1. Yum! Brands, Inc.

(YUM) is a fast food industry company with a few restaurants

under its corporate structure such as Taco Bell, Kentucky Fried Chicken, Pizza Hut,
and two smaller companies in China doing business as Little Sheep and East
Dawning. In total Yum! Brands operates over 40,000 restaurants in over 125
countries worldwide. (Jones, 2014). The fast food industry is large with over $180
billion in sales annually. In the U.S. there are more than 300,000 fast food and fast
casual restaurants, and their average drive thru window order time is less than 3
minutes. (Nichols, 2013) Recently the industry has been facing pressure from
activists protesting the minimum wage that fast food workers usually earn. In many
cities throughout the U.S. protesters would like to see the national minimum wage
raise to $15 per hour. In New York City this appears to be likely to pass. (McGeehan,
2015) For the future of the industry the growth seems to be in the fast casual
segment. Since 1999, the fast casual segment has grown 550 percent, which is
about 10 times the growth seen by the fast food industry. Yum! Brands competitor
Chipotle most readily signifies this trend toward the fast casual market (Ferdman,
2015)
2. Read Note 1 (Description of Business) of Yum! Brands, Inc.s annual report.
What do you learn here and why is it important?
Reading Note 1 (Description of Business) we learn that the Indian division has been
reported as a separate line item from Yum! Restaurants International (YRI) since
2012. The historical values for YRI have been restated to be consistent and
comparable with current financial reports. This is important because if we have nonrestated historical financial reports for Yum! Brands then we would be comparing
the current data incorrectly. In addition, the sale of Long John Silvers and A&W All
American Food Restaurants also will have an impact when comparing financial data
in 2010 and 2011. (Appendix B, p. 852)
3. Name two of Yum! Brands, Inc.s competitors. Why is this information important
in evaluation Yum! Brands, Inc.s financial performance?
Some of the largest competitors to Yum! Brands, Inc.s Concepts are McDonalds
Corp., Dominos Pizza, Inc., and Chipotle Mexican Grill, Inc. (Morningstar, Inc.) It is
important to know Yum! Brands, Inc.s competitors because it allows us to evaluate
the company financial reports against its industry peers. Companies do not operate
in a vacuum, and being able to compare between them allows to understand how
well each company is effectively managed.
4. Write Yum! Brands, Inc.s accounting equation at December 31, 2012 (express all
items in millions and round to the nearest $1 million). Does Yum! Brands, Inc.s
financial condition look strong or weak? How can you tell?
Assets = Liabilities + Owners Equity
December 31, 2012 Yum! Brands, Inc.s Financial Data (Appendix B, p. 850)
$9,011 (assets) = $6,699 (liabilities) + $59 (redeemable non-controlling interest,
liability?) + $2,253 (shareholders equity)

Yum! Brands, Inc.s financial condition looks decently strong. Their assets can easily
cover the amount of total liabilities for the company while keeping some equity for
the shareholders. We can see that compared to the previous year the total liabilities
decreased while assets and stockholders equity increased. This shows that the
company improved when compared to their previous year.
5. What was the results of Yum! Brands, Inc.s operations during 2012? Identify both
the name and the dollar amount of the result of operations for 2012. Does an
increase (or decrease) signal good news or bad news for the company and its
stockholders?
Yum! Brands, Inc.s has been able to consistently increase their Net Cash Provided
by Operating Activities in the last three years. From $1,968 in 2010 to $2,170 in
2011, to $2,294 in 2012. This is a good news signal for the company and its
stakeholders because it shows that the company has been successful in getting
consumers to increasingly purchase their products, while maintaining their
operating expenditures under control.
6. Examine retained earnings in the Consolidated Statements of Shareholders
Equity. What caused retained earnings to increase during 2012?
Retained earnings were able to increase to $2,286 in 2012 mainly due to the
increase in Net Income to $1,608 in 2011. The increase in Net Income was able to
offset the increase in Dividends and Repurchase of shares of Common Stock.
7. Which statement reports cash and cash equivalents as part of Yum! Brands, Inc.s
financial position? Which statement tells why cash and cash equivalents increased
(or decreased) during the year? Which activities caused Yum! Brands, Inc.s cash
and cash equivalents to change during 2012, and how much did each activity
provide or use?
The Consolidated Balance Sheets reports Cash and Cash Equivalents. The
Consolidated Statements of Cash Flows shows why cash and cash equivalents
increased (or decreased) during the year.
The largest increase of cash outflows were Contributions to defined benefit pension
plans, Capital Spending, Acquisitions, Repurchase of shares of Common Stock. The
spending seems to be related to long term liabilities such as pension plans for their
employees, and investing in growing the company in acquisitions, capital spending,
and repurchase of common stock.
References:
Jones, Adam. 2014. A critical overview of Yum! Brands for investors. Market Realist.
Retrieved from http://marketrealist.com/2014/10/critical-overview-yum-brandsinvestors/
Nichols, Chris. 2013. Fast-food Facts That Will Blow Your Mind. Yahoo! Finance.
Retrieved from http://finance.yahoo.com/blogs/the-exchange/fast-food-facts-blowmind-215644960.html

McGeehan, Patrick. 2015. New York Plans $15-an-Hour Minimum Wage for Fast Food
Workers. The New York Times. Retrieved from
http://www.nytimes.com/2015/07/23/nyregion/new-york-minimum-wage-fast-foodworkers.html?_r=0
Ferdman, Robert A. 2015. The Chipotle effect: Why America is obsessed with fast
casual food. The Washington Post. Retrieved from
http://www.washingtonpost.com/news/wonkblog/wp/2015/02/02/the-chipotle-effectwhy-america-is-obsessed-with-fast-casual-food/
Morningstar, Inc. 2015. Yum Brands, Inc. Industry Peers. Morningstar. Retrieved from
http://financials.morningstar.com/competitors/industry-peer.action?
t=YUM&region=usa&culture=en-US