UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
___________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

October 7, 2014

Commission file number 1-13163
________________________
YUM! BRANDS, INC.
(Exact name of registrant as specified in its charter)

North Carolina
 
13-3951308
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
 
 
1441 Gardiner Lane, Louisville, Kentucky
 
40213
(Address of principal executive offices)
 
(Zip Code)
 
 
 
Registrant’s telephone number, including area code:  (502) 874-8300
 
 
 
Former name or former address, if changed since last report:   N/A

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))







Section 2 – Financial Information

Item 2.02      Results of Operations and Financial Condition

On October 7, 2014, YUM! Brands, Inc. ("YUM") issued a press release announcing financial results for the quarter ended September 6, 2014.  The Company also reduced its full-year 2014 EPS expectations. A copy of the press release is attached hereto as Exhibit 99.1.

    



Section 9 – Financial Statements and Exhibits

Item 9.01      Financial Statements and Exhibits

 
(c)
Exhibits
 
99.1
Press Release dated October 7, 2014 from YUM! Brands, Inc.





SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


 
 
 
YUM! BRANDS, INC.
 
 
 
 
(Registrant)
 



Date:
October 7, 2014
 
/s/        David E. Russell
 
 
 
 
Vice President, Finance and
Corporate Controller
 
 
 
 
(Principal Accounting Officer)
 



8K EX99.1 10.7.14
NEWS
Steve Schmitt
Vice President, Investor Relations & Corporate Strategy



Yum! Brands Reports Third-Quarter EPS Growth of 3%, Excluding Special Items;
Soft China Sales Reduce 2014 Full-Year EPS Expectations


Louisville, KY (October 7, 2014) - Yum! Brands, Inc. (NYSE: YUM) today reported results for the third quarter ended September 6, 2014, including EPS of $0.87, excluding Special Items. Reported EPS was $0.89. The Company now estimates 2014 EPS growth to be between 6% and 10% versus prior year, excluding Special Items.


THIRD-QUARTER HIGHLIGHTS
●
Worldwide system sales grew 1%. Worldwide restaurant margin decreased 2.7 percentage points to 14.9%, and worldwide operating profit decreased 12%.
 
 
 
●
Total international development was 400 new restaurants; 77% of this development occurred in emerging markets.
 
 
●
China Division system sales declined 9%, as 6% unit growth was offset by a 14% same-store sales decline. Restaurant margin decreased 4.6 percentage points to 14.9%. Operating profit decreased 38%.
 
 
●
KFC Division system sales increased 6%, driven by 2% unit growth and 3% same-store sales growth. Restaurant margin increased 1.0 percentage point to 13.4%. Operating profit increased 16%.
 
 
●
Pizza Hut Division system sales were even, as 2% unit growth was offset by a 1% same-store sales decline. Restaurant margin decreased 1.0 percentage point to 8.9%. Operating profit decreased 2%.
 
 
●
Taco Bell Division system sales increased 4%, driven by 2% unit growth and 3% same-store sales growth. Restaurant margin increased 1.8 percentage points to 20.7%. Operating profit increased 14%.
 
 
●
India Division system sales increased 14%, driven by 26% unit growth which was partially offset by a 4% same-store sales decline.
 
 
●
Worldwide effective tax rate decreased to 22.4% from 33.1%, benefiting EPS by 14 percentage points.
 
 
●
Foreign currency translation negatively impacted operating profit by $6 million.
 
 
 
●
On September 10, 2014, the Company announced an 11% increase in its quarterly dividend, marking the tenth consecutive year the dividend increased at a double-digit percentage rate.


 
Third Quarter
Year-to-Date
 
2014
2013
% Change
2014
2013
% Change
EPS Excluding Special Items
$0.87
$0.85
3%
$2.48
$2.11
17%
Special Items Gain/(Loss)1
$0.02
$(0.52)
NM
$0.02
$(0.45)
NM
EPS
$0.89
$0.33
171%
$2.50
$1.66
50%
1 See Reconciliation of Non-GAAP Measurements to GAAP Results for further detail of the Special Items. Special Items for 2014 are primarily related to U.S. refranchising gains. Special Items for 2013 are primarily related to the impairment of Little Sheep and U.S. refranchising gains.


Note: All comparisons are versus the same period a year ago and exclude Special Items unless noted. System sales and operating profit figures on this page exclude foreign currency translation.

Yum! Brands, Inc. • 1900 Colonel Sanders Lane • Louisville, KY 40213
Tel 502 874-8006 • Fax 502 874-2410 • Web Site www.yum.com/investors



CHINA UPDATE
On July 20th, an undercover report was televised in China depicting improper food handling practices by supplier Shanghai Husi, a division of OSI, which is a large, global supplier to many in the restaurant industry. This triggered extensive news coverage in China that has shaken consumer confidence and impacted brand usage. Subsequently, the Shanghai FDA launched an investigation into this matter, alleging illegal activity by OSI. Upon learning of these events, we terminated our relationship with OSI globally, with minimal disruption to our menu offerings in China. Even though OSI was a minor supplier, sales at KFC and Pizza Hut were disproportionately impacted given our category-leading positions. While sales are rebounding, they continue to be negative. Our brands have proven resilient over time and we expect this to be the case with this situation as well.

