|
UNITED
STATES
|
SECURITIES
AND EXCHANGE COMMISSION
|
Washington, D. C. 20549
|
[
ü
]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
|
||
EXCHANGE ACT OF 1934
for
the quarterly period ended June 13, 2009
|
|||
OR
|
|||
[ ]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
|
North
Carolina
|
13-3951308
|
||
(State or other jurisdiction of
|
(I.R.S. Employer
|
||
incorporation or organization)
|
Identification No.)
|
||
1441 Gardiner Lane, Louisville, Kentucky
|
40213
|
||
(Address of principal executive offices)
|
(Zip Code)
|
||
Registrant’s telephone number, including area code: (502) 874-8300
|
Page
|
||||||
No.
|
||||||
Part I.
|
Financial Information
|
|||||
Item 1 - Financial Statements
|
||||||
Condensed
Consolidated Statements of Income - Quarters and Years to date
ended
June
13, 2009 and June 14, 2008
|
3
|
|||||
Condensed
Consolidated Statements of Cash Flows – Years to date ended
June
13, 2009 and June 14, 2008
|
4
|
|||||
Condensed
Consolidated Balance Sheets – June 13, 2009
and
December 27, 2008
|
5
|
|||||
Notes to Condensed Consolidated Financial Statements
|
6
|
|||||
Item 2 - Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
27
|
|||||
Item 3 - Quantitative and Qualitative Disclosures about Market Risk
|
46
|
|||||
Item 4 - Controls and Procedures
|
47
|
|||||
Report of Independent Registered Public Accounting Firm
|
48
|
|||||
Part II.
|
Other Information and Signatures
|
|||||
Item 1 – Legal Proceedings
|
49
|
|||||
Item 1A – Risk Factors
|
49
|
|||||
Item
4 – Submission of Matters to a vote of Security Holders
|
50
|
|||||
Item 6 – Exhibits
|
51
|
|||||
Signatures
|
53
|
Item
1.
|
Financial
Statements
|
Quarter
|
Year
to date
|
||||||||||||||||||
Revenues
|
6/13/09
|
6/14/08
|
6/13/09
|
6/14/08
|
|||||||||||||||
Company
sales
|
$
|
2,152
|
$
|
2,323
|
$
|
4,070
|
$
|
4,417
|
|||||||||||
Franchise
and license fees and income
|
324
|
336
|
623
|
655
|
|||||||||||||||
Total
revenues
|
2,476
|
2,659
|
4,693
|
5,072
|
|||||||||||||||
Costs
and Expenses, Net
|
|||||||||||||||||||
Company
restaurants
|
|||||||||||||||||||
Food
and paper
|
693
|
766
|
1,304
|
1,435
|
|||||||||||||||
Payroll
and employee benefits
|
505
|
574
|
962
|
1,107
|
|||||||||||||||
Occupancy
and other operating expenses
|
630
|
672
|
1,172
|
1,256
|
|||||||||||||||
Company
restaurant expenses
|
1,828
|
2,012
|
3,438
|
3,798
|
|||||||||||||||
General
and administrative expenses
|
281
|
317
|
536
|
593
|
|||||||||||||||
Franchise
and license expenses
|
25
|
19
|
45
|
38
|
|||||||||||||||
Closures
and impairment (income) expenses
|
22
|
8
|
26
|
6
|
|||||||||||||||
Refranchising
(gain) loss
|
1
|
(1
|
)
|
(13
|
)
|
24
|
|||||||||||||
Other
(income) expense
|
(75
|
)
|
(13
|
)
|
(84
|
)
|
(130
|
)
|
|||||||||||
Total
costs and expenses, net
|
2,082
|
2,342
|
3,948
|
4,329
|
|||||||||||||||
Operating
Profit
|
394
|
317
|
745
|
743
|
|||||||||||||||
Interest
expense, net
|
43
|
52
|
96
|
105
|
|||||||||||||||
Income
Before Income Taxes
|
351
|
265
|
649
|
638
|
|||||||||||||||
Income
tax provision
|
45
|
40
|
124
|
157
|
|||||||||||||||
Net
Income – including noncontrolling interest
|
306
|
225
|
525
|
481
|
|||||||||||||||
Net
Income – noncontrolling interest
|
3
|
1
|
4
|
3
|
|||||||||||||||
Net
Income – YUM! Brands, Inc.
|
$
|
303
|
$
|
224
|
$
|
521
|
$
|
478
|
|||||||||||
Basic
Earnings Per Common Share
|
$
|
0.65
|
$
|
0.47
|
$
|
1.11
|
$
|
0.99
|
|||||||||||
Diluted
Earnings Per Common Share
|
$
|
0.63
|
$
|
0.45
|
$
|
1.08
|
$
|
0.95
|
|||||||||||
Dividends
Declared Per Common Share
|
$
|
0.38
|
$
|
0.19
|
$
|
0.38
|
$
|
0.34
|
|||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
|
Year
to date
|
|||||||||
6/13/09
|
6/14/08
|
||||||||
Cash
Flows – Operating Activities
|
|||||||||
Net
Income – including noncontrolling interest
|
$
|
525
|
$
|
481
|
|||||
Depreciation
and amortization
|
246
|
250
|
|||||||
Closures
and impairment (income) expenses
|
26
|
6
|
|||||||
Refranchising
(gain) loss
|
(13
|
)
|
24
|
||||||
Contributions
to defined benefit pension plans
|
(92
|
)
|
(2
|
)
|
|||||
Gain
upon consolidation of a former unconsolidated affiliate in
China
|
(68
|
)
|
—
|
||||||
Gain
on sale of interest in Japan unconsolidated affiliate
|
—
|
(100
|
)
|
||||||
Deferred
income taxes
|
(29
|
)
|
13
|
||||||
Equity
income from investments in unconsolidated affiliates
|
(17
|
)
|
(20
|
)
|
|||||
Distributions
of income received from unconsolidated affiliates
|
8
|
22
|
|||||||
Excess
tax benefits from share-based compensation
|
(43
|
)
|
(31
|
)
|
|||||
Share-based
compensation expense
|
26
|
29
|
|||||||
Changes
in accounts and notes receivable
|
(19
|
)
|
6
|
||||||
Changes
in inventories
|
15
|
(1
|
)
|
||||||
Changes
in prepaid expenses and other current assets
|
(18
|
)
|
(9
|
)
|
|||||
Changes
in accounts payable and other current liabilities
|
(140
|
)
|
(88
|
)
|
|||||
Changes
in income taxes payable
|
15
|
(19
|
)
|
||||||
Other
non-cash charges and credits, net
|
73
|
65
|
|||||||
Net
Cash Provided by Operating Activities
|
495
|
626
|
|||||||
Cash
Flows – Investing Activities
|
|||||||||
Capital
spending
|
(342
|
)
|
(348
|
)
|
|||||
Proceeds
from refranchising of restaurants
|
63
|
66
|
|||||||
Acquisition
of restaurants from franchisees
|
(22
|
)
|
(3
|
)
|
|||||
Acquisitions
and investments
|
(56
|
)
|
—
|
||||||
Sales
of property, plant and equipment
|
8
|
34
|
|||||||
Other,
net
|
(7
|
)
|
(4
|
)
|
|||||
Net
Cash Used in Investing Activities
|
(356
|
)
|
(255
|
)
|
|||||
Cash
Flows – Financing Activities
|
|||||||||
Repayments
of long-term debt
|
(144
|
)
|
(257
|
)
|
|||||
Revolving
credit facilities, three months or less, net
|
108
|
475
|
|||||||
Short-term
borrowings by original maturity
|
|||||||||
More
than three months - proceeds
|
—
|
—
|
|||||||
More
than three months - payments
|
—
|
—
|
|||||||
Three
months or less, net
|
4
|
(9
|
)
|
||||||
Repurchase
shares of Common Stock
|
—
|
(994
|
)
|
||||||
Excess
tax benefits from share-based compensation
|
43
|
31
|
|||||||
Employee
stock option proceeds
|
77
|
40
|
|||||||
Dividends
paid on Common Stock
|
(175
|
)
|
(146
|
)
|
|||||
Other,
net
|
5
|
—
|
|||||||
Net
Cash Used in Financing Activities
|
(82
|
)
|
(860
|
)
|
|||||
Effect
of Exchange Rates on Cash and Cash Equivalents
|
(6
|
)
|
8
|
||||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
51
|
(481
|
)
|
||||||
Change
in Cash and Cash Equivalents due to consolidation of entities in
China
|
17
|
17
|
|||||||
Cash
and Cash Equivalents - Beginning of Period
|
216
|
789
|
|||||||
Cash
and Cash Equivalents - End of Period
|
$
|
284
|
$
|
325
|
|||||
See
accompanying Notes to Condensed Consolidated Financial
Statements.
|
(Unaudited)
|
|||||||||
6/13/09
|
12/27/08
|
||||||||
ASSETS
|
|||||||||
Current
Assets
|
|||||||||
Cash
and cash equivalents
|
$
|
284
|
$
|
216
|
|||||
Accounts
and notes receivable, net
|
278
|
229
|
|||||||
Inventories
|
134
|
143
|
|||||||
Prepaid
expenses and other current assets
|
201
|
172
|
|||||||
Deferred
income taxes
|
84
|
81
|
|||||||
Advertising
cooperative assets, restricted
|
90
|
110
|
|||||||
Total
Current Assets
|
1,071
|
951
|
|||||||
Property,
plant and equipment, net
|
3,807
|
3,710
|
|||||||
Goodwill
|
760
|
605
|
|||||||
Intangible
assets, net
|
341
|
335
|
|||||||
Investments
in unconsolidated affiliates
|
23
|
65
|
|||||||
Other
assets
|
582
|
561
|
|||||||
Deferred
income taxes
|
340
|
300
|
|||||||
Total
Assets
|
$
|
6,924
|
$
|
6,527
|
|||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY (DEFICIT)
|
|||||||||
Current
Liabilities
|
|||||||||
Accounts
payable and other current liabilities
|
$
|
1,343
|
$
|
1,473
|
|||||
Income
taxes payable
|
87
|
114
|
|||||||
Short-term
borrowings
|
32
|
25
|
|||||||
Advertising
cooperative liabilities
|
90
|
110
|
|||||||
Total
Current Liabilities
|
1,552
|
1,722
|
|||||||
Long-term
debt
|
3,516
|
3,564
|
|||||||
Other
liabilities and deferred credits
|
1,299
|
1,335
|
|||||||
Total
Liabilities
|
6,367
|
6,621
|
|||||||
Shareholders’
Equity (Deficit)
|
|||||||||
Common Stock, no par value,
750 shares authorized; 466 shares and 459 shares
issued in 2009
and 2008, respectively
|
170
|
7
|
|||||||
Retained
earnings
|
646
|
303
|
|||||||
Accumulated
other comprehensive income (loss)
|
(340
|
)
|
(418
|
)
|
|||||
Total
Shareholders’ Equity (Deficit) – YUM! Brands, Inc.
|
476
|
(108
|
)
|
||||||
Noncontrolling
interest
|
81
|
14
|
|||||||
Total
Shareholders’ Equity (Deficit)
|
557
|
(94
|
)
|
||||||
Total
Liabilities and Shareholders’ Equity (Deficit)
|
$
|
6,924
|
$
|
6,527
|
|||||
See accompanying Notes to Condensed Consolidated Financial Statements.
