Taco Bell 2011 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    Financial Highlights (In millions, except for per share amounts) Year-end 2011 2010 % B/(W) change Company sales Franchise and license fees and income Total revenues Operating Profit Net Income - Yum! Brands, Inc. Diluted Earnings Per Common Share before Special Items Special Items Earnings Per ...

  • Page 3
    ... position our company for future growth. 14% EPS Growth* +7% System Sales Growth** +1,561 New Units Opened $1.3 billion Net Income +14% Increased Dividend $1.14 Annual Dividend Per Share Rate David C. Novak Chairman & Chief Executive Officer, Yum! Brands, Inc. * ** Excluding special items...

  • Page 4
    2

  • Page 5
    ...driven sales and profit growth. It's important to note that China new unit returns are the best in our business, with cash paybacks within 3 years. 656 New restaurants in China in 2011. The macroeconomic environment continues to work in our favor in China. Rising incomes are making our brands even...

  • Page 6
    ...incredible progress in India, opening 101 new restaurants in 2011. Ten years ago, we were essentially just beginning with KFC in India, and now it's our second leading country for new unit development. In fact, we're so excited about our prospects in India, and its impact on the future growth of Yum...

  • Page 7
    ... the day with breakfast, 24-hour service, delivery and innovative beverages. We're making progress in several other countries as well. In Yum! Restaurants International, we have over 4,000 KFC restaurants with ovens, which enable innovative non-fried products, and 3,900 KFC restaurants serving...

  • Page 8
    ... progress reinvigorating our U.S. business which clearly under-performed in 2011, with same store sales down 1% and profit down 12%. The good news is we are poised to achieve significantly better results. In fact, we had positive net unit growth at Taco Bell and Pizza Hut in 2011, and we expect this...

  • Page 9
    ... the Doritos® Locos Taco in March 2012, which is a taco made from Frito-Lay's enormously popular Nacho Cheese Doritos®. Pizza Hut was our best U.S. performer delivering a solid year in 2011 on the heels of a great year in 2010. The combination of everyday value, innovative new products and unique...

  • Page 10
    ... generated over $2 billion cash from operations in 2011. We're fortunate to have many high-return, global opportunities to invest in for future growth. We will also continue to return cash to shareholders. 2011 marked the 7th consecutive year we raised our dividend at a double-digit percentage rate...

  • Page 11
    ... quarter of 2011 to refranchise our Pizza Hut UK business. We have started the sale process and our intention is to sell this business in 2012. At the same time, we are aggressively growing emerging and under-penetrated markets. While our franchise partners fuel the majority of our new unit growth...

  • Page 12
    ... to thank our franchise partners, team members and associates around the globe for their hard work, dedication and commitment to help build Yum! Brands and for Serving the World. After reading this Annual Report, I hope you will agree we are on the ground floor of global growth...China and a whole...

  • Page 13
    ... Make Customer Mania come alive for every customer in every restaurant Build dynasties in every country Always connect with customers, always reach, always lead a company whtx a xuge xeart Open doors and grow each other Truly care about the world...and save lives with the World Food Programme

  • Page 14
    ... aggressive, International expansion and build strong brands everywhere Dramatically improve U.S. brand positions, consistency and returns Drive industryleading, long-term shareholder and franchisee value how we win together (HWWT)2 Believe in All People Be Restaurant and Customer Maniacs...NOW...

  • Page 15
    ...Novak 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 17, 2012-this Notice and proxy statement is available at www.yum.com/investors/investor_materials.asp and the Annual Report on Form 10...

  • Page 16

  • Page 17
    .... Items of Business: You can vote if you were a shareholder of record as of the close of business on March 19, 2012. Proxy Statement Annual Report: A copy of our 2011 Annual Report on Form 10-K is included with this proxy statement. Web site: You may also read the Company's Annual Report and...

  • Page 18
    ... Independent Board Chair ...Item 5: Shareholder Proposal regarding Palm Oil ...STOCK OWNERSHIP INFORMATION ...SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE ...EXECUTIVE COMPENSATION ...Compensation Discussion and Analysis ...Management Planning and Development Committee Report ...Summary...

  • Page 19
    ..., Kentucky 40213 PROXY STATEMENT For Annual Meeting of Shareholders To Be Held On May 17, 2012 The Board of Directors (the ''Board of Directors'' or the ''Board'') of YUM! Brands, Inc., a North Carolina corporation (''YUM'' or the ''Company''), solicits the enclosed proxy for use at the Annual...

  • Page 20
    ... vote. As of March 19, 2012, YUM had 460,176,259 shares of common stock outstanding. What am I voting on? You will be voting on the following five items of business at the Annual Meeting: • The election of eleven (11) directors to serve until the next Annual Meeting of Shareholders and until their...

  • Page 21
    ... by mail, you can vote by completing, signing and returning the enclosed proxy card in the postage-paid envelope provided. If you are a participant in the Direct Stock Purchase Plan, the administrator of this program, as the shareholder of record, may only vote the shares for which it has received...

  • Page 22
    ... director named in this proxy statement (Item 1); • FOR the ratification of the selection of KPMG LLP as our independent auditors for the fiscal year 2012 (Item 2); • FOR the proposal regarding an advisory vote on executive compensation (Item 3); and • AGAINST the shareholder proposals (Items...

  • Page 23
    ... of the compensation of our named executive officers and approval of each of the two shareholder proposals must receive the ''FOR'' vote of a majority of the shares, present in person or represented by proxy, and entitled to vote at the Annual Meeting. For each of these items, you may vote ''FOR...

  • Page 24
    ...period he or she served as a director. What is the Board's policy regarding director attendance at the Annual Meeting of Shareholders? Proxy Statement The Board of Director's policy is that all directors should attend the Annual Meeting and ten of the Company's 12 directors attended the 2011 Annual...

  • Page 25
    ... 2013. Notices should be sent to: Corporate Secretary, YUM! Brands, Inc., 1441 Gardiner Lane, Louisville, Kentucky 40213. The nomination must contain the information described on page 80. What is the Board's Leadership Structure? The Company's Corporate Governance Principles provide that the CEO may...

  • 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
    ... by designing pay programs at all levels that align team performance, individual performance, customer satisfaction and shareholder return, emphasize long-term incentives and require executives to personally invest in Company stock. In 2012, the Management Planning and Development Committee of...