REVISED 2014 OUTLOOK
It is difficult to confidently forecast the exact trajectory of China sales. In our experience, sales typically take six to nine months to recover from these types of events. With the assumption that China same-store sales continue to improve, but are negative for the fourth-quarter, we now estimate 2014 EPS growth to be between 6% and 10% versus prior year, excluding Special Items.
 

DAVID NOVAK COMMENTS
David C. Novak, Chairman and CEO said, "I'm absolutely confident in Yum! Brands' ability to deliver strong, sustainable growth in the years ahead despite the recent supplier incident in China, which has significantly impacted China sales, leading us to reduce our full-year EPS outlook.

China sales are on the path to recovery and we expect to develop at least 700 new restaurants in China this year, which we're confident will ultimately deliver high returns as we further capitalize on the world’s fastest growing consuming class. Outside of China, we expect continued solid sales and profit growth at our KFC division, led by strong international performance and improving U.S. results. At Taco Bell, we’re extremely pleased with restaurant margins of nearly 21% in the quarter and the overall results of our breakfast offering, which has given us a new growth platform to build upon in the years to come. At Pizza Hut, we are making progress with our U.S. turnaround and have major actions in place to drive same-store sales growth balance of year and beyond.

Overall, our business model is compelling and we firmly believe we are building momentum behind major initiatives around the world that will drive strong sales and profit growth in 2015. We remain focused on the three keys to driving shareholder value: new-unit development, same-store sales growth and generating high returns on invested capital."



2





CHINA DIVISION
 
Third Quarter
Year-to-Date
 
 
% Change
 
% Change
2014
2013
Reported
Ex F/X
2014
2013
Reported
Ex F/X
System Sales Growth
 
 
(10)
(9)
 
 
+7
+7
Same-Store Sales Growth (%)
(14)
(11)
NM
NM
+1
(16)
NM
NM
Franchise & License Fees ($MM)
31
32
(7)
(6)
80
70
+14
+14
Restaurant Margin (%)
14.9
19.5
(4.6)
(4.5)
17.9
16.0
1.9
1.9
Operating Profit ($MM)
202
335
(40)
(38)
681
557
+22
+22
 
Our new 2014 reporting structure does not impact the China Division. For the full year 2013, China Division contributed 35% of Yum!'s total operating profit.
●
China Division same-store sales for the quarter were significantly impacted by adverse publicity in July surrounding improper food handling practices by a former supplier.
●
China Division system sales decreased 9%, prior to foreign currency translation.
○
System sales declined 11% for KFC and increased 3% for Pizza Hut Casual Dining.
○
Same-store sales declined 14%, including declines of 14% at KFC and 11% at Pizza Hut Casual Dining.
●
China Division opened 125 new units during the quarter.
China Units
Q3 2014
% Change2
Restaurants1
6,419
+6
KFC
4,669
+5
Pizza Hut
 
 
Casual Dining
1,171
+23
Home Service
226
+22
1 Total includes East Dawning and Little Sheep units.
2 Represents year-over-year change.

●
Restaurant margin decreased 4.6 percentage points to 14.9%, driven by sales deleverage, the corresponding impact to food and labor efficiencies, and inventory write-offs.
○
Excluding the impact of Little Sheep, restaurant margin would have been 15.9%.
●
Operating profit declined 38%, prior to foreign currency translation.
●
Foreign currency translation negatively impacted operating profit by $5 million.
 
 
 
●
Consistent with prior years, China Division's third quarter, which is a period of high seasonality, includes June, July and August results.



3

KFC DIVISION
 
Third Quarter
Year-to-Date
 
 
 
% Change
 
 
% Change
 
2014
2013
Reported
Ex F/X
2014
2013
Reported
Ex F/X
Restaurants1
13,961
13,743
+2
NA
13,961
13,743
+2
NA
System Sales Growth
 
 
+6
+6
 
 
+2
+5
Same-Store Sales Growth (%)
+3
Even
NM
NM
+2
+1
NM
NM
Franchise & License Fees ($MM)
205
190
+8
+9
596
580
+3
+6
Restaurant Margin (%)
13.4
12.4
1.0
0.9
13.1
12.7
0.4
0.3
Operating Profit ($MM)
169
147
+16
+16
487
457
+7
+10
Operating Margin (%)
21.9
20.8
1.1
1.3
22.2
22.1
0.1
0.4
1 Restaurant counts now reflect licensed units.

KFC is a new reporting division for 2014 and includes all KFC results outside of the China and India divisions. For the full year 2013, KFC Division contributed 29% of Yum!'s total operating profit, 91% of which was generated outside the U.S. This division is 91% franchised.
●
KFC Division system sales increased 6%, excluding foreign currency translation.
 
○
International system sales grew 12% in emerging markets and 6% in developed markets. U.S. system sales were even.
 
○
International same-store sales grew 4% in emerging markets and 3% in developed markets. U.S. same-store sales grew 2%.
●
KFC Division opened 144 new international restaurants in 41 countries. This included 103 units in emerging markets.
 