|
Quarter
ended
|
Year
to date
|
||||||||||||||||||
6/13/09
|
6/14/08
|
6/13/09
|
6/14/08
|
||||||||||||||||
Net
Income – YUM! Brands, Inc.
|
$
|
303
|
$
|
224
|
$
|
521
|
$
|
478
|
|||||||||||
Weighted-average
common shares outstanding (for basic calculation)
|
470
|
480
|
468
|
483
|
|||||||||||||||
Effect
of dilutive share-based employee compensation
|
13
|
18
|
13
|
18
|
|||||||||||||||
Weighted-average
common and dilutive potential common shares outstanding (for diluted
calculation)
|
483
|
498
|
481
|
501
|
|||||||||||||||
Basic
EPS
|
$
|
0.65
|
$
|
0.47
|
$
|
1.11
|
$
|
0.99
|
|||||||||||
Diluted
EPS
|
$
|
0.63
|
$
|
0.45
|
$
|
1.08
|
$
|
0.95
|
|||||||||||
Unexercised
employee stock options and stock appreciation rights (in millions)
excluded from the diluted EPS computation
(a)
|
13.9
|
6.6
|
14.6
|
5.4
|
(a)
|
These
unexercised employee stock options and stock appreciation rights were not
included in the computation of diluted EPS because to do so would have
been antidilutive for the periods
presented.
|
Note
3 - Shareholders’ Equity
|
Shares
Repurchased
(thousands)
|
Dollar
Value of Shares
Repurchased
|
||||||||||||||||
Authorization
Date
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
January
2008
|
—
|
5,141
|
$
|
—
|
$
|
179
|
|||||||||||
October
2007
|
—
|
22,875
|
—
|
813
|
|||||||||||||
Total
|
—
|
28,016
|
$
|
—
|
$
|
992
|
(
a
)
|
(a)
|
Amount
excludes the effect of $13 million in share repurchases (0.4 million
shares) with trade dates prior to the 2007 fiscal year end but cash
settlement dates subsequent to the 2007 fiscal year end and includes the
effect of $11 million in share repurchases (0.3 million shares) with trade
dates prior to June 14, 2008 but cash settlement dates subsequent to June
14, 2008.
|
Quarter
ended
|
Year
to date
|
||||||||||||||||
6/13/09
|
6/14/08
|
6/13/09
|
6/14/08
|
||||||||||||||
Net
Income – YUM! Brands, Inc.
|
$
|
303
|
$
|
224
|
$
|
521
|
$
|
478
|
|||||||||
Foreign
currency translation adjustment arising during the period
|
73
|
20
|
65
|
28
|
|||||||||||||
Foreign
currency translation adjustment included in Net Income
|
—
|
—
|
—
|
(25
|
)
|
||||||||||||
Changes
in fair value of derivatives, net of tax
|
(9
|
)
|
—
|
5
|
10
|
||||||||||||
Reclassification
of derivative (gains) losses to Net Income, net of tax
|
9
|
—
|
3
|
(9
|
)
|
||||||||||||
Reclassification
of pension actuarial losses to Net Income, net of tax
|
3
|
2
|
5
|
3
|
|||||||||||||
Total
comprehensive income
|
$
|
379
|
$
|
246
|
$
|
599
|
$
|
485
|
Note
4 - Items Affecting Comparability of Net Income and Cash
Flows
|
Current
assets, including cash of $17
|
$
|
27
|
Property,
plant and equipment
|
66
|
|
Goodwill
|
133
|
|
Other
long-term assets
|
2
|
|
Total
assets acquired
|
228
|
|
Current
liabilities
|
53
|
|
Other
long-term liabilities
|
8
|
|
Total
liabilities assumed
|
61
|
|
Net
assets acquired
|
$
|
167
|
Quarter
ended June 13, 2009
|
|||||||||||||||||||
U.S.
|
YRI
|
China
Division
|
Worldwide
|
||||||||||||||||
Refranchising
(gain) loss
(a)
|
$
|
(1
|
)
|
$
|
2
|
$
|
—
|
$
|
1
|
||||||||||
Store
closure (income) costs
(b)
|
$
|
2
|
$
|
—
|
$
|
(1
|
)
|
$
|
1
|
||||||||||
Store
impairment charges
|
12
|
3
|
6
|
21
|
|||||||||||||||
Closure
and impairment (income) expenses
|
$
|
14
|
$
|
3
|
$
|
5
|
$
|
22
|
Quarter
ended June 14, 2008
|
|||||||||||||||||||
U.S.
|
YRI
|
China
Division
|
Worldwide
|
||||||||||||||||
Refranchising
(gain) loss
(a)
|
$
|
(1
|
)
|
$
|
1
|
$
|
(1
|
)
|
$
|
(1
|
)
|
||||||||
Store
closure (income) costs
(b)
|
$
|
(6
|
)
|
$
|
(1
|
)
|
$
|
(2
|
)
|
$
|
(9
|
)
|
|||||||
Store
impairment charges
|
12
|
1
|
4
|
17
|
|||||||||||||||
Closure
and impairment (income) expenses
|
$
|
6
|
$
|
—
|
$
|
2
|
$
|
8
|
Year
to date ended June 13, 2009
|
|||||||||||||||||||
U.S.
|
YRI
|
China
Division
|
Worldwide
|
||||||||||||||||
Refranchising
(gain) loss
(a)
|
$
|
(15
|
)
|
$
|
2
|
$
|
—
|
$
|
(13
|
)
|
|||||||||
Store
closure (income) costs
(b)
|
$
|
3
|
$
|
1
|
$
|
—
|
$
|
4
|
|||||||||||
Store
impairment charges
|
13
|
3
|
6
|
22
|
|||||||||||||||
Closure
and impairment (income) expenses
|
$
|
16
|
$
|
4
|
$
|
6
|
$
|
26
|
Year
to date ended June 14, 2008
|
|||||||||||||||||||
U.S.
|
YRI
|
China
Division
|
Worldwide
|
||||||||||||||||
Refranchising
(gain) loss
(a)
|
$
|
25
|
$
|
—
|
$
|
(1
|
)
|
$
|
24
|
||||||||||
Store
closure (income) costs
(b)
|
$
|
(8
|
)
|
$
|
(3
|
)
|
$
|
(2
|
)
|
$
|
(13
|
)
|
|||||||
Store
impairment charges
|
13
|
2
|
4
|
19
|
|||||||||||||||
Closure
and impairment (income) expenses
|
$
|
5
|
$
|
(1
|
)
|
$
|
2
|
$
|
6
|
(a)
|
Refranchising
(gain) loss is not allocated to segments for performance reporting
purposes.
|
(b)
|
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 to those reserves and other
facility-related expenses from previously closed
stores.
|
Noncontrolling
interest as of December 27, 2008
|
$
|
14
|
||
Net
income – noncontrolling interest
|
4
|
|||
Purchase
of subsidiary shares from noncontrolling interest (See Note
4)
|
70
|
|||
Dividends
declared
|
(7
|
)
|
||
Noncontrolling
interest as of June 13, 2009
|
$
|
81
|
Note
6 - New Accounting Pronouncements Not Yet
Adopted
|
Note
7 - Other (Income) Expense
|
Quarter
ended
|
Year
to date
|
|||||||||||||||
6/13/09
|
6/14/08
|
6/13/09
|
6/14/08
|
|||||||||||||
Equity
income from investments in unconsolidated affiliates
|
$
|
(7
|
)
|
$
|
(9
|
)
|
$
|
(17
|
)
|
$
|
(20
|
)
|
||||
Gain
upon consolidation of former unconsolidated affiliate in China
(a)
|
(68
|
)
|
—
|
(68
|
)
|
—
|
||||||||||
Gain
upon sale of investment in unconsolidated affiliate
(b)
|
—
|
—
|
—
|
(100
|
)
|
|||||||||||
Foreign
exchange net (gain) loss and other
|
—
|
(4
|
)
|
1
|
(10
|
)
|
||||||||||
Other
(income) expense
|
$
|
(75
|
)
|
$
|
(13
|
)
|
$
|
(84
|
)
|
$
|
(130
|
)
|
(a)
|
See
Note 4 for further discussion of the consolidation of a former
unconsolidated affiliate in China.
|
(b)
|
Reflects
the gain recognized on the sale of our interest in our unconsolidated
affiliate in Japan. See our 2008 Form 10-K for further discussion of this
transaction.
|
Note
8 – Supplemental Balance Sheet
Information
|
6/13/09
|
12/27/08
|
||||||||
Accounts
and notes receivable
|
$
|
305
|
$
|
252
|
|||||
Allowance
for doubtful accounts
|
(27
|
)
|
(23
|
)
|
|||||
Accounts
and notes receivable, net
|
$
|
278
|
$
|
229
|
Property,
plant and equipment, gross
|
$
|
7,093
|
$
|
6,897
|
|||||
Accumulated
depreciation and amortization
|
(3,286
|
)
|
(3,187
|
)
|
|||||
Property,
plant and equipment, net
|
$
|
3,807
|
$
|
3,710
|
Quarter
ended
|
Year
to date
|
|||||||||||||||
Revenues
|
6/13/09
|
6/14/08
|
6/13/09
|
6/14/08
|
||||||||||||
United
States
|
$
|
1,099
|
$
|
1,226
|
$
|
2,145
|
$
|
2,418
|
||||||||
YRI
(a)
|
588
|
730
|
1,169
|
1,431
|
||||||||||||
China
Division
(b)
|
793
|
703
|
1,410
|
1,223
|
||||||||||||
Unallocated
Franchise and license fees and income
(c)(f)
|
(4
|
)
|
—
|
(31
|
)
|
—
|
||||||||||
$
|
2,476
|
$
|
2,659
|
$
|
4,693
|
$
|
5,072
|
Quarter
ended
|
Year
to date
|
|||||||||||||||
Operating Profit
|
6/13/09
|
6/14/08
|
6/13/09
|
6/14/08
|
||||||||||||
United
States
|
$
|
169
|
$
|
155
|
$
|
326
|
$
|
301
|
||||||||
YRI
|
100
|
118
|
223
|
256
|
||||||||||||
China
Division
(d)
|
105
|
92
|
236
|
195
|
||||||||||||
Unallocated
Franchise and license fees and income
(c)(f)
|
(4
|
)
|
—
|
(31
|
)
|
—
|
||||||||||
Unallocated
and corporate G&A expenses
(f)
|
(43
|
)
|
(53
|
)
|
(89
|
)
|
(95
|
)
|
||||||||
Unallocated
Other income (expense)
(e)(f)
|
68
|
4
|
67
|
110
|
||||||||||||
Unallocated
Refranchising gain (loss)
(f)
|
(1
|
)
|
1
|
13
|
(24
|
)
|
||||||||||
Operating
Profit
|
394
|
317
|
745
|
743
|
||||||||||||
Interest
expense, net
|
(43
|
)
|
(52
|
)
|
(96
|
)
|
(105
|
)
|
||||||||
Income
Before Income Taxes
|
$
|
351
|
$
|
265
|
$
|
649
|
$
|
638
|
(a)
|
Includes
revenues of $236 million and $296 million for the quarters ended June 13,
2009 and June 14, 2008, respectively, and $469 million and $591 million
for the years to date ended June 13, 2009 and June 14, 2008, respectively,
for entities in the United Kingdom.
|
(b)
|
Includes
revenues of approximately $727 million and $625 million for the quarters
ended June 13, 2009 and June 14, 2008, respectively, and approximately
$1.3 billion and $1.1 billion for the years to date ended June 13, 2009
and June 14, 2008, respectively, in mainland China.
|
(c)
|
Amount
consists of reimbursements to, or obligations to reimburse, KFC
franchisees for installation costs of ovens for the national launch of
Kentucky Grilled Chicken. See Note 4.
|
(d)
|
Includes
equity income from investments in unconsolidated affiliates of $7 million
and $9 million for the quarters ended June 13, 2009 and June 14, 2008,
respectively, and $17 million and $19 million for years to date ended June
13, 2009 and June 14, 2008, respectively, for the China
Division.
|
(e)
|
The
quarter and year to date ended June 13, 2009 includes a $68 million gain
recognized upon our acquisition of additional ownership in, and
consolidation of, the operating entity that owns the KFCs in Shanghai,
China. See Note 4 for further discussion of this
transaction. The year to date ended June 14, 2008 includes a
$100 million gain recognized on the sale of our interest in our
unconsolidated affiliate in Japan. See our 2008 Form 10-K for
further discussion of this transaction.
|
(f)
|
Amounts
have not been allocated to the U.S., YRI or China Division segments for
performance reporting purposes.
|
U.S.