  • Page 28
    ... other parties interested in communicating directly with individual directors, the non-management directors as a group or the entire Board may do so by writing to the Nominating and Governance Committee, c/o Corporate Secretary, YUM! Brands, Inc., 1441 Gardiner Lane, Louisville, Kentucky 40213. The...

  • Page 29
    ... to contact the appropriate members of management and/or the Board of Directors with respect to all concerns it receives. The full text of our Policy on Reporting of Concerns Regarding Accounting and Other Matters is available on our Web site at www.yum.com/investors/governance/complaint.asp...

  • Page 30
    ... Reviews the Company's accounting and financial reporting principles and practices including any significant changes • Advises the Board with respect to Company policies and procedures regarding compliance with applicable laws and regulations and the Company's Worldwide Code of Conduct and Policy...

  • Page 31
    ... 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 are independent within the meaning of the listing standards of the NYSE. Name of...

  • Page 32
    ... total revenues and the related person is not an executive officer of the other company. Proxy Statement Does the Company require stock ownership by directors? Yes, the Company requires stock ownership by directors. The Board of Directors expects nonmanagement directors to hold a meaningful number...

  • Page 33
    ... 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 34
    ... sales and distribution business • Expertise in branding, marketing, sales and international business development • Public company directorship and committee experience • Independent of Company Proxy Statement Mirian M. Graddick-Weir Age 57 Director since January 2012 Executive Vice President...

  • Page 35
    ... of private investment firms and chief executive officer of a financial institution • Expertise in finance, accounting and public company leadership • Public company directorship and committee experience • Independent of Company Bonnie G. Hill Age 70 Director since 2003 President, B. Hill...

  • Page 36
    ... experience, skills and expertise: • Operating and management experience, including as president and chief executive officer of global travel-related services company • Expertise in finance, marketing and international business development • Public company directorship and committee experience...

  • Page 37
    ..., a position he has held since October 21, 1997. Mr. Novak previously served as Group President and Chief Executive Officer, KFC and Pizza Hut from August 1996 to July 1997, at which time he became acting Vice Chairman of YUM. He is also a director of JPMorgan Chase & Co. and Friends of World Food...

  • Page 38
    ... and expertise: • Operating and management experience, including as chief executive officer, of global healthcare and service provider business • Expertise in finance, business development, business integrations, financial reporting, compliance and controls • Public company directorship and...

  • Page 39
    ... of 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 2011 and 2010 included audits of financial statements of certain employee benefit plans, agreed upon procedures and...

  • Page 40
    ...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. The complete policy is available on the Company's Web site at www.yum.com/investors/governance/ media/gov_auditpolicy.pdf. Proxy Statement...

  • Page 41
    ...Elements • Annual Bonus. The annual bonus program is tied to key financial metrics that are long-term drivers of shareholder value-growth in EPS, operating profit at the business unit level, same store sales and new store growth. • Long Term Incentives. In 2011, 63% of our CEO's targeted pay and...

  • Page 42
    .... Our named executive officers do not have employment agreements or guaranteed bonuses. • Clawbacks. Our compensation recovery (''clawback'') policy gives our Board discretion to recover incentive compensation paid to senior management in the event of a restatement of our financial statements due...

  • Page 43
    ... vote of a majority of shares present in person or represented by proxy and entitled to vote at the Annual Meeting. While this vote is advisory and non-binding on the Company, the Board of Directors and the Management Planning and Development Committee will review the voting results and consider...

  • Page 44
    ... can best provide the necessary oversight of management. Thus, the California Public Employees' Retirement System's Global Principles of Accountable Corporate Governance recommends that a Company's board should generally be chaired by an independent director, as does the Council of Institutional...

  • Page 45
    MANAGEMENT STATEMENT IN OPPOSITION TO SHAREHOLDER PROPOSAL The Board of Directors recommends that shareholders vote AGAINST this proposal. What is the Company's position regarding this proposal? The proposal seeks to separate the roles of Chairman of the Board and Chief Executive Officer and ...

  • Page 46
    We encourage shareholders to learn more about our Company's governance practices at our website, www.yum.com, and at page 6 of the proxy. ... vote of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting. 16MAR201218540977 Proxy Statement 28

  • Page 47
    ... Problem: What's Driving Palm Oil Today, Ucsusa.org, June 2011). Due to high levels of continuing deforestation and the burning of peat lands in land clearance, Indonesia is now the 3rd largest emitter of GHGs globally. A 2010 report commissioned by Indonesia's National Development Planning Agency...

  • Page 48
    ... associated with sourcing and purchasing on behalf of the Company. To this end, as described more fully in the Company's 2010 Corporate Social Responsibility Report (located on the Company's website at www.yum.com/CSR), our suppliers must submit to regular audits conducted by third party auditors...

  • Page 49
    ... named executive officers call for them to own 50,000 shares of YUM common stock or stock equivalents within five years following their appointment to their current position. The table shows the number of shares of common stock and common stock equivalents beneficially owned as of December 31, 2011...

  • Page 50
    ...held in deferred compensation accounts for each of the named persons under our Directors Deferred Compensation Plan or our Executive Income Deferral Program. Amounts payable under these plans will be paid in shares of YUM common stock at termination of employment/directorship or within 60 days if so...

  • Page 51
    ... persons who own more than 10% of the outstanding shares of YUM common stock to file with the SEC reports of their ownership and changes in their ownership of YUM common stock. Directors, executive officers and greater-than-ten percent shareholders are also required to furnish YUM with copies of all...

  • Page 52
    ...operating profits by 4% (prior to special items and foreign currency translation) • Generated $1.32 billion in net income-a new high • Generated over $2.1 billion of cash from operations • Remained an industry leader with Return on Invested Capital of over 22% • Increased our annual dividend...

  • Page 53
    ... in control agreements with our NEOs to ensure continuity of management in the event of a prospective change in control of the Company. • Perquisites. Effective in 2011, all perquisites except for those related to overseas service assignment benefits and personal use of corporate aircraft have...

  • Page 54
    ...Mix-2011 Salary %, 26% Proxy Statement Salary % Long-Term Equity %, 47% Annual Bonus % Long-Term Equity % 16MAR201218540977 Annual Bonus %, 27% 30MAR201215223047 2011 Compensation Program/Decisions For 2011, we highlighted four major growth strategies as drivers for earnings growth. The Company...

  • Page 55
    ...stock options in 2005. The special items excluded are the same as those excluded in the Company's annual earning releases. Annual Total Shareholder Return Through 12/31/11 86th percentile 86th percentile 23% 92nd percentile 16% 14% 10% 17% 26% 16MAR201218 Proxy Statement 4% 2% -0.2% 1-Year 3-Year...

