Monthly Archives: October 2010

Denny’s Announces the Expiration of Tender Offer for its 10% Senior Notes due 2012

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Denny’s Corporation (NASDAQ: DENN) today announced that the tender offer (the “Tender Offer”) by Denny’s Holdings, a wholly owned subsidiary of Denny’s Corporation, for its 10% Senior Notes due 2012, guaranteed by Denny’s Corporation (the “Notes”) (CUSIP No. 24869QAB8) expired at 11:59 p.m., New York City time, on October 6, 2010 (the “Expiration Time”). At the Expiration Time, an aggregate of $125,279,000 in principal amount of the Notes (71.59% of the original amount of the Notes) had been validly tendered and not validly withdrawn in the Tender Offer. Of that amount, as of September 22, 2010, at 5:00 p.m. New York City time (the “Consent Date”), $125,266,000 in principal amount of the Notes had been validly tendered and not validly withdrawn. On September 30, 2010, Denny’s Holdings paid $1,002.50 (the “Total Consideration”) for each $1,000 principal amount of the Notes validly tendered on or prior to the Consent Date, which included a consent payment of $10.00 per $1,000 principal amount of Notes, plus accrued and unpaid interest on the purchased Notes up to, but not including, September 30, 2010. On October 7, 2010, Denny’s Holdings paid $992.50 for each $1,000 principal amount of the Notes tender after the Consent Date but before the Expiration Time, plus accrued and unpaid interest on such purchased Notes up to, but not including, October 7, 2010. After giving effect to the Notes purchased in the Tender Offer an aggregate of $49,721,000 principal amount of the Notes currently remain outstanding.

On October 1, 2010, Denny’s Holdings gave a notice of redemption pursuant to the Indenture dated as of October 5, 2004 (as amended by Supplemental Indenture dated as of September 22, 2010, the “Indenture”) among Denny’s Holdings, Denny’s Corporation and U.S. Bank National Association, as trustee, providing that it will redeem all of the aggregate principal amount of the Notes not purchased in the Tender Offer at a redemption price of 100% of the principal amount thereof, plus accrued and unpaid interest to, but not including, the redemption date. The redemption date for such Notes is November 1, 2010.

This press release is neither an offer to purchase, nor a solicitation for acceptance of an offer to sell, the Notes. Denny’s Holdings made the Tender Offer only by, and pursuant to the terms of, the Offer to Purchase and the related Letter of Transmittal.

BofA Merrill Lynch and Wells Fargo Securities acted as exclusive Dealer Managers and Solicitation Agents for the Tender Offer. Questions regarding the Tender Offer may be directed to BofA Merrill Lynch at 888-292-0070 (toll-free) and 646-855-3401 (collect) and Wells Fargo Securities at 866-309-6316 (toll-free) and 704-715-8341 (collect).

Star Buffet, Inc. Files Form 8-K Regarding Compliance With NASDAQ Listing Rules

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Star Buffet, Inc. (Nasdaq:STRZ) today filed a Form 8-K with the Securities and Exchange Commission. On September 30, 2010, Star Buffet, Inc. (the “Company”) received a letter from The NASDAQ Stock Market (“NASDAQ”) indicating that the Company was not in compliance with the NASDAQ Listing Rule 5810 (b) for Continued Listing as a result of its failure to file its report on Form 10-Q for the period ended August 9, 2010. According to NASDAQ regulations the Company has 60 calendar days from September 30, 2010 to submit a plan to regain compliance. Filing the Company’s report on Form 10-Q for the quarter ending August 9, 2010 is a primary component of the plan.

Star Buffet is a multiconcept restaurant operator. As of October 6, 2010, Star Buffet, through its subsidiaries, operates six Barnhill’s Buffet restaurants, six 4B’s restaurants, five JB’s restaurants, four franchised HomeTown Buffets, three K-BOB’S Steakhouses, two Casa Bonita Mexican theme restaurants, two Whistle Junction restaurants, one BuddyFreddys restaurant, one Western Sizzlin restaurant, one Holiday House restaurant, one JJ North’s Grand Buffet, one Pecos Diamond Steakhouse and one Bar-H Steakhouse.

Ruby Tuesday Reports First Quarter Fiscal 2011 Results

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Ruby Tuesday, Inc. (NYSE: RT) today reported financial results for the fiscal first quarter ended August 31, 2010.

Highlights for the first quarter of 2011 compared to the first quarter of 2010 include:

  • Positive same-restaurant sales of 1.2% at Company-owned Ruby Tuesday restaurants
  • Restaurant level operating margin of 18.5%, or 18.0% excluding accounting gains from franchise partner acquisitions of $1.7 million. The adjusted margin, an improvement of 210 basis points over the prior year, was primarily driven by lower levels of promotional activity.
  • Net income of $12.4 million, or $10.7 million excluding accounting gains realized from franchise partner acquisitions, compares to prior-year net income of $6.1 million
  • Diluted earnings per share of $0.19, or $0.17 per share excluding accounting gains noted above, compares to diluted earnings per share of $0.11 for the prior year
  • Book debt to EBITDA ratio of 2.08 represents a sizeable improvement over the prior-year ratio of 2.84
  • We have included a reconciliation of the franchise partner acquisition accounting gains noted above on the Investor Relations page of the Ruby Tuesday website: www.rubytuesday.com

Sandy Beall, Founder and CEO, commented on the results, saying, “We are excited to report another solid quarter and believe our strategies and repositioning efforts are showing sustained traction as our momentum has continued to build over the past year. The positive same-restaurant sales for the quarter, on lower promotional levels and in a continued difficult economic environment, are a strong testament to the new Ruby Tuesday. Our strategies going forward are to continue strengthening the business, resume growing the business, and further enhance shareholder value.”

Other highlights from our first quarter results include:

  • Second consecutive quarter of positive same-restaurant sales, and outperformed Knapp-TrackTM, the industry benchmark
  • Same-restaurant sales for domestic franchised restaurants increased by 0.4%
  • Total revenue increased 0.7% from the same period of the prior year
  • Sales at domestic and international franchise Ruby Tuesday restaurants (which is the basis for determining royalty fees included in franchise revenue on the Company’s statement of operations) totaled $91.1 million and $94.8 million for the first quarter of fiscal 2011 and 2010, respectively
  • Acquired the Long Island and New England franchise partner businesses, which represent a total of 20 restaurants
  • The Company did not open any new Ruby Tuesday restaurants and closed two restaurants
  • Domestic and international franchisees opened three new Ruby Tuesday restaurants and closed three
  • Total capital expenditures were $6.6 million

Mr. Beall said, “The improvements in our sales, operations, and balance sheet have allowed us to begin executing on our longer-term strategies to further strengthen and grow our business in order to rebuild shareholder value. Our key strategies for the next three to five years include the following four areas:

