1、1999 annual reportthe power of YUMthe power of YUMfinancial highlights($ in millions, except for unit and share data)Number of stores:19991998% changeCompany6,9818,397(17)%Affiliates1,1781,1205%Franchisees18,41416,65011%Licensees3,4093,596(5)%System29,98229,7631%System sales (rounded)21,80020,6006%C
2、ompany revenues7,8228,479(8)%Ongoing operating profit88176815%Accounting changes29NMFacility actions net gain38127538%Unusual items(51)(15)NMOperating profit1,2401,02821%Net income62744541%Diluted earnings per common share$3.92$2.8438%Diluted ongoing operating earnings per common share$2.58$1.8341%C
3、ash flows provided by:Operating activities565674(16)%Refranchising proceeds91678417%average U.S. sales per system unit$ in thousands (Compounded annual growth rates)5-year 199919981997199619951994growthKFC$837$817$786$775$733$7063%Pizza Hut6966456306206516342%Taco Bell918931902886925953(1)%worldwide
4、 system sales$ in billions (Compounded annual growth rates)5-year199919981997199619951994growthKFC4.34.24.03.93.73.54%Pizza Hut5.04.84.74.95.14.9Taco Bell5.25.04.84.64.44.24%Total U.S.14.514.013.513.413.212.63%Total Intl7.36.67.06.96.55.65%Total21.820.620.520.319.718.24%our passionis to put a yum on
5、 peoples faces around the worldwe offer that special eating experience that makes you smileand creates lifelong customers. And well do that with:food you crave,comeback value, andcustomer-focused teams.Our jobs are the best in the worldfor people who are committed to quality food andsatisfying custo
6、mers better than anyone else.2 letter to shareholders7 our formula for success8 people capability first12 satisfied customers follow20 then we make more money22 tricon facts24 financials1On the Cover:Three Restaurant General Managers,our #1 Leaders, demonstrating our Passion the way we startall of o
7、ur major system meetings with a “YUM Cheer!”Give me a “Y”!David Alston KFC Restaurant General ManagerGive me a “U”!Jackie Lopez Pizza Hut Restaurant General ManagerGive me a “M”!Carlos Diaz Taco Bell Franchise Restaurant General Managerdear partners,When we launched Tricon as an independent company,
8、 our goal was to take three leading restaurant brands that had been under-managed over time, and ultimatelybecome the best restaurant company in the world. Toward that end, were pleased toreport that 1999 was an outstanding year for Tricon, with solid progress made againstalmost every operational an
9、d financial goal we set for ourselves. Weve worked hard atincreasing our performance by developing our culture, driving same store sales growth,improving our restaurant economics and cost structure, while expanding our system.Some key highlights include:41% ongoing operating EPS growth4% combined sa
10、me store sales growth in the United Statesgenerated over $1.5 billion of cash flow 24% Return on Assets Employed Were proud of all our system has accomplished. Whats more, were confident the actions weve undertaken this past year will pave the wayfor greater success. While weve been disappointed by
11、the recentdecline in our stock price, we know we will build shareholder valueover the long term by focusing on these five differentiating performance drivers:#1 Consistent Same Store Sales Growth with aPortfolio of Three Leading Brands: The primary waywere measured in our industry is by consistently
12、 deliveringsame store sales growth. In 1999, we delivered strong com-bined U.S. same store sales growth of 4%, on top of 4%combined growth in 1998. We are committed to consis-tently delivering 23% combined samestore sales growth, year after year.Importantly, our unique portfolioof three leadership b
13、rands enablesus to deliver these results in theU.S., even if one of our brands istemporarily experiencing some upsand downs. Our intention, of course, is tohave all three brands clicking at the sametime; but its a unique strength to have apowerful portfolio of leading brands wherestronger performanc
14、e by some can offsetany short-term softness at others.In addition to our existing delicious products and continued operationsimprovement, a key driver of same store sales growth and one of our2“Stepping back, it has been agreat privilege these last twoyears to serve as Chairman andCEO, alongside Dav
15、id Novak,Vice Chairman and President.The Board and I were pleased to name him CEO on January 1,2000. He has earned this recog-nition based on his considerableaccomplishments and is the best possible person to lead thecompany into the new century.As Chairman, I will continueto play an active role wor
16、king with our world-class Board ofDirectors and companyleaders as we build on theprogress begun theselast few years.”Andrall E. Pearson Chairman of the Boardmost important achievements in 1999 was our new product success. We entered newproduct segments with considerable long-term growth potential at
17、 each of our brands:“on the go” with sandwiches at KFC“value” with The Big New Yorker at Pizza Hut“big taste, hot value” with Chalupas at Taco BellThese new products add to our leading category market share. As a result, we are going forward with a significant opportunity for future growth off an ev
