Pizza Hut 2009 Annual Report Download - page 188

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Post-retirement Medical Benefits
Our post-retirement plan provides health care benefits, principally to U.S. salaried retirees and their dependents, and
includes retiree cost sharing provisions. During 2001, the plan was amended such that any salaried employee hired or
rehired by YUM after September 30, 2001 is not eligible to participate in this plan. Employees hired prior to September
30, 2001 are eligible for benefits if they meet age and service requirements and qualify for retirement benefits. We fund
our post-retirement plan as benefits are paid.
At the end of both 2009 and 2008, the accumulated post-retirement benefit obligation was $73 million. The unrecognized
actuarial loss recognized in Accumulated other comprehensive loss is less than $1 million at the end of 2009 and $2
million at the end of 2008. The net periodic benefit cost recorded in 2009, 2008 and 2007 was $7 million, $10 million and
$5 million, respectively, the majority of which is interest cost on the accumulated post-retirement benefit obligation. 2009
and 2008 costs included $1 million and $4 million, respectively, of special termination benefits primarily related to the
U.S. business transformation measures described in Note 5. Approximately $2 million was charged to retained earnings
in 2008 related to changing the measurement date for our post-retirement plan to our fiscal year end. The weighted-
average assumptions used to determine benefit obligations and net periodic benefit cost for the post-retirement medical
plan are identical to those as shown for the U.S. pension plans. Our assumed heath care cost trend rates for the following
year as of 2009 and 2008 are 7.8% and 7.5%, respectively, with expected ultimate trend rates of 4.5% reached in 2028 and
5.25% reached in 2015, respectively.
There is a cap on our medical liability for certain retirees. The cap for Medicare eligible retirees was reached in 2000 and
the cap for non-Medicare eligible retirees is expected to be reached in 2011; once the cap is reached, our annual cost per
retiree will not increase. A one-percentage-point increase or decrease in assumed health care cost trend rates would have
less than a $1 million impact on total service and interest cost and on the post-retirement benefit obligation. The benefits
expected to be paid in each of the next five years are approximately $7 million and in aggregate for the five years
thereafter are $31 million.
Note 16 – Stock Options and Stock Appreciation Rights
At year end 2009, we had four stock award plans in effect: the YUM! Brands, Inc. Long-Term Incentive Plan and the
1997 Long-Term Incentive Plan (“collectively the “LTIPs”), the YUM! Brands, Inc. Restaurant General Manager Stock
Option Plan (“RGM Plan”) and the YUM! Brands, Inc. SharePower Plan (“SharePower”). Under all our plans, the
exercise price of stock options and stock appreciation rights (“SARs”) granted must be equal to or greater than the average
market price or the ending market price of the Company’s stock on the date of grant.
Form 10-K