Pension Plans
|
International
Pension Plans
|
||||||||||||||||||
Quarter
ended
|
Quarter
ended
|
||||||||||||||||||
6/13/09
|
6/14/08
|
6/13/09
|
6/14/08
|
||||||||||||||||
Service
cost
|
$
|
6
|
$
|
7
|
$
|
1
|
$
|
2
|
|||||||||||
Interest
cost
|
14
|
12
|
1
|
2
|
|||||||||||||||
Expected
return on plan assets
|
(14
|
)
|
(12
|
)
|
(2
|
)
|
(3
|
)
|
|||||||||||
Amortization
of net loss
|
3
|
1
|
1
|
—
|
|||||||||||||||
Net
periodic benefit cost
|
$
|
9
|
$
|
8
|
$
|
1
|
$
|
1
|
U.S.
Pension Plans
|
International
Pension Plans
|
||||||||||||||||||
Year
to date
|
Year
to date
|
||||||||||||||||||
6/13/09
|
6/14/08
|
6/13/09
|
6/14/08
|
||||||||||||||||
Service
cost
|
$
|
12
|
$
|
14
|
$
|
2
|
$
|
4
|
|||||||||||
Interest
cost
|
27
|
24
|
3
|
4
|
|||||||||||||||
Expected
return on plan assets
|
(27
|
)
|
(24
|
)
|
(3
|
)
|
(5
|
)
|
|||||||||||
Amortization
of net loss
|
6
|
3
|
1
|
—
|
|||||||||||||||
Net
periodic benefit cost
|
$
|
18
|
$
|
17
|
$
|
3
|
$
|
3
|
Quarter
ended
|
Year
to date
|
||||||
Gains
(losses) recognized into OCI, net of tax
|
$
|
(9)
|
$
|
5
|
|||
Gains
(losses) reclassified from Accumulated OCI into income, net of
tax
|
$
|
(9)
|
$
|
(3)
|
Note
12 - Fair Value Measurements
|
Fair
Value Measurements at June 13, 2009
|
||||||||||||||||
Description
|
Total
|
Level
1
(a)
|
Level
2
(b)
|
Level
3
(c)
|
||||||||||||
Foreign
Currency Forwards, net
|
$
|
17
|
$
|
—
|
$
|
17
|
$
|
—
|
||||||||
Interest
Rate Swaps, net
|
40
|
—
|
40
|
—
|
||||||||||||
Other
Investments
(d)
|
11
|
11
|
—
|
—
|
||||||||||||
Total
|
$
|
68
|
$
|
11
|
$
|
57
|
$
|
—
|
Fair
Value Measurements at December 27, 2008
|
||||||||||||||||
Description
|
Total
|
Level
1
(a)
|
Level
2
(b)
|
Level
3
(c)
|
||||||||||||
Foreign
Currency Forwards, net
|
$
|
12
|
$
|
—
|
$
|
12
|
$
|
—
|
||||||||
Interest
Rate Swaps, net
|
62
|
—
|
62
|
—
|
||||||||||||
Other
Investments
(d)
|
10
|
10
|
—
|
—
|
||||||||||||
Total
|
$
|
84
|
$
|
10
|
$
|
74
|
$
|
—
|
Fair
Value Measurements Using
|
Total
Losses
|
||||||||||||||||||||||||
Description
|
As
of
June
13, 2009
|
Level
1
(a)
|
Level
2
(b)
|
Level
3
(c)
|
Quarter
|
Year
to date
|
|||||||||||||||||||
Long-lived
assets held for use
|
$
|
19
|
$
|
—
|
$
|
—
|
$
|
19
|
$
|
21
|
$
|
24
|
(a)
|
Inputs
based upon quoted prices in active markets for
identical assets.
|
(b)
|
Inputs
other than quoted prices included within Level 1 that are observable for
the asset, either directly or indirectly.
|
(c)
|
Inputs
that are unobservable for the asset.
|
(d)
|
The
Other Investments include investments in mutual funds, which are used to
offset fluctuations in deferred compensation liabilities that employees
have chosen to invest in phantom shares of a Stock Index Fund or Bond
Index Fund.
|
Note
13 - Guarantees, Commitments and
Contingencies
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
|
·
|
The
Company provides the percentage changes excluding the impact of foreign
currency translation. These amounts are derived by translating
current year results at prior year average exchange rates. We
believe the elimination of the foreign currency translation impact
provides better year-to-year comparability without the distortion of
foreign currency fluctuations.
|
·
|
System
sales growth includes the results of all restaurants regardless of
ownership, including Company-owned, franchise, unconsolidated affiliate
and license restaurants. Sales of franchise, unconsolidated
affiliate and license restaurants generate franchise and license fees for
the Company (typically at a rate of 4% to 6% of
sales). Franchise, unconsolidated affiliate and license
restaurant sales are not included in Company sales on the Condensed
Consolidated Statements of Income; however, the franchise and license fees
are included in the Company’s revenues. We believe system sales
growth is useful to investors as a significant indicator of the overall
strength of our business as it incorporates all of our revenue drivers,
Company and franchise same store sales as well as net unit
development.
|
·
|
Same
store sales is the estimated growth in sales of all restaurants that have
been open one year or more.
|
·
|
Company
restaurant margin as a percentage of sales is defined as Company sales
less expenses incurred directly by our Company restaurants in generating
Company sales divided by Company sales.
|
·
|
Operating
margin is defined as Operating Profit divided by Total
revenues.
|
·
|
International
development of 328 new restaurants including 118 new units in mainland
China and 193 in YRI.
|
·
|
Worldwide
system sales growth prior to foreign currency translation of 3% including
8% in mainland China, 6% in YRI, and a 1% decline in the
U.S.
|
·
|
Worldwide
restaurant margin improved 1.7 percentage points driven by the combination
of prior year pricing, flat commodity costs and refranchising; all three
divisions improved margins.
|
·
|
Worldwide
operating profit growth of 31%, excluding foreign currency translation,
including a $68 million gain recognized upon the consolidation of an
entity that operates KFCs in Shanghai, China. Each of our
divisions generated profit growth: 11% in the China Division, 8% in the
U.S. and 6% for YRI.
|
·
|
EPS
growth was negatively impacted by foreign currency translation of
approximately $0.03 per share partially offset by the benefit of last
year’s substantial share repurchases, which reduced average shares
outstanding by 3%.
|
Quarter
ended
|
Year
to date
|
||||||||||||||||||
6/13/09
|
6/14/08
|
6/13/09
|
6/14/08
|
||||||||||||||||
Number
of units refranchised
|
85
|
170
|
205
|
207
|
|||||||||||||||
Refranchising
proceeds, pre-tax
|
$
|
27
|
$
|
47
|
$
|
63
|
$
|
66
|
|||||||||||
Refranchising
(gain) loss, pre-tax
|
$
|
1
|
$
|
(1
|
)
|
$
|
(13
|
)
|
$
|
24
|
Quarter
ended 6/13/09
|
|||||||||||||||||||
U.S.
|
YRI
|
China
Division
|
Worldwide
|
||||||||||||||||
Decreased Company sales
|
$
|
(167
|
)
|
$
|
(21
|
)
|
$
|
(1
|
)
|
$
|
(189
|
)
|
|||||||
Increased
Franchise and license fees and income
|
10
|
1
|
—
|
11
|
|||||||||||||||
Decrease in Total revenues
|
$
|
(157
|
)
|
$
|
(20
|
)
|
$
|
(1
|
)
|
$
|
(178
|
)
|
Year
to date ended 6/13/09
|
|||||||||||||||||||
U.S.
|
YRI
|
China
Division
|
Worldwide
|
||||||||||||||||
Decreased Company sales
|
$
|
(324
|
)
|
$
|
(37
|
)
|
$
|
(2
|
)
|
$
|
(363
|
)
|
|||||||
Increased
Franchise and license fees and income
|
18
|
2
|
—
|
20
|
|||||||||||||||
Decrease in Total revenues
|
$
|
(306
|
)
|
$
|
(35
|
)
|
$
|
(2
|
)
|
$
|
(343
|
)
|
Quarter
ended 6/13/09
|
|||||||||||||||||||
U.S.
|
YRI
|
China
Division
|
Worldwide
|
||||||||||||||||
Decreased Restaurant profit
|
$
|
(16
|
)
|
$
|
(1
|
)
|
$
|
—
|
$
|
(17
|
)
|
||||||||
Increased
Franchise and license fees and income
|
10
|
1
|
—
|
11
|
|||||||||||||||
Decreased
G&A
|
4
|
—
|
—
|
4
|
|||||||||||||||
Increase
(decrease) in Operating Profit
|
$
|
(2
|
)
|
$
|
—
|
$
|
—
|
$
|
(2
|
)
|
Year
to date ended 6/13/09
|
|||||||||||||||||||
U.S.
|
YRI
|
China
Division
|
Worldwide
|
||||||||||||||||
Decreased Restaurant profit
|
$
|
(33
|
)
|
$
|
(1
|
)
|
$
|
—
|
$
|
(34
|
)
|
||||||||
Increased
Franchise and license fees and income
|
18
|
2
|
—
|
20
|
|||||||||||||||
Decreased
G&A
|
7
|
—
|
—
|
7
|
|||||||||||||||
Increase
(decrease) in Operating Profit
|
$
|
(8
|
)
|
$
|
1
|
$
|
—
|
$
|
(7
|
)
|
Quarter
ended
|
Year
to date
|
|||||||||||||||||||||
6/13/09
|
6/14/08
|
%
B/(W)
|
6/13/09
|
6/14/08
|
%
B/(W)
|
|||||||||||||||||
Company sales
|
$
|
2,152
|
$
|
2,323
|
(7
|
)
|
$
|
4,070
|
$
|
4,417
|
(8
|
)
|
||||||||||
Franchise
and license fees and income
|
324
|
336
|
(4
|
)
|
623
|
655
|
(5
|
)
|
||||||||||||||
Total revenues
|
$
|
2,476
|
$
|
2,659
|
(7
|
)
|
$
|
4,693
|
$
|
5,072
|
(7
|
)
|
||||||||||
Company restaurant profit
|
$
|
324
|
$
|
311
|
4
|
$
|
632
|
$
|
619
|
2
|
||||||||||||
% of Company sales
|
15.1%
|
13.4%
|
1.7
|
ppts.
