YUM 12 /10/08a

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  1. 1. WELCOME 2008 Investor UpdateDecember 10, 2008
  2. 2. WELCOME!Tim Jerzyk SVP Treasurer/Investor RelationsInvestor Update MeetingDecember 2008
  3. 3. Information herein is as of 12/10/08 This presentation will include forward-lookingstatements that reflect managementsexpectations based on currently available data.However, actual results are subject to futureevents and uncertainties. The information in thepresentation related to projections or otherforward-looking statements may be relied onsubject to the safe harbor statement posted on ourWeb site: www.yum.com.
  4. 4. What To Expect In 2009 . . . At least 10% EPS Growth Driven by:Strong International New Unit DevelopmentContinued Growth in Global Same-Store-SalesIndustry-Leading ROIC
  5. 5. YUM Shareholder Payout 2008Meaningful Dividend . . . 27% Increase Leader in Shareholder Share Buy Backs . . . . . nearly $1.7BNPayout Among Global ConsumerCompanies Total Shareholder Payout . . . $2.0BN
  6. 6. Yum! Leads in Shareholder PayoutQ3 2008LTM 14.4% 12.5% 7.8% 7.7% 7.3% 6.9%5.9%5.5%3.6% 2.6%2.3%Source: JPMorgan; Defined as last twelve months (LTM )dividend and share repurchase payout as % of average market cap over the past four quarters.
  7. 7. Longer Term, Since 2004 . . . 2004 2008 Reduced share count by 20%Nearly quadrupled quarterly dividendIncreased debt by $2.0BNDramatically extended debt maturities with low-cost debt
  8. 8. Earlier Debt Profile2004 ...... Revolver Maturities: 1.0 BN 2 to 8 years
  9. 9. Dramatically Extended Maturities2008......RevolverMaturities: 1.0 BN1.5 BN 3 to 29 yearsNew Term Loan $375MM
  10. 10. New Debt Since 2004 10-Year Bond 6.25% $300MM 20062007 10-Year Bond 6.25% $600MM30-Year Bond 6.875%$600MM3-Year Revolver 5-Year 2007 Libor + 35 BPS $1.0 BN$1.5 BN20083-Year Term Loan$375MMLibor + 150 BPS
  11. 11. U.S. Refranchising Update 1998 2008# of Units1,219 1,170 Nearly 672700452304244 155 150 113 47'98'99'00 '01 '02 '03 '04 '05'06 '07'08 YTD2008 is the most since 1999
  12. 12. Continued Strong Cash Generation Forecast ($ million) 20082009 Cash Flow from Operations1,4551,553 CAPEX(900)(900) Refranchising & Sale of PP&E295300 Option Proceeds90 80 940 1,033 Dividends(321)(360) Excess Free Cash Flow 619673
  13. 13. 2009 Cash PrioritiesBuild Liquidity, Maintain FlexibilityNo Share Buy Backs PlannedDebt Reduction, Share Buy BacksSecond Half of 2009?
  14. 14. Summary No Near-Term Debt Maturity IssuesStrong Balance SheetSubstantial Cash Generation
  15. 15. Agenda Welcome . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tim JerzykStrategic Update . . . . . . . . . . . . . . . . . . . . . . . . . . . . .David NovakRoad Map to At Least 10% EPS Growth in 2009 . . . Rick CarucciBREAKQ&A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . David Novak Rick CarucciWrap Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . David NovakADJOURN
  16. 16. AgendaFinancial Modeling and Q&A Session . . . . . . . . . . Rick CarucciTim JerzykTed KnopfLarry GathofDave Russell
  17. 17. The Yum! UpdateGlobal Growth & Cash Machine David Novak Chairman and CEO Investor Update Meeting December 2008
  18. 18. Driving Shareholder Value Same-Store-SalesNew Permanent Sales Layers Growth#1 LeadingNew Unit GrowthInternational DeveloperHigh ReturnsIndustry Leading Returns on Invested Capital
  19. 19. Driving Global Growth More Balanced OptionsMulti-DaypartsGrowMulti-ProteinsExistingDestination Desserts and Beverages Assets Everyday ValueContemporary AssetsKey Drive Growth Mainland ChinaGlobal DriversYum! Restaurants InternationalGrowthEstablish Taco Bell International New Global East Dawning Brands PHD
  20. 20. 20 Straight Quarters of Global Same-Store-Sales GrowthWorldwide Same-Store-Sales Growth4% 4% 3%3%3%3%3%2% 0405 0607Q1Q2Q3Q4 F 2008
  21. 21. Record International New Unit Openings 1,4451,358YRI 8951,189 1,181 China 5501,07704 05 06 07 08 FYum! is the #1 international retail developer!
  22. 22. Restaurant Industry Leader in ROIC2008 ROIC 16.9%15.5% 14.7% 13.9%12.5%10.6%10.6% 9.5% Source: JPMorgan; LTM after-tax EBITR/Average Capital adjusted for operating leases less excess cash.
  23. 23. Driving Shareholder Value Same-Store-Sales Growth New Unit GrowthHigh Return on Invested CapitalANDExecuted with Consistency
  24. 24. 7th Straight Year of Double-Digit EPS Growth Earnings Per Share Growth+15% +15% +14%+13%+13% +13%+12%Target at least 10%02 03 0405 06 07 08 FNote: Prior to special items. 2005 growth rate is also prior to the impact of expensing stock options.
