Yum! Brands Inc. to Host Annual Investor Conference; Confirms 2005 EPS Guidance; Details 2006 Expectations and Announces Period 12 Sales

Business Wire, Dec 1, 2005

LOUISVILLE, Ky. -- Yum! Brands Inc. (NYSE: YUM) will host an Annual Conference for Investors and Analysts Tuesday, December 6, 2005, in New York. The company will present comprehensive updates on its business strategies and discuss its global expansion outlook for the next three years. Additional details about the conference are included at the end of this release.

Additionally, the company

--Confirms 12% growth in 2005 earnings per share (EPS) of $2.64 prior to special items and adopting SFAS123R, stock option expensing.

--Targets at least 10% growth in 2006 EPS to at least $2.90 excluding the impact of adopting SFAS123R, which is estimated to reduce full-year EPS by $0.12.

The company also reported for Period 12 . . .

--Estimated Yum! Restaurants International Division system sales increased 3% in U.S. dollars and prior to conversion to U.S. dollars.

--Estimated China Division system sales increased 1% in U.S. dollars, or decreased 1% prior to conversion to U.S. dollars.

--Estimated U.S. blended same-store sales at company restaurants increased 6% versus last year (Taco Bell, 9%; Pizza Hut, (3)%; KFC, 11%).

"The content of the meeting will demonstrate the power of YUM's global portfolio of brands and major opportunities for global expansion. We look forward to sharing the significant progress we have made executing our key strategies and building value. The results of our execution include: 4% U.S. blended same-store-sales growth, fifth straight year of opening 1,000 new restaurants outside the United States and industry-leading ROIC of 18%.

"Over the long term, we are confident we can continue to grow EPS at least 10% each year by executing our unique strategies and maintaining our value-building focus and discipline.

"For 2005, we expect to grow EPS 12%, exceeding our target of at least 10%. Our global portfolio and global expansion continue to consistently drive strong results in spite of a slower than expected sales recovery in mainland China. Sales there have been impacted recently by consumers' concerns about avian flu, despite the fact that the World Health Organization and other health experts have stated that properly cooked chicken is perfectly safe to eat. Even in this environment, our EPS expectation remains $0.78 per share for the fourth quarter given the balance of our global portfolio. Our confidence is driven by better-than-expected same-store-sales growth in the U.S.A. and strong performances by our international franchise markets," said David Novak, Chairman and Chief Executive Officer.

Full-Year 2006 Forecast

The company expects . . .

--Worldwide system-sales growth of 5% to 6%; International Division system-sales growth of at least 5% (local currency basis); China Division system-sales growth of at least 22%, and U.S. system-sales growth of 3% to 4%. These growth rates are prior to the impact of lapping the fifty-third week in 2005. Including the fifty-third week, growth rates for 2006 would be reduced by 1% in the worldwide, U.S. and International divisions.

--Worldwide revenue growth of 4% to 5%; China Division, 20%; International Division, at least 1%; and U.S., 1% to 2%. These growth rates are prior to the impact of lapping the fifty-third week in 2005. Including the fifty-third week, growth rates for 2006 would be reduced by 1% in the worldwide, U.S. and International Division. Refranchising activity for 2005 negatively impacts the growth rates. Additional refranchising activity in 2006 will negatively impact this growth rate.

--U.S. blended same-store-sales growth at company restaurants in the range of 2% to 3%.

--At least 1,500 new system restaurants to be opened worldwide:

--  750 new International Division restaurants

        --  400 new China Division restaurants

        --  350 new U.S. restaurants

--International Division net-restaurant expansion to be at least 3%.

--The U.S. restaurant base is expected to decrease slightly versus 2005.

--Five hundred fifty (550) multibrand restaurant additions for the U.S. system, including conversions of existing restaurants, rebuilds, and new builds.

--Continued growth in franchise fees of at least 5% resulting from worldwide restaurant expansion and same-store-sales growth. Refranchising during 2006, as it occurs, will add further growth. Historically, worldwide franchise fees have grown 8% per year on average since 1998 as a result of worldwide restaurant expansion, same-store-sales growth, and the impact of refranchising.

--Worldwide restaurant margin slightly favorable versus 2005, with improvement expected in each division.

--General and administrative costs will increase versus 2005 by approximately 1% with increased China spending to support brand expansion. Franchise and license expense will be even.

--Interest expense will be up $10 to $15 million versus 2005 primarily due to higher rates and increased borrowing.

--Closure and impairment charges of $45 to $50 million. Refranchising gains are expected to be $0 to $15 million.

--No net impact from foreign currency conversion on operating profit for the full year. This assumes $10 million of benefit in the China Division offset by $10 million of negative impact for the International Division. The Chinese renminbi, British pound sterling, Australian dollar, Korean won, Japanese yen, Canadian dollar, Mexican peso and European euro are important currencies in the company's international business.