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yum!
world฀of
2005฀Annual฀Customer฀Mania฀Report
A

Table of contents

  • Page 1
    yum! 2005฀Annual฀Customer฀Mania฀Report world฀of A

  • Page 2
    ...Information Shareholder฀Services A฀World฀of฀Giving฀Back 12-15฀ A฀World฀of฀International฀Growth 16-19฀ A฀World฀of฀Leading฀Brands 20฀ 21฀ 22฀ 23฀ 24฀ Taco฀Bell:฀Think฀Outside฀the฀Bun! Pizza฀Hut:฀Gather฀'Round฀the฀Good฀Stuff KFC:฀Chicken...

  • Page 3
    ...฀value฀in฀the฀retail฀category:฀(1)฀solid฀and฀improving฀same฀store฀sales฀growth,฀ +4%฀in฀the฀U.S.,฀(2)฀consistent฀new฀unit฀expansion,฀setting฀a฀record฀of฀1,554฀new฀openings฀around฀the฀world฀ and฀(3)฀best฀in฀class฀return...

  • Page 4
    ...฀over฀360฀ cities.฀We฀also฀have฀one฀of฀the฀largest฀real฀estate฀development฀teams฀of฀any฀retailer฀in฀the฀world.฀Given฀our฀rapid฀ growth,฀we฀now฀have฀a฀major฀national฀advertising฀budget฀ that฀is฀building฀brand฀awareness฀and...

  • Page 5
    ...our฀ brands฀ there฀are฀fundamentally฀well฀positioned฀in฀their฀categories฀and฀our฀teams฀are฀focused฀on฀turning฀the฀business฀ around.฀At฀the฀same฀time,฀I'd฀like฀to฀give฀a฀special฀pat฀on฀ the฀back฀to฀our฀team฀in฀Mexico,฀which...

  • Page 6
    ...฀ year.฀ Taco฀ Bell's฀ "Think฀Outside฀the฀Bun®"฀advertising฀campaign฀continues฀ to฀ break฀ through฀ the฀ clutter,฀ featuring฀ innovative฀ ideas฀ like฀ the฀ successful฀ Big฀ Bell฀ Value฀ Menu®฀ and฀ the฀ new฀ Crunchwrap฀Supreme.฀Given...

  • Page 7
    ...฀an฀estimated฀$330฀million฀in฀ U.S.฀company฀store฀profits฀and฀franchise฀fees.฀ Our฀most฀successful฀combination฀is฀KFC/Taco฀Bell.฀ This฀combo฀represents฀a฀proven฀opportunity฀to฀open฀high฀ return฀new฀restaurants฀in฀trade฀areas฀that...

  • Page 8
    ...฀ global฀initiative.฀Customer฀Mania฀is฀defined฀as฀delivering฀ our฀customers฀100%฀CHAMPS฀with฀a฀"Yes"฀attitude฀every฀ single฀time.฀We've฀made฀progress฀by฀investing฀more฀in฀ management฀ and฀ team฀ member฀ training,฀ new฀ point฀ of...

  • Page 9

  • Page 10
    ...serving฀up฀฀ delicious฀chicken฀and฀pizzas.฀Together,฀we're฀in฀over฀360฀Chinese฀ cities฀and฀in฀every฀province.฀Our฀team฀is฀energized฀by฀the฀potential฀ we฀have฀today฀in฀China฀because฀we฀know฀we฀are฀positioned฀for฀ growth.฀We...

  • Page 11
    ... of the largest real estate development teams of any retailer in the world - that's the power of Yum! China. Our bold goal is clear: Build dominant restaurant brands in every significant category. In addition to KFC and Pizza Hut casual dining, we've developed Pizza Hut Home Service Delivery and our...

  • Page 12
    ... units, 93% were opened by our franchise and joint-venture partners. Sales growth was strong too, especially so in several rapidly developing regions where our brands are firmly entrenched but where we still see significant potential for further expansion. Open 12. | world of A growth Graham...

  • Page 13
    Around the world from Mexico to the United Kingdom, from Africa, A sia and the Middle East to emerging market s like Rus sia, India and Continental Europe, Yum ! Restaurant s International is driving profitable new unit development. In 2005, we opened 780 new unit s acros s six continent s and we'...

