Pizza Hut 2010 Annual Report Download - page 175

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Russia Acquisition
On July 1, 2010, we completed the exercise of our option with our Russian partner to purchase their interest in the co-
branded Rostik’s-KFC restaurants across Russia and the Commonwealth of Independent States. As a result, we acquired
company ownership of 50 restaurants and gained full rights and responsibilities as franchisor of 81 restaurants, which our
partner previously managed as master franchisee. Upon exercise of our option, we paid cash of $56 million, net of
settlement of a long-term note receivable of $11 million, and assumed long-term debt of $10 million. The remaining
balance of the purchase price, anticipated to be $11 million, will be paid in cash in July 2012. As a result of our
preliminary purchase price allocation for this acquisition, our Consolidated Balance Sheet includes $36 million of
goodwill and $36 million of identifiable intangibles at December 25, 2010. The impact of consolidating this business on
all line items within our Consolidated Statement of Income was insignificant for the year ended December 25, 2010.
The pro forma impact on our results of operations if the acquisition had been completed as of the beginning of 2010 or
2009 would not have been significant.
Acquisition of Interest in Little Sheep
During 2009, our China Division paid approximately $103 million, in several tranches, to purchase 27% of the
outstanding common shares of Little Sheep Group Limited (“Little Sheep”) and obtain Board of Directors representation.
We began reporting our investment in Little Sheep using the equity method of accounting and this investment is included
in Investments in unconsolidated affiliates on our Consolidated Balance Sheets. Equity income recognized from our
investment in Little Sheep was not significant in the years ended December 25, 2010 and December 26, 2009.
Little Sheep is the leading brand in China’s “Hot Pot” restaurant category with approximately 375 restaurants, primarily
in China as well as Hong Kong, Japan, Canada and the U.S.
Consolidation of a Former Unconsolidated Affiliate in Shanghai, China
On May 4, 2009 we acquired an additional 7% ownership in the entity that operates more than 200 KFCs in Shanghai,
China for $12 million, increasing our ownership to 58%. The acquisition was driven by our desire to increase our
management control over the entity and further integrate the business with the remainder of our KFC operations in China.
Prior to our acquisition of this additional interest, this entity was accounted for as an unconsolidated affiliate under the
equity method of accounting due to the effective participation of our partners in the significant decisions of the entity that
were made in the ordinary course of business. Concurrent with the acquisition we received additional rights in the
governance of the entity, and thus we began consolidating the entity upon acquisition. As required by GAAP, we
remeasured our previously held 51% ownership in the entity, which had a recorded value of $17 million at the date of
acquisition, at fair value and recognized a gain of $68 million accordingly. This gain, which resulted in no related income
tax expense, was recorded in Other (income) expense on our Consolidated Statement of Income during 2009 and was not
allocated to any segment for performance reporting purposes.
Form 10-K