Burger King 2006 Annual Report Download - page 92

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BURGER KING HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements Ì (Continued)
June 30, 2004. The change in allowances for doubtful accounts for each of the three years ending June 30,
2006 are as follows:
Years Ended June 30,
2006 2005 2004
Beginning balanceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29 79 106
Bad debt expense, net of recoveries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2) 1 11
Write-offs and transfers to/from notes receivable, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5 (51) (38)
Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32 29 79
Note 6. Property and Equipment, Net
Property and equipment, net, along with their estimated useful lives, consist of the following
(in millions):
Years Ended
June 30,
2006 2005
Land ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 379 $ 384
Buildings and improvementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (up to 40 years) 517 470
Machinery and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (up to 18 years) 228 234
Furniture, fixtures, and other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (up to 10 years) 85 37
Construction in progress ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34 26
1,243 1,151
Accumulated depreciation and amortizationÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (357) (252)
Property and equipment, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 886 $ 899
Depreciation expense on property and equipment totaled $109 million for the year ended June 30, 2006,
$100 million for the year ended June 30, 2005, and $112 million for the year ended June 30, 2004.
Property and equipment, net, includes assets under capital leases, net of depreciation, of $47 million and
$39 million at June 30, 2006 and 2005, respectively.
Note 7. Intangible Assets, Net and Goodwill
The Burger King brand of $896 million and $909 million at June 30, 2006 and 2005, respectively and
goodwill of $20 million and $17 million at June 30, 2006 and 2005, respectively, represent the Company's
indefinite-lived intangible assets. The increase in goodwill of $3 million is attributable to acquisitions during
2006. The decrease in the net carrying amount of the brand is attributable to a $12 million reduction in pre-
acquisition deferred tax valuation allowances and $6 million deferred tax liability associated with these
reductions, both of which were recorded as part of the Transaction, and were applied against the brand in
accordance with SFAS No. 109. These amounts were offset by the foreign currency translation effect of
$3 million on the value of the brand transferred to EMEA operating segment as part of the realignment of the
European and Asian businesses (See Note 13).
80