Yum! Brands, Inc. (YUM)
Q2 2010 Earnings Call Transcript
July 14, 2010 9:15 a.m. ET

Executives

Tim Jerzyk – SVP, IR
David Novak – Chairman, CEO & President
Richard Carucci – CFO

Analysts

Jeff Omohundro
David Palmer – UBS
John Glass
Joe Buckley
Jake Bartlett
Jeffrey Bernstein
Jonathan Komp [ph]
Larry Miller
John Ivankoe
Tom Forte – Telsey Advisory Group
Keith Siegner – Credit Suisse
Linda Farquhar – Friess
Sara Senatore – Sanford Bernstein
Mitchell Speiser – Buckingham Research

Presentation

Operator

Good morning. My name is Jasper and I will be your conference operator today. At this time, I would like to welcome everyone to the 2010 second quarter’s earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question press the pound key. Thank you.

I would now like to turn the call over to Mr. Tim Jerzyk. You may begin sir.

Tim Jerzyk

Thanks, Jasper. Good morning, everyone and thanks for joining us today on our call. The call is being recorded and will be available for playback. We are broadcasting the conference call via our website at www.yum.com. Please be advised that if you ask a question, it will be included in both our live conference and in any future use of the recording.

I would also like to remind you that this conference call includes forward-looking statements. Forward-looking statements are subject to future events and uncertainties that could cause our actual results to differ materially from these statements. All forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our filings with the SEC.

In addition, please refer to the investors section of the Yum! Brands’ website to find disclosures and reconciliations of any non-GAAP financial measures that may be used on today’s call.

Finally we would like you to be please be aware of an upcoming Yum! Investor Event, where you will have a great opportunity to meet leadership team from one of our businesses. September 21, we will host our Yum! China Investor Conference in Shanghai. Space is limited, so please notify us if you are interested in attending as soon as possible. Also on Tuesday, October 5, our third quarter earnings will be released and a conference call will be held the following morning of October 6.

On our call today you will hear from David Novak, Chairman and CEO and Rick Carucci, our CFO. Following remarks from both, we will take your questions. Now I will turn the call over to David Novak.

David Novak

Thank you Tim and good morning everyone. I am pleased to report we are raising our full-year 2010 EPS growth forecast to 12% based on our strong second quarter and first half performance. Our second quarter EPS growth of 17% before special items was fueled by profit growth in each of our three divisions.

We were particularly pleased with our business in China which reported robust profit growth of 33% driven by same-store sales growth, margin improvement and continued unit development. In the U.S., we were also pleased to see significant improvement in operating profit despite flat same-store sales.

Our primary focus is to drive same-store sales growth balance of the year given the challenging consumer environment. At Yum! Restaurants International, we increased system sales 4% prior to foreign currency translation benefit. We expect stronger sales and profit growth for the balance of the year at YRI.

Now let me take you through our key strategies and trends for each of our divisions. First, I am obviously very proud of our China team’s performance. Same-store sales grew by 4% and units expanded 12%. Our China division generated operating profit growth of 33%. Through the first half of this year our China division’s profit growth has been 35%.