|
15.5%
|
14.0%
|
1.5
|
ppts.
|
||||||||||||||
Operating Profit
|
394
|
317
|
25
|
745
|
743
|
—
|
||||||||||||||||
Interest expense, net
|
43
|
52
|
15
|
96
|
105
|
8
|
||||||||||||||||
Income tax provision
|
45
|
40
|
(13
|
)
|
124
|
157
|
21
|
|||||||||||||||
Net
Income – including noncontrolling interest
|
306
|
225
|
35
|
525
|
481
|
9
|
||||||||||||||||
Net
Income – noncontrolling interest
|
3
|
1
|
(31
|
)
|
4
|
3
|
(14
|
)
|
||||||||||||||
Net Income
– YUM! Brands, Inc.
|
$
|
303
|
$
|
224
|
35
|
$
|
521
|
$
|
478
|
9
|
||||||||||||
Diluted earnings per share
(a)
|
$
|
0.63
|
$
|
0.45
|
40
|
$
|
1.08
|
$
|
0.95
|
14
|
Total
|
|||||||||||||||||
Unconsolidated
|
Excluding
|
||||||||||||||||
Worldwide
|
Company
|
Affiliates
|
Franchisees
|
Licensees
(a)
|
|||||||||||||
Beginning
of year
|
7,568
|
645
|
25,911
|
34,124
|
|||||||||||||
New
Builds
|
222
|
41
|
440
|
703
|
|||||||||||||
Acquisitions
|
42
|
—
|
(42
|
)
|
—
|
||||||||||||
Refranchising
|
(205
|
)
|
—
|
204
|
(1
|
)
|
|||||||||||
Closures
|
(59
|
)
|
(4
|
)
|
(309
|
)
|
(372
|
)
|
|||||||||
Other
(b)
|
236
|
(236
|
)
|
(4
|
)
|
(4
|
)
|
||||||||||
End
of quarter
|
7,804
|
446
|
26,200
|
34,450
|
|||||||||||||
%
of Total
|
23%
|
1%
|
76%
|
100%
|
Total
|
|||||||||||||||||||
Unconsolidated
|
Excluding
|
||||||||||||||||||
United States
|
Company
|
Affiliates
|
Franchisees
|
Licensees
(a)
|
|||||||||||||||
Beginning
of year
|
3,314
|
—
|
14,482
|
17,796
|
|||||||||||||||
New
Builds
|
10
|
—
|
109
|
119
|
|||||||||||||||
Acquisitions
|
42
|
—
|
(42
|
)
|
—
|
||||||||||||||
Refranchising
|
(188
|
)
|
—
|
187
|
(1
|
)
|
|||||||||||||
Closures
|
(15
|
)
|
—
|
(168
|
)
|
(183
|
)
|
||||||||||||
Other
|
—
|
—
|
(1
|
)
|
(1
|
)
|
|||||||||||||
End
of quarter
|
3,163
|
—
|
14,567
|
17,730
|
|||||||||||||||
%
of Total
|
18%
|
—
|
82%
|
100%
|
Total
|
|||||||||||||||||||
Unconsolidated
|
Excluding
|
||||||||||||||||||
YRI
|
Company
|
Affiliates
|
Franchisees
|
Licensees
(a)
|
|||||||||||||||
Beginning
of year
|
1,589
|
—
|
11,157
|
12,746
|
|||||||||||||||
New
Builds
|
19
|
—
|
319
|
338
|
|||||||||||||||
Acquisitions
|
—
|
—
|
—
|
—
|
|||||||||||||||
Refranchising
|
(15
|
)
|
—
|
15
|
—
|
||||||||||||||
Closures
|
(19
|
)
|
—
|
(139
|
)
|
(158
|
)
|
||||||||||||
Other
|
—
|
—
|
(3
|
)
|
(3
|
)
|
|||||||||||||
End
of quarter
|
1,574
|
—
|
11,349
|
12,923
|
|||||||||||||||
%
of Total
|
12%
|
—
|
88%
|
100%
|
China Division
|
Company
|
Unconsolidated
Affiliates
|
Franchisees
|
Total
|
|||||||||||||
Beginning
of year
|
2,665
|
645
|
272
|
3,582
|
|||||||||||||
New
Builds
|
193
|
41
|
12
|
246
|
|||||||||||||
Acquisitions
|
—
|
—
|
—
|
—
|
|||||||||||||
Refranchising
|
(2
|
)
|
—
|
2
|
—
|
||||||||||||
Closures
|
(25
|
)
|
(4
|
)
|
(2
|
)
|
(31
|
)
|
|||||||||
Other
(b)
|
236
|
(236
|
)
|
—
|
—
|
||||||||||||
End
of quarter
|
3,067
|
446
|
284
|
3,797
|
|||||||||||||
%
of Total
|
81%
|
12%
|
7%
|
100%
|
(a)
|
The
Worldwide, U.S. and YRI totals exclude 2,162, 1,994 and 168 licensed
units, respectively, at June 13, 2009. There are no licensed
units in the China Division. Licensed units are generally units
that offer limited menus and operate in non-traditional locations like
malls, airports, gasoline service stations, convenience stores, stadiums
and amusement parks where a full scale traditional outlet would not be
practical or efficient. As licensed units have lower average
unit sales volumes than our traditional units and our current strategy
does not place a significant emphasis on expanding our licensed units, we
do not believe that providing further detail of licensed unit activity
provides significant or meaningful information.
|
(b)
|
During
the second quarter of 2009 we acquired additional ownership in and began
consolidating an entity that operates the KFC business in Shanghai, China
and have reclassified the units accordingly. This entity was
previously accounted for as an unconsolidated
affiliate.
|
Company
|
Franchisees
|
Total
|
||||||||||||
United
States
|
1,494
|
3,534
|
5,028
|
|||||||||||
YRI
|
—
|
382
|
382
|
|||||||||||
Worldwide
|
1,494
|
3,916
|
5,410
|
Quarter
ended 6/13/09 vs. Quarter ended 6/14/08
|
|||||||||||||||
U.S.
|
YRI
|
China
Division
|
Worldwide
|
||||||||||||
Same
store sales growth (decline)
|
(1
|
)%
|
1
|
%
|
(4
|
)%
|
(1
|
)%
|
|||||||
Net
unit growth and other
|
—
|
5
|
11
|
4
|
|||||||||||
Foreign
currency translation (“forex”)
|
N/A
|
(18
|
)
|
1
|
(7
|
)
|
|||||||||
%
Change
|
(1
|
)%
|
(12
|
)%
|
8
|
%
|
(4
|
)%
|
|||||||
%
Change, excluding forex
|
N/A
|
6
|
%
|
7
|
%
|
3
|
%
|
||||||||
Year
to date ended 6/13/09 vs. Year to date ended 6/14/08
|
|||||||||||||||
U.S.
|
YRI
|
China
Division
|
Worldwide
|
||||||||||||
Same
store sales growth (decline)
|
(2
|
)%
|
4
|
%
|
(2
|
)%
|
—
|
%
|
|||||||
Net
unit growth and other
|
1
|
4
|
11
|
3
|
|||||||||||
Foreign
currency translation (“forex”)
|
N/A
|
(15
|
)
|
2
|
(5
|
)
|
|||||||||
%
Change
|
(1
|
)%
|
(7
|
)%
|
11
|
%
|
(2
|
)%
|
|||||||
%
Change, excluding forex
|
N/A
|
8
|
%
|
9
|
%
|
3
|
%
|
||||||||
Quarter
ended
|
Year
to date
|
||||||||||||||||||
6/13/09
|
6/14/08
|
6/13/09
|
6/14/08
|
||||||||||||||||
U.S.
|
$
|
923
|
$
|
1,059
|
$
|
1,805
|
$
|
2,093
|
|||||||||||
YRI
|
451
|
577
|
883
|
1,129
|
|||||||||||||||
China
Division
|
778
|
687
|
1,382
|
1,195
|
|||||||||||||||
Worldwide
|
$
|
2,152
|
$
|
2,323
|
$
|
4,070
|
$
|
4,417
|
|||||||||||
Quarter
ended 6/13/09 vs. Quarter ended 6/14/08
|
|||||||||||||||||||
U.S.
|
YRI
|
China
Division
|
Worldwide
|
||||||||||||||||
Same
store sales growth (decline)
|
—
|
% |
3
|
%
|
(3
|
)%
|
—
|
% | |||||||||||
Net
unit growth
|
1
|
4
|
11
|
5
|
|||||||||||||||
Refranchising
|
(16
|
)
|
(4
|
)
|
—
|
(8
|
)
|
||||||||||||
Other
|
2
|
1
|
4
|
1
|
|||||||||||||||
Foreign
currency translation (“forex”)
|
N/A
|
(26
|
)
|
1
|
(5
|
)
|
|||||||||||||
%
Change
|
(13
|
)%
|
(22
|
)%
|
13
|
%
|
(7
|
)%
|
|||||||||||
%
Change, excluding forex
|
N/A
|
4
|
%
|
12
|
%
|
(2
|
)%
|
||||||||||||
Year
to date ended 6/13/09 vs. Year to date ended 6/14/08
|
|||||||||||||||||||
U.S.
|
YRI
|
China
Division
|
Worldwide
|
||||||||||||||||
Same
store sales growth (decline)
|
(1
|
)%
|
3
|
%
|
(1
|
)%
|
—
|
% | |||||||||||
Net
unit growth
|
1
|
4
|
12
|
5
|
|||||||||||||||
Refranchising
|
(15
|
)
|
(3
|
)
|
—
|
(8
|
)
|
||||||||||||
Other
|
1
|
(1
|
)
|
2
|
1
|
||||||||||||||
Foreign
currency translation (“forex”)
|
N/A
|
(25
|
)
|
3
|
(6
|
)
|
|||||||||||||
%
Change
|
(14
|
)%
|
(22
|
)%
|
16
|
%
|
(8
|
)%
|
|||||||||||
%
Change, excluding forex
|
N/A
|
3
|
%
|
13
|
%
|
(2
|
)%
|
||||||||||||
%
Increase
|
||||||||||||
%
Increase
|
(Decrease)
|
|||||||||||
Quarter
ended
|
(Decrease)
|
excluding
forex
|
||||||||||
6/13/09
|
6/14/08
|
|||||||||||
U.S.
|
$
|
176
|
$
|
167
|
5
|
N/A
|
||||||
YRI
|
137
|
153
|
(11)
|
6
|
||||||||
China
Division
|
15
|
16
|
(6)
|
(7)
|
||||||||
Unallocated
Franchise and license fees and income
|
(4
|
)
|
—
|
—
|
N/A
|
|||||||
Worldwide
|
$
|
324
|
$
|
336
|
(4)
|
4
|
||||||
%
Increase
|
||||||||||||
%
Increase
|
(Decrease)
|
|||||||||||
Year
to date
|
(Decrease)
|
excluding
forex
|
||||||||||
6/13/09
|
6/14/08
|
|||||||||||
U.S.
|
$
|
340
|
$
|
325
|
5
|
N/A
|
||||||
YRI
|
286
|
302
|
(5)
|
9
|
||||||||
China
Division
|
28
|
28
|
2
|
(1)
|
||||||||
Unallocated
Franchise and license fees and income
|
(31
|
)
|
—
|
—
|
N/A
|
|||||||
Worldwide
|
$
|
623
|
$
|
655
|
(5)
|
2
|
||||||
Worldwide
Franchise and license fees and income included reductions of $4 million,
or 1%, and $31 million, or 5% for the quarter and year to date ended June
13, 2009, respectively, as a result of our reimbursements to, or
obligations to reimburse, KFC franchisees for installation costs for the
national launch of Kentucky Grilled Chicken that have not been allocated
to the U.S. segment for performance reporting purposes.
|
U.S.