  25. 25. 2009 Getting Better and Better
  26. 26. Whats New for China in 2009Build Leading Brands Across CHINAin Every Significant CategoryDriveAggressive InternationalExpansion and BuildStrong BrandsEverywhereDramatically ImproveU.S. Brand Positions, Consistency and Returns DriveIndustry-Leading, Long-Term Shareholder and FranchiseeValue
  27. 27. KFC #1 Brand in ChinaQ4 2008Brand Attributes LeadingCompetitorThe QSR brand I like most58%*41%Not the traditional Western QSR &53%* 41%Driving a new direction for ChinaNote: Percentages for Top 2 Boxes Data source: BIT Oct. 2008, by CBC *Significant difference, N=1900 in 47 cities95% confidence level
  28. 28. Competitive Position Continues to StrengthenMainland ChinaWestern QSR# of Restaurants
  29. 29. Building New Permanent Sales LayersMultiple Proteins Chicken Fish Shrimp Beef
  30. 30. Building New Permanent Sales LayersAND Multiple Dayparts BreakfastDelivery Its easy to have a GOOD breakfast at KFCExpanding to 65 cities
  31. 31. Competitive Position Continues toStrengthenMainland ChinaWestern Casual Dining# of Restaurants
  32. 32. Enhanced Casual Dining ExperienceSweets Appetizers PizzaPasta & Rice Drinks/CoffeeAlready broadened menu from 76 to 102 itemsWork in Progress
  33. 33. Building Emerging BrandsEast Dawning Pizza Hut Home ServiceOpened in Beijing, Guangzhou 75 Units in 11 Chinese cities4 new cities in 2008 Building commissary platform Optimizing cost structure
  34. 34. The Leading Western Retail Developer in Mainland China Yum! China DivisionNew Unit Development 550At least 506 500409396 357297030405060708 F 09 FNote: This includes KFC Taiwan and Thailand.
  35. 35. Strategic Position Has Never Been BetterCountrywideUnmatchedUnparalleledTargetedDistribution DevelopmentTalent &ManufacturingSystemCapability ExperienceNational Scale 500 Cities
  36. 36. Whats New for YRI in 2009Build Leading Brands Across CHINAin EverySignificant CategoryDrive Aggressive International Expansion and Build Strong BrandsEverywhere Dramatically Improve U.S. Brand Positions,Consistency and ReturnsDrive Industry-Leading, Long-TermShareholder and Franchisee Value
  37. 37. Consistent Growth From YRI DevelopmentYRI New Builds+900 +895+852 +785+780'05'06'0708 F'09 F Net Unit Growth +4% +3%+4%+4%+4% % from Franchisees 93%94%94%95%+ 95%+
  38. 38. Broad-Based YRI Development Development by Region 2008 F Net UnitDevelopment coming from: Total Units Growth Asia4,064+4% Over 75 countriesCanada 1,236+1%Europe 1,126+9% Over 200 franchisees Latin America 1,060+4%Middle East1,046+13% Top 4 countries: South Africa 555 +11% Indonesia Franchise Malaysia 9,087+6%Markets South Africa Saudi Arabia YRI Total Units12,900+4%
  39. 39. Consistent System-Sales GrowthYRI System-Sales Growth (%) Local Currency Basis +10% +9%+9% +8% +8%+7% '06 '07 Q1 Q2 Q3 Q4 TD 2008
  40. 40. and Consistent Same-Store-Sales GrowthYRISame-Store-Sales Growth % +6% +4% +4%+3-4%+2% '05 '06 '07 '08 F '09 F
  41. 41. Building New Permanent Sales LayersYRI 2009 Rapid expansion as global launch begins in 2009 Over 1,000 KFC stores by year end 2009
  42. 42. Building New Permanent Sales LayersValueMexico IndonesiaHong Kong MexicoSouth Africa Global Roll-Out for 2009
  43. 43. Building Emerging BrandsOpened in Dubai 64 units in 11 countries
  44. 44. YRI: Stable Growth Nearly 90% franchised Over $650 million in fees Total operating profit of over $500 million Sales momentumStrong unit economics and well-capitalized franchisees2009: More of same . . . unit development and same- store-sales growth
  45. 45. Whats New for U.S. in 2009Build Leading Brands Across CHINAin Every Significant CategoryDriveAggressive InternationalExpansion and BuildStrong BrandsEverywhereDramatically ImproveU.S. Brand Positions, Consistency and Returns DriveIndustry-Leading, Long-Term Shareholder and FranchiseeValue
  46. 46. Transforming Our U.S. Business FROM TOHMR HMRPizza PizzaPastaChickenMexican Mexican-Inspired FoodPowerhouseFried, Grilled, Value andFried Chicken Portable
  47. 47. Building New Permanent Sales Layers Fiesta Meals . . . to go Make Every NightTaco NightFrutista Freeze Why Pay More!FrescoDinner 2009 Test in Early 2009 Test in Early 2009More News Add SIX NEW Flavorsfor Possible Launchfor Possible Launch More New Products
  48. 48. Building New Permanent Sales Layers2009 PastaBalanced OptionsWingsValueTesting More Options More OptionsNational Launch National Launch
  49. 49. Building New Permanent Sales Layers Kentucky Grilled Chicken Winning concept and product test results Overcomes key fried only consumer barrier Proven operating platform Better economics than friedLongest Market Test in KFC History
  50. 50. Building New Permanent Sales LayersFirst NationalKFC Value Menu KFC Snackers99Original Recipe Honey BBQ2 Biscuits 2 Apple Turnovers Value DrinkSide Salad $1.49 Toasted Wrap $1.99 Snack Boxes Popcorn Chicken 3 Hot WingsSnack Size Bowl Honey BBQ SandwichSuccessfully Tested in 3 Markets
  51. 51. Reinforcing the Corevs. KFC Average FRESH Advert