Pizza Hut 1999 Annual Report Download - page 52

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The following table displays a summary of the 1999 and 1998
activity related to all stores disposed of or held for disposal
including the stores covered by the fourth quarter 1997 charge.
We believe that the remaining carrying amounts are adequate
to complete our disposal actions.
Asset
Valuation
Allowances Liabilities
Carrying amount at
December 27, 1997 $ 291 $ 115
Amounts used (148) (36)
(Income) expense impact:
New decisions 16 5
Estimate/decision changes (33) (8)
Other 1 1
Carrying amount at
December 26, 1998 127 77
Amounts used (100) (36)
(Income) expense impact:
New decisions 9 15
Estimate/decision changes (20) 15
Other 4 —
Carrying amount at
December 25, 1999 $20 $71
The carrying values of assets held for disposal (which include
stores, our idle processing facility in Wichita, Kansas and a
minority interest investment in a non-core business in 1998)
by reportable operating segment as of December 25, 1999 and
December 26, 1998 were as follows:
1999 1998
U.S. $ 40 $ 111
International —46
Total $40 $ 157
We anticipate that all assets held for disposal at December 25,
1999 will be disposed of during 2000.
The results of operations for stores held for disposal or disposed
of in 1999, 1998 and 1997 were as follows:
1999 1998 1997
Stores held for disposal or
disposed of in 1999:
Sales $ 734 $ 1,271 $ 1,155
Restaurant margin 76 147 114
Stores disposed of in
1998 and 1997:
Sales $— $ 637 $ 1,779
Restaurant margin —55 132
The loss of restaurant margin from the disposal of these stores
is mitigated in income before taxes by the increased franchise
fees for stores refranchised, lower general and administrative
expenses and reduced interest costs primarily resulting from
the reduction of debt by the after-tax cash proceeds from our
refranchising activities. The margin reported above includes
the benefit from the suspension of depreciation and amortiza-
tion of approximately $9 million ($8 million in the U.S. and
$1 million in International), $32 million ($24 million in the U.S.
and $8 million in International) and $17 million in the U.S. in
1999, 1998 and 1997, respectively, on assets held for disposal.
Unusual Items
1999 1998 1997
U.S. $48 $11 $ 85
International 3499
Worldwide $51 $ 15 $ 184
After-tax $29 $ 3 $ 165
On January 31, 2000, AmeriServe Food Distribution, Inc.
(“AmeriServe”), our primary U.S. distributor, filed for protec-
tion under Chapter 11 of the U.S. Bankruptcy Code. As a result
of the bankruptcy, we wrote off approximately $41 million of
amounts owed to us by AmeriServe, including a $15 million
unsecured loan. See Note 22. In addition to the AmeriServe
write-off, unusual items included the following in 1999: (1) an
increase in the estimated costs of settlement of certain wage
and hour litigation and associated defense and other costs
incurred, as more fully described in Note 21; (2) favorable
adjustments to our 1997 fourth quarter charge related to lower
actual costs; (3) the writedown to estimated fair market value
less cost to sell of our idle Wichita processing facility; (4) costs
associated with the pending formation of international uncon-
solidated affiliates in Canada and Poland; (5) the impairment
of enterprise-level goodwill in one of our international busi-
nesses; and (6) additional severance and other exit costs
related to 1998 strategic decisions to streamline the infra-
structure of our international businesses. The estimated fair
market value of our idle Wichita processing facility was deter-
mined by using the estimated selling price based primarily on
an evaluation by a qualified third party.
Unusual items in 1998 included: (1) an increase in the esti-
mated costs of settlement of certain wage and hour litigation
and associated defense and other costs incurred; (2) sever-
ance and other exit costs related to 1998 strategic decisions to
streamline the infrastructure of our international businesses;
(3) favorable adjustments to our 1997 fourth quarter charge
related to anticipated actions that were not taken, primarily sev-
erance; (4) the writedown to estimated fair market value less
costs to sell of our minority interest in a privately held non-core
business, previously carried at cost; and (5) reversals of cer-
tain valuation allowances and lease liabilities relating to
better-than-expected proceeds from the sale of properties and
settlement of lease liabilities associated with properties retained
upon the sale of a Non-core Business.
Unusual items in 1997 included: (1) $120 million ($125 mil-
lion after-tax) of unusual asset impairment and severance