  • Continue to Enhance the Quality of Our Core Brand – Our Ruby Tuesday brand restaurants will remain our primary focus. Over the past year, we have introduced several new key promotions and offerings, which we call ‘Game Changers,’ that have strengthened the brand. We launched our fall menu on August 24th, along with our enhanced Sunday Brunch and Bar menus. Our new product offerings, including our complimentary garlic cheese biscuits and our Fit & Trim entrees, should continue to provide momentum for our brand. We will continue to invest in various initiatives from both a food quality and labor standpoint to facilitate our longer-term goal of providing a $25 high-quality casual dining experience for $15.
  • Increase Revenue and EBITDA Through New Concept Conversions and Franchise Partnership Acquisitions – Part of our long-term plan is to convert certain underperforming Company-owned restaurants to other high-quality casual dining concepts. We opened our first converted Jim ‘N Nick’s Bar-B-Q in Knoxville on September 21st and our first Truffles conversion will open in the Buckhead area of Atlanta in November. The low capital requirement for these conversions should provide attractive cash-on-cash returns for our shareholders. Another part of our plan is focused on generating incremental revenue and EBITDA from our current franchise partners. We completed two franchise partner acquisitions in the first quarter and are considering our options for the remaining franchise partners, which include potential additional acquisitions or conversion to traditional franchises over time.
  • Focus on Low Risk, Low Capital-Intensive Growth – We are excited about the licensing agreement we recently entered into with Lime Fresh Mexican Grill, a Florida-based restaurant concept, which gives us the opportunity to operate up to 200 fast casual fresh-Mexican restaurants in the eastern United States, excluding Florida. Our growth with the Lime brand will primarily be in smaller, inline locations. The Lime brand is in alignment with our focus on high quality and offers great opportunities for us in the high-growth, high-quality, fast casual dining segment. We also plan on opening Company-owned, inline Ruby Tuesday restaurants as another segment of our growth strategy. The ability to enter the growing fast casual segment with a strong brand such as Lime and further expand our Ruby Tuesday Company-owned brand provides a growth option that should create long-term value for our shareholders with relatively low risk.
  • Optimally Manage Excess Cash Flow – We have made great progress over the past year in strengthening our balance sheet and we will, in the short term, continue to leverage our free cash flow to pay down debt. As the cash flow from our core business continues to grow through current and new brand enhancements, and our conversions and inline growth begin to generate incremental cash flow, we will return the excess cash flow, which we are unable to accretively reinvest in the Company, to our shareholders.”

Fiscal Year 2011 Guidance

  • Same-Restaurant Sales - We estimate same-restaurant sales for Company-owned restaurants will be in the range of flat to positive 2% for the year
  • Company-Owned Restaurant Development - We expect to open one to two smaller prototype, inline restaurants in 2011, expect to close seven to nine Company-owned restaurants, and convert five to seven Company-owned restaurants to other high-end casual dining concepts. In addition to the 20 franchise restaurants acquired during our first fiscal quarter, we are evaluating the buy back of five to 10 additional franchise restaurants over the remainder of the fiscal year.
  • Franchise Restaurant Development - We project our franchisees will open eight to 13 restaurants, up to 10 of which will be international
  • Restaurant Operating Margins – Margins are anticipated to be relatively flat, primarily reflecting the impact of our continued investment in higher-quality menu items and new product offerings, as well as investments in service to enhance our guest experience and drive sales, offset by lower promotional levels. Our food costs are expected to remain relatively stable compared to the prior year.
  • Other Expenses - Depreciation is projected in the $60-$63 million range and selling, general, and administrative expenses are targeted to be up 8%-10% from a year earlier, primarily reflecting higher advertising, training, and marketing research expenses. Interest expense is projected to be $10-$12 million and the effective tax rate is estimated to be 20-25%.
  • Diluted Earnings Per Share for the year are projected to be in the $0.76-$0.86 range. Fully-diluted weighted average shares outstanding are estimated to be approximately 64.5 million for the year.
  • Capital Expenditures are estimated to be $29-$33 million

In closing, Mr. Beall said, “We are excited with the improved results in our core Ruby Tuesday business and believe our repositioning efforts and investments in high-quality menu offerings, combined with targeted and effective marketing, have been the basis for our continued momentum. We first and foremost will continue to focus on making our Ruby Tuesday brand even stronger in the high-quality casual dining space. Additionally, we look forward to leveraging our future growth options and believe our long-range plan will enable us to rebuild shareholder value going forward.”

A FRESH NEW RUBY TUESDAY

Ruby Tuesday, Inc. has Company-owned and/or franchise Ruby Tuesday brand restaurants in 46 states, the District of Columbia, 15 foreign countries, and Guam. As of August 31, 2010, the Company owned and operated 674 Ruby Tuesday restaurants, while domestic and international franchisees (including Hawaii and Guam) operated 146 and 57 restaurants, respectively. Ruby Tuesday, Inc. is traded on the New York Stock Exchange (Symbol: RT).

The Company will host a conference call, which will be a live web-cast, this afternoon at 5:00 p.m. Eastern Time. The call will be available live at the following websites:

http://www.rubytuesday.com
http://www.earnings.com

Special Note Regarding Forward-Looking Information

This press release contains various forward-looking statements, which represent our expectations or beliefs concerning future events, including one or more of the following: future financial performance and restaurant growth (both Company-owned and franchised), future capital expenditures, future borrowings and repayments of debt, availability of debt financing on terms attractive to the Company, payment of dividends, stock repurchases, and restaurant and franchise acquisitions and refranchises. We caution the reader that a number of important factors and uncertainties could, individually or in the aggregate, cause our actual results to differ materially from those included in the forward-looking statements (such statements include, but are not limited to, statements relating to cost savings that we estimate may result from any programs we implement, our estimates of future capital spending and free cash flow, and our targets for annual growth in same-restaurant sales and average annual sales per restaurant), including, without limitation, the following: general economic conditions; changes in promotional, couponing and advertising strategies; changes in our guests’ disposable income; consumer spending trends and habits; increased competition in the restaurant market; laws and regulations affecting labor and employee benefit costs, including further potential increases in state and federally mandated minimum wages; guests’ acceptance of changes in menu items; guests’ acceptance of our development prototypes, remodeled restaurants, and conversion strategy; mall-traffic trends; changes in the availability and cost of capital; weather conditions in the regions in which Company-owned and franchised restaurants are operated; costs and availability of food and beverage inventory; our ability to attract qualified managers, franchisees and team members; impact of adoption of new accounting standards; impact of food-borne illnesses resulting from an outbreak at either Ruby Tuesday or other restaurant concepts; effects of actual or threatened future terrorist attacks in the United States; and significant fluctuations in energy prices.

RUBY TUESDAY, INC.
 
