Pizza Hut 2009 Annual Report Download - page 167

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Under the equity method of accounting, we previously reported our 51% share of the net income of the unconsolidated
affiliate (after interest expense and income taxes) as Other (income) expense in the Consolidated Statements of Income.
We also recorded a franchise fee for the royalty received from the stores owned by the unconsolidated affiliate. From the
date of the acquisition, we have reported the results of operations for the entity in the appropriate line items of our
Consolidated Statement of Income. We no longer recorded franchise fee income for these restaurants nor did we report
Other (income) expense as we did under the equity method of accounting. Net income attributable to our partner’s
ownership percentage is recorded as Net Income – noncontrolling interest. For the year ended December 26, 2009 the
consolidation of this entity increased Company sales by $192 million and decreased Franchise and license fees and
income by $12 million. The consolidation of this entity positively impacted Operating Profit by $4 million for the year
ended December 26, 2009. The impact on Net Income – YUM! Brands, Inc. was not significant to the year ended
December 26, 2009.
The pro forma impact on our results of operations if the acquisition had been completed as of the beginning of 2009, 2008
or 2007 would not have been significant.
Sale of Our Interest in Our Japan Unconsolidated Affiliate
In December 2007, we sold our interest in our unconsolidated affiliate in Japan for $128 million in cash (including the
impact of related foreign currency contracts that were settled in December 2007). Our international subsidiary that owned
this interest operates on a fiscal calendar with a period end that is approximately one month earlier than our consolidated
period close. Thus, consistent with our historical treatment of events occurring during the lag period, the pre-tax gain on
the sale of this investment of $100 million was recorded in the quarter ended March 22, 2008. However, the cash
proceeds from this transaction were transferred from our international subsidiary to the U.S. in December 2007 and thus
were reported on our Consolidated Statement of Cash Flows for the year ended December 29, 2007.
While we will no longer have an ownership interest in the entity that operates both KFCs and Pizza Huts in Japan, it will
continue to be a franchisee as it was when it operated as an unconsolidated affiliate. Excluding the one-time gain, the sale
of our interest in our Japan unconsolidated affiliate did not have a significant impact on our results of operations for 2008
or 2009 as the Other income we previously recorded representing our share of earnings of the unconsolidated affiliate has
historically not been significant.
Form 10-K