  • Page 14
    ... company in the world has the underlying power of our global portfolio of leading restaurant brands. With leadership positions in the chicken, pizza, Mexican-style food and quick-service seafood categories, we continue to show the world the power of our portfolio. We have individual management teams...

  • Page 15
    ... store sales were up 7%, with nearly half of the increase coming from transactions. More and more people are discovering that Taco Bell is the place to go when you want to THINK OUTSIDE THE BUN®! In 2005 we introduced one of the most popular THINK OUTSIDE THE BUN products in our company's history...

  • Page 16
    Think Outside the Bun!® Open

  • Page 17
    Gather 'Round the Good Stuff®

  • Page 18
    Chicken Capital USAâ„¢

  • Page 19
    Yarr, Genius!â„¢

  • Page 20
    Hometown Food Made Fun!â„¢

  • Page 21
    ...for฀training,฀ measuring฀and฀rewarding฀employee฀performance฀against฀ key฀customer฀metrics.฀We're฀starting฀to฀build฀an฀ emotional฀connection฀with฀our฀customers฀by฀bringing฀฀ our฀"brand฀essence"฀to฀life฀in฀each฀of฀our฀brands'฀service...

  • Page 22
    ...same฀store฀ sales฀growth฀of฀7%.฀Tim฀says฀he฀succeeds฀by฀"stressing฀FUN฀and฀taking฀ Customer฀Mania฀to฀the฀limit." A&W฀฀ ALL฀AMERICAN฀FOOD฀ North฀Aurora,฀Illinois Make฀it฀sparkle.฀That's฀what฀฀ RGM฀Perla฀Garcia฀tells฀her฀team...

  • Page 23
    ...boasts฀a฀consistent฀ 96%฀CHAMPS฀average฀for฀product฀ quality,฀along฀with฀+11%฀same฀store฀ sales฀growth.฀ Linda฀Gardner฀฀ PIZZA฀HUT฀ Orlando,฀Florida If฀you฀blink฀you฀might฀miss฀฀ seeing฀Franchise฀RGM฀of฀the฀ Year,฀Lori฀Houser...

  • Page 24
    ...฀we฀first฀offered฀our฀ customers฀two฀great฀brands฀in฀one฀restaurant,฀our฀goal฀has฀remained฀ the฀same:฀To฀be฀the฀best฀in฀the฀world฀at฀providing฀customers฀ branded฀restaurant฀choice฀and฀convenience.฀ Today,฀not฀only฀can฀we฀get...

  • Page 25
    3000+ multibrand฀units฀฀ in฀the฀U.S. Multibrand฀units฀฀ make฀up฀more฀฀ than฀17%฀of฀our฀total฀฀ restaurant฀base฀฀ in฀the฀U.S. NEW฀multibrand฀฀ units฀in฀2005 500+

  • Page 26
    ...are฀all฀working฀hard฀to฀build฀upon฀this฀consistent฀ record฀of฀performance฀to฀show฀the฀world฀that฀"We're฀Not฀Your฀Ordinary฀Restaurant฀Company."฀ Rick฀Carucci,฀CHIEF฀FINANCIAL฀OFFICER,฀YUM!฀BRANDS,฀INC. WORLDWIDE฀SALES ฀ (in฀billions...

  • Page 27
    ... Total฀International฀ CHINA KFC฀ Pizza฀Hut฀ Taco฀Bell฀ Total฀China(a)฀ Total(a)฀ (a)฀Includes฀3฀units฀in฀2005฀for฀an฀Asian฀food฀concept฀in฀China. Company฀ ฀ Unconsolidated฀฀ Affiliate฀ Franchised฀ Licensed฀ Total 1,155฀ 1,655...

  • Page 28
    ...฀13% Dine฀Out฀75% Dine฀In฀25% ฀Dinner฀51%฀ ฀Lunch฀46% ฀Snacks/Breakfast฀3% Dine฀Out฀59% Dine฀In฀41% ฀Dinner฀35%฀ ฀Lunch฀45% ฀Snacks/Breakfast฀20% 32.฀ ฀ ฀ |฀ ฀ ฀ Yum!฀Brands,฀Inc. Source:฀The฀NPD฀Group,฀Inc.;฀NPD฀Foodworld...

