure (income) costs and the carrying amount of assets held for sale. Note 21 - Contingencies Lease Guarantees...

  • Page 200
    ...by U.S. refranchising and improved loss trends. Beginning Balance $ 196 $ 197 Ending Balance $ 173 $ 196 2009 Activity 2008 Activity Expense 44 68 Payments (67) (69) Form 10-K In the U.S. and in certain other countries, we are also self-insured for healthcare claims and long-term disability for...

  • Page 201
    ... of the cost of the Cole Arbitration, taking into account a number of factors, including our current projection of eligible claims, the estimated amount of each eligible claim, the estimated claim recovery rate, the estimated legal fees incurred by Claimants and a reasonable settlement value of...

  • Page 202
    ... Bell RGM purporting to represent all current and former RGMs who worked at corporate-owned restaurants in California from August 2002 to the present. The lawsuits allege violations of California's wage and hour laws involving unpaid overtime and meal period violations and seek unspecified amounts...

  • Page 203
    ... of Widjaja, a former California hourly assistant manager, and purportedly all other individuals employed in Taco Bell's California restaurants as managers and alleges failure to reimburse for business related expenses, failure to provide rest periods, unfair business practices and conversion. Taco...

  • Page 204
    ... on behalf of all California hourly employees alleging various California Labor Code violations, including rest and meal break violations, overtime violations, wage statement violations and waiting time penalties. Plaintiff is a current non-managerial KFC restaurant employee represented by the same...

  • Page 205
    ...automobile costs, uniforms costs, and other job-related expenses and seeks to represent a class of delivery drivers nationwide under the Fair Labor Standards Act (FLSA) and Colorado state law. On September 15, 2009, a putative class action styled Sue Blackwood and Scott Lewis v. Pizza Hut of America...

  • Page 206
    Note 22 - Selected Quarterly Financial Data (Unaudited) 2009 Third Quarter $ 2,432 346 2,778 425 470 334 0.71 0.69 - First Quarter Revenues: Company sales Franchise and license fees and income Total revenues Restaurant profit Operating Profit(a) Net Income - YUM! Brands, Inc. Basic earnings per ...

  • Page 207
    ...system of internal control over financial reporting, designed to provide reasonable assurance as to the reliability of the financial statements, as well as to safeguard assets from unauthorized use or disposition. The system is supported by formal policies and procedures, including an active Code of...

  • Page 208
    ..., Chief Executive Officer and President (the "CEO") and the Chief Financial Officer (the "CFO"), the Company's management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report. Management's Report...

  • Page 209
    ... proxy statement which will be filed with the Securities and Exchange Commission no later than 120 days after December 26, 2009. Information regarding executive officers of the Company is included in Part I. Item 11. Executive Compensation. Information regarding executive and director compensation...

  • Page 210
    ...(a) (1) Exhibits and Financial Statement Schedules. Financial Statements: Consolidated financial statements filed as part of this report are listed under Part II, Item 8 of this Form 10-K. Financial Statement Schedules: No schedules are required because either the required information is not present...

  • Page 211
    ... Chief Financial Officer (principal financial officer) February 17, 2010 Senior Vice President Finance and Corporate Controller (principal accounting officer) February 17, 2010 /s/ David W. Dorman David W. Dorman /s/ Massimo Ferragamo Massimo Ferragamo Form 10-K Director February 17, 2010...

  • Page 212
    ... Robert D. Walter Robert D. Walter Director February 17, 2010 Director February 17, 2010 Director February 17, 2010 Director February 17, 2010 Director February 17, 2010 Vice-Chairman of the Board February 17, 2010 Director February 17, 2010 Director February 17, 2010 Form 10-K 121

  • Page 213
    ... Amended and Restated Sales and Distribution Agreement between AmeriServe Food Distribution, Inc., YUM, Pizza Hut, Taco Bell and KFC, effective as of November 1, 1998, which is incorporated herein by reference from Exhibit 10 to YUM's Annual Report on Form 10-K for the fiscal year ended December 26...

  • Page 214
    ... Proxy Statement on Form DEF 14A for the Annual Meeting of Shareholders held on May 21, 2009. YUM Executive Income Deferral Program, as effective October 7, 1997, and as amended through May 16, 2002, which is incorporated herein by reference from Exhibit 10.10 to YUM's Annual Report on Form 10...

  • Page 215
    ...13, 2004, by and between the Company and Samuel Su, which is incorporated herein by reference from Exhibit 10.28 to YUM's Annual Report on Form 10-K for the fiscal year ended December 25, 2004. Form of 1999 Long Term Incentive Plan Award Agreement (Stock Appreciation Rights) which is incorporated by...

  • Page 216
    ... for the quarter ended June 14, 2008. YUM! Performance Share Plan, as effective January 1, 2009 (as filed herewith). YUM! Brands Third Country National Retirement Plan, as effective January 1, 2009 (as filed herewith). 2010 YUM! Brands Supplemental Long Term Disability Coverage Summary, as effective...

  • Page 217
    Supplement to Yum! Brands, Inc. Annual Report to Shareholders On May 21, 2009, David Novak, Yum! Brands, Inc. 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 218
    ...Tim Jerzyk Senior Vice President, Investor Relations Yum! Brands, Inc. 1441 Gardiner Lane Louisville, KY 40213 Phone: (502) 874-8006 INDEPENDENT AUDITORS KPMG LLP 400 West Market Street, Suite 2600 Louisville, KY 40202 Phone: (502) 587-0535 STOCK TRADING SYMBOL-YUM The New York Stock Exchange is the...

  • Page 219
    ... Management Corporation Robert D. Walter 64 Founder and Retired Chairman/CEO, Cardinal Health, Inc. Senior Officers David C. Novak 57 Chairman, Chief Executive Officer and President, Yum! Brands, Inc. Jing-Shyh S. (''Sam'') Su 57 Vice Chairman, Yum! Brands, Inc. President, Yum! Restaurants China...

  • Page 220
    Alone we're delicious. Together we're Yum!® www.yum.com/annualreport Yum! Brands, Inc., trades under the symbol YUM and is proud to meet the listing requirements of the NYSE, the world's leading equities market.