Taco Bell 2004 Annual Report Download

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power฀
฀yum!
2004฀Annual฀Customer฀Mania฀Report
of
Alone฀we’re฀delicious.฀Together฀we’re฀

Table of contents

  • Page 1
    power฀ ฀ yum! 2004฀Annual฀Customer฀Mania฀Report of

  • Page 2
    ...฀POWER฀X5 TACO฀BELL:฀THINK฀OUTSIDE฀THE฀BUN! PIZZA฀HUT:฀GATHER฀'ROUND฀THE฀GOOD฀STUFF 20-21฀ 22-23฀ ฀ 24-25฀ 26-29฀ 30-32฀ 33-80฀ KFC:฀CHICKEN฀CAPITAL฀U.S.A. LONG฀JOHN฀SILVER'S:฀GET฀COASTAL! A&W:฀HOMETOWN฀FOOD฀MADE฀FUN฀ MULTIBRAND฀POWER...

  • Page 3
    ...the฀first฀dividend฀in฀our฀history฀and฀buying฀back฀a฀record฀$569฀million฀ of฀ Yum!฀ shares.฀ Given฀ this฀ overall฀ strong฀ performance,฀ our฀share฀price฀climbed฀37%฀in฀2004.฀We're฀pleased฀our฀ annual฀return฀to฀shareholders฀is฀22...

  • Page 4
    ...Service฀and฀our฀Taco฀Bell...sales...arena...fact,฀our฀franchisees฀opened฀up฀over฀80%฀of฀ the฀738฀new฀restaurants฀we฀added...franchise-only฀business฀units฀ that฀have฀over฀600฀restaurants฀each.฀We're฀focusing฀our฀ international฀ company...฀reported฀...

  • Page 5
    ...฀you฀on฀our฀ U.S.฀progress. Taco฀Bell฀generated฀5%฀same฀store฀sales฀growth,฀hit฀the฀ $1฀million฀ mark฀ again฀ for฀ average฀ unit฀ volumes฀ and฀ is฀ now฀the฀second฀most฀profitable฀Quick฀Service฀Restaurant฀ brand.฀We're฀especially...

  • Page 6
    ... incremental฀average฀sales฀per฀unit,฀dramatically฀improving฀ unit฀ cash฀ flows.฀ Our฀ franchisees฀ then฀ pioneered฀ multibrand฀combinations฀by฀pairing฀KFC฀and฀Taco฀Bell฀with฀Long฀ John฀Silver's,฀the฀country's฀leading฀quick-service฀seafood...

  • Page 7
    ...coach฀John฀Wooden,฀our฀strategy฀is...company฀additions฀ several฀points฀above฀the฀company...especially฀at฀Taco฀Bell,฀but฀ ...fact,฀our฀customers฀in฀the฀U.S.฀are฀telling฀ us฀we฀are฀giving฀them฀a฀100%฀CHAMPS...฀same฀store฀sales฀growth.฀So฀...

  • Page 8
    ...100%฀CHAMPS฀with฀a฀"Yes!"฀ attitude฀in฀ Every฀Store฀and฀Same฀Store฀Sales฀Growth... by฀ investors฀ what฀ I฀ see฀ going฀ on฀ in฀ our฀ company฀that฀they฀...฀team฀members,฀restaurant฀ managers,฀franchise฀partners,฀and฀outstanding฀Board฀of...

  • Page 9

  • Page 10
    ...largest฀ restaurant฀company฀-฀฀and฀a฀pioneer฀of฀franchising฀-฀in฀China.฀ And฀we've฀only฀just฀begun.฀Over฀the฀last฀four฀years฀we've฀been฀adding... finally,฀a฀strong,฀tenured฀leadership฀team฀averaging฀17฀ years฀of฀experience฀in฀...

  • Page 11
    OVER $1.1 BILLION IN REVENUE 1,900 SYSTEM RESTAURANTS OVER $200 MILLION IN OPERATING PROFIT AVERAGE SALES PER SYSTEM UNIT OF $1.0 MILLION (U.S. DOLLARS) OVER 85,000 EMPLOYEES IN OVER 280 CITIES!

  • Page 12
    KFC IS THE LARGEST AND FASTEST GROWING RESTAURANT CHAIN IN CHINA PIZZA HUT IS THE #1 CASUAL DINING BRAND IN CHINA RECENTLY INTRODUCED PIZZA HUT HOME SERVICE AND TACO BELL GRANDE DINE-IN 1,000 RGMs celebrating the 1,000th KFC with the world's largest "Yum!" cheer.