  • Page 29
    ...฀ operations฀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...

  • Page 30
    ...December,฀ 2002฀ through฀ November,฀2003,฀respectively,฀as฀previously฀reported. Adoption฀of฀Statement฀of฀Financial฀Accounting฀Standards฀ No.฀123R,฀"Share-Based฀Payment"฀ In฀the฀fourth฀quarter฀ 2005,฀the฀Company฀adopted฀SFAS฀No.฀123฀(Revised...

  • Page 31
    ...as฀our฀international฀businesses฀that฀report฀ on฀a฀period,฀as฀opposed฀to฀a฀monthly,฀basis.฀In฀the฀U.S.,฀ we฀permanently฀accelerated฀the฀timing฀of฀the฀KFC฀business฀ closing฀by฀one฀week฀in฀December฀2005,฀and฀thus,฀there฀was฀ no...

  • Page 32
    ...฀going฀forward. Hurricane฀ Katrina฀ During฀ the฀ third฀ quarter฀ of฀ 2005,฀ Hurricane฀ Katrina฀ caused฀ significant฀ damage฀ to฀ several฀ company฀ and฀ franchised฀ stores.฀ This฀ storm฀ resulted฀ in฀ approximately฀$4฀million฀of฀one-time...

  • Page 33
    ...26฀million฀in฀2005,฀ 2004฀ and฀ 2003,฀ respectively.฀ See฀ Note฀ 4฀ for฀ a฀ detailed฀ discussion฀of฀AmeriServe฀and฀other฀charges฀(credits). Store฀ Portfolio฀ Strategy฀ From฀ time฀ to฀ time฀ we฀ sell฀ Company฀ restaurants฀ to฀ existing...

  • Page 34
    ...฀units฀at฀the฀ end฀of฀2005฀and฀2004,฀respectively. ฀ ฀ China฀Division฀ ฀ ฀ Company฀ Uncon-฀ ฀ Total฀ solidated฀ ฀ Excluding฀ Affiliates฀Franchisees฀ Licensees Balance฀at฀end฀of฀2003฀ New฀Builds฀ Acquisitions฀ Refranchising฀ Closures...

  • Page 35
    ...by฀ refranchising฀and฀store฀closures. U.S.฀same฀store฀sales฀includes฀only฀Company฀restaurants฀that฀have฀been฀open฀one฀year฀or฀more.฀U.S.฀blended฀ same฀ store฀ sales฀ includes฀ KFC,฀ Pizza฀Hut฀ and฀ Taco฀Bell฀ Yum!฀Brands,฀Inc 39.

  • Page 36
    ... ฀ Pizza฀Hut฀ Taco฀Bell฀ ฀ ฀ Same฀฀ Store฀฀ Sales฀ ฀ ฀ Transactions฀ Average฀ Guest฀ Check ฀ 6 7%฀ Same฀฀ Store฀฀ Sales฀ ฀ 5%฀ ฀(5)%฀ ฀ 3%฀ ฀ ฀ Transactions฀ ฀ ฀ ฀ 1% 5% 4% Average฀ Guest฀ ฀Check 2005฀ Company...

  • Page 37
    ...฀favorable฀impact฀of฀the฀53rd฀week฀ (8฀basis฀points). In฀2004,฀International฀Division฀restaurant฀margins฀as฀a฀ percentage฀of฀sales฀were฀ï¬,at฀compared฀to฀2003.฀The฀favorable฀impact฀of฀same฀store฀sales฀growth฀on฀restaurant฀margin...

  • Page 38
    ...31฀million฀or฀9%฀in฀2005.฀The฀increase฀ was฀ driven฀ by฀ the฀ impact฀ of฀ same฀ store฀ sales฀ growth฀ on฀ restaurant฀profit฀and฀franchise฀and฀license฀fees,฀the฀impact฀ of฀new฀unit฀development฀on฀franchise฀and฀license฀fees฀and...