Franchise and license fees and income for both the quarter and year to
date ended June 13, 2009 were positively impacted by 5% due to the impact
of refranchising.
|
Quarter
ended 6/13/09
|
|||||||||||||||
U.S.
|
YRI
|
China
Division
|
Worldwide
|
||||||||||||
Company
sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
|||||||
Food
and paper
|
29.3
|
32.1
|
35.7
|
32.2
|
|||||||||||
Payroll
and employee benefits
|
29.5
|
26.1
|
14.7
|
23.5
|
|||||||||||
Occupancy
and other operating expenses
|
26.5
|
30.7
|
31.7
|
29.2
|
|||||||||||
Company
restaurant margin
|
14.7
|
%
|
11.1
|
%
|
17.9
|
%
|
15.1
|
%
|
Quarter
ended 6/14/08
|
|||||||||||||||
U.S.
|
YRI
|
China
Division
|
Worldwide
|
||||||||||||
Company
sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
|||||||
Food
and paper
|
30.7
|
31.7
|
37.7
|
33.0
|
|||||||||||
Payroll
and employee benefits
|
30.4
|
26.5
|
14.5
|
24.7
|
|||||||||||
Occupancy
and other operating expenses
|
26.5
|
31.2
|
30.7
|
28.9
|
|||||||||||
Company
restaurant margin
|
12.4
|
%
|
10.6
|
%
|
17.1
|
%
|
13.4
|
%
|
Year
to date ended 6/13/09
|
|||||||||||||||
U.S.
|
YRI
|
China
Division
|
Worldwide
|
||||||||||||
Company
sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
|||||||
Food
and paper
|
29.0
|
32.1
|
36.0
|
32.1
|
|||||||||||
Payroll
and employee benefits
|
30.1
|
25.7
|
13.9
|
23.6
|
|||||||||||
Occupancy
and other operating expenses
|
26.9
|
30.6
|
30.0
|
28.8
|
|||||||||||
Company
restaurant margin
|
14.0
|
%
|
11.6
|
%
|
20.1
|
%
|
15.5
|
%
|
Year
to date ended 6/14/08
|
|||||||||||||||
U.S.
|
YRI
|
China
Division
|
Worldwide
|
||||||||||||
Company
sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
|||||||
Food
and paper
|
30.3
|
31.2
|
37.6
|
32.5
|
|||||||||||
Payroll
and employee benefits
|
30.8
|
26.1
|
14.1
|
25.1
|
|||||||||||
Occupancy
and other operating expenses
|
26.5
|
30.9
|
29.4
|
28.4
|
|||||||||||
Company
restaurant margin
|
12.4
|
%
|
11.8
|
%
|
18.9
|
%
|
14.0
|
%
|
Quarter
ended
|
Year
to date
|
|||||||||||||||
6/13/09
|
6/14/08
|
6/13/09
|
6/14/08
|
|||||||||||||
Equity
income from investments in unconsolidated affiliates
|
$
|
(7
|
)
|
$
|
(9
|
)
|
$
|
(17
|
)
|
$
|
(20
|
)
|
||||
Gain
upon consolidation of former unconsolidated affiliate in China
(a)
|
(68
|
)
|
—
|
(68
|
)
|
—
|
||||||||||
Gain
upon sale of investment in unconsolidated affiliate
(b)
|
—
|
—
|
—
|
(100
|
)
|
|||||||||||
Foreign
exchange net (gain) loss and other
|
—
|
(4
|
)
|
1
|
(10
|
)
|
||||||||||
Other
(income) expense
|
$
|
(75
|
)
|
$
|
(13
|
)
|
$
|
(84
|
)
|
$
|
(130
|
)
|
(a)
|
See
Note 4 for further discussion of the consolidation of a former
unconsolidated affiliate in China.
|
(b)
|
Reflects
the gain recognized on the sale of our interest in our unconsolidated
affiliate in Japan. See our 2008 Form 10-K for further discussion on this
transaction.
|
Quarter
ended
|
Year
to date
|
|||||||||||||||||||||||
6/13/09
|
6/14/08
|
%
B/(W)
|
6/13/09
|
6/14/08
|
%
B/(W)
|
|||||||||||||||||||
United
States
|
$
|
169
|
$
|
155
|
8
|
$
|
326
|
$
|
301
|
8
|
||||||||||||||
YRI
|
100
|
118
|
(15
|
)
|
223
|
256
|
(13
|
)
|
||||||||||||||||
China
Division
|
105
|
92
|
14
|
236
|
195
|
21
|
||||||||||||||||||
Unallocated
Franchise and license fees and income
|
(4
|
)
|
—
|
NM
|
(31
|
)
|
—
|
NM
|
||||||||||||||||
Unallocated
and corporate G&A expenses
|
(43
|
)
|
(53
|
)
|
17
|
(89
|
)
|
(95
|
)
|
(4
|
)
|
|||||||||||||
Unallocated
Other income (expense)
|
68
|
4
|
NM
|
67
|
110
|
NM
|
||||||||||||||||||
Unallocated
Refranchising gain (loss)
|
(1
|
)
|
1
|
NM
|
13
|
(24
|
)
|
NM
|
||||||||||||||||
Operating
Profit
|
$
|
394
|
$
|
317
|
25
|
$
|
745
|
$
|
743
|
—
|
||||||||||||||
United
States operating margin
|
15.3%
|
12.7%
|
2.6
|
ppts.
|
15.2%
|
12.5%
|
2.7
|
ppts.
|
||||||||||||||||
International
Division operating margin
|
17.1%
|
16.2%
|
0.9
|
ppts.
|
19.1%
|
17.9%
|
1.2
|
ppts.
|
Quarter
ended
|
Year
to date
|
|||||||||||||||||||||
6/13/09
|
6/14/08
|
%
B/(W)
|
6/13/09
|
6/14/08
|
%
B/(W)
|
|||||||||||||||||
Interest
expense
|
$
|
47
|
$
|
59
|
19
|
$
|
103
|
$
|
118
|
12
|
||||||||||||
Interest
income
|
(4
|
)
|
(7
|
)
|
(50
|
)
|
(7
|
)
|
(13
|
)
|
(43
|
)
|
||||||||||
Interest
expense, net
|
$
|
43
|
$
|
52
|
15
|
$
|
96
|
$
|
105
|
8
|
Quarter
ended
|
Year
to date
|
|||||||||||||||
6/13/09
|
6/14/08
|
6/13/09
|
6/14/08
|
|||||||||||||
Income
taxes
|
$
|
45
|
$
|
40
|
$
|
124
|
$
|
157
|
||||||||
Effective
tax rate
|
12.8
|
%
|
14.9
|
%
|
19.1
|
%
|
24.6
|
%
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
Item
4.
|
Controls
and Procedures
|
/s/
KPMG LLP
|
|
Louisville,
Kentucky
|
|
July
21, 2009
|
Item
1.
|
Legal
Proceedings
|
Item
1A.
|
Risk
Factors
|
·
|
Food-borne
illnesses (such as E. coli, hepatitis A., trichinosis or salmonella), food
safety issues and health concerns arising from outbreaks of Avian Flu, may
have an adverse effect on our business;
|
·
|
A
significant and growing number of our restaurants are located in China,
and our business is increasingly exposed to risk there. These
risks include changes in economic conditions, tax rates, currency exchange
rates, laws and consumer preferences, as well as changes in the regulatory
environment and increased competition;
|
·
|
Our
other foreign operations, which are significant and increasing, subject us
to risks that could negatively affect our business. These
risks, which can vary substantially by market, include political
instability, corruption, social unrest, changes in economic conditions,
the regulatory environment, tax rates and laws and consumer preferences,
as well as changes in the laws that govern foreign investment in countries
where our restaurants are operated. In addition, our results of
operations and the value of our foreign assets are affected by
fluctuations in foreign currency exchange rates, which may favorably or
adversely affect reported earnings;
|
·
|
Changes
in commodity and other operating costs could adversely affect our results
of operations;
|
·
|
Shortages
or interruptions in the availability or delivery of food or other supplies
or other supply chain or business disruptions could adversely affect the
availability, quality or cost of items we buy and the operations of our
restaurants;
|
·
|
Our
operating results are closely tied to the success of our franchisees, and
any significant inability of our franchisees to operate successfully could
adversely affect our operating results;
|
·
|
Our
results and financial condition could be affected by the success of our
refranchising program;
|
·
|
We
could be party to litigation that could adversely affect us by increasing
our expenses or subjecting us to material money damages and other
remedies;
|
·
|
We
may not attain our target development goals, which are dependent upon our
ability and the ability of our franchisees to upgrade existing restaurants
and open new restaurants, and any new restaurants may not produce
operating results similar to those of our existing
restaurants;
|
·
|
Our
business may be adversely impacted by current economic conditions or the
global financial crisis through decreased discretionary spending by
consumers, difficulty in refinancing or incurring indebtedness or the
insolvency of our suppliers;
|
·
|
Changes
in governmental regulations, including changing laws relating to
nutritional content, nutritional labeling, product safety and menu
labeling regulation, may adversely affect our business operations;
and
|
·
|
The
retail food industry in which we operate is highly
competitive.
|
Item
4.
|
Submission
of Matters to a vote of Security
Holders
|
1)
|
Elected
thirteen directors to serve until the next Annual Meeting of Shareholders
and until their respective successors are duly elected and
qualified.
|
|
|
2)
|
Ratified
the selection of KPMG LLP as our independent auditors for the fiscal year
ended December 26, 2009.
|
3)
|
Approved
the Company’s Executive Incentive Compensation Plan as amended by the
first amendment and second amendment.
|
4)
|
through
5) Approved two shareholder proposals.
|
6)
|
through
7) Rejected two shareholder
proposals.
|
(1)
|
Election
of Directors
|
For
|
Against
|
Abstain
|
|||||
David
W. Dorman
|
379,490,826
|
10,073,533
|
947,430
|
||||||
Massimo
Ferragamo
|
379,340,646
|
10,303,279
|
867,864
|
||||||
J.
