Pizza Hut 2013 Annual Report Download - page 156

YUM! BRANDS, INC.-2013 Form10-K60
Form 10-K
PART II
ITEM 8Financial Statements andSupplementaryData
The estimated net loss for the U.S. and International pension plans that will be amortized from Accumulated other comprehensive income (loss) into net
periodic pension cost in 2014 is $17 million and less than $1 million, respectively. The estimated prior service cost for the U.S. pension plans that will
be amortized from Accumulated other comprehensive income (loss) into net periodic pension cost in 2014 is $1 million.
Weighted-average assumptions used to determine benefit obligations at the measurement dates:
U.S. Pension Plans International Pension Plans
2013 2012 2013 2012
Discount rate 5.40% 4.40% 4.70% 4.70%
Rate of compensation increase 3.75% 3.75% N/A(a) 3.70%
Weighted-average assumptions used to determine the net periodic benefit cost for fiscal years:
U.S. Pension Plans International Pension Plans
2013 2012 2011 2013 2012 2011
Discount rate 4.40% 4.90% 5.90% 4.69% 4.75% 5.40%
Long-term rate of return on plan assets 7.25% 7.25% 7.75% 5.37% 5.55% 6.64%
Rate of compensation increase 3.75% 3.75% 3.75% 1.74% 3.85% 4.41%
(a) As of 2013, both plans presented are now frozen to future service cost credits.
Our estimated long-term rate of return on plan assets represents the weighted-average of expected future returns on the asset categories included in
our target investment allocation based primarily on the historical returns for each asset category.
Plan Assets
The fair values of our pension plan assets at December 28, 2013 by asset category and level within the fair value hierarchy are as follows:
U.S. Pension Plans International Pension Plans
Level 1:
Cash(a) $ — $ 1
Level 2:
Cash Equivalents(a) 5 —
Equity Securities – U.S. Large cap(b) 329 —
Equity Securities – U.S. Mid cap(b) 55 —
Equity Securities – U.S. Small cap(b) 53 —
Equity Securities – Non-U.S.(b) 110 159
Fixed Income Securities – U.S. Corporate(b) 234 —
Fixed Income Securities – Non-U.S. Corporate(b) — 33
Fixed Income Securities – U.S. Government and Government Agencies(c) 129 —
Fixed Income Securities – Other(d) 15 66
TOTAL FAIR VALUE OF PLAN ASSETS(e) $ 930 $ 259
(a) Short-term investments in money market funds
(b) Securities held in common trusts
(c) Investments held directly by the Plan
(d) Includes securities held in common trusts and investments held directly by the Plan
(e) U. S. plans exclude net unsettled trades receivable of $3 million
Our primary objectives regarding the investment strategy for the Plan’s
assets, which make up 78% of total pension plan assets at the 2013
measurement date, are to reduce interest rate and market risk and to provide
adequate liquidity to meet immediate and future payment requirements.
To achieve these objectives, we are using a combination of active and
passive investment strategies. Our equity securities, currently targeted to
be rebalanced to 45% from 55% of our investment mix, consist primarily of
low-cost index funds focused on achieving long-term capital appreciation.
We diversify our equity risk by investing in several different U.S. and foreign
market index funds. Investing in these index funds provides us with the
adequate liquidity required to fund benefit payments and plan expenses.
The fixed income asset allocation, currently targeted to be rebalanced
to 55% from 45% of our mix, is actively managed and consists of long-
duration fixed income securities that help to reduce exposure to interest
rate variation and to better correlate asset maturities with obligations. The
fair values of all pension plan assets are determined based on closing
market prices or net asset values.
A mutual fund held as an investment by the Plan includes shares of YUM
common stock valued at $0.2 million at December 28, 2013 and $0.7 million
at December 29, 2012 (less than 1% of total plan assets in each instance).