  • Page 56
    ... to Base Salary: Provided merit-based salary increases to each of our NEOs; • Pay-for-Performance Annual Bonus: Based on our strong 2011 performance, we paid bonuses for 2011 recognizing our strong system sales growth, continued operating profit growth (prior to special items and foreign...

  • Page 57
    ...Officers (NEOs) for 2011: • David C. Novak, Chairman, Chief Executive Officer and President • Richard T. Carucci, Chief Financial Officer • Jing-Shyh S. Su, Vice Chairman of the Board and Chairman and CEO-China Division • Graham D. Allan, Chief Executive Officer-Yum Restaurants International...

  • Page 58
    ... Committee reviews and establishes each NEO'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 independent members of the Board. In...

  • Page 59
    ... based on information that is derived from comparable businesses of a similar size to us for the CEO and other NEOs and assist the Committee in its determination of the annual compensation package for our CEO. During 2011, Meridian did not provide any services to the Company unrelated to executive...

  • Page 60
    ... the enterprise that franchising introduces, in particular, managing product introductions, marketing, driving new unit development, customer satisfaction and overall operations improvements across the entire franchise system. Accordingly, consistent with its practice from prior years which Meridian...

  • Page 61
    ... Proxy Statement (1) Data not publicly available (2) 2010 company sales + 25% of franchisee and licensee sales The former peer group was used by the Committee in connection with its 2011 salary and long-term incentive compensation decisions made in January 2011. The new peer group was used by the...

  • Page 62
    ... also received a base salary increase of $125,000 in December 2011 related to his promotion to Chief Executive Officer of YRI. Mr. Novak's salary is discussed below. The Committee, as part of its annual review of salaries, reviews market data for the peer group. As in prior years, the Committee did...

  • Page 63
    ... increased shareholder value over the long term. These measures are designed to align employee goals with the Company's and individual Divisions' current-year objectives to grow earnings and sales, develop new restaurants, improve margins and increase customer satisfaction and in the case of our CEO...

  • Page 64
    ... and Carucci Weighted Average Divisions' Team Factors(1) EPS Growth Total Weighted TP Factor-Yum Su Operating Profit Growth (Before Tax; Excluding Forex) System Sales Growth (Excluding Forex) System Gross New Builds System Customer Satisfaction Total Weighted TP Factor-China Division 75% Division/25...

  • Page 65
    ... executives to help us achieve our long-range performance goals that will enhance our value and, as a result, enhance our shareholders' returns on their investments. Proxy Statement Under our LTI Plan, our NEOs are awarded long-term incentives primarily in the form of non-qualified stock options...

  • Page 66
    ..., his position as a senior leader of the Company and as part of his compensation package upon his promotion to President of the International Division at year end. Mr. Novak's long-term incentive compensation is discussed below. How we Compensate our Chief Executive Officer Comparative Compensation...

  • Page 67
    ... consumer products peer group in terms of total shareholder return (top quartile for the three and five-year periods), return on net assets (top quartile for each period), EPS growth (top 50% for the one-year period and top quartile for the three and five-year periods) and operating income growth...

  • Page 68
    ...based salaried employees. In 2010, our broad-based employee disability plan was changed to limit the annual benefit coverage to $300,000. For employees whose coverage was reduced as a result of the change, the Company is purchasing individual disability coverage for three years (provided employment...

  • Page 69
    ... 2011 in recognition of this change. Our CEO does not receive perquisites or allowances. However, Mr. Novak is required to use the Company aircraft for personal as well as business travel pursuant to the Company's executive security program established by the Board of Directors. The Board's security...

  • Page 70
    ... shares owned outright by the NEO and vested RSUs acquired under the Company's executive income deferral program. (2) Based on YUM closing stock price of $59.01 as of December 31, 2011. Proxy Statement Under our Code of Conduct, speculative trading in YUM stock, including trading in puts, calls...

  • Page 71
    ...periodically reviews these agreements and other aspects of the Company's change in control program. The Company's change in control agreements, in general, pay, in case of an NEO's termination of employment for other than cause within two years of the change in control, a benefit of two times salary...

  • Page 72
    ... 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 73
    ...''negative discretion'' in setting payouts under the annual bonus plan. By setting a high amount which can then be reduced at the Committee's discretion, our annual bonus plan meets the requirements of Section 162(m) of the Internal Revenue Code. In 2011, the Committee, after certifying that EPS had...

  • Page 74
    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 75
    ... to Consolidated Financial Statements at Note 15, ''Share-based and Deferred Compensation Plans.'' Amounts in column (f) reflect the annual incentive awards earned for the 2011, 2010 and 2009 fiscal year performance periods, which were awarded by our Management Planning and Development Committee in...

  • Page 76
    ... increase in actuarial present value of age 62 accrued benefits under all actuarial pension plans during the 2011 fiscal year (using interest rate and mortality assumptions consistent with those used in the Company's financial statements). The change in pension value for 2011 is mainly the result of...

  • Page 77
    ... crew travel, on board catering, landing and license fees, ''dead head'' costs of flying planes to and from locations for personal use, and contract labor, and for Mr. Su: expatriate spendables/housing allowance ($211,401). As described further beginning on page 43 under the heading ''2011 Executive...

  • Page 78
    GRANTS OF PLAN-BASED AWARDS The following table provides information on stock options, SARs, RSUs and PSUs granted for 2011 to each of the Company's NEOs. The amount of these awards that were expensed is shown in the Summary Compensation Table at page 57. 16MAR201218540977 Proxy Statement Name ...

  • Page 79
    ... subject to performance-based vesting conditions under the Long Term Incentive Plan in 2011. The PSUs vest on December 28, 2013, subject to the Company's achievement of specified earnings per share (''EPS'') growth during the performance period ending on December 28, 2013. The performance target for...

  • Page 80
    ... 31, 2011. Option/SAR 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 (a) Novak Grant Date 1/27/2004 1/28/2005 1/26/2006 1/19/2007 1/24/2008 2/5/2009 2/5/2010 2/4/2011 Number of Securities...

  • Page 81
    ... of Mr. Su 176,616 RSUs represent a 2010 retention award (including accrued dividends) that vests after 5 years. The market value of these awards are calculated by multiplying the number of shares covered by the award by $59.01, the closing price of YUM stock on the NYSE on December 30, 2011. The...

