Pizza Hut 2010 Annual Report Download - page 176

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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 Statements 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 in Net Income – noncontrolling interest. For the years ended December 25, 2010 and
December 26, 2009, the consolidation of the existing restaurants upon acquisition increased Company sales by $98
million and $192 million, respectively, and decreased Franchise and license fees and income by $6 million and $12
million, respectively. For the years ended December 25, 2010 and December 26, 2009, the consolidation of the existing
restaurants upon acquisition increased Operating Profit by $3 million and $4 million, respectively. The impact on Net
Income – YUM! Brands, Inc. was not significant to either the year ended December 25, 2010 or December 26, 2009.
The pro forma impact on our results of operations if the acquisition had been completed as of the beginning of 2009
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 to Other (income) expense
in the Consolidated Statement of Income and was not allocated to any segment for performance reporting purposes.
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.
Form 10-K