  • Page 39
    ...฀ ฀ Effective฀tax฀rate฀ 2005฀ $฀264฀ ฀ 25.8%฀ 2004฀ $฀286฀ ฀ 27.9%฀ 2003 $฀268 ฀ 30.2% The฀reconciliation฀of฀income฀taxes฀calculated฀at฀the฀U.S.฀federal฀ tax฀statutory฀rate฀to฀our฀effective฀tax฀rate฀is฀set฀forth฀below...

  • Page 40
    ...฀our฀company฀stores฀ and฀from฀our฀franchise฀operations,฀...program฀for฀up฀to฀$500฀million฀of฀ the฀Company's฀outstanding฀common฀stock฀(excluding฀applicable฀transaction฀fees)฀to฀be฀purchased฀through฀November฀ 2006.฀At฀December฀31,฀2005...

  • Page 41
    ...฀were฀primarily฀charged฀to฀net฀ refranchising฀loss฀(gain).฀New฀loans฀added฀to฀the฀loan฀pools฀ in฀2005฀were฀not฀significant. CRITICAL฀ACCOUNTING฀POLICIES฀AND฀ESTIMATES Our฀ reported฀ results฀ are฀ impacted฀ by฀ the฀ application฀ of...

  • Page 42
    ...฀the฀royalty฀we฀avoid,฀in฀ the฀case฀of฀Company฀stores,฀or฀receive,฀in฀the฀case฀of฀franchise฀stores,฀due฀to฀our฀ownership฀of฀the฀trademark/brand.฀ We฀have฀determined฀that฀the฀KFC฀trademark/brand฀has฀an฀ indefinite฀ life฀ and...

  • Page 43
    ...50฀basis฀point฀change฀ in฀our฀discount฀rate฀assumption฀of฀5.75%฀at฀September฀30,฀ 2005฀would฀impact฀our฀2006฀pension฀expense฀by฀approximately฀$13฀million. The฀assumption฀we฀make฀regarding฀our฀expected฀longterm฀rate฀of฀return฀on...

  • Page 44
    ... change฀ in฀ market฀ value฀ associated฀ with฀ interest฀rate฀swaps฀is฀offset฀by฀the฀opposite฀market฀impact฀ on฀the฀related฀debt. At฀ December฀31,฀ 2005฀ and฀ December฀25,฀ 2004,฀ a฀ hypothetical฀100฀basis฀point฀increase฀in฀short-term...

  • Page 45
    ...฀on฀our฀business;฀new฀product฀and฀concept฀development฀by฀us฀and/or฀our฀food฀industry฀competitors;฀changes฀ in฀commodity,฀labor,฀and฀other฀operating฀costs;฀changes฀in฀ competition฀in฀the฀food฀industry;฀publicity฀which฀may฀impact...

  • Page 46
    ...฀position฀of฀YUM฀as฀of฀December฀31,฀2005...Company฀Accounting฀Oversight฀ Board฀(United฀States),฀the฀effectiveness฀of฀YUM's฀internal฀control฀over฀fi ฀nancial฀reporting฀as฀of฀December฀31,฀ 2005...Kentucky March฀2,฀2006 50 Yum!฀Brands,฀Inc.

  • Page 47
    ...฀in฀the฀accompanying฀Management's฀Report฀on฀Internal฀ Control฀over฀Financial฀Reporting,฀appearing฀on฀page฀53฀of฀the฀Company's฀Annual฀Report฀for฀the฀fi ฀scal฀year฀ended฀ December฀31,฀2005,฀that฀YUM!฀Brands,฀Inc.฀and฀Subsidiaries...

  • Page 48
    ...accepted฀in฀the฀United฀States฀of฀America฀and฀include฀certain฀ amounts฀based฀upon฀our฀estimates฀and฀assumptions,฀as฀required.฀Other฀fi ฀nancial฀information฀presented฀in฀the฀ annual฀report฀is฀derived฀from฀the฀fi ฀nancial฀statements...

  • Page 49
    ...฀July฀15,฀2005,฀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 50
    ...฀of฀Income YUM!฀Brands,฀Inc.฀and฀Subsidiaries Fiscal฀years฀ended฀December฀31,฀2005,฀ December฀25,฀2004฀and฀December฀27,฀2003 (in฀millions,฀except฀per฀share฀data) 2005฀ 2004฀ 2003 Revenues Company฀sales฀ Franchise฀and฀license฀fees...

