Pizza Hut 2010 Annual Report Download - page 179

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(c) In the fourth quarter of 2010 we recorded a $52 million loss on the refranchising of our Mexico equity market as we
sold all of our company owned restaurants, comprised of 222 KFCs and 123 Pizza Huts, to an existing Latin
American franchise partner. The buyer will also serve as the master franchisee for Mexico which had 102 KFCs an
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53 Pizza Hut franchise restaurants at the time of the transaction. The write off of goodwill included in this loss was
minimal as our Mexico reporting unit includes an insignificant amount of goodwill. This loss did not result in any
related income tax benefit and was not allocated to any segment for performance reporting purposes.
During the year ended December 26, 2009 we recognized a non-cash $10 million refranchising loss as a result of ou
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decision to offer to refranchise our KFC Taiwan equity market. During the year ended December 25, 2010 we
refranchised all of our remaining company restaurants in Taiwan, which consisted of 124 KFCs. We included in ou
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December 25, 2010 financial statements a non-cash write-off of $7 million of goodwill in determining the loss on
refranchising of Taiwan. Neither of these losses resulted in a related income tax benefit, and neither loss was
allocated to any segment for performance reporting purposes. The amount of goodwill write-off was based on the
relative fair values of the Taiwan business disposed of and the portion of the business that was retained. The fai
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value of the business disposed of was determined by reference to the discounted value of the future cash flows
expected to be generated by the restaurants and retained by the franchisee, which include a deduction for the
anticipated royalties the franchisee will pay the Company associated with the franchise agreement entered into in
connection with this refranchising transaction. The fair value of the Taiwan business retained consists of expected,
net cash flows to be derived from royalties from franchisees, including the royalties associated with the franchise
agreement entered into in connection with this refranchising transaction. We believe the terms of the franchise
agreement entered into in connection with the Taiwan refranchising are substantially consistent with market. The
remaining carrying value of goodwill related to our Taiwan business of $30 million, after the aforementioned write-
off, was determined not to be impaired as the fair value of the Taiwan reporting unit exceeded its carrying amount.
(d) Store closure (income) costs include the net gain or loss on sales of real estate on which we formerly operated a
Company restaurant that was closed, lease reserves established when we cease using a property under an operating
lease and subsequent adjustments to those reserves and other facility-related expenses from previously closed stores.
(e) The 2009 store impairment charges for YRI include $12 million of goodwill impairment for our Pizza Hut South
Korea market. See Note 9.
(f) In 2009, an additional $26 million of goodwill impairment related to our LJS and A&W-U.S. businesses was no
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allocated to segments for performance reporting purposes and is not included in this table. See Note 9.
Form 10-K