Pizza Hut 2013 Annual Report Download - page 99

YUM! BRANDS, INC.-2013 Form10-K 3
Form 10-K
PART I
ITEM 1Business
PART I
ITEM 1 Business
YUM! Brands, Inc. (referred to herein as “YUM”, the “Registrant” or the
“Company”), was incorporated under the laws of the state of North
Carolina in 1997. The principal executive offices of YUM are located at
1441Gardiner Lane, Louisville, Kentucky 40213, and the telephone number
at that location is [phone]. Our website address is http://yum.com.
YUM, together with its subsidiaries, is referred to in this Form 10-K annual
report (“Form 10-K”) as the Company. The terms “we,” “us” and “our”
are also used in the Form 10-K to refer to the Company. Throughout this
Form10-K, the terms “restaurants,” “stores” and “units” are used
interchangeably. While YUM! Brands, Inc., referred to as the Company,
does not directly own or operate any restaurants, throughout this document
we may refer to restaurants as being Company-owned.
Financial Information about Operating Segments
As of and through December 28, 2013, YUM consisted of six operating
segments: YUM Restaurants China (“China” or “China Division”), YUM
Restaurants International (“YRI” or “International Division”), Taco Bell U.S.,
KFC U.S., Pizza Hut U.S. and YUM Restaurants India (“India” or “India
Division”). The China Division includes mainland China, and the India
Division includes India, Bangladesh, Mauritius, Nepal and Sri Lanka. YRI
includes the remainder of our international operations.
For financial reporting purposes, management considers the three U.S.
operating segments to be similar and, therefore, has aggregated them into
a single reportable operating segment (“U.S.”). In 2012, our India Division
began being reported as a standalone reporting segment separate from YRI
as a result of changes to our management reporting structure. While our
consolidated results are not impacted, our historical segment information
has been restated to be consistent with the current period presentation. In
December 2011, the Company sold the Long John Silver’s (“LJS”) and A&W
All-American Food Restaurants (“A&W”) brands to key franchisee leaders
and strategic investors in separate transactions. Financial information prior
to these transactions reflects our ownership of these brands.
Operating segment information for the years ended December 28, 2013,
December 29, 2012 and December 31, 2011 for the Company is included
in Management’s Discussion and Analysis of Financial Condition and
Results of Operations (“MD&A”) in Part II, Item 7, pages 15 through 35
and in the related Consolidated Financial Statements in Part II, Item 8,
pages 36 through 71.
In the first quarter of 2014, we will combine our YRI and U.S. businesses
and begin reporting segment information for three global divisions: KFC,
Pizza Hut and Taco Bell. China and India will remain separate reporting
segments due to their strategic importance and growth potential. This
new structure is designed to drive greater global brand focus, enabling
us to more effectively share know-how and accelerate growth. While our
consolidated results will not be impacted, we will restate our historical
segment information during 2014 for consistent presentation.
Narrative Description of Business
General
YUM has over 40,000 restaurants in more than 125 countries and territories.
Primarily through the three concepts of KFC, Pizza Hut and Taco Bell (the
“Concepts”), the Company develops, operates, franchises and licenses a
worldwide system of restaurants which prepare, package and sell a menu
of competitively priced food items. Units are operated by a Concept or
by independent franchisees or licensees under the terms of franchise or
license agreements. Franchisees can range in size from individuals owning
just one restaurant to large publicly traded companies.
The China Division, based in Shanghai, China, comprises approximately
6,200 system restaurants, primarily Company-owned KFCs and Pizza
Huts. In 2013, the China Division recorded revenues of approximately
$6.9 billion and Operating Profit of $777 million. On February 1, 2012, we
acquired a controlling interest in Little Sheep Group Limited (“Little Sheep”),
a casual dining concept headquartered in Inner Mongolia, China. See Note 4
for details. The Company also owns non-controlling interests in Chinese
entities who operate in a manner similar to KFC franchisees and a meat
processing entity that supplies lamb primarily to our recently acquired Little
Sheep business. YRI, based in Plano, Texas, comprises approximately
15,200 system restaurants, primarily franchised KFCs andPizza Huts,
operating in over 120 countries outside the U.S., Chinaand India. In
2013 YRI recorded revenues of approximately $3.1 billion and Operating
Profit of $760 million. We have approximately 18,100 system restaurants,
primarily franchised restaurants, in the U.S. and recorded revenues of
approximately $3.0 billion and Operating Profit of $684 million in 2013.
The India Division, based in Delhi, India comprises approximately 700
system restaurants. In 2013, India recorded revenues of approximately
$125 million and an Operating Loss of $15 million.