Pizza Hut 2013 Annual Report Download - page 123

YUM! BRANDS, INC.-2013 Form10-K 27
Form 10-K
PART II
ITEM7Management’s Discussion and Analysis of Financial Condition and Results of Operations
YRI G&A expenses for 2013, excluding the impact of foreign currency
translation, decreased due to the impact of refranchising our remaining
Company-owned Pizza Hut UK dine-in restaurants in the fourth quarter
of 2012, lapping certain prior year headquarter restructuring costs and
a pension curtailment gain in the first quarter of 2013 related to one of
our UK pension plans, partially offset by higher headcount in strategic
growth markets.
YRI G&A expenses for 2012, excluding the impact of foreign currency
translation, increased due to investments in strategic growth markets,
including the acquisition of restaurants in South Africa in 2011, and
increased compensation costs in the remaining markets.
U.S. G&A expenses for 2013 decreased due to lower incentive compensation
costs, lapping higher litigation costs recorded in 2012, our restaurant
refranchising initiatives and lower pension costs.
U.S. G&A expenses for 2012 increased due to higher pension costs,
incentive compensation costs and litigation costs, partially offset by the
LJS and A&W divestitures and our restaurant refranchising initiatives.
Unallocated G&A expenses for 2013 decreased due to lower pension
costs, which includes lower settlement charges, and lower incentive
compensation costs, partially offset by higher legal and professional fees.
Unallocated G&A expenses for 2012 increased due to higher pension
costs, including a pension settlement charge of $87 million, partially offset
by lapping costs related to the actions taken as part of our U.S. business
transformation measures, lower litigation costs and costs related to the
LJS and A&W divestitures in 2011.
Franchise and License Expenses
Amount % Increase (Decrease)
% Increase (Decrease)
excluding foreign
currency translation
% Increase (Decrease)
excluding foreign
currency translation
and 53rd week
2013 2012 2011 2013 2012 2013 2012 2013 2012
China $ 13 $ 9 $ 4 41 NM 38 NM 38 NM
YRI 65 50 51 29 — 27 4 27 4
U.S. 78 74 92 6 (20) 6 (20) 6 (19)
India 2 — — NM — NM — NM —
Unallocated — — (2) — 78 — 78 — 78
WORLDWIDE $ 158 $ 133 $ 145 19 (8) 19 (7) 19 (7)
China Franchise and license expenses for 2013 and 2012, excluding the
impact of foreign currency translation, increased due to higher franchise-
related rent expense and depreciation as a result of refranchising.
YRI Franchise and license expenses for 2013, excluding the impact of
foreign currency translation, increased due to costs associated with
our bi-annual franchise convention, higher marketing costs and higher
franchise-related rent expense and depreciation as a result of refranchising.
YRI Franchise and license expenses for 2012, excluding foreign currency
translation, were higher due to higher franchise rent expense and depreciation
as a result of refranchising, partially offset by lapping costs associated
with our bi-annual franchise convention.
U.S. Franchise and license expenses for 2013 increased due to higher
franchise development incentives, lapping recoveries of past due receivables
in 2012 and higher franchise-related rent expense and depreciation as a
result of refranchising.
U.S. Franchise and license expenses for 2012 were positively impacted by
15% due to the LJS and A&W divestitures. The remaining decrease was
driven by lower franchise development incentives, partially offset by higher
franchise-related rent expense and depreciation as a result of refranchising.
Worldwide Other (Income) Expense
2013 2012 2011
Equity income from investments in unconsolidated affiliates(a) $ (26) $ (47) $ (47)
Gain upon acquisition of Little Sheep(b) — (74) —
Foreign exchange net (gain) loss and other 10 6 (6)
OTHER (INCOME) EXPENSE $ (16) $ (115) $ (53)
(a) Declines in the year ended December 28, 2013 are due to the impact of KFC sales declines in China on net income of our unconsolidated affiliates.
(b) See the Little Sheep Acquisition and Subsequent Impairment section of Note 4 for further discussion of the gain upon acquisition of Little Sheep.
Worldwide Closure and Impairment (Income) Expenses and Refranchising (Gain) Loss
See the Store Portfolio Strategy section for more detail of our refranchising activity and Note 4 for a summary of the Closure and impairment (income)
expenses and Refranchising (gain) loss by reportable operating segment. See Significant Known Events, Trends or Uncertainties Impacting or Expected
to Impact Comparisons of Reported or Future Results and the Little Sheep Acquisition and Subsequent Impairment section of Note 4 for information
on Little Sheep Impairment.