18、en stronger competitive foundation. In 1999, Pizza Hut had another outstanding year, withsame store sales up 9%. On Super Bowl Sunday,Pizza Hut launched The Big New Yorker pizza, themost successful new product introduction in thepizza category in recent history. This 16authentic New York style pizza
19、 is offeredat a unique $9.99 value price, appealingdirectly to the heavy pizza consumer com-pelled by value and product innovation. Withour existing popular Pan, Thin Crust, Stuffed Crustand Hand-Tossed pizzas, Pizza Hut is delivering on itscompetitive positioning to have the “Best Pizzas Under One
20、Roof.” In fact, Pizza Hutoutperformed its major competitors for the year in same store sales growth and grewmarket share in the key traditional segment.At KFC, our strategy is to reposition the brand as the “chicken experts for allchicken occasions,” not just fried chicken on the bone. KFC grew same
21、store sales by 2% in the year. However, while KFC dominates the chickenon the bone segment with our world-famous Original Recipe and abouta 40% market share, this segment has been relatively flat. Our growthin recent years has come from adding concept layers, like the intro-duction of Colonels Crisp
22、y Strips, which added about $120,000 to theaverage KFC restaurant. We now own about a 10% share of the $4 bil-lion strips category after four years. Our goal with the introduction ofchicken sandwiches is to add another concept layer to reignite KFCstopline growth. After our introductory quarter, we
23、now own 8% of the$5 billion sandwich category. Nearly a fifth of all Quick ServiceRestaurant users have tried our sandwiches, and theyve told us theirintent to repurchase is over 85%. Research says we have the bestchicken sandwiches of any national competitor and were currently gen-erating $130,000
24、of annualized sales per restaurant our challenge nowis to make sandwiches more incremental to the base business. Our entire system, especially our franchisees, are committed to making sandwichesa success because we know we have such a strong consumer proposition. While Taco Bells same store sales we
25、re flat for the year, we began to makegreat progress by refocusing on Quick Service Restaurant consumers whoalready crave Taco Bells great-tasting food and rate it #1 on “value.” Ourstrategy is to reinforce Grande Taste, Loco Value Big Taste, Great Value David C. NovakChief Executive Officer3every d
26、ay, and communicate this in everything we do. Following this strategy, transactionsturned positive with the launch of our freshly fried hot Chalupas late in the year. Having nowtransformed the quality of Taco Bell food by reinventing the taco with our highly popularGorditas and Chalupas, Taco Bell w
27、ill continue to feature more quality upgrades of existing prod-ucts, like Enchiritos, burritos and nacho chips.#2 International Growth: One of our greatest success stories this past year has beenthe outstanding results we generated from our international business. In 1999,Tricon achieved a 39% incre
28、ase in international ongoing operating profit the strongest increase in almost adecade. Our strategy has been to focus equity (Tricon-owned restaurants) in about 10 key countries, while grow-ing elsewhere around the globe with our growth-ready franchisees. This strategy is paying off. For example, o
29、urKFC businesses in Mexico, Australia, the U.K. and China all are booming, as is Pizza Hut in China, Canadaand the U.K. In fact, one-fourth of our total ongoing operating profit in 1999 came from our internationalbusiness, and we expect it to grow on average at least 15-20% per year. We plan to buil
30、d over700 new restaurants across our system outside of the United States in 2000, on top of the 700units we opened in 1999. We are convinced our international business will continue to bea primary growth engine for Tricon in the years ahead. Weve only begun to scratch thesurface of marketplace prese
31、nce and the global popularity of our food is phenomenal.#3 Multi-Branding and New Unit Expansion: Tricon is uniquely positioned to offer more than one brand under one roof, providing customers an opportunity to please the entire family at one counter. Weve proven the success of “2-n-1s” KFC/TacoBell
32、 ExpressTaco Bell/Pizza Hut Expressand KFC/Pizza Hut Express. Were going to accelerate building these restaurants,increasing growth opportunities for our franchisees. Were also still testing “3-n-1s” restaurants that serve all three of our popular brands. Given our category leadership in pizza, Mexi
33、can-style food and chicken, no one else can offer this unique oppor-tunity. We ended 1999 with over 700 multi-branded restaurants in the system. In 2000, we plan to build a total of about 1,300multi-branded and single-branded restaurants across our system 600 restaurants in the U.S.,and an additiona
