Pizza Hut 2003 Annual Report Download - page 61

Yum! Brands Inc. 59.
ITEMS AFFECTING COMPARABILITY OF NET INCOME
note
7
Facility Actions
Facility actions consists of the following components:
Refranchising net (gains) losses;
Store closure costs;
Impairment of long-lived assets for stores we intend to
close and stores we intend to continue to use in the
business;
Impairment of goodwill and indefinite-lived intangible
assets subsequent to the adoption of SFAS 142.
2003 2002 2001
U.S.
Refranchising net (gains) losses(a) (b) $ (20) $ (4) $ (44)
Store closure costs 1 8 13
Store impairment charges 10 15 14
SFAS 142 impairment charges(c) 5 — —
Facility actions (4) 19 (17)
International
Refranchising net (gains) losses(a) (b) 16 (15) 5
Store closure costs 5 7 4
Store impairment charges 19 16 9
SFAS 142 impairment charges(c) — 5 —
Facility actions 40 13 18
Worldwide
Refranchising net (gains) losses(a) (b) (4) (19) (39)
Store closure costs 6 15 17
Store impairment charges 29 31 23
SFAS 142 impairment charges(c) 5 5 —
Facility actions $ 36 $ 32 $ 1
(a) Includes initial franchise fees in the U.S. of $3 million in 2003, $1 million
in 2002 and $4 million in 2001 and in International of $2 million in 2003,
$5 million in 2002 and $3 million in 2001. See Note 9.
(b) In 2001, U.S. refranchising net (gains) losses included $12 million of previously
deferred refranchising gains and International refranchising net (gains) losses
included a charge of $11 million to mark to market the net assets of the
Singapore business, which was held for sale. The Singapore business was
subsequently sold during the third quarter of 2002. In 2003, International
refranchising net (gains) losses included a charge of approximately $16 million
to write down the carrying value of the Puerto Rican business to fair value.
(c) In 2003, we recorded a $5 million charge in the U.S. related to the impairment
of the A&W trademark/brand (see further discussion at Note 12). In 2002, we
recorded a $5 million charge in International related to the impairment of the
goodwill of the Pizza Hut France reporting unit.
The following table summarizes the 2003 and 2002 activity
related to reserves for remaining lease obligations for
stores closed or stores we intend to close.
Estimate/
Beginning Amounts New Decision Ending
Balance Used Decisions Changes Other Balance
2002 Activity $ 48 (17) 16 3 1 $ 51
2003 Activity $ 51 (27) 11 2 3 $ 40
The following table summarizes the carrying values of the
major classes of assets held for sale at December 27, 2003
and December 28, 2002. U.S. amounts primarily represent
land on which we previously operated restaurants and are
net of impairment charges of $2 million and $4 million at
December 27, 2003 and December 28, 2002, respectively.
The carrying values in International relate primarily to our
Puerto Rican business, which we wrote down $16 million
during 2003 to reflect then current estimates of its fair value.
These write-downs were recorded as a refranchising loss. The
carrying values of liabilities of the Puerto Rican business that
we anticipate will be assumed by a buyer were not significant
at December 27, 2003 or at December 28, 2002.
December 27, 2003
Inter-
U.S. national Worldwide
Property, plant and equipment, net $ 9 $ 73 $ 82
Goodwill — 12 12
Other assets — 2 2
Assets classified as held for sale $ 9 $ 87 $ 96
December 28, 2002
Inter-
U.S. national Worldwide
Property, plant and equipment, net $ 7 $ 89 $ 96
Goodwill — 13 13
Other assets — 2 2
Assets classified as held for sale $ 7 $ 104 $ 111
The following table summarizes Company sales and restau-
rant profit related to stores held for sale at December 27,
2003, or disposed of through refranchising or closure during
2003, 2002 and 2001. Stores disposed of through closure
include certain stores we have relocated within the same
trade area. The operations of such stores classified as held
for sale as of December 27, 2003 or December 28, 2002
or disposed of in 2003 or 2002, which meet the conditions
of SFAS 144 for reporting as discontinued operations were
not material. Restaurant profit represents Company sales
less the cost of food and paper, payroll and employee
benefits and occupancy and other operating expenses.
2003 2002 2001
Stores held for sale at
December 27, 2003:
Sales $ 187 $ 189 $ 184
Restaurant profit 34 28 23
Stores disposed of in
2003, 2002 and 2001:
Sales $ 158 $ 324 $ 640
Restaurant profit 14 37 67
Restaurant profit on stores held for sale includes a benefit
from the suspension of depreciation and amortization of
approximately $13 million and $4 million in 2003 and
2002, respectively.
Wrench Litigation
Expense of $42 million for 2003 reflects the legal judg-
ment against Taco Bell Corp. on June 4, 2003 in Wrench
v. Taco Bell Corp. and related interest. See Note 24 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.