  • Page 51
    ...Brands,฀Inc.฀and฀Subsidiaries Fiscal฀years฀ended฀December฀31,฀2005,฀฀ December฀25,฀2004฀and฀December฀27,฀2003฀ (in฀millions)฀ ฀ ฀ 2005฀ 2004฀ 2003...฀operating฀working฀capital฀...Sales...฀ Employee฀stock...of฀Exchange฀Rate฀on฀Cash...

  • Page 52
    ...฀2005฀and฀$22฀in฀2004฀ Inventories฀ Prepaid฀expenses฀and฀other฀current฀assets฀ Deferred฀income฀taxes฀ Advertising฀...฀stock,฀no฀par฀value,฀750฀shares฀authorized;฀278฀shares฀and฀290฀shares฀ ฀ issued฀in฀2005฀and฀2004,฀respectively฀...

  • Page 53
    ...!฀Brands,฀Inc.฀and฀Subsidiaries ฀ Fiscal฀years฀ended฀December฀31,฀2005,฀฀ December฀25,฀2004฀and฀December฀27,฀2003฀...common฀share)฀ Repurchase฀of฀shares฀of฀common฀stock฀฀ Employee฀stock฀option฀exercises฀(includes฀tax฀impact฀ ฀ of...

  • Page 54
    ...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฀Yorkshire฀Global฀Restaurants,฀ Inc...

  • Page 55
    ...฀that฀benefit฀both฀our฀franchise฀and฀ license฀communities฀and฀their฀representative฀organizations฀ and฀our฀Company฀operated฀restaurants.฀These฀expenses,฀ along฀with฀other฀costs฀of฀servicing฀of฀franchise฀and฀license฀ agreements฀ are...

  • Page 56
    ...฀services฀required฀by฀the฀franchise฀or฀ license฀agreement,฀which฀is฀generally฀upon฀the฀opening฀of฀a฀ store.฀...advertising฀ expenses฀were฀$497฀million,฀$458฀million฀and฀$419฀million฀ in฀2005,฀2004฀and฀2003,฀respectively.฀We฀report...

  • Page 57
    ...2005,฀December฀25,฀2004฀and฀ are฀held฀for฀sale. December฀27,฀2003. chising฀ proceeds.฀ Accordingly,฀ actual฀ results฀ could฀ vary฀ significantly฀from฀our฀estimates. Considerable฀ management...addresses฀ the฀financial฀accounting฀and฀reporting...Company...

  • Page 58
    ...฀ down฀to฀its฀implied฀fair฀value.฀We฀have฀selected฀the฀beginning฀of฀our฀fourth฀quarter฀as฀the฀date฀on฀which฀to฀perform฀ our฀ongoing฀annual฀impairment฀test฀for฀goodwill.฀For฀2005,฀ 2004฀and฀2003,฀there฀was฀no฀impairment...

  • Page 59
    ...the฀gain฀or฀loss฀is฀recognized฀ in฀the฀results฀of฀operations฀immediately.฀See฀Note฀13฀for฀ a฀discussion฀of฀our฀use฀of฀derivative฀instruments,฀management฀of฀credit฀risk฀inherent฀in฀derivative฀instruments฀and฀fair฀ value฀information...

  • Page 60
    ...฀2003,฀we฀recorded฀a฀$5฀million฀charge฀in฀the฀U.S.฀related฀to฀the฀impairment฀ of฀the฀A&W฀trademark/brand฀(see฀further฀discussion฀at฀Note฀9). (d)฀Refranchising฀(gains)฀losses฀are฀not฀allocated฀to฀segments฀for฀performance฀ reporting...

  • Page 61
    ...฀AND฀LICENSE฀FEES $฀ 2004฀ 43฀ 2003 $฀ 36 ฀ (5) ฀ 31 ฀908 $฀939 2005฀ Initial฀fees,฀including฀renewal฀fees฀ $฀ 51฀ Initial฀franchise฀fees฀included฀in฀ ฀ refranchising฀gains฀ ฀ (10 41฀ Continuing฀fees฀ ฀1,083฀ $฀1,124฀ ฀ (10...