Financial Results For the First Quarter of Fiscal Year 2011
(Amounts in thousands except per share amounts)
(Unaudited)
 
      13 Weeks           13 Weeks            
      Ended           Ended            
      August 31,     Percent     September 1,     Percent     Percent
      2010     of Revenue     2009     of Revenue     Change
                               
                               
Revenue:                              
Restaurant sales and operating revenue     $ 300,632       99.3       $ 299,301     99.6      
Franchise revenue       2,054       0.7         1,311     0.4      
Total revenue       302,686       100.0         300,612     100.0     0.7
                               
Operating Costs and Expenses:                              
(as a percent of Restaurant sales and operating revenue)                              
Cost of merchandise       85,093       28.3         90,327     30.2      
Payroll and related costs       100,209       33.3         100,459     33.6      
Other restaurant operating costs       59,643       19.8         60,877     20.3      
Depreciation and amortization       15,122       5.0         16,281     5.4      
(as a percent of Total revenue)                              
Selling, general and administrative, net       22,543       7.4         19,020     6.3      
Closures and impairments       1,739       0.6         590     0.2      
Equity in (earnings)/losses of unconsolidated franchises       (203 )     (0.1 )       228     0.1      
Total operating costs and expenses       284,146               287,782            
                               
Earnings before Interest and Taxes       18,540       6.1         12,830     4.3     44.5
                               
Interest expense, net       2,463       0.8         5,388     1.8      
                               
Pre-tax Profit       16,077       5.3         7,442     2.5     116.0
                               
Provision for income taxes       3,680       1.2         1,298     0.4      
                               
Net Income     $ 12,397       4.1       $ 6,144     2.0     101.8
                               
                               
Earnings Per Share                              
Basic:     $ 0.19             $ 0.11           72.7
Diluted:     $ 0.19             $ 0.11           72.7
                               
Shares:                              
Basic:       63,681               56,127            
Diluted:       64,412               56,295            
 
RUBY TUESDAY, INC.
             
Financial Results For the First Quarter of Fiscal Year 2011
(Amounts in thousands)
(Unaudited)
 
      August 31,     June 1,
CONDENSED CONSOLIDATED BALANCE SHEETS     2010     2010
Assets            
Cash and Short-Term Investments     $ 9,155     $ 9,569
Accounts and Notes Receivable       8,171       9,746
Inventories       39,735       28,813
Deferred Income Taxes       11,563       13,794
Assets Held for Sale       3,919       3,234
Prepaid Rent and Other Expenses       12,313       11,154
             
Total Current Assets       84,856       76,310
             
Property and Equipment, Net       956,822       943,486
Notes Receivable, Net       339       269
Other Assets       47,847       43,964
             
Total Assets     $ 1,089,864     $ 1,064,029
             
Liabilities            
Current Portion of Long Term Debt, including Capital Leases     $ 18,209     $ 12,776
Income Tax Payable       1,095       1,049
Other Current Liabilities       100,215       100,956
Long-Term Debt, including Capital Leases       276,532       276,490
Deferred Income Taxes       40,882       40,010
Deferred Escalating Minimum Rents       42,677       42,305
Other Deferred Liabilities       54,459       52,343
             
Total Liabilities       534,069       525,929
             
Shareholders’ Equity       555,795       538,100
             
Total Liabilities and Shareholders’ Equity     $ 1,089,864     $ 1,064,029

Yum! Brands Reports Third Quarter 2010 Results

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Yum! Brands Inc. (NYSE: YUM) today reported results for the third quarter ended September 4, 2010, including EPS growth of 5%, prior to special items.

THIRD-QUARTER HIGHLIGHTS

  • Worldwide operating profit grew 14% prior to foreign currency translation, including +23% in China, +16% in Yum Restaurants International (“YRI”), and a decline of 2% in the U.S.
  • Worldwide system sales growth prior to foreign currency translation of 5%, including +18% in China, +5% in YRI, and +1% in the U.S.
  • Same-store-sales growth in each division including +6% in China, +1% in YRI, and +1% in the U.S.
  • Worldwide restaurant margin improvement of 1.6 percentage points including increases in China, YRI, and the U.S.
  • Significantly higher tax rate of 27.4% versus 19.9% in the third quarter of 2009.
  • Announced a 19% increase in the Company’s quarterly dividend. The quarterly cash dividend will increase from $0.21 to $0.25 per share.
  • Issued a 10-year, $350 million bond at 3.875%, which is the lowest coupon ever for a BBB- corporate name.
           
    Third Quarter     Year-to-Date
    2010   2009   % Change     2010   2009   % Change
EPS Excluding Special Items   $0.73   $0.70   5%     $1.90   $1.67   14%
Special Items Gain/(Loss)1   $0.01   ($0.01)   NM     ($0.08)   $0.10   NM
EPS   $0.74   $0.69   7%     $1.82   $1.77   3%
                           
1 See Reconciliation of Non-GAAP Measurements to GAAP Results for further detail of the Special Items.
Note: All comparisons are versus the same period a year ago and exclude Special Items unless noted.
 

FULL YEAR OUTLOOK

The Company raised its full-year 2010 EPS forecast from $2.43 to $2.48 per share, or from 12% to 14% growth prior to special items, based on strong year-to-date operating profit performance.

David C. Novak, Chairman and CEO said, “I’m pleased to report we are raising our full year EPS growth forecast to 14%, which will make 2010 the 9th consecutive year we meet or exceed our annual target of at least 10%. We take satisfaction that our year-to-date operating profit has increased 15%, excluding special items and the impact of foreign currency translation, and is driving our strong EPS growth this year. A key driver of our overall growth continues to be new unit development in China and Yum! Restaurants International. We expect to open about 1,400 international new units this year. This new unit growth positions us well for another successful year in 2011.

“We continue to make progress at all three divisions and are especially pleased with the continued strong results from our China business. The combination of high return new unit development, same-store-sales growth, and increasing margins drove operating profit growth of 23% in China for the quarter, excluding the impact of foreign currency translation. At Yum! Restaurants International, we increased system sales by 5% and grew operating profit 16%, prior to foreign currency translation benefit. Our U.S. business modestly improved same-store-sales growth and margin but operating profit declined slightly. We expect sales momentum to continue in the fourth quarter.

“Overall, we are encouraged with our strong performance. We continue to drive aggressive, international expansion while maintaining our industry-leading return on invested capital. Our intent is to continue to build shareholder value and return cash to shareholders through dividends and share repurchases.”

CHINA DIVISION

           
    Third Quarter     Year-to-Date
        % Change         % Change
  2010   2009   Reported   Ex F/X     2010   2009   Reported   Ex F/X
System Sales Growth           +19   +18             +16   +16
Same-Store-Sales Growth   +6   Even   NM   NM     +5   (1)   NM   NM
Restaurant Margin (%)   25.2   24.3   0.9   0.9     24.0   22.4   1.6   1.6
Operating Profit ($MM)   267   216   +24   +23     582   449   +30   +29
                                   
  • China Division system sales growth of 18%, prior to the benefit of foreign currency translation, was driven by new unit development of 12% and same-store-sales growth of 6%.
    • China opened 90 new restaurants in the third quarter and 245 year-to-date, further strengthening the company’s leadership position.
         
