Interview With The Senior Vice President Of Investor Relations: Yum! Brands, Inc. (YUM) - Tim Jerzyk
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Tim Jerzyk is Senior Vice President of Investor Relations for Yum! Brands, the world's largest restaurant company in terms of units, with more than 37,000 stores in over 110 countries, and parent of KFC, Pizza Hut, Taco Bell, Long John Silver's and A&W All-American Food. He has led the investor relations function since 2000. Mr. Jerzyk was also Treasurer of Yum! from January 2007 to March 2010. Prior to assuming his current role, Mr. Jerzyk served as Vice President of Business Planning and founded the function when PepsiCo spun off KFC, Pizza Hut and Taco Bell as Tricon Global Restaurants, Inc., in 1997. He has held numerous other roles in finance, including corporate planning, corporate control, field/division CFO and operations.
TWST: In mid-July, Yum! Brands reported continued overseas unit development, with sales growth of 15% in China and 10% in emerging markets. Your strong international results really improved earnings. What key things investors should know about Yum!'s international operations?
Mr. Jerzyk: Potential investors understand that we're not new to the game in terms of international development. We've been working on this for a long time. The basis of our international operations really started with PepsiCo, and we have aggressively grown this business over time. We have the people capability and the track record that give us the ability and credibility to talk about the future opportunities in both developed and emerging international markets. Beyond that, we have really developed our people capability, and our scale and structure overseas. We've grown as a company over the last 12 years. We have more than 1,000 franchisees on the international side of our business, and they're great growth partners. Last year marked the ninth straight year we opened more than 1,000 new restaurants outside the U.S. along with our franchisee partners.
We also have a great team on the ground in China and significant competitive advantages. We own our own distribution system in China, and it gives us the capability to go anywhere in the country. We are in over 650 cities in China, with 3,000 KFC restaurants. We're as far west as the Gobi Desert; we're in Mongolia, and we're in a lot of places where any other U.S. brand cannot get to today in the country. Pizza Hut Casual Dining continues to be the leading Western casual dining concept in China, with 469 units in over 120 cities. We also continue to invest in our two emerging brands, Pizza Hut Home Service and East Dawning. Pizza Hut Home Service focuses on the home delivery category, with over 100 units. East Dawning, our Chinese fast food concept, continues to progress as we drive for scalable economics. Since 2005 we have added over 1,800 restaurants and tripled our profits with our brands in China.
In addition to China, we have a tremendous amount of other high-return markets, such as India and additional major markets in Southeast Asia. Our return on invested capital is very strong and as a result, the cash flow that we generate, even after capital spending, is substantial. For that reason, we do not have to borrow or short our spending in emerging markets. It's a situation where basically we have more than enough cash to grow our international business.
TWST: Last week you also raised your earnings forecast. I wondered if you could explain a bit more about the reasoning behind that.
Mr. Jerzyk: Overall for the first half, our earnings per share was up 20%; it's a really strong start for us. Our target is to grow earnings per share on an annual basis at least 10% - that's our commitment to shareholders. So we're well ahead of that target after the first half. We feel confident in looking out at the full year that we could get the 12% earnings per share growth, based on that strong first half, especially given our very strong results in China.
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