David Grissom
|
387,766,448
|
1,925,983
|
819,358
|
||||||
Bonnie
G. Hill
|
374,654,749
|
15,029,723
|
827,317
|
||||||
Robert
Holland, Jr.
|
377,079,888
|
12,543,436
|
888,465
|
||||||
Kenneth
G. Langone
|
377,380,744
|
12,228,970
|
902,075
|
||||||
Jonathan
S. Linen
|
387,765,215
|
1,877,336
|
869,238
|
||||||
Thomas
C. Nelson
|
382,855,200
|
6,791,397
|
865,192
|
||||||
David
C. Novak
|
376,743,223
|
12,851,754
|
916,812
|
||||||
Thomas
M. Ryan
|
363,372,157
|
26,243,295
|
896,337
|
||||||
Jing-Shyh
S. Su
|
380,684,716
|
8,983,589
|
843,484
|
||||||
Jackie
Trujillo
|
379,616,026
|
10,031,603
|
864,160
|
||||||
Robert
D. Walter
|
379,679,275
|
9,959,147
|
873,367
|
||||||
For
|
Against
|
Abstain
|
|||||||
(2)
|
Ratification
of
Independent Auditors
|
376,054,088
|
13,621,887
|
835,814
|
|||||
(3)
|
Approve
the Company’s
Executive Incentive
Plan
|
362,059,459
|
26,418,056
|
2,034,274
|
|||||
For
|
Against
|
Abstain
|
Non-Votes
|
||||||
(4)
|
Shareholder
Proposal –
Shareholders Rights Plan
|
242,829,584
|
89,989,876
|
1,357,126
|
56,335,203
|
||||
(5)
|
Shareholder
Proposal –
Advisory
Shareholder
Vote to Ratify Executive Compensation
|
170,971,382
|
158,881,102
|
4,324,102
|
56,335,203
|
||||
(6)
|
Shareholder
Proposal –
Healthcare Reform
Principles
|
17,997,337
|
273,303,374
|
42,877,225
|
56,333,853
|
||||
(7)
|
Shareholder
Proposal –
Animal
Welfare
|
20,518,373
|
269,202,985
|
44,456,578
|
56,333,853
|
Item
6.
|
Exhibits
|
Exhibit
32.2
|
Certification
of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
YUM!
BRANDS, INC.
|
||||
(Registrant)
|
Date:
|
July
21, 2009
|
/s/ Ted
F. Knopf
|
||
Senior
Vice President of Finance
|
||||
and
Corporate Controller
|
||||
(Principal
Accounting Officer)
|
YUM!
BRANDS
|
DIRECTOR
DEFERRED
|
COMPENSATION
PLAN
|
Plan
Document for the 409A Program
|
Amended
and Restated Effective as of January 1, 2005
|
(with
Revisions through November 14, 2008)
|
TABLE OF CONTENTS
|
||
Page
|
||
ARTICLE I – INTRODUCTION
|
1
|
|
ARTICLE II – DEFINITIONS
|
2
|
|
2.01
|
Account:
|
2
|
2.02
|
Act:
|
2
|
2.03
|
Annual Retainer:
|
2
|
2.04
|
Beneficiary:
|
2
|
2.05
|
Code:
|
2
|
2.06
|
Company:
|
3
|
2.07
|
Compensation Year:
|
3
|
2.08
|
Deferral Subaccount:
|
3
|
2.09
|
Director:
|
3
|
2.10
|
Director Compensation:
|
3
|
2.11
|
Disability:
|
3
|
2.12
|
Distribution Valuation
Date:
|
4
|
2.13
|
Election Form:
|
4
|
2.14
|
Eligible Director:
|
4
|
2.15
|
ERISA:
|
4
|
2.16
|
Fair Market Value:
|
4
|
2.17
|
409A Program:
|
5
|
2.18
|
Initial Retainer:
|
5
|
2.19
|
Key Employee:
|
5
|
2.20
|
Participant:
|
6
|
2.21
|
Plan:
|
6
|
2.22
|
Plan Administrator:
|
6
|
2.23
|
Plan Year:
|
6
|
2.24
|
Pre-409A Program:
|
6
|
2.25
|
Second Look Election:
|
6
|
2.26
|
Section 409A:
|
6
|
2.27
|
Separation from Service:
|
7
|
2.28
|
Specific Payment Date:
|
7
|
2.29
|
Unforeseeable Emergency:
|
7
|
2.30
|
Valuation Date:
|
8
|
2.31
|
YUM! Brands Organization:
|
8
|
ARTICLE III – ELIGIBILITY AND
PARTICIPATION
|
9
|
|
3.01
|
Eligibility to Participate:
|
9
|
3.02
|
Termination of Eligibility to
Defer:
|
9
|
3.03
|
Termination of
Participation:
|
9
|
TABLE OF CONTENTS
|
|||
|
Page
|
||
ARTICLE IV – DEFERRAL OF
COMPENSATION
|
10
|
||
4.01
|
Deferral Election:
|
10
|
|
4.02
|
Time and Manner of Deferral
Election:
|
10
|
|
4.03
|
Period of Deferral; Form of
Payment:
|
11
|
|
4.04
|
Second Look Election:
|
12
|
|
4.05
|
Deferral of Initial
Retainer
|
14
|
|
ARTICLE V – INTERESTS OF
PARTICIPANTS
|
16
|
||
5.01
|
Accounting for Participants’
Interests:
|
16
|
|
5.02
|
Phantom Investment of
Account:
|
16
|
|
5.03
|
Vesting of a Participant’s
Account:
|
17
|
|
ARTICLE VI – DISTRIBUTIONS
|
18
|
||
6.01
|
General:
|
18
|
|
6.02
|
Distributions Based on a Specific Payment
Date:
|
18
|
|
6.03
|
Distributions on Account of a Separation from
Service:
|
19
|
|
6.04
|
Distributions on Account of
Death:
|
21
|
|
6.05
|
Distributions on Account of Unforeseeable
Emergency:
|
22
|
|
6.06
|
Distributions of Initial
Retainers:
|
22
|
|
6.07
|
Valuation:
|
23
|
|
6.08
|
Impact of Section 16 of the Act on
Distributions:
|
23
|
|
6.09
|
Actual Payment Date:
|
24
|
|
ARTICLE VII – PLAN
ADMINISTRATION
|
25
|
||
7.01
|
Plan Administrator:
|
25
|
|
7.02
|
Action:
|
25
|
|
7.03
|
Powers of the Plan
Administrator:
|
25
|
|
7.04
|
Compensation, Indemnity and
Liability:
|
26
|
|
7.05
|
Withholding:
|
27
|
|
7.06
|
Section 16 Compliance:
|
27
|
|
7.07
|
Conformance with Section
409A:
|
28
|
|
ARTICLE VIII – CLAIMS
PROCEDURE
|
29
|
||
8.01
|
Claims for Benefits:
|
29
|
|
8.02
|
Appeals of Denied Claims:
|
29
|
|
8.03
|
Special Claims Procedures for Disability
Determinations:
|
29
|
|
ARTICLE IX – AMENDMENT AND
TERMINATION
|
30
|
||
9.01
|
Amendment of Plan:
|
30
|
|
9.02
|
Termination of Plan:
|
30
|
TABLE OF CONTENTS
|
|||
Page
|
|||
ARTICLE X – MISCELLANEOUS
|
31
|
||
10.01
|
Limitation on Participant's
Rights:
|
31
|
|
10.02
|
Unfunded Obligation of the
Company:
|
31
|
|
10.03
|
Other Plans:
|
31
|
|
10.04
|
Receipt or Release:
|
31
|
|
10.05
|
Governing Law:
|
31
|
|
10.06
|
Gender, Tense and Examples:
|
32
|
|
10.07
|
Successors and Assigns; Nonalienation of
Benefits:
|
32
|
|
10.08
|
Facility of Payment:
|
32
|
|
ARTICLE XI – AUTHENTICATION
|
33
|
||
YUM!
BRANDS, INC.
|
|
By:_________________________________
|
|
Name:
|
|
Title:
|
YUM!
BRANDS
|
EXECUTIVE
INCOME
|
DEFERRAL
PROGRAM
|
Plan
Document for the 409A Program
|
Effective
as of January 1, 2005
|
(with
Amendments through June 30, 2009)
|
TABLE
OF CONTENTS
|
||
P
age
|
||
ARTICLE I – INTRODUCTION
|
1
|
|
ARTICLE II – DEFINITIONS
|
2
|
|
2.01
|
Account:
|
2
|
2.02
|
Act:
|
2
|
2.03
|
Base Compensation:
|
2
|
2.04
|
Beneficiary:
|
2
|
2.05
|
Bonus Compensation:
|
2
|
2.06
|
Code:
|
3
|
2.07
|
Company:
|
3
|
2.08
|
Deferral Subaccount:
|
3
|
2.09
|
Disability:
|
3
|
2.10
|
Distribution Valuation
Date:
|
3
|
2.11
|
Election Form:
|
4
|
2.12
|
Eligible Executive:
|
4
|
2.13
|
Employer:
|
4
|
2.14
|
ERISA:
|
4
|
2.15
|
Executive:
|
4
|
2.16
|
Fair Market Value:
|
4
|
2.17
|
409A Program:
|
5
|
2.18
|
Key Employee:
|
5
|
2.19
|
Matching Stock Fund:
|
6
|
2.20
|
NAV:
|
6
|
2.21
|
Participant:
|
6
|
2.22
|
Performance Period:
|
6
|
2.23
|
Phantom Share Equivalent:
|
6
|
2.24
|
Plan:
|
6
|
2.25
|
Plan Administrator:
|
6
|
2.26
|
Plan Year:
|
7
|
2.27
|
Pre-409A Program:
|
7
|
2.28
|
Recordkeeper:
|
7
|
2.29
|
Retirement:
|
7
|
2.30
|
Second Look Election:
|
7
|
2.31
|
Section 409A:
|
7
|
2.32
|
Separation from Service:
|
8
|
2.33
|
Signing Bonus:
|
8
|
2.34
|
Specific Payment Date:
|
8
|
2.35
|
Unforeseeable Emergency:
|
8
|
2.36
|
U.S.:
|
9
|
2.37
|
Valuation Date:
|
9
|
2.38
|
YUM! Brands Organization:
|
9
|
TABLE
OF CONTENTS
|
||
P
age
|
||
ARTICLE III – ELIGIBILITY AND
PARTICIPATION
|
9
|
|
3.01
|
Eligibility to Participate:
|
9
|
3.02
|
Termination of Eligibility to
Defer:
|
10
|
3.03
|
Termination of
Participation:
|
10
|
ARTICLE IV – DEFERRAL OF
COMPENSATION
|
11
|
|
4.01
|
Deferral Election:
|
11
|
4.02
|
Time and Manner of Deferral
Election:
|
13
|
4.03
|
Period of Deferral:
|
15
|
4.04
|
Form of Deferral Payout:
|
16
|
4.05
|
Second Look Election:
|
17
|
4.06
|
Signing Bonus Deferrals:
|
19
|
ARTICLE V – INTERESTS OF
PARTICIPANTS
|
19
|
|
5.01
|
Accounting for Participants’
Interests:
|
19
|
5.02
|
Investment Options:
|
20
|
5.03
|
Method of Allocation:
|
22
|
5.04
|
Vesting of a Participant’s
Account:
|
23
|
5.05
|
Risk of Forfeiture:
|
23
|
ARTICLE VI – DISTRIBUTIONS
|
24
|
|
6.01
|
General:
|
24
|
6.02
|
Distributions Based on a Specific Payment
Date:
|
25
|
6.03
|
Distributions on Account of a Separation from
Service:
|
26
|
6.04
|
Distributions on Account of
Death:
|
27
|
6.05
|
Distributions on Account of Unforeseeable
Emergency:
|
28
|
6.06
|
Valuation:
|
29
|
6.07
|
Section 162(m) Compliance:
|
29
|
6.08
|
Impact of Section 16 of the Act on
Distributions:
|
30
|
6.09
|
Actual Payment Date:
|
30
|
ARTICLE VII – PLAN
ADMINISTRATION
|
30
|
|
7.01
|
Plan Administrator:
|
30
|
7.02
|
Action:
|
30
|
7.03
|
Powers of the Plan
Administrator:
|
30
|
7.04
|
Compensation, Indemnity and
Liability:
|
31
|
7.05
|
Withholding:
|
32
|
7.06
|
Section 16 Compliance:
|
32
|
7.07
|
Conformance with Section
409A:
|
33
|
ARTICLE VIII – CLAIMS
PROCEDURE
|
33
|
|
8.01
|
Claims for Benefits:
|
33
|
8.02
|
Appeals of Denied Claims:
|
34
|
8.03
|
Special Claims Procedures for Disability
Determinations:
|
34
|
TABLE
OF CONTENTS
|
|||
P
age
|
|||
ARTICLE IX – AMENDMENT AND
TERMINATION
|
34
|
||
9.01
|
Amendment of Plan:
|
34
|
|
9.02
|
Termination of Plan:
|
34
|
|
ARTICLE X – MISCELLANEOUS
|
35
|
||
10.01
|
Limitation on Participant’s
Rights:
|
35
|
|
10.02
|
Unfunded Obligation of Individual
Employer:
|
35
|
|
10.03
|
Other Plans:
|
35
|
|
10.04
|
Receipt or Release:
|
36
|
|
10.05
|
Governing Law:
|
36
|
|
10.06
|
Adoption of Plan by Related
Employers:
|
36
|
|
10.07
|
Gender, Tense and Examples:
|
36
|
|
10.08
|
Successors and Assigns; Nonalienation of
Benefits:
|
36
|
|
10.09
|
Facility of Payment:
|
37
|
|
ARTICLE XI – AUTHENTICATION
|
38
|
||
APPENDIX
|
Appendix
|
||
APPENDIX
ARTICLE A – RDC TRANSFERS
|
A-1
|
||
APPENDIX
ARTICLE B – CERTAIN TRANSITION PROVISIONS
|
B-1
|
YUM!