China Units   Q3 2010   % Change
Traditional Restaurants   3,664   +12
KFC   3,054   +12
Pizza Hut Casual Dining   479   +8
Pizza Hut Home Service   106   +22
         
  • Restaurant margin increased 0.9 percentage points driven primarily by strong same-store-sales growth and commodity deflation, offsetting labor inflation. While we continue to expect full year margin improvement, labor and commodity inflation will negatively impact margins in the fourth quarter.
  • Operating profit benefited about $10 million in the quarter from our brands’ participation in the World Expo in Shanghai. This benefit will not occur in 2011.
  • China Division includes solely the results of our operations in mainland China.

YUM! RESTAURANTS INTERNATIONAL (YRI) DIVISION

           
    Third Quarter     Year-to-Date
        % Change         % Change
  2010   2009   Reported   Ex F/X     2010   2009   Reported   Ex F/X
Traditional Restaurants   14,001   13,486   +4   NA     14,001   13,486   +4   NA
System Sales Growth           +7   +5             +10   +3
Franchise & License Fees   171   157   +8   +6     499   445   +12   +4
Operating Profit ($MM)   142   120   +18   +16     405   346   +17   +8
Operating Margin (%)   20.1   16.4   3.7   2.9     19.3   17.2   2.1   1.7
                                   
  • YRI system sales grew 5% prior to the benefit of foreign currency, driven primarily by new unit development and same-store-sales growth of 1%. Our emerging markets led the way with 9% system sales growth while developed markets grew 3%.
  • We opened 194 new units, with the majority across 34 emerging markets.
  • Restaurant margins increased 1.6 percentage points to 12.5% driven primarily by the impact of refranchising.
  • Operating profit grew 16% prior to foreign currency translation, primarily driven by new unit development. Additionally, general & administrative and franchise & license expenses were lower than last year.
  • Foreign currency translation positively impacted operating profit by $3 million in the third quarter and $31 million year-to-date.
     
Key YRI Markets   System-Sales Growth
Ex F/X (%)
  Third Quarter   Year-to-Date
Franchise Only Markets        
Asia (ex Mainland China)   +8   +4
Continental Europe1   +3   (3)
Middle East   +9   +9
Latin America   +8   +7
Company/Franchise Markets        
Australia   +2   Even
UK   Even   +2
New Growth Markets
(France, Russia, and India)		   +21   +16
         
1 Continental Europe year-to-date system sales growth was negatively impacted by a 99 unit franchisee in Spain exiting the Pizza Hut system in the third quarter of 2009 (equivalent to 7 percentage points based on units).
         

U.S. DIVISION

           
    Third Quarter     Year-to-Date
    2010   2009   % Change     2010   2009   % Change
Same-Store-Sales Growth (%)   +1   (6)   NM     Even   (3)   NM
Restaurant Margin (%)   14.4   14.1   +0.3     14.3   14.0   +0.3
Operating Profit ($MM)   168   171   (2)     495   497   -
Operating Margin (%)   17.4   16.2   +1.2     17.1   15.5   +1.6
                           
  • Same-store-sales increased 1% driven by growth of 8% at Pizza Hut and 3% at Taco Bell, offset by a decline of 8% at KFC.
  • Restaurant margin increased 0.3 percentage points primarily due to refranchising.
  • Operating profit decreased $3 million primarily due to the timing of employee costs and legal expenses.

REFRANCHISING UPDATE

U.S. DIVISION

  • We continue to pursue the refranchising of a substantial portion of our U.S. businesses, principally Pizza Hut and KFC. Year-to-date we have sold 98 restaurants. Since the inception of our refranchising program in late 2007, we have sold over 1,300 units across all the brands. We continue to expect to complete our U.S. refranchising efforts during 2011.

YRI DIVISION

  • Subsequent to the end of our third quarter we agreed to refranchise all of our company owned restaurants in Mexico, which includes 224 KFCs and 123 Pizza Huts. The buyer is an existing Latin American franchise partner, who will also serve as the master franchisor for the Mexico market. We expect the transaction to close by the end of October. In the fourth quarter we anticipate recording a pre-tax refranchising loss of approximately $50 million in special items as a result of this transaction.

REMINDER – DIVISION REPORTING REALIGNMENT

Beginning in the first quarter of 2010, Thailand and KFC Taiwan, previously part of China Division, are being reported as part of YRI. The China Division includes solely the results of our mainland China business. While our consolidated results are not impacted, our historical segment financial information for YRI and China Division has been restated for 2009 for consistent presentation.

CONFERENCE CALL

Yum! Brands Inc. will host a conference call to review the company’s financial performance and strategies at 9:15 a.m. ET Wednesday, October 6, 2010. The number is 877/815-2029 for U.S. callers and 706/645-9271 for international callers.

The call will be available for playback beginning at noon Eastern Time Wednesday, October 6, through midnight Wednesday, October 20, 2010. To access the playback, dial 800/642-1687 in the United States and 706/645-9291 internationally. The playback pass code is 14416434.

The webcast and the playback can be accessed via the internet by visiting Yum! Brands’ Web site, www.yum.com/investors and selecting “Q3 2010 Earnings Conference Call” under “Investors: Presentations.” A podcast will be available within 24 hours.

ADDITIONAL INFORMATION ONLINE

Third quarter end dates for each division, restaurant-count details, and definitions of terms including Key Markets are available online at www.yum.com under “Investors”.

This announcement, any related announcements and the related webcast may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Our forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from those projected. Factors that can cause our actual results to differ materially include, but are not limited to: food borne-illness or food safety issues; economic and political conditions in the countries where we operate; currency exchange and interest rates; commodity, labor and other operating costs; our ability to secure and maintain distribution and adequate supply to our restaurants; the effectiveness of our operating initiatives and marketing; the success of our strategies for refranchising and international development; the continued viability and success of our franchise and license operators; publicity that may impact our business and/or industry; pending or future legal claims; the impact of any widespread illness; our effective tax rates; our actuarially determined casualty loss estimates; government regulations; accounting policies and practices; and competition, consumer preferences or perceptions. You should consult our filings with the Securities and Exchange Commission (including the information set forth under the captions “Risk Factors” and “Forward-Looking Statements” in our Annual Report on Form 10-K) for additional detail about factors that could affect our financial and other results. Forward-looking statements are based on current expectations and assumptions and currently available data and are neither predictions nor guarantees of future events or performance. You should not place undue reliance on forward-looking statements, which speak only as of the date hereof. We are not undertaking to update any of these statements.

