Pizza Hut 2010 Annual Report Download - page 150

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We sponsor noncontributory defined benefit pension plans covering certain salaried and hourly employees, the most
significant of which are in the U.S. and U.K. The most significant of these plans, the YUM Retirement Plan (the “Plan”),
is funded while benefits from the other U.S. plans are paid by the Company as incurred. Our funding policy for the Plan
is to contribute annually amounts that will at least equal the minimum amounts required to comply with the Pension
Protection Act of 2006. However, additional voluntary contributions are made from time to time as are determined to be
appropriate to improve the Plan’s funded status. At December 25, 2010, the Plan was in a net underfunded position of
$100 million. The U.K. pension plans are in a net underfunded position of $23 million at our 2010 measurement date.
Based on the current funding status of the Plan and our UK pension plans, we will not be required to make significant
contributions in 2011. Investment performance and corporate bond rates have a significant effect on our net funding
position as they drive our asset balances and discount rate assumption. Future changes in investment performance and
corporate bond rates could impact our funded status and the timing and amounts of required contributions beyond 2011.
Our post-retirement plan in the U.S. is not required to be funded in advance, but is pay as you go. We made post-
retirement benefit payments of $7 million in 2010 and no future funding amounts are included in the contractual
obligations table. See Note 14 for further details about our pension and post-retirement plans.
We have excluded from the contractual obligations table payments we may make for exposures for which we are self-
insured, including workers’ compensation, employment practices liability, general liability, automobile liability, product
liability and property losses (collectively “property and casualty losses”) and employee healthcare and long-term
disability claims. The majority of our recorded liability for self-insured employee healthcare, long-term disability and
property and casualty losses represents estimated reserves for incurred claims that have yet to be filed or settled.
Off-Balance Sheet Arrangements
We have agreed to provide financial support, if required, to an entity that operates a franchisee lending program used
primarily to assist franchisees in the development of new restaurants and, to a lesser extent, in connection with the
Company’s historical refranchising programs. As part of this agreement, we have provided a partial guarantee of
approximately $15 million and two letters of credit totaling approximately $23 million in support of the franchisee loan
program at December 25, 2010. One such letter of credit could be used if we fail to meet our obligations under our
guarantee. The other letter of credit could be used, in certain circumstances, to fund our participation in the funding of the
franchisee loan program. The total loans outstanding under the loan pool were $70 million with an additional $30 million
available for lending at December 25, 2010.
Our unconsolidated affiliates had approximately $70 million and $40 million of debt outstanding as of December 25, 2010
and December 26, 2009, respectively.
New Accounting Pronouncements Not Yet Adopted
In January 2010, the Financial Accounting Standards Board (“FASB”) issued new guidelines and clarifications for
improving disclosures about fair value measurements. This guidance requires enhanced disclosures for purchases, sales,
issuances, and settlements on a gross basis for Level 3 fair value measurements. We do not anticipate the adoption of this
guidance to materially impact the Company. These new disclosures are effective for interim and annual reporting periods
beginning after December 15, 2010.
Form 10-K