○
81% of these new units were opened by franchisees.
●
Operating profit increased 16%. Operating profit growth was positively impacted 2 percentage points from the overlap of prior year expenses related to the bi-annual franchisee convention.
●
Operating margin increased 1.3 percentage points, driven by same-store sales growth.
●
Foreign currency translation negatively impacted operating profit by $1 million.
KFC MARKETS1
Percent of KFC System Sales 2
SYSTEM Sales Growth Ex F/X
Third Quarter (%)
Year-to-Date (%)
Emerging Markets
 
 
 
Asia (e.g. Malaysia, Indonesia, Philippines)
8%
+6
+5
Africa3
7%
+11
+11
Latin America (e.g. Mexico, Peru)
6%
+6
+7
Middle East / North Africa
6%
+9
+11
Russia
3%
+36
+40
Thailand
3%
+12
+8
Continental Europe (e.g. Poland)
2%
+10
+10
 
 
 
 
 
 
 
 
Developed Markets
 
 
 
U.S.
25%
Even
(3)
Asia (e.g. Japan, Korea, Taiwan)
11%
+4
+3
Australia
10%
+5
+4
U.K.
8%
+9
+11
Continental Europe (e.g. France, Germany)
6%
+6
+7
Canada
4%
(3)
(2)
Latin America (e.g. Puerto Rico)
1%
(4)
(3)
 
 
 
 
1 See website www.yum.com under tab "Investors" for a list of the countries within each of the markets.
2 Reflects Full Year 2013.
3 Starting in 2014, Africa market includes Mauritius results. For comparability purposes, systems sales growth excludes Mauritius.

4

PIZZA HUT DIVISION
 
Third Quarter
Year-to-date
 
 
 
% Change
 
 
% Change
 
2014
2013
Reported
Ex F/X
2014
2013
Reported
Ex F/X
Restaurants1
13,393
13,120
+2
NA
13,393
13,120
+2
NA
System Sales Growth
 
 
Even
Even
 
 
(1)
Even
Same-Store Sales Growth (%)
(1)
(1)
NM
NM
(2)
(1)
NM
NM
Franchise & License Fees ($MM)
124
124
Even
Even
374
376
(1)
Even
Restaurant Margin (%)
8.9
9.9
(1.0)
(1.1)
9.0
12.8
(3.8)
(4.0)
Operating Profit ($MM)
68
71
(2)
(2)
215
250
(14)
(13)
Operating Margin (%)
26.1
26.7
(0.6)
(0.4)
27.1
31.3
(4.2)
(4.1)
1Restaurant counts now reflect licensed units.

Pizza Hut is a new reporting division for 2014 and includes all Pizza Hut results outside of the China and India divisions. For the full year 2013, Pizza Hut Division contributed 15% of Yum!'s total operating profit, 54% of which was generated in the U.S. This division is 94% franchised.
●
Pizza Hut Division system sales were even.
 
○
International system sales grew 6% in emerging markets and were even in developed markets. U.S. system sales declined 2%.
 
○
International same-store sales grew 3% in emerging markets and declined 1% in developed markets. U.S. same-store sales declined 2%.
●
Pizza Hut Division opened 152 new restaurants, including 102 international units and 50 U.S. units. This included 54 units in emerging markets.
 
○
85% of these new units were opened by franchisees.
●
Operating profit declined 2%. Operating profit growth was positively impacted 4 percentage points from the overlap of prior year expenses related to the bi-annual franchisee convention.
●
Operating margin declined 0.4 percentage points, driven by sales deleverage.
●
Foreign currency translation had a negligible impact on operating profit.
PIZZA HUT MARKETS1
Percent of Pizza Hut System Sales2
SYSTEM Sales Growth Ex F/X
Third Quarter (%)
Year-to-Date (%)
Emerging Markets
 
 
 
Latin America (e.g. Mexico, Peru)
6%
+9
+9
Asia (e.g. Malaysia, Indonesia, Philippines)
5%
+3
+6
Middle East / North Africa
5%
+4
+3
Continental Europe (e.g. Poland)
1%
+5
+5
 
 
 
 
Developed Markets
 
 
 
U.S.
55%
(2)
(2)
Asia (e.g. Japan, Korea, Taiwan)
10%
(1)
(1)
U.K.
6%
+1
Even
Continental Europe (e.g. France, Germany)
5%
+4
+3
Australia
3%
(1)
Even
Canada
3%
(1)
Even
Latin America (e.g. Puerto Rico)
1%
(8)
(6)
 
 
 
 
1 See website www.yum.com under tab "Investors" for a list of the countries within each of the markets.
2 Reflects Full Year 2013.

5





TACO BELL DIVISION
 
Third Quarter
Year-to-Date
 
 
 
% Change
 
 
% Change
 
2014
2013
Reported
Ex F/X
2014
2013
Reported
Ex F/X
Restaurants1
6,109
6,003
+2
NA
6,109
6,003
+2
NA
System Sales Growth
 
 
+4
+4
 
 
+3
+3
Same-Store Sales Growth (%)
+3
+2
NM
NM
+1
+3
NM
NM
Franchise & License Fees ($MM)
99
95
+4
+4
281
274
+2
+3
Restaurant Margin (%)
20.7
18.9
1.8
1.8
18.1
19.2
(1.1)
(1.1)
Operating Profit ($MM)
124
109
+14
+14
317
320
(1)
(1)
Operating Margin (%)
28.1
25.0
3.1
3.1
24.9
24.2
0.7
0.7
1 Restaurant counts now reflect licensed units.