Yum! Brands, Inc., based in Louisville, Kentucky, is the world’s largest restaurant company in terms of system restaurants, with more than 37,000 restaurants in over 110 countries and territories. The company is ranked #216 on the Fortune 500 List, with revenues of nearly $11 billion in 2009. Four of the company’s restaurant brands – KFC, Pizza Hut, Taco Bell and Long John Silver’s – are the global leaders of the chicken, pizza, Mexican–style food and quick–service seafood categories, respectively. Outside the United States in 2009, the Yum! Brands system opened more than four new restaurants each day of the year, making it a leader in international retail development.

YUM! Brands, Inc.
Consolidated Summary of Results
(amounts in millions, except per share amounts)
(unaudited)
 
    Quarter     % Change     Year to Date     % Change
    9/4/10     9/5/09     B/(W)     9/4/10     9/5/09     B/(W)
Company sales   $ 2,496       $ 2,432       3     $ 6,712       $ 6,502       3
Franchise and license fees and income     366         346       5       1,069         969       10
Total revenues     2,862         2,778       3       7,781         7,471       4
                                           
Company restaurants                                          
Food and paper     788         777       (2)       2,112         2,081       (1)
Payroll and employee benefits     516         523       1       1,480         1,485       —
Occupancy and other operating expenses     713         707       (1)       1,935         1,879       (3)
Company restaurant expenses     2,017         2,007       (1)       5,527         5,445       (2)
                                           
General and administrative expenses     285         276       (3)       813         812       —
Franchise and license expenses     24         29       18       71         74       4
Closures and impairment (income) expenses     5         5       (12)       21         31       32
Refranchising (gain) loss     (2 )       4       NM       51         (9 )     NM
Other (income) expense     (11 )       (13 )     (12)       (31 )       (97 )     (68)
Total costs and expenses, net     2,318         2,308       —       6,452         6,256       (3)
                                           
Operating Profit     544         470       16       1,329         1,215       9
Interest expense, net     38         42       10       121         138       12
Income before income taxes     506         428       18       1,208         1,077       12
Income tax provision     139         88       (57)       307         212       (45)
Net Income – including noncontrolling interest     367         340       8       901         865       4
Net Income – noncontrolling interest     10         6       (57)       17         10       (65)
Net Income – YUM! Brands, Inc.   $ 357       $ 334       7     $ 884       $ 855       3
                                           
Effective tax rate     27.5 %       20.6 %     (6.9) ppts       25.4 %       19.7 %     (5.7) ppts
                                           
Effective tax rate before special items     27.4 %       19.9 %     (7.5) ppts       25.8 %       21.1 %     (4.7) ppts
                                           
Basic EPS Data                                          
EPS   $ 0.76       $ 0.71       7     $ 1.87       $ 1.82       3
Average shares outstanding     473         472       —       473         469       (1)
                                           
Diluted EPS Data                                          
EPS   $ 0.74       $ 0.69       7     $ 1.82       $ 1.77       3
Average shares outstanding     484         485       —       485         482       (1)
                                           
Dividends declared per common share   $ —       $ —             $ 0.42       $ 0.38        
                                                   
See accompanying notes.
 
 
YUM! Brands, Inc.
CHINA DIVISION Operating Results
(amounts in millions)
(unaudited)
 
    Quarter     % Change     Year to Date     % Change
    9/4/10     9/5/09     B/(W)     9/4/10     9/5/09     B/(W)
                                           
Company sales   $ 1,172       $ 980       20     $ 2,745       $ 2,251       22
Franchise and license fees and income     16         14       18       38         40       (4)
Total revenues     1,188         994       20       2,783         2,291       21
                                           
Company restaurant expenses, net                                          
Food and paper     390         341       (14)       909         796       (14)
Payroll and employee benefits     151         116       (31)       372         286       (31)
Occupancy and other operating expenses     335         286       (17)       806         666       (21)
      876         743       (18)       2,087         1,748       (19)
General and administrative expenses     55         45       (24)       136         117       (17)
Franchise and license expenses     1         —       NM       1         —       NM
Closures and impairment (income) expenses     —         2       67       5         6       15
Other (income) expense     (11 )       (12 )     4       (28 )       (29 )     (1)
      921         778       (18)       2,201         1,842       (20)
Operating Profit   $ 267       $ 216       24     $ 582       $ 449       30
                                           
Company sales     100.0 %       100.0 %             100.0 %       100.0 %      
Food and paper     33.3         34.8       1.5 ppts       33.1         35.3       2.2 ppts
Payroll and employee benefits     12.9         11.7       (1.2) ppts       13.6         12.7       (0.9) ppts
Occupancy and other operating expenses     28.6         29.2       0.6 ppts       29.3         29.6       0.3 ppts
Restaurant margin     25.2 %       24.3 %     0.9 ppts       24.0 %       22.4 %     1.6 ppts
                                                   
See accompanying notes.
 
As discussed in (d) in the accompanying notes, we began consolidating the operating entity that owns the KFC business in Shanghai, China, with 236 units, during the second quarter of 2009. This entity was previously accounted for as an unconsolidated affiliate.
 
As discussed in (g) in the accompanying notes, beginning in 2010 the China Division only consists of operations in mainland China and the International Division includes the remainder of our international operations. We have restated the segment information for 2009 to be consistent with 2010.
 
 
YUM! Brands, Inc.
YUM! RESTAURANTS INTERNATIONAL DIVISION Operating Results
(amounts in millions)
(unaudited)
 
    Quarter     % Change     Year to Date     % Change
    9/4/10     9/5/09     B/(W)     9/4/10     9/5/09     B/(W)
                                           
Company sales   $ 533       $ 573       (7)     $ 1,602       $ 1,567       2
Franchise and license fees and income     171         157       8       499         445       12
Total revenues     704         730       (4)       2,101         2,012       4
                                           
Company restaurant expenses, net                                          
Food and paper     170         188       9       516         513       (1)
Payroll and employee benefits     133         144       9       404         393       (2)
Occupancy and other operating expenses     163         177       8       498         483       (3)
      466         509       8       1,418         1,389       (2)
General and administrative expenses     84         89       5       248         243       (2)
Franchise and license expenses     9         13       31       24         29       17
Closures and impairment (income) expenses     3         (1 )     NM       6         5       (6)
Other (income) expense     —         —       —       —         —       —
      562         610       8       1,696         1,666       (2)
Operating Profit   $ 142       $ 120       18     $ 405       $ 346       17
                                           
Company sales     100.0 %       100.0 %             100.0 %       100.0 %      
Food and paper     31.9         32.6       0.7 ppts       32.2         32.7       0.5 ppts
Payroll and employee benefits     24.9         25.5       0.6 ppts       25.2         25.2       — ppts
Occupancy and other operating expenses     30.7         31.0       0.3 ppts       31.1         30.8       (0.3) ppts
Restaurant margin     12.5 %       10.9 %     1.6 ppts       11.5 %       11.3 %     0.2 ppts
                                           
Operating margin     20.1 %       16.4 %     3.7 ppts       19.3 %       17.2 %     2.1 ppts
                                                   
See accompanying notes.
 