  • Page 13
    KFC RGM, Din Jing, celebrating with some of her smallest customers! P L EASE OP EN We served nearly a billion customers in China alone in 2004!

  • Page 14
    12 "global power"

  • Page 15
    ...System฀ sales฀ represents฀ the฀ combined฀ sales฀ of฀ Company,฀ franchise,฀ unconsolidated฀ affiliate฀ and฀ license฀restaurants. (b)฀Includes฀KFC฀Germany,฀KFC฀Netherlands,฀KFC฀France,฀ Brazil฀and฀India. (c)฀Includes฀Japan,฀Canada,฀PH฀France...

  • Page 16
    ...฀USA"฀to฀try฀some฀of฀the฀Colonel's฀secret฀ 11฀herbs฀and฀spices. Long฀John฀Silver's฀is฀giving฀seafood฀lovers฀the฀chance฀to "Get฀ A&W฀All-American฀ Coastal"฀with฀the฀signature฀seafood฀tastes฀you฀crave.฀And฀in฀2004,฀ Made฀Fun...

  • Page 17
    "brand ฀ ฀฀฀power฀x5" 15

  • Page 18
    16

  • Page 19
    ...฀of฀Mountain฀Dew฀with฀a฀bold฀tropical฀lime฀blast,฀available฀only฀at฀participating฀Taco฀Bell฀ restaurants.฀Another฀industry฀first฀was฀Taco฀Bell฀becoming฀the฀"Official฀Quick฀Service฀Restaurant"฀of฀Major฀League฀Baseball®฀ (MLB).*฀Our...

  • Page 20
    18

  • Page 21
    ...฀drive฀strong฀same฀store฀sales฀growth,฀it฀was฀one฀of฀the฀most฀successful฀new฀product฀launches฀in฀Pizza฀ Hut฀history,฀with฀the฀highest฀consumer฀awareness฀of฀any฀new฀product.฀This฀success฀was฀followed฀closely฀by฀ Buffalo฀Chicken...

  • Page 22
    20

  • Page 23
    Chicken฀Capital฀USA 2004฀ was฀ a฀ year฀ of฀ rebuilding฀ for฀ KFC.฀ The฀ KFC฀ team฀ was฀ aggressive฀ with฀ its฀ plan฀-฀installing฀ new฀ menuboards฀ in฀ every฀ restaurant,฀ adding฀ new฀ products฀ to฀ the฀ menu฀ and฀ launching฀ a฀ new...

  • Page 24
    ...forward,฀we฀will฀continue฀to฀build฀our฀brand฀by฀leveraging฀our฀history฀and฀ equity฀in฀both฀single฀and฀multibrand฀formats. Get฀Coastal! Hometown฀ Food฀ Made฀ Fun STEVE฀DAVIS,฀PRESIDENT,฀LONG฀JOHN฀SILVER'S/A&W฀AND฀Yum!฀MULTIBRANDING 22

  • Page 25
    23

  • Page 26
    ฀฀power " "multibrand

  • Page 27
    ...restaurants฀accounting฀for:...franchise฀fees฀(excluding฀G&A฀expenses),฀ or฀about฀17%฀of฀the฀U.S.฀total฀ ฀ Signifi ฀cant฀incremental฀average฀sales฀ per฀units,฀dramatically฀improving฀our฀unit฀ cash฀ï¬, ฀ows฀ 500+ new multibrand units฀in 2004...

  • Page 28
    C H M A

  • Page 29
    .... Ring! Diane Oney, Long John Silver's, Sterling Silver Restaurants franchisee SPEED OF SERVICE Don't blink. You might miss RGM Abul Azad making things happen - fast. Abul runs one of KFC's best restaurants! In 2004, he maintained a 97% CHAMPS average and a near-perfect 5.0 Balanced Scorecard. Abul...

  • Page 30
    26 ฀power" C Cleanliness฀ "customer ฀฀mania H Hospitality A Accuracy M Maintenance P Product฀ Quality S Speed฀of฀ Service

  • Page 31
    ...dedicated฀ to฀ 100%฀ CHAMPS฀ with฀ a฀ Yes!฀ Attitude.฀ It's฀ ...฀fourth฀year฀of฀Customer฀and฀Sales฀Mania฀training฀every฀quarter฀ in...teams.฀And฀I'm฀proud฀to฀report฀that฀ we're฀making...฀that฀will฀take฀this฀company฀to฀the฀next฀level...

