Kentucky Fried Chicken 2005 Annual Report Download - page 61

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Assets฀held฀for฀sale฀at฀December฀31,฀2005฀and฀December฀25,฀
2004฀total฀$11฀million฀and฀$7฀million,฀respectively,฀of฀U.S.฀
property,฀plant฀and฀equipment,฀primarily฀land,฀on฀which฀we฀
previously฀operated฀restaurants฀and฀are฀included฀in฀prepaid฀
expenses฀ and฀ other฀ current฀ assets฀ on฀ our฀ Consolidated฀
Balance฀Sheets.
Wrench฀ Litigation฀ We฀ recorded฀ income฀ of฀ $2฀million฀ in฀
2005฀from฀a฀settlement฀with฀an฀insurance฀carrier฀related฀to฀
the฀Wrench฀litigation.฀Income฀of฀$14฀million฀was฀recorded฀
for฀2004฀refl฀ecting฀settlements฀associated฀with฀the฀Wrench฀
litigation฀for฀amounts฀less฀than฀previously฀accrued฀as฀well฀
as฀ related฀ insurance฀ recoveries.฀ Expense฀ of฀ $42฀million฀
was฀recorded฀as฀Wrench฀litigation฀for฀2003฀refl฀ecting฀the฀
amounts฀awarded฀to฀the฀plaintiff฀and฀interest฀thereon.฀See฀
Note฀21฀for฀a฀discussion฀of฀Wrench฀litigation.
AmeriServe฀and฀Other฀Charges฀(Credits)฀ AmeriServe฀Food฀
Distribution฀Inc.฀(“AmeriServe”)฀was฀the฀primary฀distributor฀
of฀food฀and฀paper฀supplies฀to฀our฀U.S.฀stores฀when฀it฀fi฀led฀for฀
protection฀under฀Chapter฀11฀of฀the฀U.S.฀Bankruptcy฀Code฀on฀
January฀31,฀2000.฀A฀plan฀of฀reorganization฀for฀AmeriServe฀
(the฀“POR”)฀was฀approved฀on฀November฀28,฀2000,฀which฀
resulted฀ in,฀ among฀ other฀ things,฀ the฀ assumption฀ of฀ our฀
distribution฀agreement,฀subject฀to฀certain฀amendments,฀by฀
McLane฀Company,฀Inc.฀During฀the฀AmeriServe฀bankruptcy฀
reorganization฀process,฀we฀took฀a฀number฀of฀actions฀to฀ensure฀
continued฀supply฀to฀our฀system.฀Those฀actions฀resulted฀in฀
signifi฀cant฀expense฀for฀the฀Company,฀primarily฀recorded฀in฀
2000.฀ Under฀ the฀ POR,฀ we฀ are฀ entitled฀ to฀ proceeds฀ from฀
certain฀residual฀assets,฀preference฀claims฀and฀other฀legal฀
recoveries฀of฀the฀estate.
Income฀of฀$2฀million,฀$16฀million฀and฀$26฀million฀was฀
recorded฀as฀AmeriServe฀and฀other฀charges฀(credits)฀for฀2005,฀
2004฀ and฀ 2003,฀ respectively.฀ These฀ amounts฀ primarily฀
resulted฀ from฀ cash฀ recoveries฀ related฀ to฀ the฀ AmeriServe฀
bankruptcy฀reorganization฀process.
