Pizza Hut 2007 Annual Report Download - page 70

74 YUM! BRANDS, INC.
INFORMATION FOR PENSION PLANS WITH AN ACCUMULATED
BENEFIT OBLIGATION IN EXCESS OF PLAN ASSETS:
U.S. International
Pension Plans Pension Plans
2007 2006 2007 2006
Projected benefit obligation $ 73 $ 864 $ 80 $ 79
Accumulated benefit obligation 64 786 74 75
Fair value of plan assets —673 53 44
INFORMATION FOR PENSION PLANS WITH A PROJECTED
BENEFIT OBLIGATION IN EXCESS OF PLAN ASSETS:
U.S. International
Pension Plans Pension Plans
2007 2006 2007 2006
Projected benefit obligation $ 842 $ 864 $ 80 $ 79
Accumulated benefit obligation 770 786 74 75
Fair value of plan assets 732 673 53 44
Based on current funding rules, we do not anticipate being
required to make contributions to the Plan in 2008, but we may
make discretionary contributions during the year based on our
estimate of the Plan’s expected December 27, 2008 funded sta-
tus. The funding rules for our pension plans outside the U.S. vary
from country to country and depend on many factors including
discount rates, performance of plan assets, local laws and tax
regulations. Since our plan assets currently approximate our pro-
jected benefit obligation for our KFC U.K. pension plan,we did not
make a significant contribution in 2007 and we do not anticipate
any significant near term funding. The projected benefit obliga-
tion of our Pizza Hut U.K. pension plan exceeds plan assets by
approximately $27 million. We anticipate taking steps to reduce
this deficit in the near term, which could include a decision to
partially or completely fund the deficit in 2008.
We do not anticipate any plan assets being returned to the
Company during 2008 for any plans.
COMPONENTS OF NET PERIODIC BENEFIT COST:
U.S. International
Pension Plans Pension Plans(d)
2007 2006 2005 2007 2006 2005
Net periodic benefit cost
Service cost $ 33 $ 34 $ 33 $ 9 $ 5 $ 3
Interest cost 50 46 43 84 2
Amortization of prior
service cost(a) 13 3 —— —
Expected return on plan
assets (51) (47) (45) (9) (4) (2)
Amortization of net loss 23 30 22 11 —
Net periodic benefit cost $ 56 $ 66 $ 56 $ 9 $ 6 $ 3
Additional loss recognized
due to:
Curtailment(b) $ — $ — $ 1 $ — $ — $ —
Settlement(c) $ — $ — $ 3 $ — $ — $ —
PENSION LOSSES IN ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS):
U.S. International
Pension Plans Pension Plans
2007 2007
Beginning of year $ 216 $ 31
Net actuarial gain (116) (17)
Amortization of net loss (23) (1)
Prior service cost 4 —
Amortization of prior service cost (1) —
End of year $ 80 $ 13
(a) Prior service costs are amortized on a straight-line basis over the average remaining
service period of employees expected to receive benefits.
(b) Curtailment losses have been recognized as refranchising losses as they have
resulted primarily from refranchising activities.
(c) Settlement loss results from benefit payments from a non-funded plan exceeding
the sum of the service cost and interest cost for that plan during the year.
(d) Excludes pension expense for the Pizza Hut U.K. pension plan of $4 million in
both 2006 and 2005 related to periods prior to our acquisition of the remaining
fifty percent interest in the unconsolidated affiliate.
The estimated net loss for the U.S. and International pension
plans that will be amortized from accumulated other comprehen-
sive loss into net periodic pension cost in 2008 is $6 million
and $1 million, respectively. The estimated prior service cost for
the U.S. pension plans that will be amortized from accumulated
other comprehensive loss into net periodic pension cost in 2008
is $1 million.
WEIGHTED-AVERAGE ASSUMPTIONS USED TO DETERMINE
BENEFIT OBLIGATIONS AT THE MEASUREMENT DATES:
U.S. International
Pension Plans Pension Plans
2007 2006 2007 2006
Discount rate 6.50% 5.95% 5.60% 5.00%
Rate of compensation increase 3.75% 3.75% 4.30% 3.77%
WEIGHTED-AVERAGE ASSUMPTIONS USED TO DETERMINE
THE NET PERIODIC BENEFIT COST FOR FISCAL YEARS:
U.S. International
Pension Plans Pension Plans
2007 2006 2005 2007 2006 2005
Discount rate 5.95% 5.75% 6.15% 5.00% 5.00% 5.50%
Long-term rate of
return on plan
assets 8.00% 8.00% 8.50% 7.07% 6.70% 7.00%
Rate of
compensation
increase 3.75% 3.75% 3.75% 3.78% 3.85% 4.00%
Our estimated long-term rate of return on plan assets represents
the weighted-average of expected future returns on the asset
categories included in our target investment allocation based pri-
marily on the historical returns for each asset category, adjusted
for an assessment of current market conditions.