  • Page 32
    ...NM 9% 8% 1% 6% 30 Company฀sales฀ Franchisee฀sales฀(b)฀ A&W (c) LONG฀JOHN฀SILVER'S฀(c) Franchisee฀sales฀(b)฀ Company฀sales฀ Franchisee฀sales฀(b)฀ Company฀sales฀ Franchisee฀sales฀(b)฀ Company฀sales฀ Franchisee฀sales฀(b)฀ TACO฀BELL PIZZA฀HUT...

  • Page 33
    ...฀in฀China. BREAKDOWN฀OF฀WORLDWIDE฀SYSTEM฀UNITS ฀ 2004฀ UNITED฀STATES ฀ ฀ ฀ Company฀ Unconsolidated฀฀ Affiliate฀ Franchised฀ Licensed฀ Total 31 KFC฀ Pizza฀Hut฀ Taco฀Bell฀ Long฀John฀Silver's฀ A&W฀ Total฀U.S.฀ INTERNATIONAL ฀1,248...

  • Page 34
    Yum!฀at฀a฀glance U.S.฀SALES฀฀ BY฀DAYPART฀ BY฀DISTRIBUTION฀CHANNEL Dinner฀59% Lunch฀35% Snacks/Breakfast฀6% Dine฀Out฀78% Dine฀In฀22% Dinner฀63% Lunch฀27% Snacks/Breakfast฀10% Dine฀...

  • Page 35
    ...฀of฀KFC,฀Pizza฀Hut,฀Taco฀Bell,฀Long฀John฀Silver's฀ ("LJS")฀ and฀ A&W฀ All-American฀ Food฀ Restaurants฀ ("A&W")฀ (collectively฀"the฀Concepts")฀and฀is฀the฀world's฀largest฀quick฀ service฀restaurant฀("QSR")฀company฀based฀on฀the฀number...

  • Page 36
    ...฀Pizza฀Huts฀and฀Taco฀ Bells,฀while฀almost฀all฀KFCs฀are฀operated฀by฀franchisees.฀As฀ a฀result฀of฀operating฀certain฀restaurants฀that฀were฀previously฀ operated฀by฀the฀unconsolidated฀affiliate,฀our฀Company฀sales,฀ restaurant฀profit฀and...

  • Page 37
    ...2004฀and฀2003,฀respectively. Company฀sales฀ Franchise฀and฀license฀fees฀ Revenues฀ Company฀restaurant฀profit฀ %฀of฀Company฀sales...฀cumulative฀effect฀฀ ฀ of฀accounting฀change฀ ฀ 740฀ Cumulative฀effect฀of accounting฀change,฀net฀of฀tax Net...

  • Page 38
    ...฀to฀investors฀as฀a฀significant฀indicator฀of฀the฀overall฀ strength฀of฀our฀business฀as฀it฀incorporates฀all฀of฀our฀revenue฀ drivers,฀Company฀and฀franchise฀same฀store฀sales฀as฀well฀as฀ net฀unit฀development. In฀2004,฀the฀increase...

  • Page 39
    ...store฀sales฀includes฀only฀Company฀restaurants฀ that฀have฀been฀open฀one฀year฀or฀more.฀U.S.฀blended฀same฀ store฀sales฀include฀KFC,฀Pizza฀Hut฀and฀Taco฀Bell฀Companyowned฀restaurants฀only.฀U.S.฀same฀store฀sales฀for฀Long฀John฀ Silver...

  • Page 40
    ...฀allowances฀for฀doubtful฀franchise฀and฀license฀fee฀receivables,฀principally฀at฀Taco฀Bell. WORLDWIDE฀OTHER฀(INCOME)฀EXPENSE ฀ Equity฀income฀from฀investments฀฀ ฀ in฀unconsolidated฀affiliates฀ Foreign฀exchange฀net฀(gain)฀loss฀ Other฀(income...

  • Page 41
    ...our฀average฀debt฀outstanding. INCOME฀TAXES ฀ Reported ฀ Income฀taxes฀ ฀ Effective฀tax฀rate฀ 2004฀ $฀...฀sales฀increases฀on฀restaurant฀ profit฀and฀franchise฀...฀international฀ tax฀planning฀strategies฀implemented฀in฀2004.฀The฀decrease฀ was฀...