  • Page 82
    ...those used in the Company's financial statements. 2011 Fiscal Year Pension Benefits Table Number of Present Value of Years of Accumulated Credited Service Benefit(4) (#) ($) (c) (d) Proxy Statement 16MAR201218540977 Name (a) Plan Name (b) Payments During Last Fiscal Year ($) (e) Novak Carucci Su...

  • Page 83
    ... 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 Final Average Earnings times...

  • Page 84
    ...must take their benefits in the form of a monthly annuity and no lump sum is available. When a lump sum is paid from the plan, it is calculated based on actuarial assumptions for lump sums required by Internal Revenue Code Section 417(e)(3) (currently this is the annual 30-year Treasury rate for the...

  • Page 85
    ... or contributed to by the Company or one or more of the group of corporations that is controlled by the Company. 16MAR201218 Proxy Statement Benefits are payable under the same terms and conditions as the Retirement Plan without regard to Internal Revenue Service limitations on amounts of...

  • Page 86
    ... provide market rate returns and do not provide for preferential earnings. The S&P 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 tracks the investment return of...

  • Page 87
    ... 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 2011 and prior years or would have been reported as compensation if the executive had been a NEO in those previous years. Novak . Carucci Su...

  • Page 88
    ... that would become payable under existing plans and arrangements if the NEO's employment had terminated on December 31, 2011, given the NEO's compensation and service levels as of such date and, if applicable, based on the Company's closing stock price on that date. These benefits are in addition...

  • Page 89
    ... payment equal to two times the sum of the executive's base salary and the target bonus or, if higher, the actual bonus for the year preceding the change in control of the Company, • outplacement services for up to one year following termination, and • a ''tax gross-up payment'' which, in...

  • Page 90
    ... portion of the performance period after the change in control. The change in control severance agreements have a three-year term and are automatically renewable each January 1 for another three-year term. An executive whose employment is not terminated within two years of a change in control will...

  • Page 91
    ... Data'' of the 2011 Annual Report in Notes to Consolidated Financial Statements at Note 15, ''Share-based and Deferred Compensation Plans.'' (3) At December 31, 2011, the aggregate number of options and SARs awards outstanding for nonmanagement directors was: Name Options SARs 16MAR201218 Proxy...

  • Page 92
    ... for service on the Board until the director has ceased being a member of the Board for one year (sales are permitted to cover income taxes attributable to any stock retainer payment or exercise of a stock option or SAR). Matching Gifts. To further YUM's support for charities, non-employee directors...

  • Page 93
    ... 31, 2011, the equity compensation plans under which we may issue shares of stock to our directors, officers and employees under the 1999 Long Term Incentive Plan (''1999 Plan''), the 1997 Long Term Incentive Plan (the ''1997 Plan''), SharePower Plan and Restaurant General Manager Stock Option Plan...

  • Page 94
    ... 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 95
    ... 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 controls and procedures and disclosure controls and procedures, the Company's risk management, the Company...

  • Page 96
    ... recommended to the Board of Directors that it include the audited consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011 for filing with the SEC. Who prepared this report? This report has been furnished by the members of the Audit...

  • Page 97
    ...materials? The Company has adopted a procedure called ''householding'' which has been approved by the SEC. The Company and some brokers household proxy materials, delivering a single Notice and, if applicable, this proxy statement and Annual Report, to multiple shareholders sharing an address unless...

  • Page 98
    ... our proxy statement. 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 and you must include information set forth...

  • Page 99
    ... service would not impair his or her ability to effectively serve on the Committee, and discloses this determination in the Company's annual proxy statement. No member of the Committee may receive any compensation from the Company other than Director's fees, which may be received in cash, stock...

  • Page 100
    ... will be periodically performed by the Committee in carrying out its oversight responsibility: A. Review and discuss with management and the independent auditors, as applicable, (i) critical accounting policies and practices and major issues regarding accounting principles and financial statement...

  • Page 101
    ...balance sheet arrangements, on the financial statements of the Company. B. C. Discuss generally with management earnings press releases, as well as the types of financial information and earnings guidance provided to analysts and rating agencies. Discuss with management the Company's major financial...

  • Page 102
    ... scope, plan and procedures to be used on the annual audit, as recommended by the independent auditors. Proxy Statement 2. 3. B. 16MAR201218540977 C. Prior to filing the Company's Form 10-K, review and discuss with the independent auditors and management the Company's annual audited financial...

  • Page 103
    ... the Board with respect to the Company's policies and procedures regarding compliance with applicable laws and regulations and with the Company's Worldwide Code of Conduct and Policy on Conflict of Interest. Proxy Statement 2. Obtain reports from management, the Company's Vice President, Audit...

  • Page 104
    ... to plan or conduct audits or to determine that the Company's financial statements and disclosures are complete and accurate, and present fairly the financial position, the results of operations and the cash flows of the Company, in compliance with GAAP. This is the responsibility of management and...

  • Page 105
    ... solely of shares of Common Stock) held by non-affiliates of the registrant as of June 11, 2011 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 $24,430,261,521. All executive officers and directors of the...

  • Page 106
    ... this Form 10-K and (ii) the factors described in 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 making...

  • Page 107
    ...aggregated them into a single reportable operating segment ("U.S."). 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...

  • Page 108
    ... agreements, franchisees supply capital - initially by paying a franchise fee to YUM, purchasing or leasing the land, building, equipment, signs, seating, inventories and supplies and, over the longer term, by reinvesting in the business. Franchisees then contribute to the Company's revenues...

  • Page 109
    ... under the brand WingStreet, primarily in the U.S. Pizza Hut units feature a distinctive red roof logo on their signage. Taco Bell • • The first Taco Bell restaurant was opened in 1962 by Glen Bell in Downey, California, and in 1964, the first Taco Bell franchise was sold. Taco Bell operates in...

  • Page 110
    ...-owned restaurants from using alternative distributors for most products. Trademarks and Patents The Company and its Concepts own numerous registered trademarks and service marks. The Company believes that many of these marks, including its Kentucky Fried Chicken®, KFC®, Pizza Hut® and Taco Bell...

  • Page 111
    ...); Irvine, California (Taco Bell); Louisville, Kentucky (KFC U.S.) and several other locations outside the U.S. The Company expensed $34 million, $33 million and $31 million in 2011, 2010 and 2009, respectively, for R&D activities. From time to time, independent suppliers also conduct research and...

  • Page 112
    ... related Consolidated Financial Statements in Part II, Item 8, pages 48 through 93. (e) Available Information The Company makes available through the Investor Relations section of its internet website at www.yum.com its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on...