As discussed in (g) in the accompanying notes, beginning in 2010 the China Division only consists of operations in mainland China and the International Division includes the remainder of our international operations. We have restated the segment information for 2009 to be consistent with 2010.
 
 
YUM! Brands, Inc.
UNITED STATES Operating Results
(amounts in millions)
(unaudited)
 
    Quarter     % Change     Year to Date     % Change
    9/4/10     9/5/09     B/(W)     9/4/10     9/5/09     B/(W)
                                           
Company sales   $ 791       $ 879       (10)     $ 2,365       $ 2,684       (12)
Franchise and license fees and income     179         176       2       532         516       3
Total revenues     970         1,055       (8)       2,897         3,200       (9)
                                           
Company restaurant expenses, net                                          
Food and paper     228         248       8       687         772       11
Payroll and employee benefits     232         263       12       704         806       13
Occupancy and other operating expenses     217         244       11       636         730       13
      677         755       10       2,027         2,308       12
General and administrative expenses     110         109       —       323         330       2
Franchise and license expenses     14         16       10       46         45       (2)
Closures and impairment (income) expenses     2         4       39       10         20       49
Other (income) expense     (1 )       —       NM       (4 )       —       NM
      802         884       9       2,402         2,703       11
Operating Profit   $ 168       $ 171       (2)     $ 495       $ 497       —
                                           
Company sales     100.0 %       100.0 %             100.0 %       100.0 %      
Food and paper     28.9         28.3       (0.6) ppts       29.1         28.8       (0.3) ppts
Payroll and employee benefits     29.2         29.9       0.7 ppts       29.7         30.0       0.3 ppts
Occupancy and other operating expenses     27.5         27.7       0.2 ppts       26.9         27.2       0.3 ppts
Restaurant margin     14.4 %       14.1 %     0.3 ppts       14.3 %       14.0 %     0.3 ppts
                                           
Operating margin     17.4 %       16.2 %     1.2 ppts       17.1 %       15.5 %     1.6 ppts
                                                   
See accompanying notes.
 
 
YUM! Brands, Inc.
Condensed Consolidated Balance Sheets
(amounts in millions)
 
    (unaudited)      
    9/4/10     12/26/09
ASSETS              
Current Assets              
Cash and cash equivalents   $ 1,274       $ 353  
Accounts and notes receivable, less allowance: $34 in 2010 and $35 in 2009     249         239  
Inventories     149         122  
Prepaid expenses and other current assets     313         314  
Deferred income taxes     81         81  
Advertising cooperative assets, restricted     109         99  
Total Current Assets     2,175         1,208  
Property, plant and equipment, net of accumulated depreciation and amortization of $3,460 in 2010 and $3,348 in 2009     3,770         3,899  
Goodwill     700         640  
Intangible assets, net     440         462  
Investments in unconsolidated affiliates     145         144  
Other assets     529         544  
Deferred income taxes     329         251  
Total Assets   $ 8,088       $ 7,148  
                   
LIABILITIES AND SHAREHOLDERS’ EQUITY              
Current Liabilities              
Accounts payable and other current liabilities   $ 1,374       $ 1,413  
Income taxes payable     94         82  
Short-term borrowings     724         59  
Advertising cooperative liabilities     109         99  
Total Current Liabilities     2,301         1,653  
                   
Long-term debt     2,905         3,207  
Other liabilities and deferred credits     1,239         1,174  
Total Liabilities     6,445         6,034  
               
Shareholders’ Equity              
Common stock, no par value, 750 shares authorized; 468 shares and 469 shares issued in 2010 and 2009, respectively     112         253  
Retained earnings     1,681         996  
Accumulated other comprehensive income (loss)     (237 )       (224 )
Total Shareholders’ Equity – YUM! Brands, Inc.     1,556         1,025  
Noncontrolling interest     87         89  
Total Shareholders’ Equity     1,643         1,114  
Total Liabilities and Shareholders’ Equity   $ 8,088       $ 7,148  
                   
See accompanying notes.
 
 
YUM! Brands, Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in millions)
(unaudited)
 
    Year to Date
    9/4/10     9/5/09
Cash Flows – Operating Activities              
Net Income – including noncontrolling interest   $ 901       $ 865  
Depreciation and amortization     383         385  
Closures and impairment (income) expenses     21         31  
Refranchising (gain) loss     51         (9 )
Contributions to defined benefit pension plans     (22 )       (96 )
Gain upon consolidation of a former unconsolidated affiliate in China     —         (68 )
Deferred income taxes     (130 )       59  
Equity income from investments in unconsolidated affiliates     (34 )       (29 )
Distributions of income received from unconsolidated affiliates     34         29  
Excess tax benefits from share-based compensation     (46 )       (48 )
Share-based compensation expense     37         39  
Changes in accounts and notes receivable     (6 )       11  
Changes in inventories     (30 )       34  
Changes in prepaid expenses and other current assets     15         (26 )
Changes in accounts payable and other current liabilities     94         2  
Changes in income taxes payable     118         (87 )
Other, net     111         43  
Net Cash Provided by Operating Activities     1,497         1,135  
               
Cash Flows – Investing Activities              
Capital spending     (490 )       (505 )
Proceeds from refranchising of restaurants     106         91  
Acquisitions & investments     (62 )       (99 )
Sales of property, plant and equipment     21         16  
Other, net     (10 )       (8 )
Net Cash Used in Investing Activities     (435 )       (505 )
               
Cash Flows – Financing Activities              
Proceeds from long-term debt     350         499  
Repayments of long-term debt     (20 )       (522 )
Revolving credit facilities, three months or less, net     12         (289 )
Short-term borrowings by original maturity              
More than three months – proceeds     —         —  
More than three months – payments     —         —  
Three months or less, net     5         5  
Repurchase shares of Common Stock     (283 )       —  
Excess tax benefits from share-based compensation     46         48  
Employee stock option proceeds     64         91  
Dividends paid on Common Stock     (295 )       (263 )
Other, net     (30 )       (8 )
Net Cash Used in Financing Activities     (151 )       (439 )
Effect of Exchange Rates on Cash and Cash Equivalents     10         —  
Net Increase in Cash and Cash Equivalents     921         191  
Change in Cash and Cash Equivalents due to Consolidation of an Entity in China     —         17  
Cash and Cash Equivalents – Beginning of Period   $ 353       $ 216  
Cash and Cash Equivalents – End of Period   $ 1,274       $ 424  
                   
See accompanying notes.
 