Taco Bell is a new reporting division for 2014, which includes all Taco Bell results outside of the India division.
For the full year 2013, Taco Bell Division contributed 21% of Yum!'s total operating profit, 97% of which was
generated in the U.S. This division is 85% franchised.
 
 
 
●
Taco Bell Division system sales increased 4%.
 
○
U.S. same-store sales grew 3%, driven by breakfast sales.
●
Taco Bell Division opened 48 new restaurants; 42 of these new units were opened by franchisees.
●
Restaurant margin was 20.7%, an increase of 1.8 percentage points, driven by same-store sales growth.
●
Operating margin increased 3.1 percentage points.


INDIA DIVISION
●
India Division system sales increased 14%, prior to foreign currency translation, driven by 26% unit growth. Same-store sales declined 4%.
●
Operating loss was $3 million, an improvement of $1 million versus prior year.
●
Effective the beginning of 2014, results from our 28 franchised stores in Mauritius are no longer included in the India Division and are included in the KFC and Pizza Hut Divisions, as applicable. India unit and system sales growth as shown here exclude Mauritius from the prior year amounts to enhance comparability.
India Units
Q3 2014
% Change2
Restaurants1
736
+26
KFC
345
+25
Pizza Hut
 
 
    Casual Dining
182
+5
    Home Service
204
+55
1 Total includes 5 Taco Bell units.
2 Represents year-over-year change.


TAX / SHARE REPURCHASE UPDATE
●
During the quarter an agreement was reached with the IRS on a previously disclosed issue related to the valuation of intangible assets. As a result of this agreement, we closed out our 2004-2006 audit cycle and made a cash payment to the IRS of $120 million, which was effectively fully reserved, to settle all issues. The agreement also covers claims made by the IRS related to the same valuation issue for years 2007-2013. We anticipate making further cash payments, for which we are fully reserved, of lesser amounts with respect to these years.
 
○
Our effective tax rate before special items in the third quarter of 2013 included higher reserve amounts recorded for this issue. We now estimate our full year 2014 effective tax rate before special items will be between 25% and 26%.
●
Year-to-date through October 6, 2014, we repurchased 6.8 million shares totaling $510 million at an average price of $75.

6

CONFERENCE CALL
Yum! Brands, Inc. will host a conference call to review the company's financial performance and strategies at 9:15 a.m. Eastern Time Wednesday, October 8, 2014. The number is 877/815-2029 for U.S. callers and 706/645-9271 for international callers.

The call will be available for playback beginning at 12:45 p.m. Eastern Time Wednesday, October 8, through midnight Monday, November 3, 2014. To access the playback, dial 855/859-2056 in the United States and 404/537-3406 internationally. The playback pass code is 10524298.

The webcast and the playback can be accessed via the internet by visiting Yum! Brands' website, www.yum.com/investors and selecting “Q3 2014 Earnings Conference Call” under “Investment Events.” A podcast will be available within 24 hours.

ADDITIONAL INFORMATION ONLINE
Quarter end dates for each division, restaurant-count details and definitions of terms are available online at www.yum.com under “Investors”.

This announcement, any related announcements and the related webcast may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Our forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from those projected. Factors that can cause our actual results to differ materially include, but are not limited to: food safety and food borne-illness issues; changes in economic conditions, consumer preferences, tax rates and laws and the regulatory environment, as well as increased competition and other risks in China, where a significant and growing portion of our restaurants are located; changes in economic and political conditions in the other countries outside the U.S. where we operate; the impact or threat of any widespread illness or outbreaks of viruses or other diseases; our ability to protect the integrity and security of individually identifiable data of our customers and employees; our ability to secure and maintain distribution and adequate supply to our restaurants; the success of our international development strategy; commodity, labor and other operating costs; the continued viability and success of our franchise and license operators; consumer preferences and perceptions of our brands; the impact of social media; a potential suspension of the Chinese affiliate of our independent auditor; pending or future litigation and legal claims or proceedings; changes in or noncompliance with government regulations; tax matters, including disagreements with taxing authorities; significant changes in global economic conditions, including consumer spending, consumer confidence and unemployment; and competition within the retail food industry, including with respect to price and quality of food products, new product development, advertising levels and promotional initiatives, customer service, reputation, restaurant location, and attractiveness and maintenance of properties. You should consult our filings with the Securities and Exchange Commission (including the information set forth under the captions “Risk Factors” and “Forward-Looking Statements” in our Annual Report on Form 10-K) for additional detail about factors that could affect our financial and other results. Forward-looking statements are based on current expectations and assumptions and currently available data and are neither predictions nor guarantees of future events or performance. You should not place undue reliance on forward-looking statements, which speak only as of the date hereof. We are not undertaking to update any of these statements.

Yum! Brands, Inc., based in Louisville, Kentucky, has over 40,000 restaurants in more than 125 countries and territories. Yum! is ranked #216 on the Fortune 500 List with revenues of over $13 billion and in 2014 was named among the top 100 Corporate Citizens by Corporate Responsibility Magazine. The Company's restaurant brands - KFC, Pizza Hut and Taco Bell - are the global leaders of the chicken, pizza and Mexican-style food categories. Outside the United States, the Yum! Brands system opened over five new restaurants per day, making it a leader in international retail development.