  • Page 42
    ...฀settlements...long-term฀ debt฀ as฀ a฀ result฀ of฀ the฀ early฀ redemption฀ of฀ our฀ 2005฀ Senior฀ Unsecured฀ Notes฀ of฀ $350฀million฀in฀2004...company฀stores฀ and฀from฀our฀franchise... long-term฀ debt฀balances...purchases฀and฀sales฀of฀shortterm฀...

  • Page 43
    ...outstanding฀Common฀Stock฀(excluding฀applicable฀transaction฀fees)฀under฀this฀program.฀In฀January฀2005,฀ the฀Board฀of฀Directors฀authorized฀a฀new฀share฀repurchase฀ program฀for฀up฀to฀$500฀million฀of฀the฀Company's฀outstanding฀ common฀stock...

  • Page 44
    ...quarterly฀reporting฀period฀thereafter฀will฀begin฀one฀ month฀later฀in฀2005฀than฀in฀previous฀years. 42 OTHER฀SIGNIFICANT฀KNOWN฀EVENTS,฀TRENDS฀ OR฀UNCERTAINTIES฀EXPECTED฀TO฀IMPACT฀2005฀ OPERATING฀PROFIT฀COMPARISONS฀WITH฀2004 New฀Accounting...

  • Page 45
    ...฀from฀the฀royalty฀we฀avoid,฀ in฀the฀case฀of฀Company฀stores,฀or฀receive,฀in฀the฀case฀of฀franchise฀stores,฀due฀to฀our฀ownership฀of฀the฀trademarks/brands.฀ Thus,฀anticipated฀sales฀are฀the฀most฀important฀assumption฀ in฀valuing...

  • Page 46
    ...,฀as฀previously฀mentioned,฀the฀ plans฀are฀closed฀to฀new฀participants.฀A฀50฀basis฀point฀change฀ in฀our฀discount฀rate฀assumption฀of฀6.15%฀at฀September฀30,฀ 2004฀would฀impact฀our฀2005฀pension฀expense฀by฀approximately฀$12฀million...

  • Page 47
    ...25,฀2004.฀ Operating฀ in฀ international฀ markets฀ exposes฀ the฀ Company฀ to฀ movements฀ in฀ foreign฀ currency฀ exchange฀ rates.฀ The฀ Company's฀primary฀exposures฀result฀from฀our฀operations฀in฀ Asia-Pacific,฀the฀Americas฀and฀Europe.฀Changes...

  • Page 48
    ...฀both฀written฀reports฀and฀oral...21E฀ of฀ the฀ Securities฀ Exchange฀ Act฀ of฀ 1934,฀ as...strategy;฀volatility฀of฀actuarially฀determined฀losses฀and฀loss฀ estimates;฀ and฀ adoption฀ of฀ new฀ or฀ changes฀ in฀ accounting...products฀of฀the฀Company...

  • Page 49
    ...except฀per฀share฀data)฀ REVENUES 2004฀ 2003฀ 2002 Company฀sales฀ Franchise฀and฀license฀fees $฀7,992฀ ฀1,...ACCOUNTING฀CHANGE฀ Income฀tax฀provision฀ INCOME฀BEFORE฀CUMULATIVE฀EFFECT฀OF฀ACCOUNTING฀CHANGE฀ Cumulative฀effect฀of฀accounting...

  • Page 50
    ...long-term฀debt฀ Short-term฀borrowings-three฀months฀or฀less,฀net฀ Repurchase฀shares฀of฀common฀stock฀ Employee฀stock฀option฀proceeds฀ Dividends฀paid฀on฀common฀shares฀ Other,฀net฀ NET฀CASH฀USED฀IN฀FINANCING฀ACTIVITIES฀ EFFECT฀OF฀EXCHANGE...

  • Page 51
    ...Accounts฀and฀notes฀receivable,฀less฀allowance:฀$22฀in฀2004฀and฀$25฀in฀2003฀ Inventories฀ Assets฀classified฀as฀held฀for฀sale...฀cooperative฀liabilities฀ ฀ Total฀Current฀Liabilities฀ Long-term฀debt฀ Other฀liabilities฀and฀deferred฀credits...

