Pizza Hut 2006 Annual Report Download - page 65

70 YUM! BRANDS, INC.
The carrying amounts and fair values of our other financial
instruments subject to fair value disclosures are as follows:
2006 2005
Carrying Fair Carrying Fair
Amount Value Amount Value
Debt
Short-term borrowings and
long-term debt, excluding
capital leases and the
derivative instrument
adjustments $ 2,057 $ 2,230 $ 1,752 $ 1,931
Debt-related derivative
instruments:
Open contracts in a net
asset (liability) position (15) (15) (5) (5)
Foreign currency-related
derivative instruments:
Open contracts in a net
asset (liability) position (7) (7) — —
Lease guarantees 19 28 16 27
Guarantees supporting
financial arrangements of
certain franchisees and
other third parties 7 7 7 7
Letters of credit — 1 — 1
We estimated the fair value of debt, debt-related derivative instru-
ments, foreign currency-related derivative instruments, guarantees
and letters of credit using market quotes and calculations based
on market rates.
15.
Pension and Postretirement Medical Benefits
The following disclosures reflect our fourth quarter adoption of the
recognition and disclosure provisions of SFAS 158 as discussed
in Note 2.
PENSION BENEFITS We sponsor noncontributory defined benefit
pension plans covering certain full-time salaried and hourly U.S.
employees. The most significant of these plans, the YUM Retire-
ment Plan (the “Plan”), is funded while benefits from the other
U.S. plan are paid by the Company as incurred. During 2001, the
plans covering our U.S. salaried employees were amended such
that any salaried employee hired or rehired by YUM after Septem-
ber 30, 2001 is not eligible to participate in those plans. Benefits
are based on years of service and earnings or stated amounts
for each year of service. We also sponsor various defined benefit
pension plans covering certain of our non-U.S. employees, the
most significant of which are in the U.K. (including a plan for Pizza
Hut U.K. employees that was sponsored by our unconsolidated
affiliate prior to our acquisition of the remaining fifty percent
interest in the unconsolidated affiliate in 2006). Our plans in the
U.K. have previously been amended such that new participants
are not eligible to participate in these plans.
OBLIGATION AND FUNDED STATUS AT MEASUREMENT DATE:
The following chart summarizes the balance sheet impact, as well
as benefit obligations, assets, and funded status associated with
our U.S. pension plans and significant International pension plans
based on actuarial valuations prepared as of a measurement date
of September 30, 2006 and 2005, with the exception of the Pizza
Hut U.K. pension plan where such information is presented as of
a measurement date of November 30, 2006.
U.S. International
Pension Plans Pension Plans
2006 2005 2006 2005
Change in benefit obligation
Benefit obligation at beginning
of year $ 815 $ 700 $57 $44
Service cost 34 33 5 3
Interest cost 46 43 4 2
Participant contributions — — 1 1
Plan amendments (3) — — —
Acquisitions(a) — — 71 —
Curtailment gain (1) (2) — —
Exchange rate changes — — 14 (4)
Settlement loss — 1 — —
Benefits and expenses paid (29) (33) (1) (1)
Actuarial (gain) loss 2 73 1 12
Benefit obligation at end of year $ 864 $ 815 $ 152 $57
Change in plan assets
Fair value of plan assets at
beginning of year $ 610 $ 518 $39 $32
Actual return on plan assets 60 63 6 7
Employer contributions 35 64 19 3
Participant contributions — — 1 1
Acquisitions(a) — — 40 —
Benefits paid (29) (33) (1) (1)
Exchange rate changes — — 13 (3)
Administrative expenses (3) (2) — —
Fair value of plan assets at
end of year $ 673 $ 610 $ 117 $39
Funded status at end of year $ (191) $ (205) $ (35) $ (18)
Employer contributions(b) — 10 — —
Unrecognized actuarial loss — 256 — 16
Unrecognized prior service cost — 6 — —
Net amount recognized at
year-end $ (191) $67$ (35) $ (2)
(a) Relates to the acquisition of the remaining fifty percent interest in our Pizza Hut
U.K. unconsolidated affiliate in 2006.
(b) Reflects contributions made between the measurement date and year-ending date
for 2005.
U.S. International
Pension Plans Pension Plans
2006 2005 2006 2005
Amounts recognized in the
Consolidated Balance Sheet
at December 30, 2006:
Accrued benefit
liability — current $ (2) $—$— $—
Accrued benefit
liability — non-current (189) — (35) —
$ (191) $—$ (35) $—
Amounts recognized in the
Consolidated Balance Sheet
at December 31, 2005
Accrued benefit liability $—$ (116) $— $ (6)
Intangible asset — 7 — —
Accumulated other
comprehensive loss — 176 — 4
$—$67$— $ (2)