Pizza Hut 2004 Annual Report Download - page 71

Federal฀ income฀ tax฀ receivables฀ of฀ $59฀million฀ were฀
included฀in฀prepaid฀expenses฀and฀other฀current฀assets฀at฀
December฀25,฀2004.
We฀ have฀ previously฀ not฀ provided฀ deferred฀ tax฀ on฀ the฀
undistributed฀earnings฀from฀our฀foreign฀investments,฀except฀
for฀amounts฀to฀be฀repatriated฀as฀a฀result฀of฀the฀Act,฀as฀we฀
believed฀they฀were฀permanent฀in฀nature.฀We฀estimate฀that฀
our฀ total฀ net฀ undistributed฀ earnings฀ upon฀ which฀ we฀ have฀
not฀provided฀deferred฀tax฀total฀approximately฀$300฀million฀
at฀December฀25,฀2004.฀A฀determination฀of฀the฀deferred฀tax฀
liability฀on฀such฀earnings฀is฀not฀practicable.
We฀have฀available฀net฀operating฀loss฀and฀tax฀credit฀carry-
forwards฀totaling฀approximately฀$1.7฀billion฀at฀December฀25,฀
2004฀to฀reduce฀future฀tax฀of฀YUM฀and฀certain฀subsidiaries.฀
The฀carryforwards฀are฀related฀to฀a฀number฀of฀foreign฀and฀state฀
jurisdictions.฀ Of฀these฀carryforwards,฀$30฀million฀expire฀in฀
2005฀and฀$1.3฀billion฀expire฀at฀various฀times฀between฀2006฀
and฀ 2023.฀ The฀ remaining฀ carryforwards฀ of฀ approximately฀
$400฀million฀do฀not฀expire.
REPORTABLE฀OPERATING฀SEGMENTS฀
NOTE฀23
We฀ are฀ principally฀ engaged฀ in฀ developing,฀ operating,฀ fran-
chising฀and฀licensing฀the฀worldwide฀KFC,฀Pizza฀Hut฀and฀Taco฀
Bell฀ concepts,฀ and฀ since฀ May฀ 7,฀ 2002,฀ the฀ LJS฀ and฀ A&W฀
concepts,฀which฀were฀ added฀when฀we฀acquired฀YGR.฀KFC,฀
Pizza฀Hut,฀Taco฀Bell,฀LJS฀and฀A&W฀operate฀throughout฀the฀U.S.฀
and฀in฀88,฀85,฀10,฀3฀and฀12฀countries฀and฀territories฀outside฀
the฀U.S.,฀respectively.฀Our฀five฀largest฀international฀markets฀
based฀on฀operating฀profit฀in฀2004฀are฀China,฀United฀Kingdom,฀
Australia,฀Asia฀Franchise฀and฀Korea.฀At฀December฀25,฀2004,฀
we฀had฀investments฀in฀nine฀unconsolidated฀affiliates฀outside฀
the฀ U.S.฀ which฀ operate฀ principally฀ KFC฀ and/or฀ Pizza฀ Hut฀
restaurants.฀These฀unconsolidated฀affiliates฀operate฀in฀China,฀
Japan,฀Poland฀and฀the฀United฀Kingdom.
We฀identify฀our฀operating฀segments฀based฀on฀management฀
responsibility฀within฀the฀U.S.฀and฀International.฀For฀purposes฀
of฀applying฀ SFAS฀No.฀131,฀“Disclosure฀ About฀Segments฀ of฀
An฀Enterprise฀and฀Related฀Information”฀(“SFAS฀131”)฀in฀the฀
U.S.,฀we฀consider฀LJS฀and฀A&W฀to฀be฀a฀single฀segment.฀We฀
consider฀our฀KFC,฀Pizza฀Hut,฀Taco฀Bell฀and฀LJS/A&W฀operating฀
segments฀in฀the฀U.S.฀to฀be฀similar฀and฀therefore฀have฀aggre-
gated฀them฀into฀a฀single฀reportable฀operating฀segment.