  • Page 52
    ...Employee฀stock฀option฀exercises฀฀ ฀ (includes฀tax฀impact฀of฀$102฀million)฀ Compensation-related฀events฀ Balance฀at฀December฀25,฀2004฀ See฀accompanying฀Notes฀to฀Consolidated฀Financial฀Statements. 293 8)฀ 9฀ ฀ 294 9)฀ 7฀ ฀ 292 14)฀ 12...

  • Page 53
    ...comprises฀the฀worldwide฀operations฀of฀KFC,฀Pizza฀Hut,฀Taco฀Bell฀and฀since฀May฀7,฀2002,฀Long฀ John฀Silver's฀("LJS")฀and฀A&W฀All-American฀Food฀Restaurants฀ ("A&W")฀ (collectively฀ the฀ "Concepts"),฀ which฀ were฀ added฀ when฀we฀acquired...

  • Page 54
    ...,฀are฀reported฀ in฀G&A฀expenses.฀Research฀and฀development฀expenses฀were฀ $26฀million฀in฀both฀2004฀and฀2003฀and฀$23฀million฀in฀2002. Impairment฀ or฀ Disposal฀ of฀ Long-Lived฀ Assets ฀ In฀ accordance฀ with฀ SFAS฀No.฀144,฀ "Accounting...

  • Page 55
    ... ฀ Effective฀ December฀29,฀ 2002,฀ the฀ Company฀ adopted฀ SFAS฀No.฀143,฀ "Accounting฀ for฀Asset฀Retirement฀Obligations"฀("SFAS฀143").฀SFAS฀143฀ addresses฀the฀financial฀accounting฀and฀reporting฀for฀legal฀ obligations฀associated฀with฀the...

  • Page 56
    ...and฀annual฀...applicable...฀gains฀(...฀months...฀2004... sales฀levels...reported฀separately฀from฀goodwill.฀We฀base฀ amounts฀assigned฀to฀goodwill฀and฀other฀identifiable฀intangible฀ assets฀on฀independent฀appraisals฀or฀internal฀estimates. The฀Company฀accounts...

  • Page 57
    ...price฀a฀willing฀buyer฀would฀pay฀...Company฀had฀applied฀the฀fair฀value฀recognition฀provisions฀ of฀SFAS฀No.฀123,฀"Accounting฀for฀Stock-Based฀Compensation"฀ ("SFAS฀123"),฀to฀stock-based฀employee฀compensation. ฀ 2004฀ Net฀Income,฀as฀reported...

  • Page 58
    ...or฀annual฀period฀beginning฀after฀June฀15,฀2005฀(the฀ quarter฀ending฀December฀31,฀2005฀for฀the฀Company)฀and฀ early฀adoption฀is฀encouraged.฀The฀Company฀is฀in฀the฀process฀ of฀ evaluating฀ the฀ use฀ of฀ certain฀ option-pricing฀ models...

  • Page 59
    ...gains)฀losses; ฀ Store฀closure฀costs; ฀ Impairment฀of฀long-lived฀assets฀for฀stores฀we฀intend฀to฀ close...฀("EPS")฀ ฀ Net฀income฀ Basic฀EPS: Weighted-average฀common฀shares฀฀ ฀ outstanding฀ Basic฀EPS฀ 2004฀ $฀ 740฀ 2003฀ $฀ 617฀ 2002...

  • Page 60
    ...our฀acquisition฀of฀YGR฀and฀costs฀to฀defend฀ certain฀wage฀and฀hour฀litigation. 2004 Inter-฀ national฀ Worldwide NOTE฀8 SUPPLEMENTAL฀CASH฀FLOW฀DATA฀ ฀ 2004฀ Cash฀Paid฀for: ฀ Interest฀ $฀146฀ ฀ Income฀taxes฀ ฀276฀ Significant฀Non-Cash...

  • Page 61
    ...฀franchise฀fees฀included฀in฀฀ ฀ refranchising฀gains Continuing฀fees 2004...2004฀ and฀2003฀annual฀impairment฀tests.฀The฀estimates฀of฀sales฀ attributable฀to฀the฀LJS฀trademark...Company-owned฀ portfolio.฀Both฀the฀decision฀to฀close฀these฀Company...

  • Page 62
    ...weighted฀average฀ contractual฀interest฀rate฀on฀borrowings฀outstanding฀under฀the฀ Credit฀Facility฀was฀2.72%. On฀November฀15,฀2004,฀we฀voluntarily฀redeemed฀all฀of฀ our฀7.45%฀Senior฀Unsecured฀Notes฀that฀were฀due฀in฀May฀2005฀ (the฀"2005...