  • Page 62
    ...,฀the฀typical฀term฀of฀our฀multibrand฀franchise฀ agreements฀including฀one฀renewal.฀Amortization฀expense฀of฀ the฀A&W฀trademark/brand฀approximated฀$2฀million฀in฀2005฀ and฀2004฀and฀$1฀million฀in฀2003. Amortization฀ expense฀ for฀ all฀ de...

  • Page 63
    ...฀of฀any฀(1)฀premium฀or฀discount;฀(2)฀debt฀ issuance฀costs;฀and฀(3)฀gain฀or฀loss฀upon฀settlement฀of฀related฀treasury฀locks.฀ Excludes฀the฀effect฀of฀any฀interest฀rate฀swaps฀as฀described฀in฀Note฀13. Yum!฀Brands,฀Inc 67.

  • Page 64
    ...income฀are฀set฀forth฀ below: ฀ Rental฀expense ฀ Minimum฀ ฀ Contingent Minimum฀rental฀income฀ 2005฀ $฀380฀ ฀ 51฀ $฀431฀ $฀ 11฀ 2004฀ $฀376฀ ฀ 49฀ $฀425฀ $฀ 13฀ 2003 $฀329 ฀ 44 $฀373 $฀ 14 Interest฀Rate฀Derivative฀Instruments...

  • Page 65
    ...and฀licensees฀of฀each฀Concept฀and฀the฀shortterm฀nature฀of฀the฀franchise฀and฀license฀fee฀receivables. Fair฀ Value฀ At฀ December฀31,฀ 2005฀ and฀ December฀25,฀ 2004,฀the฀fair฀values฀of฀cash฀and฀cash฀equivalents,฀shortterm฀investments...

  • Page 66
    ...62)฀ $฀(58 58) 23฀ $฀ (9) 2005฀ Change฀in฀benefit฀obligation Benefit฀obligation฀at฀ ฀ beginning฀of฀year฀ $฀ 700฀ ฀ ฀ Service฀cost฀ ฀ 33฀ ฀ ฀ Interest฀cost฀ ฀ 43฀ ฀ ฀ Plan฀amendments Curtailment฀gain฀ ฀ (2 Settlement฀loss...

  • Page 67
    ...฀Benefits฀ Postretirement฀ ฀Medical฀Benefits Discount฀rate฀ Long-term฀rate฀฀ ฀ of฀return฀on฀฀ ฀ plan฀assets฀ Rate฀of฀฀ ฀ compensation฀฀ ฀ increase฀ 2005฀ 2004฀ 2003฀ 2005฀ 2004฀ 2003 6.15%฀ 6.25%฀ 6.85%฀ 6.15%฀ 6.25%฀ 6.85...

  • Page 68
    ...฀the฀fair฀value฀of฀each฀option฀grant฀made฀ during฀2005,฀2004฀and฀2003฀as฀of฀the฀date฀of฀grant฀using฀ the฀Black-Scholes฀option-pricing฀model฀with฀the฀following฀ weighted-average฀assumptions: ฀ Risk-free฀interest฀rate฀ Expected฀term...

  • Page 69
    ...2005,฀2004฀and฀2003฀totaled฀ $94฀million,฀$102฀million฀and฀$26฀million,฀respectively. The฀Company฀has฀a฀policy฀of฀repurchasing฀shares฀on฀the฀ open...We฀expense฀the฀intrinsic฀ value฀of฀the฀discount฀over฀the฀vesting฀period.฀Investments...

  • Page 70
    ...฀ time฀ to฀time฀in฀the฀open฀market฀or฀through฀privately฀negotiated฀ transactions฀at฀the฀discretion฀of฀the฀Company. Accumulated฀ Other฀ Comprehensive฀ Income฀ (Loss)฀ ฀ Comprehensive฀ income฀ is฀ net฀ income฀ plus฀ certain฀ other฀ items...