Analysts are invited to contact
 
Steve Schmitt, Vice President Investor Relations & Corporate Strategy, at 888/298-6986
 
Donny Lau, Director Investor Relations, at 888/298-6986
Members of the media are invited to contact
 
Virginia Ferguson, Director Public Relations, at 502/874-8200

7

YUM! Brands, Inc.
Condensed Consolidated Summary of Results
(amounts in millions, except per share amounts)
(unaudited)
 
Quarter ended
 
% Change
 
Year to date
 
% Change
 
9/6/14
 
9/7/13
 
B/(W)
 
9/6/14
 
9/7/13
 
B/(W)
 
 
 
 
 
 
 
 
 
 
 
 
Company sales
$
2,891

 
$
3,021

 
(4)
 
$
7,941

 
$
7,594

 
5
Franchise and license fees and income
463

 
445

 
4
 
1,341

 
1,311

 
2
Total revenues
3,354

 
3,466

 
(3)
 
9,282

 
8,905

 
4
 
 
 
 
 
 
 
 
 
 
 
 
Company restaurant expenses
 
 
 
 
 
 
 
 
 
 
 
   Food and paper
951

 
996

 
5
 
2,562

 
2,481

 
(3)
   Payroll and employee benefits
642

 
621

 
(3)
 
1,755

 
1,701

 
(3)
   Occupancy and other operating expenses
869

 
873

 
—
 
2,326

 
2,238

 
(4)
Company restaurant expenses
2,462

 
2,490

 
1
 
6,643

 
6,420

 
(3)
 
 
 
 
 
 
 
 
 
 
 
 
General and administrative expenses
323

 
327

 
1
 
946

 
933

 
(1)
Franchise and license expenses
42

 
44

 
6
 
109

 
108

 
(1)
Closures and impairment (income) expenses
6

 
300

 
98
 
30

 
310

 
90
Refranchising (gain) loss
(20
)
 
(38
)
 
(47)
 
(27
)
 
(87
)
 
(69)
Other (income) expense
(9
)
 
(7
)
 
43
 
(19
)
 
(6
)
 
NM
Total costs and expenses, net
2,804

 
3,116

 
10
 
7,682

 
7,678

 
—
 
 
 
 
 
 
 
 
 
 
 
 
Operating Profit
550

 
350

 
57
 
1,600

 
1,227

 
30
Interest expense, net
28

 
31

 
6
 
90

 
94

 
4
Income before income taxes
522

 
319

 
63
 
1,510

 
1,133

 
33
Income tax provision
119

 
182

 
35
 
370

 
384

 
4
Net income - including noncontrolling interests
403

 
137

 
195
 
1,140

 
749

 
52
Net income (loss) - noncontrolling interests
(1
)
 
(15
)
 
94
 
3

 
(21
)
 
NM
Net income - YUM! Brands, Inc.
$
404

 
$
152

 
166
 
$
1,137

 
$
770

 
48
 
 
 
 
 
 
 
 
 
 
 
 
Effective tax rate
22.7
%
 
57.2
%
 
34.5 ppts.
 
24.5
%
 
33.9
%
 
9.4 ppts.
 
 
 
 
 
 
 
 
 
 
 
 
Basic EPS Data
 
 
 
 
 
 
 
 
 
 
 
EPS
$
0.91

 
$
0.34

 
170
 
$
2.55

 
$
1.70

 
50
Average shares outstanding
443

 
451

 
2
 
445

 
453

 
2
 
 
 
 
 
 
 
 
 
 
 
 
Diluted EPS Data
 
 
 
 
 
 
 
 
 
 
 
EPS
$
0.89

 
$
0.33

 
171
 
$
2.50

 
$
1.66

 
50
Average shares outstanding
452

 
461

 
2
 
455

 
463

 
2
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per common share
$
—

 
$
—

 
 
 
$
0.74

 
$
0.67

 
 
 
See accompanying notes.

 Percentages may not recompute due to rounding.


8

YUM! Brands, Inc.
CHINA DIVISION Operating Results
(amounts in millions)
(unaudited)

 
Quarter ended
 
% Change
 
Year to date
 
% Change
 
9/6/14
 
9/7/13
 
B/(W)
 
9/6/14
 
9/7/13
 
B/(W)
 
 
 
 
 
 
 
 
 
 
 
 
Company sales
$
1,809

 
$
2,001

 
(10)
 
$
4,848

 
$
4,563

 
6
Franchise and license fees and income
31

 
32

 
(7)
 
80

 
70

 
14
Total revenues
1,840

 
2,033

 
(10)
 
4,928

 
4,633

 
6
 
 
 
 
 
 
 
 
 
 
 
 
Company restaurant expenses
 
 
 
 
 
 
 
 
 
 
 
Food and paper
598

 
664

 
10
 
1,547

 
1,508

 
(3)
Payroll and employee benefits
366

 
357

 
(3)
 
944

 
907

 
(4)
Occupancy and other operating expenses
576

 
591

 
2
 
1,488

 
1,419

 
(5)
Company restaurant expenses
1,540

 
1,612

 
4
 
3,979

 
3,834

 
(4)
General and administrative expenses
95

 
88

 
(7)
 
259

 
233

 
(11)
Franchise and license expenses
5

 
3

 
(23)
 
11

 
8

 
(31)
Closures and impairment (income) expenses
4

 
6

 
27
 
23

 
14

 
(71)
Other (income) expense
(6
)
 
(11
)
 
(45)
 
(25
)
 
(13
)
 
95
 
1,638

 
1,698

 
4
 
4,247

 
4,076

 
(4)
Operating Profit
$
202

 
$
335

 
(40)
 
$
681

 
$
557

 
22
 
 
 
 
 
 
 
 
 
 
 
 
Company sales
100.0
%
 
100.0
%
 
 
 
100.0
%
 
100.0
%
 
 
Food and paper
33.1

 
33.2

 
0.1 ppts.
 