  • Page 63
    ...qualify฀ for฀ sale-leaseback฀ accounting,฀ they฀ are฀ accounted฀ for฀ ...Balance฀Sheets฀at฀December฀25,฀2004฀or฀ December฀27,฀2003.฀There฀was฀no฀gain฀or฀loss฀recorded฀as฀a฀ result฀of฀this฀transaction. The฀ annual฀ maturities฀ of฀ long...

  • Page 64
    ...฀forward฀contract฀ we฀will฀receive฀or฀be฀required฀to฀pay฀a฀price฀adjustment฀based฀ on฀the฀difference฀between฀the฀weighted฀average฀price฀of฀our฀ common฀stock฀over฀the฀duration฀of฀the฀Program฀and฀the฀initial฀ purchase฀price฀of...

  • Page 65
    ...฀of฀ the฀franchise฀and฀license฀fee฀receivables. Fair฀ Value ฀ At฀ December฀25,฀ 2004฀ and฀ December฀27,฀ 2003,฀the฀fair฀values฀of฀cash฀and฀cash฀equivalents,฀shortterm฀investments,฀accounts฀receivable฀and฀accounts฀payable฀ approximated...

  • Page 66
    ...฀of฀the฀Plan's฀expected฀September฀30,฀ 2005฀funded฀status. Components฀of฀Net฀Periodic฀Benefit฀Cost ฀ Pension฀Benefits Our฀estimated฀long-term฀rate฀of฀return฀on฀plan฀assets฀represents฀the฀weighted฀average฀of฀expected฀future฀returns฀on...

  • Page 67
    ...฀investment฀strategy฀is฀ primarily฀driven฀by฀our฀Plan's฀participants'฀ages฀and฀reflects฀a฀ long-term฀...2004,฀2003฀and฀2002฀as฀of฀the฀date฀of฀grant฀using฀ the฀ Black-Scholes฀ option-pricing฀ model฀ with฀ the฀ following฀ weighted-average...

  • Page 68
    ...annual฀expense฀related฀to฀this฀award฀included฀in฀earnings฀ was฀$0.4฀million฀for฀2004,฀2003฀and฀2002. NOTE฀19 OTHER฀COMPENSATION฀AND฀BENEFIT฀PROGRAMS...the฀average฀market฀ price฀at฀the฀date฀of฀deferral฀(the฀"Discount฀Stock฀Account").฀...

  • Page 69
    ...฀ Stock฀ (excluding฀ applicable฀ transaction฀fees).฀This฀share฀repurchase฀program฀was฀completed฀in฀ 2004.฀During฀2004,฀we฀repurchased฀approximately฀8.1฀million฀ shares฀for฀approximately฀$294฀million฀at฀an฀average฀price฀ per฀share฀of...

  • Page 70
    ...฀tax฀(assets)฀liabilities฀ Reported฀in฀Consolidated฀Balance฀Sheets฀as: ฀ Deferred฀income฀taxes฀ ฀ Other฀assets฀ ฀ Other฀liabilities฀and฀deferred฀credits฀ ฀ Accounts฀payable฀and฀other฀current฀liabilities 2004฀ $฀ 153฀ ฀ 209฀ $฀ 362...

  • Page 71
    ... $฀4,339฀ $฀4,158฀ $฀3,886 NOTE฀23 REPORTABLE฀OPERATING฀SEGMENTS฀ We฀ are฀ principally฀ engaged฀ in฀ developing,฀ operating,฀ franchising฀and฀licensing฀the฀worldwide฀KFC,฀Pizza฀Hut฀and฀Taco฀ Bell฀ concepts,฀ and฀ since฀ May฀ 7,฀ 2002...

  • Page 72
    ...Company's฀historical฀refranchising฀programs฀and,฀to฀a฀ lesser฀extent,฀franchisee฀development฀of฀new฀restaurants,฀at฀ December฀25,฀2004...฀(gain).฀New฀loans฀are฀not฀currently฀being฀ added...฀ losses,฀we฀make฀annual฀decisions฀to฀self-insure...

  • Page 73
    ...named฀as฀the฀ defendant฀in฀a฀class฀action฀lawsuit฀filed฀in฀the฀United฀States฀ District฀Court฀for฀the฀Northern฀District฀of฀California฀entitled฀ Moeller,฀et฀al.฀v.฀Taco฀Bell฀Corp.฀On฀August฀4,฀2003,฀plaintiffs฀filed฀an฀amended...