BRANDS, INC.
|
|
By:_________________________________
|
|
Name:
|
|
Title:
|
YUM!
BRANDS, INC. PENSION EQUALIZATION PLAN
|
|||
Table
of Contents
|
|||
Page No.
|
|||
ARTICLE
I Foreward
|
1
|
||
ARTICLE
II Definitions and Construction
|
2
|
||
2.1 Definitions
|
2
|
||
2.2
Construction
|
14
|
||
ARTICLE
III Participation and Service
|
16
|
||
3.1
Participation
|
16
|
||
3.2
Service
|
16
|
||
3.3 Credited
Service
|
16
|
||
ARTICLE
IV Requirements for Benefits
|
17
|
||
4.1
Normal Retirement Pension
|
17
|
||
4.2
Early Retirement Pension
|
17
|
||
4.3 Vested
Pension
|
17
|
||
4.4 Late
Retirement Pension
|
17
|
||
4.5 Disability
Pension
|
18
|
||
4.6 Pre-Retirement
Spouse's Pension
|
18
|
||
4.7 Vesting
|
19
|
||
4.8 Time
of Payment
|
19
|
||
4.9 Cashout
Distributions
|
20
|
||
4.10 Reemployment
of Certain Participants
|
20
|
||
ARTICLE
V Amount of Retirement Pension
|
21
|
||
5.1 PEP
Pension
|
21
|
||
5.2 PEP
Guarantee
|
22
|
||
5.3 Amount
of Pre-Retirement Spouse's Pension
|
28
|
||
5.4 Certain
Adjustments
|
31
|
||
5.5 Excludable
Employment
|
32
|
||
5.6 Pre-409A
Pension
|
32
|
||
ARTICLE
VI Distribution Options
|
33
|
||
6.1 Form
and Timing of Distributions
|
33
|
||
6.2 Available
Forms of Payment
|
35
|
||
6.3 Procedures
for Elections
|
39
|
||
6.4 Special
Rules for Survivor Options
|
40
|
||
6.5 Designation
of Beneficiary
|
41
|
||
6.6 Required
Delay for Key Employees
|
42
|
||
6.7 Payment
of FICA and Related Income Taxes
|
43
|
||
ARTICLE
VII Administration
|
45
|
||
7.1 Authority
to Administer Plan
|
45
|
||
7.2 Facility
of Payment
|
45
|
||
7.3 Claims
Procedure
|
45
|
||
7.4 Plan
Administrator Discretion
|
47
|
||
ARTICLE
VIII Miscellaneous
|
49
|
||
8.1 Nonguarantee
of Employment
|
49
|
||
8.2 Nonalienation
of Benefits
|
49
|
||
8.3
Unfunded Plan
|
49
|
||
8.4 Action
by the Company
|
50
|
YUM!
BRANDS, INC. PENSION EQUALIZATION PLAN
|
|||
Table
of Contents
|
|||
Page No.
|
|||
8.5 Indemnification
|
50
|
||
8.6
Compliance with Section 409A:
|
50
|
||
ARTICLE
IX Amendment and Termination
|
52
|
||
9.1 Continuation
of the Plan
|
52
|
||
9.2 Amendments
|
52
|
||
9.3 Termination
|
53
|
||
9.4 Change
in Control
|
53
|
||
ARTICLE
X ERISA Plan Structure
|
54
|
||
ARTICLE
XI Applicable Law
|
56
|
||
ARTICLE
XII Signature
|
58
|
||
APPENDIX
|
59
|
||
Page
|
||||
(a)
|
Accrued
Benefit
|
3
|
||
(b)
|
Actuarial
Equivalent
|
3
|
||
(c)
|
Annuity
|
4
|
||
(d)
|
Annuity
Starting Date
|
4
|
||
(e)
|
Code
|
5
|
||
(f)
|
Company
|
5
|
||
(g)
|
Covered
Compensation
|
5
|
||
(h)
|
Credited
Service
|
5
|
||
(i)
|
Disability
Retirement Pension
|
5
|
||
(j)
|
Early
409A Retirement Pension
|
5
|
||
(k)
|
Effective
Date
|
5
|
||
(l)
|
Elapsed
Time Service
|
5
|
||
(m)
|
Eligible
Spouse
|
6
|
||
(n)
|
Employee
|
6
|
||
(o)
|
Employer
|
6
|
||
(p)
|
ERISA
|
6
|
||
(q)
|
Highest
Average Monthly Earnings
|
6
|
||
(r)
|
Key
Employee
|
6
|
||
(s)
|
Late
Retirement Date
|
8
|
||
(t)
|
Late
409A Retirement Pension
|
8
|
||
(u)
|
Normal
Retirement Age
|
8
|
||
(v)
|
Normal
Retirement Date
|
8
|
||
(w)
|
Normal
409A Retirement Pension
|
8
|
||
(x)
|
Participant
|
8
|
||
(y)
|
Pension
|
8
|
||
(z)
|
Plan
|
8
|
||
(aa)
|
Plan
Administrator
|
9
|
||
(bb)
|
Plan
Year
|
9
|
||
(cc)
|
Pre-Retirement
Spouse's Pension
|
9
|
||
(dd)
|
Primary
Social Security Amount
|
9
|
||
(ee)
|
Prior
Plan
|
10
|
||
(ff)
|
Qualified
Joint and Survivor Annuity
|
10
|
||
(gg)
|
Retirement
|
11
|
||
(hh)
|
Retirement
Date
|
11
|
||
(ii)
|
Retirement
Pension
|
11
|
||
(jj)
|
Salaried
Plan
|
11
|
||
(kk)
|
Section
409A
|
11
|
||
(ll)
|
Separation
from Service
|
11
|
||
(mm)
|
Service
|
13
|
||
(nn)
|
Single
Life Annuity
|
13
|
||
(oo)
|
Single
Lump Sum
|
13
|
||
(pp)
|
Social
Security Act
|
14
|
(qq)
|
Taxable
Wage Base
|
14
|
||
(rr)
|
Vested
Pension
|
14
|
||
(ss)
|
Yum!
Brands Organization
|
14
|
SCHEDULE
1
|
Date
|
Mortality Table Factors
|
Interest Rate Factor
|
January
1, 2009-Present
|
[insert]
|
[insert]
|
Attained Age
|
Annual Charge
|
|
Up
to 35
|
0.00
%
|
|
35
-- 39
|
0.075
%
|
|
40
-- 44
|
0.10
%
|
|
45
-- 49
|
0.175
%
|
|
50
-- 54
|
0.30
%
|
|
55
-- 59
|
0.50
%
|
|
60
-- 64
|
0.50
%
|
YUM!
BRANDS, INC.
|
|
By: ___________________________________
|
|
Anne
Byerlein
|
|
Chief
People Officer
|
Transition
Provisions
|
A.2
|
Definition of
Actuarial Equivalent
.
|
A.4
|
Conformance with
Section 409A
:
|
A.6
|
Certain 19(c)
Elections
:
|
YUM!
BRANDS
|
LEADERSHIP
RETIREMENT PLAN
|
Plan
Document for the 409A Program,
|
Effective
as of January 1, 2005 (with amendments through December
2008)
|
|
YUM!
Brands Leadership Retirement Plan
Table
of Contents
|
||
Page
|
||
ARTICLE I – FOREWORD
|
1
|
|
ARTICLE II – DEFINITIONS
|
2
|
|
2.01
|
Allocation Date:
|
2
|
2.02
|
Authorized Leave of
Absence:
|
2
|
2.03
|
Base Compensation:
|
2
|
2.04
|
Beneficiary:
|
2
|
2.05
|
Bonus Compensation:
|
3
|
2.06
|
Break in Service Payment
Election:
|
3
|
2.07
|
Change in Control:
|
3
|
2.08
|
Code:
|
5
|
2.09
|
Company:
|
5
|
2.10
|
Disability:
|
5
|
2.11
|
Disability Benefits:
|
6
|
2.12
|
Disability Leave of
Absence:
|
6
|
2.13
|
Disability Payment
Election:
|
6
|
2.14
|
Earnings Credit:
|
6
|
2.15
|
Earnings Rate:
|
6
|
2.16
|
Employer:
|
7
|
2.17
|
Employer Credit / Employer Credit
Percentage:
|
7
|
2.18
|
ERISA:
|
7
|
2.19
|
Executive / Eligible
Executive:
|
7
|
2.20
|
409A Program:
|
7
|
2.21
|
Key Employee:
|
8
|
2.22
|
LRP Account:
|
9
|
2.23
|
LRP Benefit:
|
9
|
2.24
|
One-Year Break in Service:
|
9
|
2.25
|
Participant:
|
10
|
2.26
|
Plan:
|
10
|
2.27
|
Plan Administrator:
|
10
|
2.28
|
Plan Year:
|
10
|
2.29
|
Pre-409A Program:
|
10
|
2.30
|
Retirement:
|
10
|
2.31
|
Section 409A:
|
10
|
2.32
|
Separation from Service:
|
10
|
2.33
|
Spouse:
|
11
|
2.34
|
Termination Date:
|
11
|
2.35
|
Valuation Date:
|
11
|
2.36
|
Vesting Schedule:
|
11
|
2.37
|
Vested LRP Account:
|
11
|
2.38
|
Year of Participation:
|
12
|
2.39
|
Year of Service:
|
12
|
2.40
|
YUM! Organization:
|
12
|
YUM!