 
Reconciliation of Non-GAAP Measurements to GAAP Results
(amounts in millions, except per share amounts)
(unaudited)

In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) throughout this document, the Company has provided non-GAAP measurements which present operating results in 2010 and 2009 on a basis before Special Items. Included in Special Items are the U.S. refranchising gain (loss), the depreciation benefit from the KFC restaurants impaired in the first quarter of 2010, charges relating to U.S. General and Administrative (“G&A”) productivity initiatives and realignment of resources, investments in our U.S. Brands, the loss recognized upon refranchising of an equity market outside the U.S. and the 2009 gain upon our acquisition of additional ownership in, and consolidation of, the operating entity that owns the KFCs in Shanghai, China. These amounts are described in (d), (e) and (f) in the accompanying notes.

The Company uses earnings before Special Items as a key performance measure of results of operations for the purpose of evaluating performance internally. This non-GAAP measurement is not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of earnings before Special Items provides additional information to investors to facilitate the comparison of past and present operations, excluding items in 2010 and 2009 that the Company does not believe are indicative of our ongoing operations due to their size and/or nature.

    Quarter   Year to Date
    9/4/10   9/5/09   9/4/10   9/5/09
Detail of Special Items                        
Gain upon consolidation of a former unconsolidated affiliate in China   $ —     $ —     $ —     $ 68  
Loss upon refranchising of an equity market outside the U.S.     —       (10 )     (7 )     (10 )
U.S. Refranchising gain (loss)     —       8       (51 )     23  
Depreciation benefit from KFC restaurants impaired upon offer to sell     2       —       5       —  
Charges relating to U.S. G&A productivity initiatives and realignment of resources     —       —       (5 )     (9 )
Investments in our U.S. Brands     —       (1 )     —       (32 )
Total Special Items Income (Expense)     2       (3 )     (58 )     40  
Tax Benefit (Expense) on Special Items     (1 )     (3 )     19       6  
Special Items Income (Expense), net of tax   $ 1     $ (6 )   $ (39 )   $ 46  
Average diluted shares outstanding     484       485       485       482  
Special Items diluted EPS   $ 0.01     $ (0.01 )   $ (0.08 )   $ 0.10  
                         
Reconciliation of Operating Profit Before Special Items to Reported Operating Profit                        
Operating Profit before Special Items   $ 542     $ 473     $ 1,387     $ 1,175  
Special Items Income (Expense)     2       (3 )     (58 )     40  
Reported Operating Profit   $ 544     $ 470     $ 1,329     $ 1,215  
                         
Reconciliation of EPS Before Special Items to Reported EPS                        
Diluted EPS before Special Items   $ 0.73     $ 0.70     $ 1.90     $ 1.67  
Special Items EPS     0.01       (0.01 )     (0.08 )     0.10  
Reported EPS   $ 0.74     $ 0.69     $ 1.82     $ 1.77  
                         
Reconciliation of Effective Tax Rate Before Special Items to Reported Effective Tax Rate                        
Effective Tax Rate before Special Items     27.4 %     19.9 %     25.8 %     21.1 %
Impact on Tax Rate as a result of Special Items     0.1 %     0.7 %     (0.4 )%     (1.4 )%
Reported Effective Tax Rate     27.5 %     20.6 %     25.4 %     19.7 %
                                 
                                 
YUM! Brands, Inc.
Segment Results
(amounts in millions)
(unaudited)
 
Quarter Ended 9/4/10   ChinaDivision   YRI   UnitedStates   Corporate andUnallocated   Consolidated
Total revenues   $ 1,188     $ 704     $ 970     $ —     $ 2,862  
                               
Company restaurant expenses     876       466       677       (2 )     2,017  
General and administrative expenses     55       84       110       36       285  
Franchise and license expenses     1       9       14       —       24  
Closures and impairment (income) expenses     —       3       2       —       5  
Refranchising (gain) loss     —       —       —       (2 )     (2 )
Other (income) expense     (11 )     —       (1 )     1       (11 )
      921       562       802       33       2,318  
Operating Profit (loss)   $ 267     $ 142     $ 168     $ (33 )   $ 544  
                                         
Quarter Ended 9/5/09   ChinaDivision   YRI   UnitedStates   Corporate andUnallocated   Consolidated
Total revenues   $ 994     $ 730     $ 1,055     $ (1 )   $ 2,778  
                               
Company restaurant expenses     743       509       755       —       2,007  
General and administrative expenses     45       89       109       33       276  
Franchise and license expenses     —       13       16       —       29  
Closures and impairment (income) expenses     2       (1 )     4       —       5  
Refranchising (gain) loss     —       —       —       4       4  
Other (income) expense     (12 )     —       —       (1 )     (13 )
      778       610       884       36       2,308  
Operating Profit (loss)   $ 216     $ 120     $ 171     $ (37 )   $ 470  
                               
The above table reconciles segment information, which is based on management responsibility, with our Consolidated Summary of Results. Corporate and unallocated expenses comprise items that are not allocated to segments for performance reporting purposes.
 
 
YUM! Brands, Inc.
Segment Results
(amounts in millions)
(unaudited)
 
Year to Date Ended 9/4/10   ChinaDivision   YRI   UnitedStates   Corporate andUnallocated   Consolidated
Total revenues   $ 2,783     $ 2,101   $ 2,897     $ —     $ 7,781  
                               
Company restaurant expenses     2,087       1,418     2,027       (5 )     5,527  
General and administrative expenses     136       248     323       106       813  
Franchise and license expenses     1       24     46       —       71  
Closures and impairment (income) expenses     5       6     10       —       21  
Refranchising (gain) loss     —       —     —       51       51  
Other (income) expense     (28 )     —     (4 )     1       (31 )
      2,201       1,696     2,402       153       6,452  
Operating Profit (loss)   $ 582     $ 405   $ 495     $ (153 )   $ 1,329  
                               
Year to Date Ended 9/5/09   ChinaDivision   YRI   UnitedStates   Corporate andUnallocated   Consolidated
Total revenues   $ 2,291     $ 2,012   $ 3,200     $ (32 )   $ 7,471  
                               
Company restaurant expenses     1,748       1,389     2,308       —       5,445  
General and administrative expenses     117       243     330       122       812  
Franchise and license expenses     —       29     45       —       74  
Closures and impairment (income) expenses     6       5     20       —       31  
Refranchising (gain) loss     —       —     —       (9 )     (9 )
Other (income) expense     (29 )     —     —       (68 )     (97 )
      1,842       1,666     2,703       45       6,256  
Operating Profit (loss)   $ 449     $ 346   $ 497     $ (77 )   $ 1,215  
                               
The above table reconciles segment information, which is based on management responsibility, with our Consolidated Summary of Results. Corporate and unallocated expenses comprise items that are not allocated to segments for performance reporting purposes.
 
 
Notes to the Consolidated Summary of Results, Condensed Consolidated Balance Sheets
and Condensed Consolidated Statements of Cash Flows
(amounts in millions, except per share amounts)
(unaudited)
 
(a)   Percentages may not recompute due to rounding.
     
