Pizza Hut 2009 Annual Report Download - page 121

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U.S. Business Transformation Measures
The U.S. business transformation measures in 2008 and 2009 included: expansion of our U.S. refranchising; a reduced
emphasis on multi-branding as a long-term growth strategy; G&A productivity initiatives and realignment of resources
(primarily severance and early retirement costs); and investments in our U.S. Brands made on behalf of our franchisees
such as equipment purchases. We do not believe these measures are indicative of our ongoing operations and are not
including the impacts of these U.S. business transformation measures in our U.S. segment for performance reporting
purposes.
In the years ended December 26, 2009 and December 27, 2008, we recorded a pre-tax gain of $34 million and a pre-tax
loss of $5 million from refranchising in the U.S., respectively. In 2010, we currently expect to refranchise 500 restaurants
in the U.S. The impact of this refranchising on our 2010 results will be determined by the stores that we are able to sell
and the specific prices we are able to obtain for those stores. Additionally, to the extent we offer to sell a store or group of
stores at a loss, such loss is recorded at the date we make such offer. Gains upon refranchising, however, are not recorded
until we consummate the sale. This timing difference can create quarterly or annual earnings volatility as decisions are
made to refranchise a portfolio of stores.
As a result of a decline in future profit expectations for our LJS and A&W U.S. businesses due in part to the impact of a
reduced emphasis on multi-branding, we recorded a non-cash charge of $26 million, which resulted in no related income
tax benefit, in the fourth quarter of 2009 to write-off goodwill associated with these businesses.
In connection with our G&A productivity initiatives and realignment of resources (primarily severance and early
retirement costs) we recorded pre-tax charges of $16 million and $49 million in the years ended December 26, 2009 and
December 27, 2008, respectively. We realized a $65 million decline in our U.S. G&A expenses in the year ended
December 26, 2009 driven by the U.S. productivity initiatives and realignment of resources measures we took in 2008 and
2009.
Additionally, the Company recognized a reduction to Franchise and license fees and income of $32 million, pre-tax, in the
year ended December 26, 2009 related to investments in our U.S. Brands. These investments reflect our reimbursements
to KFC franchisees for installation costs of ovens for the national launch of Kentucky Grilled Chicken. The
reimbursements were recorded as a reduction to franchise and license fees and income as we would not have provided the
reimbursements absent the ongoing franchisee relationship. In the year ended December 27, 2008, the Company
recognized pre-tax expense of $7 million related to investments in our U.S. Brands in Franchise and license expenses.
Form 10-K