34、l 700 international restaurants. This kind of growth will continue and weexpect it to increase as we go into the future. #4 Margin Improvement: We will continue to leverage topline growth, productivityimprovements and cost savings to drive growth in base margins year over year. We achievedover 125 b
35、asis points in margin improvement from base operations in 1999, on top of 70basis points of improvement from base operations in 1998. Our ownership mentality is to runeach restaurant like its our only one, and thats helped make our store margins industry com-petitive. Importantly, improved margins h
36、ave helped raise our Return OnAssets Employed from 10% to about 24% in just two years. Weexpect to improve our base margins in 2000 by up to 20 basis points. With the added benefit ofrefranchising, our margins should be up by about 50 basis points next year. #5 Improved Cash Flow for Reinvestment: O
37、ur final performance driver is to continue toachieve great results from our financial strategies, and, in turn, improve our cash flow, enablingus to further reinvest in our business growth. Weve taken a series of strategic actions to improveour balance sheet and returns. In 1999, we sold over 1,400
38、restaurants to franchisees, reducingcompany ownership of the system from 28% to 23%, closing in on our target of about 20%. Cash fromoperations and this refranchising strategy generated over $1.5 billion in cash flow. This, in turn,enabled us to pay down over $1 billion in debt last year. Significan
39、tly, we also reinvested about$470 million in new and existing restaurants in 1999. We also bought back 3.3 million shares of our stock since September,underscoring both our strong cash generation and confidence in our growth potential. Additionally, weve greatly improved our4TRI004 front.6b 03.04.00
40、 3/13/00 3:06 PM Page 45effective tax rate, providing an annual cash benefit to Tricon that ulti-mately increases shareholder returns. As a result of progress wevemade implementing our financial strategies, weve greatly strengthened ourbalance sheet and increased our financial flexibility.In 2000, w
41、e expect to generate close to $500 million in free cash flow, enabling us to reinvest in thebusiness by continuing to upgrade our assets and open new restaurants while also buying back shares.Looking Ahead: Our outlook for 2000 remains optimistic off our strong 1999 results and the demonstrable prog
42、ress that weremaking on these five performance drivers. Were on track to deliver 2-3% combined U.S. same store sales growth, 6% systemwidesales growth, and an ongoing operating earnings per share growth in the range of 23 to 27%, on top of our 41% increase in 1999.However, its too early to know for
43、certain what the impact to our results, if any, might be as a result of the recent Chapter 11 bank-ruptcy filing by AmeriServe, our principal U.S. distributor. Were pleased that weve been able to maintain service to our restaurantsin a cost-effective manner to date, and we intend to continue this pe
44、rformance in the future.Were going to stay focused on our performance drivers in all that we do to make Tricon a great investment for our shareholdersover the long-term. We are putting the building blocks in place to drive dynasty-like performance. In fact, Tricon has all the char-acteristics to bec
45、ome one of the worlds great companies over time: leading brands, a proven international business, tremendouscash flow to fund reinvestment and the people to make it happen. Our goal is to become nothing less than a “dynasty” by driv-ing consistent performance, year after year. On the next page, youl
46、l see how we communicated this vision to our systems employeesand franchisees on New Years Day.As you read further, youll notice a lot of energetic people who will tell you what weve done and what were going todo to keep moving forward. In fact, on our front cover, weve featured three of our Restaur
47、ant General Managers our #1 leaders who represent a system built around restaurant teams committed to serving customers better thananyone. David Alston (KFC), Jackie Lopez (Pizza Hut) and Carlos Diaz (Taco Bell) are demonstrating our “YUMCheer” the way we begin every major system meeting, because we
48、 know if we put a “YUM” on our customersfaces, our financial results and shareholder returns will follow. Wed like to thank the nearly 600,000 people acrossthe Tricon system, our franchise partners and outstanding Board of Directors for their dedication and inspired ideas.From all of us at Tricon, Y
49、UM to you,David C. Novak CEOAndrall E. Pearson ChairmanDavid C. Novak Chief Executive OfficerTricon Global Restaurants, Inc.PO Box 32220Louisville, KY 40232-22201peoplecapabilityfirstourformulafor successis working2satisfiedcustomersfollow3then wemakemoremoneyGREGG DEDRICK, EXECUTIVE VP, PEOPLE AND
50、SHAREDSERVICES:One of our “Founding Truths” and oneof our key strategies is putting people capabilityfirst. This means we must support our employeesby giving them the tools they need to be success-ful and then reward and recognize them for thatsuccess. We all know when we do that, satisfiedcustomers