  • Page 113
    ... such changes on our results of operations, financial condition or cash flows. We may not attain our target development goals, and aggressive development could cannibalize existing sales. Our growth strategy depends in large part on our ability to increase our net restaurant count in markets outside...

  • Page 114
    .... We are in the process of refranchising restaurants in the U.S., which could reduce the percentage of Company ownership of KFCs, Pizza Huts, and Taco Bells in the U.S. from approximately 13% at the end of 2011 to approximately 8%. Our ability to execute this plan will depend on, among other things...

  • Page 115
    ... in our supply chain which could adversely impact our sales, cost of sales and financial condition. Changes in governmental regulations may adversely affect our business operations. Our Concepts and their franchisees are subject to numerous laws and regulations around the world. Our restaurants are...

  • Page 116
    ...price and quality 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...

  • Page 117
    ... by Pizza Hut. Taco Bell leases its corporate headquarters and research facility in Irvine, California. The KFC U.S. and YUM corporate headquarters and a research facility in Louisville, Kentucky are owned by the Company. In addition, YUM leases office facilities for the U.S. Division shared service...

  • Page 118
    Intellectual Property The Company has registered trademarks and service marks, many of which are of material importance to the Company's business. From time to time, the Company may become involved in litigation to defend and protect its use and ownership of its registered marks. Form 10-K 14

  • Page 119
    .../Managing Director of YUM Restaurants International South Pacific. Muktesh Pant, 57, is Chief Executive Officer of YRI. He has served in this position since December 2011. Prior to this position he served as President of YRI from May 2010 to December 2011 and as President of Global Brand Building...

  • Page 120
    ... 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. 2011 Quarter First Second...

  • Page 121
    ... 51.62 Total number of shares purchased as part of publicly announced plans or programs (thousands) 647 1,794 753 435 3,629 Approximate dollar value of shares that may yet be purchased under the plans or programs (millions) $ 343 $ $ $ $ 253 963 938 938 On January 27, 2011, our Board of Directors...

  • Page 122
    ... 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 29, 2006 to December 30, 2011, the last trading day of our 2011 fiscal year. The graph assumes that the value of the investment...

  • Page 123
    ... shares of Common Stock Dividends paid on Common Stock Balance Sheet Total assets Long-term debt Total debt Other Data Number of stores at year end Company Unconsolidated Affiliates Franchisees(d) Licensees System(d) China Division system sales growth(e) Reported Local currency(f) YRI system sales...

  • Page 124
    ... 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 estimated growth in sales of all restaurants that have been open one year or more. Local currency represents the percentage change...

  • Page 125
    ... world's largest restaurant company in terms of system restaurants with approximately 37,000 restaurants in more than 120 countries and territories operating under the KFC, Pizza Hut or Taco Bell brands. In December of 2011 we sold our Long John Silver's ("LJS") and A&W All American Food Restaurants...

  • Page 126
    ... restaurants. Our ongoing earnings growth model calls for Operating Profit growth of 5% in the U.S. 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 and share...

  • Page 127
    ....1% 2011 11 11 11 6 (0.9) ppts. 3 11 22 13 18 14 15 14 2010 4 10 5 12 1.3 ppts. 11 9 (33) 9 (60) 8 7 17 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...

  • Page 128
    ... and early retirement costs); a reduced emphasis on multi-branding as a long-term growth strategy; and investments in our U.S. Brands made on behalf of our franchisees such as equipment purchases. In the years ended December 31, 2011 and December 25, 2010, we recorded pre-tax losses of $17 million...

  • Page 129
    ... the fourth quarter of 2011 we sold the Long John Silver's and A&W All American Food Restaurants brands to key franchise leaders and strategic investors in separate transactions. We recognized $86 million of pre-tax losses and other costs primarily in Closures and impairment (income) expenses during...

  • Page 130
    ... six years. Fiscal year 2011 included a 53rd week in the fourth quarter for all our U.S. businesses and certain of our YRI businesses that report on a period, as opposed to a monthly, basis. Our China Division reports on a monthly basis and thus did not have a 53rd week. See the System Sales Growth...

  • Page 131
    ... U.S. and international markets in which we choose to continue investing capital. In the U.S., we are targeting Company ownership of KFC, Pizza Hut and Taco Bell restaurants of about 8%, down from its current level of 13%, with our primary remaining focus being refranchising at KFC and Taco Bell to...

  • Page 132
    ... the franchise and license fees from the refranchised restaurants that were recorded by the Company in the current year during periods in which the restaurants were Company stores in the prior year. The following table summarizes the impact of refranchising on Total revenues as described above: 2011...

  • Page 133
    ... predict with certainty the timing of such resolution. International Reporting Change In the first quarter of 2012, we will begin reporting information for our India business as a standalone reporting segment separate from YRI as a result of changes to our management reporting structure. While our...

  • Page 134
    Restaurant Unit Activity Worldwide Balance at end of 2009 New Builds Acquisitions Refranchising Closures Other Balance at end of 2010 New Builds Acquisitions Refranchising Closures LJS & A&W Divestitures(b) Other Balance at end of 2011 % of Total Franchisees 26,745 952 (110) 949 (668) (16) 27,852 ...

  • Page 135
    ...activity provides significant or meaningful information at this time. The reductions to Worldwide, YRI and U.S. totals of 1,633, 347 and 1,286, respectively during 2011 represent the number of LJS and A&W units as of the beginning of 2011. Therefore, 2011 New Builds and Closures exclude any activity...

  • Page 136
    ... 3 7% 4% Company-Operated Store Results The following tables detail the key drivers of the year-over-year changes of Company sales and Restaurant profit for each reportable segment by year. Store portfolio actions represent the net impact of new unit openings, acquisitions, refranchisings and store...

  • Page 137
    ... mix shift and a new business tax that took effect December 2010, wage rate inflation of 20% as well as commodity inflation of $90 million, or 8%. In 2010, the increase in China Company sales and Restaurant profit associated with store portfolio actions was primarily driven by the development of new...

  • Page 138
    ... with store portfolio actions was driven by refranchising, primarily Mexico, partially offset by new unit development. Significant other factors impacting Company sales and/or Restaurant profit were Company same-store sales growth of 3% offset by commodity inflation and higher labor costs. In 2010...

  • Page 139
    ... by net new unit development. U.S. Franchise and license fees and income for 2011 was positively impacted by 3% due to the effects of refranchising. Excluding the effects of refranchising and 53rd week, the remaining decrease was driven by store closures and same-store sales declines, partially...

