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UPDATE: Yum! pegs hit from E. coli outbreak at $20M

LOUISVILLE Ky. An E. coli outbreak at Taco Bells in the Northeast lowered same store sales for all domestic restaurants operated by franchisor Yum! Brands Inc. by 2 percent for the fourth quarter ended Dec. 30, the company indicated. Comparable sales at Taco Bell units fell by an 5 percent, according to the company, which also operates and franchises Pizza Hut, KFC, Long John Silver’s and A&W restaurants. The outbreak's impact on sales, coupled with increased marketing and legal fees, cut into operating profits by $20 million, Yum disclosed.

Overall, Yum reported a 2.6-percent increase in net income on a 4-percent jump in revenues, to $3.02 billion, for the last quarter of fiscal 2006. The year-over-year growth in profit and revenues was driven by Yum’s divisions abroad, especially in China, which offset weaker performance in the United States, where results reflected the E. coli outbreak in December. "We are still not all the way back," Yum chief executive David Novak told analysts during a conference call.

During the call, Yum officials indicated that the company will begin testing the lettuce it buys before the produce leaves the farm. Shredded lettuce was suspected as being the source of the E. coli outbreak, in which 71 people in five states were confirmed to have contracted the bacteria.

Yum operates or franchises about 34,595 restaurants worldwide.

For the fourth quarter, the company earned $232 million, or 83 cents per share, compared with earnings of $226 million, or 77 cents per share, a year earlier.

In disclosing the results, Yum noted that it would increase the number of domestic company restaurants it sells to franchisees, to 1,500 units by 2009. The company, based here, said it refranchised 452 stores during 2006.

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