  • Page 71
    ...developing,฀operating,฀franchising฀ and฀ licensing฀ the฀ worldwide฀ KFC,฀ Pizza฀ Hut฀ and฀ Taco฀Bell฀ concepts,฀ and฀ since฀ May฀ 7,฀ 2002,฀ the฀ LJS฀ and฀ A&W฀concepts,฀which฀were฀added฀when฀we฀acquired฀YGR.฀ KFC,฀Pizza฀Hut,฀Taco...

  • Page 72
    ...million,฀ $32฀million,฀and฀$33฀million฀in฀2005,฀2004฀and฀2003,฀respectively,฀for฀the฀ China฀Division. (c)฀Includes฀a฀one-time฀net฀gain฀of฀approximately฀$11฀million฀associated฀with฀the฀ sale฀of฀our฀Poland/Czech฀Republic฀business.฀See...

  • Page 73
    ...Company's฀ historical฀ refranchising฀programs฀and,฀to฀a฀lesser฀extent,฀franchisee฀ development฀ of฀ new฀ restaurants,฀ at฀ December฀31,฀ 2005...13,฀ 2003,฀ a฀ class฀ action฀ lawsuit฀ against฀ Pizza฀Hut,฀Inc.,฀entitled฀Coldiron฀v.฀Pizza฀Hut...

  • Page 74
    ...฀July฀5,฀2005. On฀December฀19,฀2003,฀counsel฀for฀plaintiff฀in฀the฀above฀ referenced฀Johnson฀lawsuit,฀filed฀a฀separate฀demand฀for฀arbitration฀with฀the฀American฀Arbitration฀Association฀("AAA")฀on฀ behalf฀of฀former฀LJS฀managers฀Erin...

  • Page 75
    ...฀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 76
    ...฀against฀Taco฀Bell's฀former฀advertising฀agency...for฀its฀review฀before฀issuing... obligation฀ ends฀ at฀ the฀ time฀ PepsiCo฀ is฀released,฀terminated฀or...in฀good฀faith,฀ use฀its฀best฀efforts...2005฀ Revenues: ฀ Company฀sales฀ ฀ Franchise...Brands,฀Inc.

  • Page 77
    ...and฀$19฀million฀for฀2004,฀2003,฀ 2002,฀and฀2001,฀respectively. (g)฀ U.S.฀Company฀blended฀same-store฀sales฀growth฀includes฀the฀results฀of฀Company฀owned฀KFC,฀Pizza฀Hut฀and฀Taco฀Bell฀restaurants฀that฀have฀been฀open฀one฀year฀or฀more...

  • Page 78
    ... Ted฀F.฀Knopf฀55 Senior฀Vice฀President,฀Finance฀and฀Corporate฀Controller,฀ Yum!฀Brands,฀Inc. Charles฀E.฀Rawley,฀III฀55 Chief฀Development฀Offi ฀cer,฀Yum!฀Brands,฀Inc. Rob฀Savage฀45 Chief฀Operating฀Offi ฀cer,฀Taco฀Bell,฀U.S.A. Sam฀Su฀53...

  • Page 79
    ...will฀be฀ held฀at฀Yum!฀Brands'฀headquarters,฀Louisville,฀Kentucky,฀at฀ 9:00฀a.m.฀(EDT),฀Thursday,฀May฀18,฀2006.฀Proxies฀for฀the฀ meeting฀will฀be฀solicited฀by฀an฀independent฀proxy฀solicitor.฀ This฀Annual฀Report฀is฀not฀part฀of฀the...

  • Page 80
    ...)฀2YUMYUM฀(298-6986) International฀Franchising฀Inquiry฀Phone฀Line฀ (972)฀338-8100฀ext.฀4480 Online฀Franchise฀Information http://www.yum.com/franchising/default.asp Yum!฀Brands'฀Annual฀Report฀contains฀many฀of฀the฀valuable฀ trademarks฀owned฀and฀used฀by...

  • Page 81
    ...฀be฀announced฀in฀June,฀2006.฀ NOURISHING฀SPIRITS฀฀ Taco฀Bell's฀Teen฀Program.฀The฀Taco฀Bell฀ Foundation฀is฀committed฀to฀helping฀teens฀ become฀successful฀and฀productive฀leaders฀ in฀their฀communities.฀Through฀its฀partnership฀with฀the...

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