This summary is based on the fourth quarter fiscal 2006 earnings call presented by Yum! Brands on February 13, 2006.
Management:
- Vice President, Investor Relations: Tim Jerzyk
- Chairman of the Board, President, Chief Executive Officer: David C. Novak
- Chief Financial Officer: Richard T. Carucci
Key Investor Issues
- Earnings increased 8% to $824 million or $3.02 a share from $762 million or $2.66 a share in 2006.
- Revenues grew 2% to $9.7 billion on growth in worldwide same-store sales.
- The firm returned $1.1 billion through share buy backs and dividends
Fourth Quarter 2006 Highlights:
- Net income was up 3% to $232 million or 86 cents a share.
- Total revenues increased by 4% to $3 billion as worldwide system sales increased by 7%.
- Worldwide restaurant margin improved 0.9 percentage points with improvements in both international businesses, and U.S. businesses.
Full Year Highlights:
Earnings increased 8% to $824 million or $3.02 a share from $762 million or $2.66 a share due to innovative and creative exciting new ideas for customers, spread through all brands and businesses around the globe.
- Strong double-digit operating-profit growth from the international divisions: China, 37% and YRI, 11%.
- Revenues increased marginally to $9.7 billion from $9.3 billion in the prior year as Mainland China restaurant unit grew by 18% and Worldwide franchise fees increased 7%..
- Yum! Restaurants International Division (YRI) reported a restaurant growth of 3%, making this the eighth consecutive year with at least 3% restaurant growth.
- - The firm returned $1.1 billion of free cash available to shareholders, with $1 billion of share buybacks.
Restaurant margin increased 1.2 percentage points worldwide and improved in all three business segments.
- Taco Bell is currently lapping one of its'' strongest quarters of same-store sales growth in the last five years.
- The firm has put in place farm-level testing of lettuce supply to add another level of testing.
- In addition it is the first company to go to this extra level of testing and increasing the safety of products.
- The new product pipeline is full with some really good products including the new Taquito a great value at $1.79 that was launched with the Super Bowl ads.
KFC finished the period down 1% in same-store sales but up 1% for the year as new ideas to grow the concepts of Variety Bucket, Snacker, Flavor Station, and the famous bowls gained momentum.
- In addition, some exciting new products and some ideas imported from Yum! Restaurants International.
- In Pizza Hut, same-store sales were down 1% as the firm is in the transition phase now and expects that growth will be up 2% to 3% for the year in same-store sales growth.
- The firm is now in 402 cities in Mainland China with KFC, over 60 cities with Pizza Hut Casual Dining, and expanding into several new cities with broader development of Pizza Hut Home Service.
KFC is expected to add nearly 300 new restaurants in Mainland China which will continue to widen its lead over the nearest competitor, now more than 1,000 units and developing at a 3 to pace to the nearest competitor.
- A total of 80 new restaurants for Pizza Hut Casual Dining would make the Pizza Hut Casual Dining concept in Mainland China one of the fastest growing casual dining concepts in the world in terms of significant scale, unit growth rate and absolute openings.
- Yum! Restaurants International (YRI) had operating profit growth of 11%, driven by 9% growth in system sales.
- The Pizza Hut United Kingdom business has stabilized and is just beginning the turnaround process.
Yum acquired the remaining 50% interest in the joint venture late last year and has put a new GM and leadership team in place.
- The firm opened 785 new restaurants last year making it the seventh consecutive year of opening at least 700 new units.
- In the YRI markets around the world the firm has an infrastructure of over 700 franchise partners that are expanding.
- Last year, the franchisees opened over 90% of the new restaurants. Additionally, the existing franchise business is very healthy with 7% same-store sales growth in the fourth quarter.
Segment Performance
China division had 36% profit growth and 12% same-store sales growth in Mainland China.
- Restaurant margin was up almost 4 points versus a year ago, and full year margin was over 20%.
- G&A expenses increased 50% driven by continued growth in the business and the people needed for the development of the brands, as well as by higher incentive compensation as a result of a great year.
The KFC Taiwan and Thailand markets together generated mixed results, and there is a higher sales growth rate in Mainland China than the division.
- In addition, restaurant margin performance was solid with an increase of six-tenths of a percentage point.
- Same-store sales at both company and franchise restaurants increased by 7% for the quarter.
The US for the fourth quarter, had slightly negative same-store sales exclusive of the impact from the Taco Bell incident.
|