31.9

 
33.0

 
1.1 ppts.
Payroll and employee benefits
20.2

 
17.8

 
(2.4 ppts.)
 
19.5

 
19.9

 
0.4 ppts.
Occupancy and other operating expenses
31.8

 
29.5

 
(2.3 ppts.)
 
30.7

 
31.1

 
0.4 ppts.
Restaurant margin
14.9
%
 
19.5
%
 
(4.6 ppts.)
 
17.9
%
 
16.0
%
 
1.9 ppts.
 
 
 
 
 
 
 
 
 
 
 
 
Operating margin
11.0
%
 
16.5
%
 
(5.5 ppts.)
 
13.8
%
 
12.0
%
 
1.8 ppts.
 
See accompanying notes.
  
Percentages may not recompute due to rounding.



9

YUM! Brands, Inc.
KFC DIVISON Operating Results
(amounts in millions)
(unaudited)

 
Quarter ended
 
% Change
 
Year to date
 
% Change
 
9/6/14
 
9/7/13
 
B/(W)
 
9/6/14
 
9/7/13
 
B/(W)
 
 
 
 
 
 
 
 
 
 
 
 
Company sales
$
566

 
$
514

 
10
 
$
1,593

 
$
1,486

 
7
Franchise and license fees and income
205

 
190

 
8
 
596

 
580

 
3
Total revenues
771

 
704

 
10
 
2,189

 
2,066

 
6
 
 
 
 
 
 
 
 
 
 
 
 
Company restaurant expenses
 
 
 
 
 
 
 
 
 
 
 
Food and paper
197

 
179

 
(10)
 
555

 
518

 
(7)
Payroll and employee benefits
135

 
123

 
(10)
 
384

 
356

 
(8)
Occupancy and other operating expenses
158

 
147

 
(7)
 
445

 
423

 
(5)
Company restaurant expenses
490

 
449

 
(9)
 
1,384

 
1,297

 
(7)
General and administrative expenses
91

 
88

 
(4)
 
261

 
261

 
—
Franchise and license expenses
20

 
20

 
3
 
54

 
51

 
(5)
Closures and impairment (income) expenses
1

 
—

 
NM
 
2

 
—

 
NM
Other (income) expense
—

 
—

 
NM
 
1

 
—

 
NM
 
602

 
557

 
(8)
 
1,702

 
1,609

 
(6)
Operating Profit
$
169

 
$
147

 
16
 
$
487

 
$
457

 
7
 
 
 
 
 
 
 
 
 
 
 
 
Company sales
100.0
%
 
100.0
%
 
 
 
100.0
%
 
100.0
%
 
 
Food and paper
34.8

 
34.9

 
0.1 ppts.
 
34.9

 
34.9

 
—
Payroll and employee benefits
23.8

 
24.0

 
0.2 ppts.
 
24.1

 
23.9

 
(0.2 ppts.)
Occupancy and other operating expenses
28.0

 
28.7

 
0.7 ppts.
 
27.9

 
28.5

 
0.6 ppts.
Restaurant margin
13.4
%
 
12.4
%
 
1.0 ppts.
 
13.1
%
 
12.7
%
 
0.4 ppts.
 
 
 
 
 
 
 
 
 
 
 
 
Operating margin
21.9
%
 
20.8
%
 
1.1 ppts.
 
22.2
%
 
22.1
%
 
0.1 ppts.
 
See accompanying notes.

Percentages may not recompute due to rounding.



10

YUM! Brands, Inc.
PIZZA HUT DIVISION Operating Results
(amounts in millions)
(unaudited)
 
 
Quarter ended
 
% Change
 
Year to date
 
% Change
 
9/6/14
 
9/7/13
 
B/(W)
 
9/6/14
 
9/7/13
 
B/(W)
 
 
 
 
 
 
 
 
 
 
 
 
Company sales
$
140

 
$
140

 
—
 
$
422

 
$
422

 
—
Franchise and license fees and income
124

 
124

 
—
 
374

 
376

 
(1)
Total revenues
264

 
264

 
—
 
796

 
798

 
—
 
 
 
 
 
 
 
 
 
 
 
 
Company restaurant expenses
 
 
 
 
 
 
 
 
 
 
 
Food and paper
41

 
40

 
(1)
 
126

 
119

 
(6)
Payroll and employee benefits
42

 
42

 
1
 
129

 
127

 
(2)
Occupancy and other operating expenses
44

 
44

 
(2)
 
129

 
122

 
(6)
Company restaurant expenses
127

 
126

 
(1)
 
384

 
368

 
(4)
General and administrative expenses
58

 
54

 
(4)
 
165

 
150

 
(9)
Franchise and license expenses
11

 
14

 
20
 
29

 
32

 
9
Closures and impairment (income) expenses
—

 
(1
)
 
NM
 
2

 
(1
)
 
NM
Other (income) expense
—

 
—

 
NM
 
1

 
(1
)
 
NM
 
196

 
193

 
(1)
 
581

 
548

 
(6)
Operating Profit
$
68

 
$
71

 
(2)
 
$
215

 
$
250

 
(14)
 
 
 
 
 
 
 
 
 
 
 
 
Company sales
100.0
%
 
100.0
%
 
 
 
100.0
%
 
100.0
%
 
 
Food and paper
29.1

 
28.7

 
(0.4 ppts.)
 
