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Yum! Brands Annual Report, Year Ended Dec 25, 2004

Filing Date
Filed February 28, 2005
Period End
December 25, 2004
Security
YUM
In the record · 2016–202610-K1110-Q328-K146

YUM filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 146 current reports (8-K) between 2016 and 2026.

  1. FY2016 annual report10-K · Feb ’17Feb ’17
  2. Material agreement8-K · Sep ’19Sep ’19
  3. Leadership change8-K · Sep ’21Sep ’21
  4. Material agreement8-K · Sep ’25Sep ’25

01—Abstract

Summary

Summary of the 10-K filed February 28, 2005. Cited figures are marked; the original filing is the authoritative source.

YUM!

Brands, Inc. (the Company) reported fiscal 2004 (52 weeks ended December 25, 2004) revenues of $9.01 billiona, up from $8.38 billion in 2003, and net income of $740 million, up from $617 million. Diluted earnings per share rose to $2.42 from $2.02. Operating profit was $1.155 billion versus $1.059 billion, helped by a $14 million Wrench litigation income item in 2004 compared with $42 million of expense in 2003.

Worldwide system sales grew 8% reported and 5% excluding currency translation. The Company operates over 33,000 units in more than 100 countries, with KFC, Pizza Hut, Taco Bell, Long John Silver's and A&W as its five Concepts. Cash generation remained strong, with net cash provided by operating activities of $1.131 billionb.

The Company repurchased $569 millionc of common stock during 2004 and, for the first time, paid quarterly dividends, declaring $0.30 per share in total and targeting a payout ratio of 15% to 20% of net income. Long-term debt fell to $1.731 billion from $2.056 billion, partly due to the early redemption of $350 million of 2005 Notes. The Company also recorded a lease accounting adjustment of $11.5 million ($7 million after tax) in the fourth quarter, and a Puerto Rico business sale on October 4, 2004.

Key risks disclosed include commodity inflation, which reduced U.S. restaurant margins by approximately 160 basis points, and pending litigation. In the Coldiron case, Pizza Hut's restaurant general managers were challenged over exempt classification under the FLSA, and the outcome cannot be predicted. In the Moeller case, Taco Bell faces a class action over accessibility of approximately 220 California company restaurants, and the cost of compliance cannot be reasonably estimated.

02—Key points

Key Highlights

  1. Revenues rose 8% to $9.01 billion, with Company sales of $7.99 billion and franchise and license fees of $1.02 billion.
  2. Net income increased 20% to $740 million; diluted EPS rose to $2.42 from $2.02.
  3. Worldwide system sales increased 8% reported and 5% excluding currency translation; International system sales grew 15% reported and 9% excluding currency.
  4. U.S. Company blended same store sales grew 3% in 2004, led by Taco Bell and Pizza Hut at 5% each, while KFC declined 2%.
  5. Share repurchases totaled $569 million, and the Company initiated quarterly dividends, declaring $0.30 per share for 2004, with a targeted payout ratio of 15% to 20% of net income.
  6. Long-term debt was reduced to $1.731 billion from $2.056 billion, and total assets rose to $5.696 billion.
  7. Commodity inflation, particularly in cheese and meat, reduced U.S. restaurant margins by approximately 160 basis points; the Company's worldwide restaurant margin was 14.5%.

03—Questions

Frequently Asked Questions

  1. How did YUM! Brands perform financially in fiscal 2004?

    Revenues increased to $9.01 billion from $8.38 billion, operating profit rose to $1.155 billion from $1.059 billion, and net income grew to $740 million from $617 million. Diluted EPS was $2.42 compared with $2.02 in 2003. The 2004 results included $14 million of Wrench litigation income and $16 million of AmeriServe and other credits.

  2. What are the main risks and legal proceedings facing the Company?

    The filing identifies commodity cost volatility as a key pressure, with cheese and meat costs reducing U.S. margins by approximately 160 basis points. Two significant lawsuits are pending: Coldiron v. Pizza Hut, a class action over the exempt classification of restaurant general managers under the FLSA, where the outcome cannot be predicted; and Moeller v. Taco Bell, an accessibility class action covering approximately 220 California company restaurants, where the potential compliance costs cannot be reasonably estimated. The Wrench litigation was settled in January 2005.

  3. What is the Company's capital return policy?

    The Company repurchased $569 million of common stock in 2004 and paid two quarterly dividends totaling $58 million. Its Board authorized a new share repurchase program of up to $500 million in January 2005, to be purchased through January 2006. The Company targets a dividend payout ratio of 15% to 20% of net income.

  4. How is the Company's international business performing?

    International revenues were $3.25 billion, up 19% reported and 15% excluding currency translation, representing about 36% of 2004 revenues. International operating profit was $542 million, up 23% reported. The Company operates over 12,990 international units, with China revenues of $903 million in 2004.

04—Continue

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