5.฀SUPPLEMENTAL฀CASH฀FLOW฀DATA
2005฀ 2004฀ 2003
Cash฀Paid฀for:
฀ Interest฀ $฀132฀ $฀146฀ $฀178
฀ Income฀taxes฀ ฀232฀ ฀276฀ ฀196
Significant฀Non-Cash฀Investing฀
฀ and฀Financing฀Activities:
Assumption฀of฀capital฀leases฀
฀ related฀to฀the฀acquisition฀of฀
฀ restaurants฀from฀franchisees฀ ฀ —฀ ฀ 8฀ ฀ —
Capital฀lease฀obligations฀incurred฀
฀ to฀acquire฀assets฀ ฀ 7฀ ฀ 13฀ ฀ 9
Debt฀reduction฀due฀to฀amendment฀
฀ of฀sale-leaseback฀agreements฀฀ ฀ —฀ ฀ —฀ ฀ 88
6.฀FRANCHISE฀AND฀LICENSE฀FEES
2005฀ 2004฀ 2003
Initial฀fees,฀including฀renewal฀fees฀ $฀ 51฀ $฀ 43฀ $฀ 36
Initial฀franchise฀fees฀included฀in฀
฀ refranchising฀gains฀ ฀ (10)฀ ฀ (10)฀ ฀ (5)
฀ ฀ ฀ ฀ 41฀ ฀ 33฀ ฀ 31
Continuing฀fees฀ ฀1,083฀ ฀ 986฀ ฀908
$฀1,124฀ $฀1,019฀ $฀939
7.฀OTHER฀(INCOME)฀EXPENSE
2005฀ 2004฀ 2003
Equity฀income฀from฀investments฀in฀
฀ unconsolidated฀affiliates฀ $฀(51)฀ $฀(54)฀ $฀(39)
Gain฀upon฀sale฀of฀investment฀in฀
฀ unconsolidated฀affiliate(a) ฀(11)฀ ฀ —฀ ฀ —
Recovery฀from฀supplier(b) ฀(20)฀ ฀ —฀ ฀ —
Foreign฀exchange฀net฀(gain)฀loss฀฀ ฀ 2฀ ฀ (1)฀ ฀ (2)
Other฀(income)฀expense฀ $฀(80)฀ $฀(55)฀ $฀(41)
(a)฀Refl฀ects฀a฀gain฀related฀to฀the฀2005฀sale฀of฀our฀fi฀fty฀percent฀interest฀in฀the฀entity฀
that฀operated฀almost฀all฀KFCs฀and฀Pizza฀Huts฀in฀Poland฀and฀the฀Czech฀Republic฀
to฀our฀then฀partner฀in฀the฀entity,฀principally฀for฀cash.฀This฀transaction฀generated฀
a฀one-time฀net฀gain฀of฀approximately฀$11฀million฀for฀YUM฀as฀cash฀proceeds฀(net฀
of฀expenses)฀of฀approximately฀$25฀million฀from฀the฀sale฀of฀our฀interest฀in฀the฀
entity฀exceeded฀our฀recorded฀investment฀in฀this฀unconsolidated฀affi฀liate.
(b)฀Relates฀to฀a฀fi฀nancial฀recovery฀from฀a฀supplier฀ingredient฀issue฀in฀mainland฀
China฀totaling฀$24฀million฀for฀the฀year฀ended฀December฀31,฀2005,฀$4฀million฀
of฀which฀was฀recognized฀through฀equity฀income฀from฀investments฀in฀unconsoli-
dated฀affi฀liates.฀Our฀KFC฀business฀in฀mainland฀China฀was฀negatively฀impacted฀
by฀the฀interruption฀of฀product฀offerings฀and฀negative฀publicity฀associated฀with฀
a฀supplier฀ingredient฀issue฀experienced฀in฀late฀March,฀2005.฀During฀the฀year฀
ended฀December฀31,฀2005,฀we฀entered฀into฀an฀agreement฀with฀the฀supplier฀for฀
a฀partial฀recovery฀of฀our฀losses.
8.฀PROPERTY,฀PLANT฀AND฀EQUIPMENT,฀NET
2005฀ 2004
Land฀฀ ฀ ฀ $฀ 567฀ $฀ 617
Buildings฀and฀improvements฀ ฀ ฀ ฀ 3,094฀ ฀ 2,957
Capital฀leases,฀primarily฀buildings฀ ฀ ฀ ฀ 126฀ ฀ 146
Machinery฀and฀equipment฀ ฀ ฀ ฀ 2,399฀ ฀ 2,337
฀ ฀ ฀ ฀ ฀ ฀ ฀ 6,186฀ ฀ 6,057
Accumulated฀depreciation฀and฀amortization฀฀ ฀(2,830)฀ ฀(2,618)
฀ ฀ ฀ ฀ ฀ ฀ $฀ 3,356฀ $฀ 3,439
Depreciation฀and฀amortization฀expense฀related฀to฀property,฀
plant฀and฀ equipment฀was฀ $459฀million,฀ $434฀million฀and฀
$388฀million฀in฀2005,฀2004฀and฀2003,฀respectively.
Yum!฀Brands,฀Inc.฀ ฀ ฀ |฀ ฀ ฀ 65.