29.8

 
28.2

 
(1.6 ppts.)
Payroll and employee benefits
30.5

 
30.7

 
0.2 ppts.
 
30.6

 
30.2

 
(0.4 ppts.)
Occupancy and other operating expenses
31.5

 
30.7

 
(0.8 ppts.)
 
30.6

 
28.8

 
(1.8 ppts.)
 
8.9
%
 
9.9
%
 
(1.0 ppts.)
 
9.0
%
 
12.8
%
 
(3.8 ppts.)
 
 
 
 
 
 
 
 
 
 
 
 
Operating margin
26.1
%
 
26.7
%
 
(0.6 ppts.)
 
27.1
%
 
31.3
%
 
(4.2 ppts.)
 
See accompanying notes.

Percentages may not recompute due to rounding.



11

YUM! Brands, Inc.
TACO BELL DIVISION Operating Results
(amounts in millions)
(unaudited)
 
 
Quarter ended
 
% Change
 
Year to date
 
% Change
 
9/6/14
 
9/7/13
 
B/(W)
 
9/6/14
 
9/7/13
 
B/(W)
 
 
 
 
 
 
 
 
 
 
 
 
Company sales
$
344

 
$
340

 
1
 
$
992

 
$
1,051

 
(6)
Franchise and license fees and income
99

 
95

 
4
 
281

 
274

 
2
Total revenues
443

 
435

 
1
 
1,273

 
1,325

 
(4)
 
 
 
 
 
 
 
 
 
 
 
 
Company restaurant expenses
 
 
 
 
 
 
 
 
 
 
 
Food and paper
101

 
100

 
—
 
297

 
303

 
2
Payroll and employee benefits
95

 
96

 
2
 
287

 
301

 
5
Occupancy and other operating expenses
78

 
80

 
3
 
229

 
245

 
6
Company restaurant expenses
274

 
276

 
1
 
813

 
849

 
4
General and administrative expenses
40

 
45

 
8
 
128

 
138

 
6
Franchise and license expenses
4

 
6

 
21
 
13

 
15

 
10
Closures and impairment (income) expenses
1

 
—

 
28
 
2

 
1

 
(69)
Other (income) expense
—

 
(1
)
 
NM
 
—

 
2

 
NM
 
319

 
326

 
3
 
956

 
1,005

 
5
Operating Profit
$
124

 
$
109

 
14
 
$
317

 
$
320

 
(1)
 
 
 
 
 
 
 
 
 
 
 
 
Company sales
100.0
%
 
100.0
%
 
 
 
100.0
%
 
100.0
%
 
 
Food and paper
29.2

 
29.4

 
0.2 ppts.
 
29.9

 
28.9

 
(1.0 ppts.)
Payroll and employee benefits
27.6

 
28.2

 
0.6 ppts.
 
28.9

 
28.7

 
(0.2 ppts.)
Occupancy and other operating expenses
22.5

 
23.5

 
1.0 ppts.
 
23.1

 
23.2

 
0.1 ppts.
 
20.7
%
 
18.9
%
 
1.8 ppts.
 
18.1
%
 
19.2
%
 
(1.1 ppts.)
 
 
 
 
 
 
 
 
 
 
 
 
Operating margin
28.1
%
 
25.0
%
 
3.1 ppts.
 
24.9
%
 
24.2
%
 
0.7 ppts.
 
See accompanying notes.

Percentages may not recompute due to rounding.



12

YUM! Brands, Inc.
Condensed Consolidated Balance Sheets
(amounts in millions)
 
(unaudited)
 
 
 
9/6/14
 
12/28/13
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
685

 
$
573

Accounts and notes receivable, less allowance: $14 in 2014 and $11 in 2013
373

 
319

Inventories
266

 
294

Prepaid expenses and other current assets
226

 
276

Short-term investments
326

 
10

Deferred income taxes
121

 
123

Advertising cooperative assets, restricted
73

 
96

Total Current Assets
2,070

 
1,691

 
 
 
 
Property, plant and equipment, net of accumulated depreciation and amortization of $3,620 in
 
 
 
2014 and $3,391 in 2013
4,480

 
4,459

Goodwill
886

 
889

Intangible assets, net
622

 
638

Investments in unconsolidated affiliates
58

 
53

Other assets
561

 
566

Deferred income taxes
500

 
399

Total Assets
$
9,177

 
$
8,695

 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable and other current liabilities
$
1,771

 
$
1,929

Income taxes payable
196

 
169

Short-term borrowings
72

 
71

Advertising cooperative liabilities
73

 
96

Total Current Liabilities
2,112

 
2,265

 
 
 
 
