Pizza Hut 2007 Annual Report Download - page 69

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The carrying amounts and fair values of our other financial
instruments subject to fair value disclosures are as follows:
2007 2006
Carrying Fair Carrying Fair
Amount Value Amount Value
Debt
Short-term borrowings and
long-term debt, excluding
capital leases and the
derivative instrument
adjustments $ 2,913 $ 3,081 $ 2,057 $ 2,230
Debt-related derivative
instruments:
Open contracts in a net
asset (liability) position 15 15 (15) (15)
Foreign currency-related
derivative instruments:
Open contracts in a net
asset (liability) position — — (7) (7)
Lease guarantees 22 26 19 28
Guarantees supporting
financial arrangements of
certain franchisees and
other third parties 8 8 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.
16.
Pension and Postretirement Medical Benefits
The following disclosures reflect our 2006 adoption of the rec-
ognition 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. plans 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 inter-
est in the unconsolidated affiliate in 2006). Our plans in the U.K.
have previously been amended such that new employees 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, 2007 and 2006, with the exception of the Pizza
Hut U.K. pension plan where such information is presented as of
a measurement date of November 30, 2007 and 2006.
U.S. International
Pension Plans Pension Plans
2007 2006 2007 2006
Change in benefit obligation
Benefit obligation at beginning
of year $ 864 $ 815 $ 152 $ 57
Service cost 33 34 95
Interest cost 50 46 84
Participant contributions ——21
Plan amendments 4(3) ——
Acquisitions(a) ——471
Curtailment gain (4) (1) ——
Exchange rate changes ——814
Benefits and expenses paid (34) (29) (2) (1)
Actuarial (gain) loss (71) 2(20) 1
Benefit obligation at end of year $ 842 $ 864 $ 161 $ 152
Change in plan assets
Fair value of plan assets at
beginning of year $ 673 $ 610 $ 117 $ 39
Actual return on plan assets 93 60 11 6
Employer contributions 235 619
Participant contributions ——21
Acquisitions(a) ———40
Benefits paid (33) (29) (2) (1)
Exchange rate changes ——513
Administrative expenses (3) (3) ——
Fair value of plan assets at
end of year $ 732 $ 673 $ 139 $ 117
Funded status at end of year $ (110) $ (191) $ (22) $ (35)
(a) Relates to the acquisition of the remaining fifty percent interest in our Pizza Hut
U.K. unconsolidated affiliate.
Amounts recognized in the Consolidated Balance Sheet:
U.S. International
Pension Plans Pension Plans
2007 2006 2007 2006
Accrued benefit
asset—non-current $ — $ — $ 5 $ —
Accrued benefit
liability—current (6) (2) ——
Accrued benefit
liability—non-current (104) (189) (27) (35)
$ (110) $ (191) $ (22) $ (35)
Amounts recognized as a loss in Accumulated Other Compre-
hensive Income:
U.S. International
Pension Plans Pension Plans
2007 2006 2007 2006
Actuarial net loss $ 77 $ 216 $ 13 $ 31
Prior service cost 3———
$ 80 $ 216 $ 13 $ 31
The accumulated benefit obligation for the U.S. and International
pension plans was $900 million and $916 million at Decem-
ber 29, 2007 and December 30, 2006, respectively.