Pizza Hut 2005 Annual Report Download - page 31
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Please find page 31 of the 2005 Pizza Hut annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report. QuarterendedSeptember4,2005
Inter- Unallo-
U.S. national China cated Total
Payrolland
employeebenefits $2 $— $— $— $ 2
Generaland
administrative 4 3 1 4 12
Operatingprofit $6 $ 3 $ 1 $ 4 14
Incometaxbenefit (5)
Netincomeimpact $ 9
QuarterendedDecember31,2005
Inter- Unallo-
U.S. national China cated Total
Payrolland
employeebenefits $2 $1 $— $— $ 3
Generaland
administrative 4 4 1 6 15
Operatingprofit $6 $5 $ 1 $ 6 18
Incometaxbenefit (6)
Netincomeimpact $12
YearendedDecember31,2005
Inter- Unallo-
U.S. national China cated Total
Payrolland
employeebenefits $ 8 $ 2 $— $ — $ 10
Generaland
administrative 14 11 4 19 48
Operatingprofit $22 $13 $ 4 $19 58
Incometaxbenefit (20)
Netincomeimpact $ 38
Prior to 2005, all stock options granted were accounted
for under the recognition and measurementprinciples of
APB25anditsrelatedInterpretations.Accordingly,nostock-
basedemployeecompensationexpensewasreflectedinthe
ConsolidatedStatementsofIncomeforstockoptions,as
allstockoptionsgrantedhadanexercisepriceequaltothe
marketvalueoftheunderlyingcommonstockonthedateof
grant.HadtheCompanyappliedthefairvalueprovisionsof
SFAS123tostockoptionsin2004and2003,netincome
of$740millionand$617million,respectively,wouldhave
beenreducedby$37millionand$38million,respectively,
to$703millionand$579million,respectively.Additionally,
bothbasicanddilutedearningspercommonsharewould
havedecreased$0.12pershareforboth2004and2003.
ExtraWeekin2005 Ourfiscalcalendarresultsina53rd
weekeveryfiveorsixyears.Fiscalyear2005includesa53rd
weekinthefourthquarterforthemajorityofourU.S.busi-
nessesaswellasourinternationalbusinessesthatreport
onaperiod,asopposedtoamonthly,basis.IntheU.S.,
wepermanentlyacceleratedthetimingoftheKFCbusiness
closingbyoneweekinDecember2005,andthus,therewas
no53rdweekbenefitforthisbusiness.Additionally,allChina
Divisionbusinessesreportonamonthlybasisandthusdid
nothavea53rdweek.
Thefollowingtablesummarizestheestimatedincrease
(decrease)ofthe53rdweekonrevenuesandoperatingprofit:
Inter-
national Unallo-
U.S. Division cated Total
Revenues
Companysales $58 $27 $— $85
Franchiseandlicensefees 8 3 — 11
TotalRevenues $66 $30 $— $96
Operatingprofit
Franchiseandlicensefees $ 8 $ 3 $— $11
Restaurantprofit 14 5 — 19
Generaland
administrativeexpenses (2) (3) (3) (8)
Equityincomefrom
investmentsin
unconsolidatedaffiliates — 1 — 1
Operatingprofit $20 $ 6 $(3) $23
Mainland China Issues Our KFC business in mainland
Chinawasnegativelyimpactedbytheinterruptionofproduct
offeringsandnegativepublicityassociatedwithasupplier
ingredientissueexperiencedinlateMarch,2005aswellas
consumerconcernsrelatedtoAvianFluinthefourthquarter
of2005.Asaresultoftheaforementionedissues,theChina
Divisionexperiencedsystemsalesgrowthin2005of11%
excludingforeigncurrency translation whichisbelow our
ongoingtargetofatleast22%.Duringtheyeartodateended
December31, 2005,we enteredinto anagreement fora
partialrecoveryofourlossesrelatedtothesupplieringre-
dientissuewiththesupplier.Asaresultoftheagreement,
werecognizedapproximately$24millioninOther income
(expense)inourConsolidatedStatementofIncomeforthe
yearendedDecember31,2005.
SaleofanInvestmentinUnconsolidatedAffiliate During
thesecondquarterof2005,wesoldourfiftypercentinterest
intheentitythatoperatedalmostallKFCsandPizzaHutsin
PolandandtheCzechRepublictoourthenpartnerinthe
entity, principallyfor cash.Concurrent with the sale,our
formerpartnercompletedaninitialpublicoffering(“IPO”)of
themajorityofthestockitthenownedintheentity.Priorto
thesale,weaccountedforourinvestmentinthisentityusing
theequitymethod.SubsequenttotheIPO,thenewpublicly
heldentity,inwhichYUMhasnoownershipinterest,isa
franchiseeaswastheentityinwhichwepreviouslyhelda
fiftypercentinterest.
Thistransactiongeneratedaone-timegainofapproxi-
mately $11million for YUM as cash proceeds (net of
expenses)ofapproximately$25millionfromthesaleofour
interestintheentityexceededourrecordedinvestmentin
thisunconsolidatedaffiliate.Aswithourequityincomefrom
investmentsinunconsolidatedaffiliates,theapproximate
$11milliongainwasrecordedinOtherincome(expense)in
ourConsolidatedStatementsofIncome.
Yum!Brands,Inc. | 35.