Brands Leadership Retirement Plan
Table
of Contents
|
||
Page
|
||
ARTICLE III – PARTICIPATION
|
13
|
|
3.01
|
Eligibility to Participate.
|
13
|
3.02
|
Inception of Participation.
|
14
|
3.03
|
Termination of
Participation.
|
15
|
3.04
|
Break in Service.
|
15
|
ARTICLE IV – ELECTIONS
|
17
|
|
4.01
|
Beneficiaries.
|
17
|
4.02
|
Deferral of Payment While Receiving Disability
Benefits.
|
17
|
4.03
|
Break in Service Deferral of
Payment.
|
18
|
ARTICLE V – PARTICIPANT LRP
BENEFITS
|
21
|
|
5.01
|
Credits to a Participant’s LRP
Account.
|
21
|
5.02
|
Vesting Schedule.
|
24
|
5.03
|
Distribution of a Participant’s Vested LRP
Account.
|
25
|
5.04
|
Valuation.
|
27
|
5.05
|
FICA Taxes and LRP Account
Reduction.
|
27
|
ARTICLE VI – PLAN
ADMINISTRATION
|
28
|
|
6.01
|
Plan Administrator.
|
28
|
6.02
|
Powers of the Plan
Administrator.
|
28
|
6.03
|
Compensation, Indemnity and
Liability.
|
29
|
6.04
|
Taxes.
|
29
|
6.05
|
Records and Reports.
|
30
|
6.06
|
Rules and Procedures.
|
30
|
6.07
|
Applications and Forms.
|
30
|
6.08
|
Conformance with Section
409A.
|
30
|
ARTICLE VII – CLAIMS
PROCEDURES
|
31
|
|
7.01
|
Claims for Benefits.
|
31
|
7.02
|
Appeals.
|
31
|
7.03
|
Special Claims Procedures for Disability
Determinations.
|
31
|
7.04
|
Exhaustion of Claims
Procedures.
|
32
|
7.05
|
Limitations on Actions.
|
33
|
ARTICLE VIII – AMENDMENT AND
TERMINATION
|
35
|
|
8.01
|
Amendment to the Plan.
|
35
|
8.02
|
Termination of the Plan.
|
35
|
ARTICLE IX – MISCELLANEOUS
|
37
|
|
9.01
|
Limitation on Participant
Rights.
|
37
|
9.02
|
Unfunded Obligation of Individual
Employer.
|
37
|
9.03
|
Other Benefit Plans.
|
37
|
9.04
|
Receipt or Release.
|
37
|
9.05
|
Governing Law.
|
38
|
YUM!
Brands Leadership Retirement Plan
Table
of Contents
|
||
|
Page
|
|
9.06
|
Adoption of Plan by Related
Employers.
|
38
|
9.07
|
Rules of Construction.
|
38
|
9.08
|
Successors and Assigns; Nonalienation of
Benefits.
|
39
|
9.09
|
Facility of Payment.
|
39
|
ARTICLE X – SIGNATURE
|
40
|
|
APPENDIX
|
41
|
|
APPENDIX ARTICLE A – LRP BENEFITS FOR CERTAIN
PARTICIPANTS
|
42
|
|
A.01
|
Scope.
|
42
|
A.02
|
Allocation Date for Class I Appendix
Participants.
|
42
|
A.03
|
Employer Credit for Class I Appendix
Participants.
|
42
|
A.04
|
Special Interim Earnings Rate for Class I Appendix
Participants.
|
44
|
A.05
|
Vesting for Class I Appendix
Participants.
|
45
|
A.06
|
Initial Eligibility Date for Class II Appendix
Participants.
|
45
|
A.07
|
Employer Credit Percentage for Class II Appendix
Participants.
|
45
|
Participant Level as of Allocation
Date
|
Employer Credit Percentage for
Participants Age 40 or
Greater
|
Level
12
|
4.5%
|
Level
13
|
5.0%
|
Level
14
|
5.5%
|
Level
15
|
6.5%
|
Level
16
|
7.5%
|
Leadership
Team (LT)
|
8.0%
|
Partners
Council (PC)
|
9.5%
|
Participant Level as of Allocation
Date
|
Employer Credit
Percentage
|
Level
14
|
5.5%
|
Level
15
|
6.5%
|
Level
16
|
7.5%
|
Leadership
Team (LT)
|
8.0%
|
Partners
Council (PC)
|
9.5%
|
YUM!
BRANDS, INC.
|
|
By:
|
|
Anne
Byerlein, Chief People Officer
|
|
Signature
Date
|
Class I Appendix Participant
|
Employer Credit Percentage
|
Maximum Years of
Employer Credits
|
Albert
Baladi
|
21.5%
|
No
maximum
|
Scott
Bergren
|
28%
|
No
maximum
|
Clyde
Leff
|
20%
|
9
|
Micky
Pant
|
20%
|
No
maximum
|
Robert
Lauber
|
16%
|
20
|
Michael
Liewen
|
20%
|
12
|
Years of Service
|
Vested Percentage
|
1
|
0%
|
2
|
25%
|
3
|
50%
|
4
|
75%
|
5
|
100%
|
Class II Appendix Participant Level as
of
Allocation Date
|
Employer Credit
Percentage
|
Level
14
|
7.0%
|
Level
15
|
8.0%
|
Level
16
|
9.0%
|
Leadership
Team (LT)
|
9.5%
|
Partner
Counsel (PC)
|
11.5%
|
Eligibility
|
Introduction
|
Grant
of Units
|
Dividends
|
Earned
Units
|
If
the Compound Annual Growth Rate for EPS for the Performance Period
is:
|
The
Performance Multiplier will be:
|
Less
than 7% per year
|
0%
|
At
least 7% but less than 8.5%
|
50%
|
At
least 8.5% but less than 10%
|
75%
|
At
least 10% but less than 11.5%
|
100%
|
At
least 11.5% but less than 13%
|
125%
|
At
least 13% but less than 14.5%
|
150%
|
At
least 14.5% but less than 16%
|
175%
|
Greater
than 16%
|
200%
|
Employment
Termination during Performance
Period
|
●
|
The
shares of Yum! stock earned for the Performance Period that ends on the
last day of the year in which the employment termination occurs, based on
the actual performance for the entire Performance
Period.
|
●
|
The
shares of Yum! stock that you would have received for Performance Periods
that end after the last day of the year in which your employment
termination occurs for each of those Performance Periods, determined as
though the target level of performance had been achieved for each such
Performance Period.
|
Deferred
Distribution
|
Miscellaneous
|
●
|
If
you have questions about the Plan, contact Mark Lagestee at
502-874-8184.
|
●
|
The
awards granted under the Plan are granted pursuant to and subject to the
terms of the Yum! Brands, Inc. Performance Share Plan
Summary. Capitalized terms used herein but not otherwise
defined shall have the meaning given to such terms under that
document.
|
●
|
The
number of Units and the manner of determining the Performance Multiplier
may be adjusted to reflect acquisitions, re-franchising, and extraordinary
or unplanned events that occur during the Performance
Period.
|
●
|
Yum!
reserves the sole discretionary right to modify, amend, or terminate the
Program at any time. Yum! retains the sole and exclusive
authority to construe and interpret the Program, decide all questions of
fact and questions or eligibility and determine the amount, manner and
time of payment of any Award, which shall be final and
binding.
|
●
|
This
Summary is not a contract. It does not confer any employment
rights nor does it give any employee or former employee any rights to
continued employment.
|
●
|
If
the number of shares delivered to a participant under the Plan is based on
attainment of a level of objective performance goals that is later
determined to have been inaccurate, such inaccuracy was caused by
misconduct by an employee of Yum! or one of its subsidiaries, and as a
result the number of shares delivered to a participant (or that would have
been delivered in the absence of an election to defer distribution) is
greater than it should have been, then:
|
(1) The
participant (regardless of whether then employed) whose misconduct caused
the inaccuracy will be required to repay the excess.
|
|
(2) The
Compensation Committee of the Board of Directors may require an active or
former participant (regardless of whether then employed) to repay the
excess previously received by that participant if the Committee concludes
that the repayment is necessary to prevent the participant from unfairly
benefiting from the inaccuracy. However, repayment under this
paragraph (2) shall apply to an active or former participant only if the
Committee reasonably determines that, prior to the time such shares were
paid (or, if payment of the shares is electively deferred by the
participant, at the time the shares would have been paid in the absence of
the deferral), such participant knew or should have known that the share
amount was greater than it should have been by reason of the
inaccuracy. Further, the amount to be repaid by the participant
may not be greater than the excess of (i) the shares paid to the
participant over (ii) the shares that would have been paid to a
participant in the absence of the inaccuracy, provided that, in
determining the amount under this clause (ii), the Committee may take into
account only the inaccuracy of which the participant knew or should have
known, and which the participant knew or should have known was caused by
misconduct.
|
|
(3) The
committee may also adjust a participant’s future compensation in
consideration of the above-described adjustment, and Yum! and its
subsidiaries may set off against the amount of any such gain any amount
owed to the participant. For this purpose, the term
“misconduct” means fraudulent or illegal conduct or omission that is
knowing or intentional. The foregoing provisions do not apply
to reductions in shares delivered under this Plan made after a Change in
Control (as defined in the Long Term Incentive Plan).
|
|
●
|
The
Plan is voluntary, and you have chosen to participate in the
Plan. You understand that all amounts paid under the Plan are
paid as an advance that is contingent on the accuracy of the measures used
to determine attainment of the level of objective performance
goals. If the amount advanced to you under the Plan is
determined to have been greater than it should have been as a result of
such measures having been determined to be inaccurate, you agree to repay
any excess amounts to Yum! or its subsidiaries if Yum! or a subsidiary
requests repayment.
If a participant does not wish
to participate in the Plan, including all the conditions specified, the
participant must notify Anne Byerlein on or before April 3,
2009.
|
/s/
KPMG LLP
|
|
Louisville,
Kentucky
|
|
July
21, 2009
|
1.
|
I
have reviewed this report on Form 10-Q of YUM! Brands,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant, as of, and for, the periods presented in this
report.
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
(b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
(c)
|
evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
|
(d)
|
disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
function):
|
(a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
(b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
July 21, 2009
|
/s/
David C. Novak
|
Chairman,
Chief Executive Officer and
President
|
1.
|
I
have reviewed this report on Form 10-Q of YUM! Brands,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant, as of, and for, the periods presented in this
report.
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
(b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
(c)
|
evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
|
(d)
|
disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
function):
|
(a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
(b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date: July
21, 2009
|
/s/
Richard T. Carucci
|
Chief
Financial Officer
|
1.
|
the
Periodic Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934;
and
|
2.
|
the
information contained in the Periodic Report fairly presents, in all
material respects, the financial condition and results of operations of
the Company.
|
Date: July
21, 2009
|
/s/
David C. Novak
|
Chairman,
Chief Executive Officer and
President
|
1.
|
the
Periodic Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934;
and
|
2.
|
the
information contained in the Periodic Report fairly presents, in all
material respects, the financial condition and results of operations of
the Company.
|
Date: July
21, 2009
|
/s/
Richard T. Carucci
|
Chief
Financial Officer
|