Revenues฀2004฀ 2003฀ 2002
United฀States฀ $฀5,763฀ $฀5,655฀ $฀5,347
International(a)฀฀3,248฀ ฀2,725฀ ฀2,410
฀฀฀฀ $฀9,011฀ $฀8,380฀ $฀7,757
Operating฀Profit;฀฀
Interest฀Expense,฀Net;฀฀
and฀Income฀Before฀Income฀Taxes฀2004฀ 2003฀ 2002
United฀States฀ $฀ 777฀ $฀ 812฀ $฀ 802
International(b)฀฀ 542฀ ฀ 441฀ ฀ 361
Unallocated฀and฀corporate฀expenses฀ ฀ (204)฀ ฀ (179)฀ ฀ (178)
Unallocated฀other฀income฀(expense)฀ ฀ (2)฀ ฀ (3)฀ ฀ (1)
Unallocated฀facility฀actions(c)฀฀ 12฀ ฀ 4฀ ฀ 19
Wrench฀litigation฀income฀(expense)(d)฀฀ 14฀ ฀ (42)฀ ฀ —
AmeriServe฀and฀other฀฀
฀ (charges)฀credits(d)฀฀ 16฀ ฀ 26฀ ฀ 27
Total฀operating฀profit฀ ฀1,155฀ ฀1,059฀ ฀1,030
Interest฀expense,฀net฀ ฀ (129)฀ ฀ (173)฀ ฀ (172)
Income฀before฀income฀taxes฀and฀฀
฀ cumulative฀effect฀of฀฀
฀ accounting฀change฀ $฀1,026฀ $฀ 886฀ $฀ 858
Depreciation฀and฀Amortization฀2004฀ 2003฀ 2002
United฀States฀ $฀ 267฀ $฀ 240฀ $฀ 228
International฀ ฀ 168฀ ฀ 146฀ ฀ 122
Corporate฀ ฀ 13฀ ฀ 15฀ ฀ 20
฀฀฀฀ $฀ 448฀ $฀ 401฀ $฀ 370
Capital฀Spending฀2004฀ 2003฀ 2002
United฀States฀ $฀ 365฀ $฀ 395฀ $฀ 453
International฀ ฀ 239฀ ฀ 246฀ ฀ 295
Corporate฀ ฀ 41฀ ฀ 22฀ ฀ 12
฀฀฀฀ $฀ 645฀ $฀ 663฀ $฀ 760
Identifiable฀Assets฀2004฀ 2003฀ 2002
United฀States฀ $฀3,316฀ $฀3,279฀ $฀3,285
International(e)฀฀2,054฀ ฀1,880฀ ฀1,732
Corporate(f)฀฀ 326฀ ฀ 461฀ ฀ 383
฀฀฀฀ $฀5,696฀ $฀5,620฀ $฀5,400
Long-Lived฀Assets(g)฀2004฀ 2003฀ 2002
United฀States฀ $฀2,900฀ $฀2,880฀ $฀2,805
International฀ ฀1,340฀ ฀1,206฀ ฀1,021
Corporate฀ ฀ 99฀ ฀ 72฀ ฀ 60
฀฀฀฀ $฀4,339฀ $฀4,158฀ $฀3,886
(a)฀Includes฀revenues฀of฀$903฀million,฀$703฀million฀and฀$531฀million฀in฀Mainland฀
China฀for฀2004,฀2003฀and฀2002,฀respectively.
(b)฀Includes฀equity฀income฀of฀unconsolidated฀affiliates฀of฀$57฀million,฀$44฀million฀and฀
$31฀million฀in฀2004,฀2003฀and฀2002,฀respectively.
(c)฀Unallocated฀ facility฀ actions฀ comprises฀ refranchising฀ gains฀ (losses)฀ which฀ are฀
not฀allocated฀to฀the฀U.S.฀or฀International฀segments฀ for฀performance฀reporting฀
purposes.
(d)฀See฀Note฀7฀for฀a฀discussion฀of฀AmeriServe฀and฀other฀(charges)฀credits฀and฀Note฀24฀
for฀a฀discussion฀of฀Wrench฀litigation.
(e)฀Includes฀investment฀ in฀unconsolidated฀affiliates฀of฀$194฀million,฀$182฀million฀
and฀ $225฀million฀ for฀ 2004,฀ 2003฀ and฀ 2002,฀ respectively.฀ On฀ November฀ 10,฀
2003,฀we฀dissolved฀our฀unconsolidated฀affiliate฀in฀Canada.฀See฀Note฀8฀for฀further฀
discussion.
(f)฀ Primarily฀includes฀deferred฀tax฀assets,฀property,฀plant฀and฀equipment,฀net,฀related฀
to฀our฀office฀facilities,฀taxes฀receivable฀and฀fair฀value฀of฀derivative฀instruments.
(g)฀Includes฀property,฀plant฀and฀equipment,฀net;฀goodwill;฀and฀intangible฀assets,฀net.
See฀Note฀7฀for฀additional฀operating฀ segment฀ disclosures฀
related฀to฀impairment,฀store฀closure฀costs฀and฀the฀carrying฀
amount฀of฀assets฀held฀for฀sale.
69
Yum!฀Brands,฀Inc.