Pizza Hut 2003 Annual Report Download - page 62

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60.
stores when it filed for protection under Chapter 11 of the
U.S. Bankruptcy Code on January 31, 2000. A plan of reor-
ganization 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 significant expense for
the Company, primarily recorded in 2000. Under the POR we
are entitled to proceeds from certain residual assets, pref-
erence claims and other legal recoveries of the estate.
We classify expenses and recoveries related to
AmeriServe, as well as integration costs related to our
acquisition of YGR, costs to defend certain wage and
hour litigation and certain other items, as AmeriServe and
other charges (credits). These amounts were classified as
unusual items in previous years.
Income of $26 million was recorded as AmeriServe
and other charges (credits) for 2003 and primarily includes
recoveries related to the AmeriServe bankruptcy reorga-
nization process. Income of $27 million was recorded as
AmeriServe and other charges (credits) for 2002, primarily
resulting from recoveries related to the AmeriServe bank-
ruptcy reorganization process, partially offset by integration
costs related to our acquisition of YGR and costs to defend
certain wage and hour litigation. Income of $3 million was
recorded as AmeriServe and other charges (credits) for
2001, which primarily included recoveries related to the
AmeriServe bankruptcy reorganization process offset
by aggregate settlement costs associated with certain
litigation, and expenses, primarily severance, related to
decisions to streamline certain support functions. The
reserves related to decisions to streamline certain support
functions were utilized in 2002.
SUPPLEMENTAL CASH FLOW DATA
note
8
2003 2002 2001
Cash Paid for:
Interest $ 178 $ 153 $ 164
Income taxes 196 200 264
Significant Non-Cash Investing and
Financing Activities:
Assumption of debt and capital leases
related to the acquisition of YGR $ — $ 227 $ —
Capital lease obligations incurred to
acquire assets 9 23 18
Contribution of non-cash net assets
to an unconsolidated affiliate — — 21
Assumption of liabilities in connection
with a franchise acquisition — — 36
Fair market value of assets received in
connection with a non-cash acquisition — — 9
Debt reduction due to amendment of
sale-lease back agreements
(See Note 14) 88 — —
On November 10, 2003 our unconsolidated affiliate in
Canada was dissolved. Upon dissolution, the Company
assumed operation of certain units that were previously
operated by the unconsolidated affiliate. The Company also
assumed ownership of the assets related to the units that
it now operates, as well as the real estate associated with
certain units previously owned and operated by the uncon-
solidated affiliate that are not operated by franchisees
(either our former partner in the unconsolidated affiliate
or a publicly-held Income Trust in Canada). The acquired
real estate associated with the units that are not operated
by the Company is being leased to the franchisees. The
resulting reduction in our investments in unconsolidated
affiliates ($56 million at November 10, 2003) was primarily
offset by increases in property, plant and equipment, net
and capital lease receivables (included in other assets). The
Company realized an immaterial gain upon the dissolution
of the unconsolidated affiliate. This gain was realized as the
fair value of our increased ownership in the assets received
was greater than our carrying value in these assets, and
was net of expenses associated with the dissolution.
FRANCHISE AND LICENSE FEES
note
9
2003 2002 2001
Initial fees, including renewal fees $ 36 $ 33 $ 32
Initial franchise fees included in
refranchising gains (5) (6) (7)
31 27 25
Continuing fees 908 839 790
$ 939 $ 866 $ 815
OTHER (INCOME) EXPENSE
note
10
2003 2002 2001
Equity income from investments in
unconsolidated affiliates $ (39) $ (29) $ (26)
Foreign exchange net (gain) loss (2) (1) 3
$ (41) $ (30) $ (23)
PROPERTY, PLANT AND EQUIPMENT, NET
note
11
2003 2002
Land $ 662 $ 621
Buildings and improvements 2,861 2,742
Capital leases, primarily buildings 119 102
Machinery and equipment 1,964 1,736
5,606 5,201
Accumulated depreciation and amortization (2,326) (2,164)
$ 3,280 $ 3,037
Depreciation and amortization expense related to property,
plant and equipment was $388 million, $357 million and
$320 million in 2003, 2002 and 2001, respectively.