  • Page 74
    ...that฀Taco฀Bell฀Corp.฀misappropriated฀certain฀ideas฀ and฀concepts฀used฀in฀its฀advertising฀featuring฀a฀Chihuahua.฀ The฀ plaintiffs฀ sought฀ to฀ recover฀ monetary฀ damages฀ under฀ several฀theories,฀including฀breach฀of฀implied-in-fact฀contract...

  • Page 75
    ... SELECTED฀QUARTERLY฀FINANCIAL฀DATA฀(UNAUDITED)฀ 2004฀ Revenues: ฀ Company฀sales฀ ฀ Franchise฀and฀license฀fees฀ ฀ Total฀...฀ Income฀before฀cumulative฀effect฀of฀accounting฀change฀ Cumulative฀effect฀of฀accounting฀change,฀net฀of฀tax฀ Net฀...

  • Page 76
    ...฀of฀the฀Consolidated฀Financial฀Statements,฀related฀notes฀ and฀other฀information฀included฀in฀this฀annual฀report.฀The฀financial฀statements฀were฀prepared฀in฀accordance฀with฀accounting฀ principles฀generally฀accepted฀in฀the฀United฀States฀of...

  • Page 77
    ...accordance฀with฀the฀standards฀of฀the฀Public฀Company฀Accounting฀Oversight฀Board฀(United฀States),฀ the฀effectiveness฀of฀YUM's฀internal฀control฀over฀financial฀reporting฀as฀of฀December฀25,฀2004,฀based฀on฀criteria฀established฀ in฀ Internal...

  • Page 78
    ...฀management's฀assessment,฀included฀in฀Management's฀Report฀on฀Internal฀Control฀over฀Financial฀Reporting,฀ appearing฀on฀page฀74฀of฀the฀Company's฀Annual฀Report฀for฀the฀fiscal฀year฀ended฀December฀25,฀2004,฀that฀YUM!฀Brands,฀Inc.฀and...

  • Page 79
    ... Fiscal฀years฀2004,฀2003,฀2002฀and฀2001฀include฀52฀weeks฀and฀fiscal฀year฀2000฀includes฀53฀weeks.฀From฀May฀7,฀2002,฀results฀include฀Long฀John฀Silver's฀("LJS")฀and฀A&W฀ All-American฀Food฀Restaurants฀("A&W"),฀which฀were฀added฀when...

  • Page 80
    ...,฀Secretary฀and฀ Chief฀Franchise฀Policy฀Officer,฀Yum!฀Brands,฀Inc. Richard฀T.฀Carucci฀47 Senior฀Vice฀President฀and฀Chief฀Financial฀Officer,฀ Yum!฀Brands,฀Inc. Steven฀A.฀Davis฀46 President,฀Long฀John฀Silver's/A&W฀and฀ Yum!฀Multibranding...

  • Page 81
    ...site฀of฀ American฀Stock฀Transfer฀&฀Trust฀("AST"). ฀ Access฀account฀balance฀and฀other฀general฀account฀ information ฀ Change฀an฀account's฀mailing฀address ฀ View฀a฀detailed฀list฀of฀holdings฀represented฀by฀certificates฀and฀the฀identifying...

  • Page 82
    ...2YUMYUM฀(298-6986) International฀Franchising฀Inquiry฀Phone฀Line฀฀ (972)฀338-8100฀ext.฀4480 Online฀Franchise฀Information฀ http://www.yum.com/franchising/info.htm Yum!฀Brands'฀Annual฀Report฀contains฀many฀of฀the฀valuable฀trademarks฀owned฀and฀used฀by...

  • Page 83
    ...! Brands, Inc. Annual Report to Shareholders On June 28, 2004, David Novak, Yum Brands, Inc. (the Company) 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 certification...

  • Page 84
    ...฀programs฀ across฀the฀country฀for฀the฀millions฀of฀ people฀who฀work฀"after฀hours"฀or฀on฀฀ weekends.฀Since฀2000,฀more฀than฀฀ $4.5฀million฀has฀been฀awarded฀to฀YMCA฀฀ Child฀Care฀Centers฀nationwide. Nourishing฀Spirits:฀Taco฀Bell...

  • Page 85
    Alone฀we're฀delicious.฀Together฀we're฀