(b)   Amounts presented as of and for the quarter and year to date ended September 4, 2010 are preliminary.
     
(c)   China Division Other (income) expense includes equity income from our investments in unconsolidated affiliates. In the year to date ended September 5, 2009, Unallocated Other (income) expense includes the gain upon our acquisition of additional ownership in, and consolidation of, the operating entity that owns the KFCs in Shanghai, China (see Note d).
     
(d)   On May 4, 2009 we acquired an additional 7% ownership in the entity that operates the KFCs in Shanghai, China for $12 million, increasing our ownership to 58%. Prior to our acquisition of this additional interest, this entity was accounted for as an unconsolidated affiliate. As part of the acquisition we received additional rights in the governance of the entity such that we began consolidating the entity upon acquisition. We remeasured our previously held 51% ownership in the entity at fair value and recognized a gain of $68 million accordingly. The gain, which resulted in no related income tax expense, was recorded as unallocated other income during the quarter ended June 13, 2009 and has been reflected as a Special Item for certain performance measures (see accompanying reconciliation to reported results). For the year to date ended September 4, 2010 the consolidation of the existing restaurants upon acquisition increased Company sales by $98 million and decreased Franchise and license fees and income by $6 million. The consolidation of the existing restaurants upon acquisition increased Operating Profit by $3 million for the year to date ended September 4, 2010.
     
(e)   As part of our plan to transform our U.S. business we took several measures (“the U.S. business transformation measures”) in 2010 and 2009 including: expansion of our U.S. refranchising, potentially reducing our Company ownership in the U.S. to below 10%; a reduced emphasis on multi-branding as a long-term growth strategy; G&A productivity initiatives and realignment of resources (primarily severance and early retirement costs); and investments in our U.S. Brands made on behalf of our franchisees such as equipment purchases. We have traditionally not allocated refranchising (gains) losses for segment reporting purposes and will not allocate the costs associated with the productivity initiatives, realignment of resources and investments in our U.S. Brands to the U.S. segment. Additionally, these items have been reflected as Special Items for certain performance measures (see accompanying reconciliation to reported results). U.S. refranchising loss recorded in the year to date ended September 4, 2010 is the net result of gains from 98 restaurants sold and non-cash impairment charges in the first quarter related to our offers to refranchise restaurants in the U.S., principally a substantial portion of our Company operated KFCs. We have recorded the depreciation benefit for the quarter and year to date ended September 4, 2010 resulting from the non-cash impairment charge related to these KFCs as a Special Item, resulting in depreciation expense in the U.S. Segment results continuing to be recorded at the rate at which it was prior to the impairment charge being recorded. Investments in our U.S. Brands recorded in 2009 reflect our reimbursements to KFC franchisees for installation costs of ovens for the national launch of Kentucky Grilled Chicken and have been recorded as a reduction of Franchise and license fees and income.
     
(f)   During the quarter ended September 5, 2009 we recognized a $10 million refranchising loss as a result of our decision to offer to refranchise our KFC Taiwan equity market. During the quarter ended March 20, 2010 we refranchised all of our remaining company restaurants in Taiwan, which consisted of 124 KFCs. We included in our March 20, 2010 financial statements a non-cash write off of $7 million of goodwill in determining the loss on refranchising of Taiwan. Neither of these losses resulted in a related income tax benefit, and neither loss was allocated to any segment for performance reporting purposes.
     
(g)   In 2010 we began reporting information for our Thailand and KFC Taiwan businesses within our International Division as a result of changes to our management reporting structure. These businesses now report to the President of our YRI Division whereas previously they reported to the President of our China Division. Beginning in 2010, the China Division only consists of operations in mainland China and the International Division includes the remainder of our international operations. While this reporting change did not impact our Consolidated results, segment information for previous periods has been restated to be consistent with the current period presentation.
     
    The following table summarizes the 2009 quarterly increases to selected line items within the YRI segment as a result of these segment reporting changes (with equal and offsetting decreases impacting the China Division segment):
                         
        First   Second   Third   Fourth    
        Quarter   Quarter   Quarter   Quarter   Total
    Company sales   $ 47     $ 64     $ 68     $ 91     $ 270
    Company restaurant expenses     42       57       62       83       244
    Operating Profit     3       —       1       2       6
                                           
(h)   On July 1, 2010, we completed the exercise of our option with our Russian partner to purchase their interest in the co-branded KFC-Rostik’s restaurants across Russia and the Commonwealth of Independent States (“CIS”). As a result, we acquired company ownership of 50 restaurants and gained full rights and responsibilities as franchisor of 81 restaurants, which our partner previously managed as master franchisor. Upon exercise of our option, we paid cash of $56 million, forgave a long-term note receivable of $11 million and assumed long-term debt of $10 million. The remaining balance of the purchase price, anticipated to be $11 million, will be paid in cash in July 2012 . The impact of consolidating this business on all line items within our Condensed Consolidated Income Statement was insignificant for the quarter ended September 4, 2010 for our International Division. While we have not yet completed our allocation of the purchase price, our Condensed Consolidated Balance Sheet at September 4, 2010 reflects the consolidation of this entity using preliminary amounts including $74 million of goodwill.

Wingstop Reaches 29 Consecutive Quarters of Positive Comp Store Sales

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Today, Wingstop announced same store sales for the third quarter are up 1.9 percent over the same quarter last year and 1.7 percent for the year to date. That marks 29 consecutive quarters of positive comparable store sales – more than seven years of continued growth – for the 460-unit chicken wing chain.

At a time when many chains struggled through the recent recession, the real question is – how do they do it?

“It’s simple. We do one thing, and we do it better than anyone else,” said Jim Flynn, Wingstop CEO. “Since the concept was created, Wingstop has kept its focus on serving chicken wings that are made fresh and cooked-to-order. Though the average wait time for an order of chicken wings is 14 minutes, guests appreciate the quality, and that dedication has propelled our growth over the years.”

Wingstop opened its first location in Garland, Texas in 1994. The chain quickly spread throughout Dallas-Fort Worth and began franchising in 1997. Today more than 95 percent of the network is franchise owned and operated, with the 500th location expected to open in early 2011.

“A large part of our success is attributed directly back to our franchise network,” said Wes Jablonski, chief development officer for Wingstop. “From single unit owners to multi-unit developers, we select strong brand partners that are passionate about the business, and customers respond to that.”

Now, with the beginning of football season, Wingstop is hitting its busiest time of the year. The chain recently launched a new advertising campaign featuring national spokesman Troy Aikman, and a Boneless Blitz promotion, geared towards stretching dollars for watching parties and events.

“Our menu is designed so that large groups and families can eat, per person, very reasonably,” said Andy Howard, chief marketing officer for Wingstop. “We focus on bringing our guests value, whether they are feeding a group of four, or forty.”