  • Page 140
    ... 2011, excluding the impact of foreign currency translation and 53rd week, was driven by increased investment in strategic growth markets, including the acquisition of our Russia business in 2010, partially offset by G&A savings from refranchising all of our remaining company restaurants in Mexico...

  • Page 141
    ... by the impact of same-store sales growth and new unit development, partially offset by higher G&A costs. Operating Profit in 2010 benefited $16 million from our brands' participation in the World Expo. YRI Division Operating Profit increased 14% in 2011, including a favorable impact from foreign...

  • Page 142
    ... a majority of our income being earned outside of the U.S. where tax rates are generally lower than the U.S. rate. In 2011 and 2010, the benefit was positively impacted by the recognition of excess foreign tax credits generated by our intent to repatriate current year foreign earnings. In 2009, the...

  • Page 143
    ... to generate substantial cash flows from the operations of our company stores and from our extensive franchise operations which require a limited YUM investment. Net cash provided by operating activities has exceeded $1 billion in each of the last ten fiscal years, including over $2 billion in 2011...

  • Page 144
    ... 18, 2011 our Board of Directors approved cash dividends of $0.285 per share of Common Stock to be distributed on February 3, 2012 to shareholders of record at the close of business on January 13, 2012. The Company is targeting an ongoing annual dividend payout ratio of 35% to 40% of net income. In...

  • Page 145
    ... as of December 31, 2011 included: Less than 1 Year $ 414 65 612 695 37 $ 1,823 More than 5 Years $ 3,207 267 2,653 9 12 $ 6,148 Long-term debt obligations(a) Capital leases (b) $ Operating leases(b) Purchase obligations(c) Other(d) Total contractual obligations (a) $ Total 4,774 437 5,337 797...

  • Page 146
    ...or settled. Off-Balance Sheet Arrangements We have agreed to provide financial support, if required, to an entity that operates a franchisee lending program used primarily to assist franchisees in the development of new restaurants and, to a lesser extent, in connection with the Company's historical...

  • Page 147
    ... 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 highly subjective judgments and can be significantly impacted by changes in the business or economic conditions...

  • Page 148
    ... a purchase price for the reporting unit. The sales growth and margin improvement assumptions that factor into the discounted cash flows are highly correlated as cash flow growth can be achieved through various interrelated strategies such as product pricing and restaurant productivity initiatives...

  • Page 149
    ... benefit payment cash flows in a future year. The weighted-average yield of this hypothetical portfolio was used to arrive at an appropriate discount rate. We also ensure that changes in the discount rate as compared to the prior year are consistent with the overall change in prevailing market rates...

  • Page 150
    ... term and pre-vesting forfeitures. These groups consist of grants made primarily to restaurant-level employees under our Restaurant General Manager Stock Option Plan (the "RGM Plan") and grants made to executives under our other stock award plans. Historically, approximately 10% - 15% of total...

  • Page 151
    ... Market Risk. The Company is exposed to financial market risks associated with interest rates, foreign currency exchange rates and commodity prices. In the normal course of business and in accordance with our policies, we manage these risks through a variety of strategies, which may include the use...

  • Page 152
    ... 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 31, 2011, December 25, 2010 and December 26, 2009 Consolidated Statements of Cash Flows for the...

  • Page 153
    ... 25, 2010, and the related consolidated statements of income, cash flows, and shareholders' equity (deficit) and comprehensive income (loss) for each of the fiscal years in the three-year period ended December 31, 2011. We also have audited YUM's internal control over financial reporting as of...

  • Page 154
    ... years ended December 31, 2011, December 25, 2010 and December 26, 2009 (in millions, except per share data) 2011 Revenues Company sales $ 10,893 $ Franchise and license fees and income 1,733 Total revenues 12,626 Costs and Expenses, Net Company restaurants Food and paper 3,633 Payroll and employee...

  • Page 155
    ... in accounts payable and other current liabilities Changes in income taxes payable Other, net Net Cash Provided by Operating Activities Cash Flows - Investing Activities Capital spending Proceeds from refranchising of restaurants Acquisitions and investments Sales of property, plant and equipment...

  • Page 156
    ... equipment, net Goodwill Intangible assets, net Investments in unconsolidated affiliates Restricted cash Other assets Deferred income taxes Total Assets LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable and other current liabilities Income taxes payable Short-term borrowings...

  • Page 157
    ... 31, 2011, December 25, 2010 and December 26, 2009 (in millions) Yum! Brands, Inc. Issued Common Stock Amount Shares 7 459 $ Retained Earnings $ 303 1,071 176 13 5 Accumulated Other Comprehensive Noncontrolling Interests Income(Loss) 14 $ (418) $ 12 Balance at December 27, 2008 Net Income Foreign...

  • Page 158
    ... for these businesses through the sale date are included in the Company's results for 2011, 2010 and 2009. As a result of changes to our management reporting structure, in the first quarter of 2012 we will begin reporting information for our India business as a standalone reporting segment separated...

  • Page 159
    ...of our YRI business. The 53rd week added $91 million to total revenues, $15 million to Restaurant profit and $25 million to Operating Profit in our 2011 Consolidated Statement of Income. The $25 million benefit was offset throughout 2011 by investments, including franchise development incentives, as...

  • Page 160
    ... Financial Statements for prior periods to be comparable with the classification for the fiscal year ended December 31, 2011. These reclassifications had no effect on previously reported Net Income - YUM! Brands, Inc. Franchise and License Operations. We execute franchise or license agreements...

  • Page 161
    ...long-lived assets. The discount rate incorporates rates of returns for historical refranchising market transactions and is commensurate with the risks and uncertainty inherent in the forecasted cash flows. In executing our refranchising initiatives, we most often offer groups of restaurants for sale...

  • Page 162
    ... of franchise, license and lease agreements. Trade receivables consisting of royalties from franchisees and licensees are generally due within 30 days of the period in which the corresponding sales occur and are classified as Accounts and notes receivable on our Consolidated Balance Sheets. Our...

  • Page 163
    ...years for buildings and improvements, 3 to 20 years for machinery and equipment and 3 to 7 years for capitalized software costs. As discussed above, we suspend depreciation and amortization on assets related to restaurants that are held for sale. Leases and Leasehold Improvements. The Company leases...

  • Page 164
    ... 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 that a third-party buyer would expect to receive when purchasing a business...

