Pizza Hut 2007 Annual Report Download - page 64

68 YUM! BRANDS, INC.
FACILITY ACTIONS Refranchising (gain) loss, store closure
(income) costs and store impairment charges by reportable seg-
ment are as follows:
2007 2006 2005
U.S.
Refranchising net (gain) loss(a) $ (12) $ (20) $ (40)
Store closure (income) costs(b) (9) (1) 2
Store impairment charges 23 38 44
Closure and impairment expenses $ 14 $ 37 $ 46
International Division
Refranchising net (gain) loss(a) $ 3 $ (4) $ (3)
Store closure (income) costs(b) 11 (1)
Store impairment charges 13 15 10
Closure and impairment expenses $ 14 $ 16 $ 9
China Division
Refranchising net (gain) loss(a) $ (2) $ — $ —
Store closure (income) costs(b) —(1) (1)
Store impairment charges 77 8
Closure and impairment expenses $ 7 $ 6 $ 7
Worldwide
Refranchising net (gain) loss(a) $ (11) $ (24) $ (43)
Store closure (income) costs(b) (8) (1) —
Store impairment charges 43 60 62
Closure and impairment expenses $ 35 $ 59 $ 62
(a) Refranchising (gain) loss is not allocated to segments for performance reporting
purposes.
(b) Store closure (income) costs include the net gain or loss on sales of real estate
on which we formerly operated a Company restaurant that was closed, lease
reserves established when we cease using a property under an operating lease
and subsequent adjustments to those reserves, and other facility-related expenses
from previously closed stores.
The following table summarizes the 2007 and 2006 activity
related to reserves for remaining lease obligations for closed
stores.
Estimate/
Beginning Amounts New Decision CTA/ Ending
Balance Used Decisions Changes Other Balance
2007 Activity $ 36 (12) 8 1 1 $ 34
2006 Activity $ 44 (17) 8 1 — $ 36
Assets held for sale at December 29, 2007 and December 30,
2006 total $9 million and $13 million, respectively, of U.S. prop-
erty, plant and equipment, primarily land, on which we previously
operated restaurants and are included in prepaid expenses and
other current assets on our Consolidated Balance Sheets.
6.
Supplemental Cash Flow Data
2007 2006 2005
Cash Paid For:
Interest $ 177 $ 185 $ 132
Income taxes 264 304 232
Significant Non-Cash Investing and
Financing Activities:
Capital lease obligations
incurred to acquire assets $ 59(a) $ 9 $ 7
Net investment in direct
financing leases 33 — —
(a) Includes the capital lease of an airplane (see Note 14).
During 2006 we assumed the full liability associated with capital
leases of $97 million and short-term borrowings of $23 million
when we acquired the remaining fifty percent ownership interest
of our Pizza Hut U.K. unconsolidated affiliate (See Note 7). Previ-
ously, our fifty percent share of these liabilities were reflected
in our Investment in unconsolidated affiliate balance under the
equity method of accounting and were not presented as liabilities
on our Consolidated Balance Sheet.
7.
Pizza Hut United Kingdom Acquisition
On September 12, 2006, we completed the acquisition of the
remaining fifty percent ownership interest of our Pizza Hut U.K.
unconsolidated affiliate for $187 million in cash, including
transaction costs and prior to $9 million of cash assumed. This
unconsolidated affiliate owned more than 500 restaurants in the
U.K. The acquisition was driven by growth opportunities we see in
the market and the desire of our former partner in the unconsoli-
dated affiliate to refocus its business to other industry sectors.
Prior to this acquisition, we accounted for our ownership interest
under the equity method of accounting. Our Investment in uncon-
solidated affiliate balance for the Pizza Hut U.K. unconsolidated
affiliate was $51 million at the date of this acquisition.
Subsequent to the acquisition we consolidated all of the
assets and liabilities of Pizza Hut U.K. These assets and liabili-
ties were valued at fifty percent of their historical carrying value
and fifty percent of their fair value upon acquisition. During 2007
we finalized our purchase price allocation such that assets and
liabilities recorded for Pizza Hut U.K. due to the acquisition were
as follows:
Current assets, including cash of $9 $ 27
Property, plant and equipment 338
Intangible assets 18
Goodwill 125
Total assets acquired 508
Current liabilities, other than capital lease obligations
and short-term borrowings 107
Capital lease obligation, including current portion 97
Short-term borrowings 23
Other long-term liabilities 43
Total liabilities assumed 270
Net assets acquired (cash paid and investment allocated) $ 238