  • Page 165
    ...Common Stock account. In such instances, on a period basis, we record the cost of any further share repurchases as a reduction in retained earnings. Due to the large number of share repurchases and the increase in the market value of our stock over the past several years, our Common Stock balance is...

  • Page 166
    ... the fourth quarter of 2011 we sold the Long John Silver's and A&W All American Food Restaurants brands to key franchise leaders and strategic investors in separate transactions. We recognized $86 million of pre-tax losses and other costs primarily in Closures and impairment (income) expenses during...

  • Page 167
    ... is based on the sales price we would expect to receive from a buyer. This fair value determination considered current market conditions, trends in the Pizza Hut UK business, and prices for similar transactions in the restaurant industry and resulted in a non-cash pre-tax write-down of $74 million...

  • Page 168
    ... to offer to refranchise our KFC Taiwan equity market. During the year ended December 25, 2010 we refranchised all of our remaining company restaurants in Taiwan, which consisted of 124 KFCs. We included in our December 25, 2010 financial statements a non-cash write-off of $7 million of goodwill...

  • Page 169
    ... and impairment (income) expenses (a) 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 a property under an operating lease and subsequent adjustments...

  • Page 170
    ... Cash Flow Data 2011 Cash Paid For: Interest Income taxes Significant Non-Cash Investing and Financing Activities: Capital lease obligations incurred Increase (decrease) in accrued capital expenditures Note 6 - Franchise and License Fees and Income 2011 Initial fees, including renewal fees...

  • Page 171
    ..., plant and equipment was $599 million, $565 million and $553 million in 2011, 2010 and 2009, respectively. Accounts Payable and Other Current Liabilities Accounts payable Accrued capital expenditures Accrued compensation and benefits Dividends payable Accrued taxes, other than income taxes Other...

  • Page 172
    ..., net for the years ended 2011 and 2010 are as follows: 2011 Gross Carrying Amount Definite-lived intangible assets Franchise contract rights Trademarks/brands Lease tenancy rights Favorable operating leases Reacquired franchise rights Other $ 130 28 58 29 167 5 417 $ Accumulated Amortization 2010...

  • Page 173
    ... the Company's balance sheet and cash flows, we were able to comply with all debt covenant requirements at December 31, 2011 with a considerable amount of cushion. We are in the process of renewing the Credit Facility and ICF. The majority of our remaining long-term debt primarily comprises Senior...

  • Page 174
    ...30 days after notice. The annual maturities of short-term borrowings and long-term debt as of December 31, 2011, excluding capital lease obligations of $279 million and fair value hedge accounting adjustments of $26 million, are as follows: Year ended: 2012 2013 2014 2015 2016 Thereafter Total $ 263...

  • Page 175
    ... 31, 2011 and December 25, 2010 were: Fair Value 2011 2010 $ 10 $ 8 22 33 3 7 (1) (3) $ 34 $ 45 Consolidated Balance Sheet Location Prepaid expenses and other current assets Other assets Prepaid expenses and other current assets Accounts payable and other current liabilities Interest Rate Swaps...

  • Page 176
    ... Value 2011 $ 2 32 15 $ 49 Level Foreign Currency Forwards, net Interest Rate Swaps, net Other Investments Total 2 2 1 2010 $ 4 41 14 59 $ The fair value of the Company's foreign currency forwards and interest rate swaps were determined based on the present value of expected future cash flows...

  • Page 177
    ...fair value of debt using market quotes and calculations based on market rates. Note 14 - Pension, Retiree Medical and Retiree Savings Plans Pension Benefits We sponsor noncontributory defined benefit pension plans covering certain full-time salaried and hourly U.S. employees. The most significant of...

  • Page 178
    U.S. Pension Plans 2011 2010 Change in benefit obligation Benefit obligation at beginning of year Service cost Interest cost Participant contributions Curtailment gain Settlement loss Special termination benefits Exchange rate changes Benefits paid Settlement payments Actuarial (gain) loss Benefit ...

  • Page 179
    ... Plans 2011 2010 1,381 $ 1,108 1,327 1,057 998 907 International Pension Plans 2011 2010 Projected benefit obligation Accumulated benefit obligation Fair value of plan assets $ Information for pension plans with a projected benefit obligation in excess of plan assets: U.S. Pension Plans 2011...

  • Page 180
    ... of the service cost and interest cost for that plan during the year. Special termination benefits primarily related to the U.S. business transformation measures taken in 2011, 2010 and 2009. Pension losses in accumulated other comprehensive income (loss): U.S. Pension Plans 2011 2010 $ 363 $ 346...

  • Page 181
    ... used to determine the net periodic benefit cost for fiscal years: U.S. Pension Plans 2009 2010 2011 6.50% 6.30% 5.90% 8.00% 7.75% 7.75% 3.75% 3.75% 3.75% International Pension Plans 2009 2010 2011 5.51% 5.50% 5.40% 7.20% 6.66% 6.64% 4.12% 4.42% 4.41% Discount rate Long-term rate of return on plan...

  • Page 182
    ...Note 4. The weighted-average assumptions used to determine benefit obligations and net periodic benefit cost for the postretirement 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 as of 2011 and 2010 are 7.5% and...

  • Page 183
    ... - Share-based and Deferred Compensation Plans Overview At year end 2011, we had four stock award plans in effect: the YUM! Brands, Inc. Long-Term Incentive Plan and the 1997 LongTerm Incentive Plan (collectively the "LTIPs"), the YUM! Brands, Inc. Restaurant General Manager Stock Option Plan ("RGM...

  • Page 184
    ... term. These groups consist of grants made primarily to restaurant-level employees under the RGM Plan, which cliff-vest after four years and expire ten years after grant, and grants made to executives under our other stock award plans, which typically have a graded vesting schedule of 25% per year...

  • Page 185
    ... exercised for 2011, 2010 and 2009 totaled $72 million, $82 million and $68 million, respectively. Note 16 - Shareholders' Equity Under the authority of our Board of Directors, we repurchased shares of our Common Stock during 2011 and 2010. All amounts exclude applicable transaction fees. There were...

  • Page 186
    ... income being earned outside of the U.S. where tax rates are generally lower than the U.S. rate. Form 10-K In 2011 and 2010, the benefit was positively impacted by the recognition of excess foreign tax credits generated by our intent to repatriate current year foreign earnings. In 2009, the benefit...

  • Page 187
    ...-tax losses and other costs, which resulted in $104 million of total net tax benefits related to the divestitures. Other. This item primarily includes the impact of permanent differences related to current year earnings and U.S. tax credits. In 2009, this item was positively impacted by a one-time...

  • Page 188
    ...: Year of Expiration 2012 Foreign U.S. federal and state $ $ 4 22 26 2013-2016 66 192 $ 258 $ 2017-2031 136 1,770 $ 1,906 $ Indefinitely $ 833 5 $ 838 $ $ Total 1,039 1,989 3,028 We recognize the benefit of positions taken or expected to be taken in tax returns in the financial statements when...

  • Page 189
    ... 23, 2010, the Company received a Revenue Agent Report from the Internal Revenue Service (the "IRS") relating to its examination of our U.S. federal income tax returns for fiscal years 2004 through 2006. The IRS has proposed an adjustment to increase the taxable value of rights to intangibles used...

  • Page 190
    .... KFC, Pizza Hut and Taco Bell operate in 115, 97, and 27 countries and territories, respectively. Our five largest international markets based on operating profit in 2011 are China, Asia Franchise, Australia, Latin America Franchise, and United Kingdom. We identify our operating segments based...

  • Page 191
    ... segments for performance reporting purposes. Includes equity income from investments in unconsolidated affiliates of $47 million, $42 million and $36 million in 2011, 2010 and 2009, respectively, for China. 2011 and 2010 include depreciation reductions arising from the impairment of KFC restaurants...

  • Page 192
    ..., 2011 and December 25, 2010 was not material. Franchise Loan Pool and Equipment Guarantees We have agreed to provide financial support, if required, to a variable interest entity that operates a franchisee lending program used primarily to assist franchisees in the development of new restaurants in...

  • Page 193
    ... to various claims and contingencies related to lawsuits, real estate, environmental and other matters arising in the normal course of business. On November 26, 2001, Kevin Johnson, a former Long John Silver's ("LJS") restaurant manager, filed a collective action against LJS in the United States...

  • Page 194
    ... in losses in excess of those currently provided for in our Consolidated Financial Statements. Taco Bell was named as a defendant in a number of putative class action suits filed in 2007, 2008, 2009 and 2010 alleging violations of California labor laws including unpaid overtime, failure to pay wages...

  • Page 195
    ...a class wide basis to Taco Bell. On July 9, 2009, a putative class action styled Mark Smith v. Pizza Hut, Inc. was filed in the United States District Court for the District of Colorado. The complaint alleged that Pizza Hut did not properly reimburse its delivery drivers for various automobile costs...

  • Page 196
    ... Colorado assistant managers under Colorado state law, which provides for daily overtime after 12 hours worked in a day. The Company has been dismissed from the case without prejudice. Taco Bell filed its answer on September 20, 2010, and the parties commenced class discovery, which is currently on...

  • Page 197
    ...0.76 0.74 - $ $ 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 common share Diluted earnings per common share Dividends declared per common share $ 2,051 374 2,425 360...

  • Page 198
    ... 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 Conduct...

  • Page 199
    ... Exchange Act of 1934 as of the end of the period covered by this report. Based on the evaluation, performed under the supervision and with the participation of the Company's management, including the Chairman, Chief Executive Officer and President (the "CEO") and the Chief Financial Officer...

  • Page 200
    ... proxy statement which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2011. Item 14. Principal Accountant Fees and Services. Information regarding principal accountant fees and services and audit committee pre-approval policies and procedures...

  • Page 201
    ... (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 202
    ... Title Chairman of the Board, Chief Executive Officer and President (principal executive officer) Chief Financial Officer (principal accounting officer) Vice President and Corporate Controller (principal accounting officer) Director Date February 20, 2012 /s/ Richard T. Carucci Richard T. Carucci...

  • Page 203
    ... Jing-Shyh S. Su Jing-Shyh S. Su /s/ Robert D. Walter Robert D. Walter Director February 20, 2012 Director February 20, 2012 Director February 20, 2012 Director February 20, 2012 Director February 20, 2012 Vice-Chairman of the Board February 20, 2012 Director February 20, 2012 Form 10...

  • Page 204
    ...Distribution Joinder Agreement between Unified Foodservice Purchasing Co-op, LLC, McLane Foodservice, Inc., and certain subsidiaries of Yum! Brands, Inc., which are incorporated herein by reference from Exhibit 10.1 to YUM's Quarterly Report on Form 10-Q for the quarter ended September 4, 2010. 100

  • Page 205
    ... Inc. and Citigroup Global Markets Inc., as Lead Arrangers and Bookrunners and Citibank N.A., as Syndication Agent, which is incorporated herein by reference from Exhibit 10.6 to YUM's Annual Report on Form 10-K for the fiscal year ended December 29, 2007. YUM Director Deferred Compensation Plan, as...

  • Page 206
    ..., 2011, 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, and from Item 5.02 of Form 8-K on May 24, 2011. Form of 1999 Long Term Incentive Plan Award Agreement (Stock...

  • Page 207
    ... from Exhibit 10.26 to YUM's Annual Report on Form 10-K for the fiscal year ended December 26, 2009. 1999 Long Term Incentive Plan Award (Restricted Stock Unit Agreement) by and between the Company and Jing-Shyh S. Su, dated as of May 20, 2010, which is incorporated by reference from Exhibit...

  • Page 208
    ... YUM through the Company's Direct Stock Purchase Plan • Sell shares held by AST Access accounts online at the following URL: https://secure.amstock.com/Shareholder/sh_login.asp. Your account number and Social Security Number are required. If you do not know your account number, please call AST at...

  • Page 209
    ... Common Stock, which trades under the symbol YUM. 19MAR201018500758 Franchise Inquiries DOMESTIC FRANCHISING INQUIRY PHONE LINE (866) 2YUMYUM (298-6986) INTERNATIONAL FRANCHISING INQUIRY PHONE LINE (972) 338-7780 ONLINE FRANCHISE INFORMATION http://www.yumfranchises.com/ Yum! Brands' Annual Report...

  • Page 210
    26MAR201222253896 YUM! BRANDS, INC. 2011 ANNUAL CUSTOMER MANIA REPORT

  • Page 211
    ... Financial Officer, Yum! Brands, Inc. Robert Holland, Jr. 71 Managing Director and Advisory Board Member, Essex Lake Group, P.C. Niren Chaudhary 49 President, Yum! Restaurants India Greg Creed 54 Chief Executive Officer, Taco Bell Kenneth Langone 76 Founder, Chairman, Chief Executive Officer...

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