Long-term debt
3,315

 
2,918

Other liabilities and deferred credits
1,146

 
1,244

Total Liabilities
6,573

 
6,427

 
 
 
 
Redeemable noncontrolling interest
36

 
39

 
 
 
 
Shareholders' Equity
 
 
 
Common stock, no par value, 750 shares authorized; 437 shares and 443 shares issued in 2014 and 2013, respectively
7

 
—

Retained earnings
2,462

 
2,102

Accumulated other comprehensive income (loss)
36

 
64

Total Shareholders' Equity - YUM! Brands, Inc.
2,505

 
2,166

Noncontrolling interests
63

 
63

Total Shareholders' Equity
2,568

 
2,229

Total Liabilities, Redeemable Noncontrolling Interest and Shareholders' Equity
$
9,177

 
$
8,695

 See accompanying notes.



13

YUM! Brands, Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in millions)
(unaudited)
 
Year to date
 
9/6/14

9/7/13
Cash Flows - Operating Activities
 
 
 
Net income - including noncontrolling interests
$
1,140

 
$
749

Depreciation and amortization
501

 
473

Closures and impairment (income) expenses
30

 
310

Refranchising (gain) loss
(27
)
 
(87
)
Deferred income taxes
(94
)
 
(51
)
Equity income from investments in unconsolidated affiliates
(31
)
 
(17
)
Distribution of income received from unconsolidated affiliates
12

 
15

Excess tax benefit from share-based compensation
(29
)
 
(27
)
Share-based compensation expense
36

 
32

Changes in accounts and notes receivable
(25
)
 
(4
)
Changes in inventories
24

 
19

Changes in prepaid expenses and other current assets
(3
)
 
(22
)
Changes in accounts payable and other current liabilities
59

 
(14
)
Changes in income taxes payable
(24
)
 
115

Other, net
43

 
62

Net Cash Provided by Operating Activities
1,612

 
1,553

 
 
 
 
Cash Flows - Investing Activities
 
 
 
Capital spending
(655
)
 
(699
)
Changes in short-term investments
(315
)
 
1

Proceeds from refranchising of restaurants
66

 
218

Acquisitions
(26
)
 
(98
)
Other, net
10

 
(9
)
Net Cash Used in Investing Activities
(920
)
 
(587
)
 
 
 
 
Cash Flows - Financing Activities
 
 
 
Repayments of long-term debt
(7
)
 
(5
)
Short-term borrowings by original maturity
 
 
 
More than three months - proceeds
2

 
56

More than three months - payments
—

 
(54
)
Three months or less, net
—

 
—

Revolving credit facilities, three months or less, net
397

 
—

Repurchase shares of Common Stock
(510
)
 
(510
)
Excess tax benefit from share-based compensation
29

 
27

Employee stock option proceeds
21

 
17

Dividends paid on Common Stock
(490
)
 
(451
)
Other, net
(28
)
 
(55
)
Net Cash Used in Financing Activities
(586
)
 
(975
)
Effect of Exchange Rate on Cash and Cash Equivalents
6

 
(14
)
Net Increase (Decrease) in Cash and Cash Equivalents
112

 
(23
)
Cash and Cash Equivalents - Beginning of Period
573

 
776

Cash and Cash Equivalents - End of Period
$
685

 
$
753

See accompanying notes.



14

Reconciliation of Non-GAAP Measurements to GAAP Results
(amounts in millions, except per share amounts)
(unaudited)
 
In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") throughout this document, the Company has provided non-GAAP measurements which present operating results in 2014 and 2013 on a basis before Special Items.  Special Items presented below relate primarily to U.S. refranchising gains in 2014 and 2013 and the impairment of certain Little Sheep assets in 2013, which are further described in (d) and (e) in the accompanying notes. Other Special Items Income (Expense) includes gains from real estate sales in 2014 related to our previously refranchised Mexico business and charges related to U.S. General and Administrative productivity initiatives and realignment of resources due to the outsourcing of certain information technology, accounting and payroll services in 2013.

The Company uses earnings before Special Items as a key performance measure of results of operations for the purpose of evaluating performance internally and Special Items are not included in any of our segment results.  This non-GAAP measurement is not intended to replace the presentation of our financial results in accordance with GAAP.  Rather, the Company believes that the presentation of earnings before Special Items provides additional information to investors to facilitate the comparison of past and present operations, excluding items in the quarters and years to date ended September 6, 2014 and September 7, 2013 that the Company does not believe are indicative of our ongoing operations due to their size and/or nature. 
 
 
Quarter ended
 
Year to date
 
 
9/6/14
 
9/7/13
 
9/6/14
 
9/7/13
Detail of Special Items
 
 
 
 
 
 
 
 
U.S. Refranchising gain (loss)(d)
 
$
8

 
$
37

 
$
11

 
$
82

Little Sheep impairment(e)
 
—

 
(295
)
 
—

 
(295
)
Other Special Items Income (Expense)
 
7

 
(9
)
 
7

 
(9
)
Total Special Items Income (Expense)
 
15

 
(267
)
 
18

 
(222
)
Tax Benefit (Expense) on Special Items
 
(5
)
 
12

 
(6
)
 
(3
)
Special Items Income (Expense), net of tax - including noncontrolling interests
 
$
10

 
$
(255
)
 
$
12

 
$
(225
)
Special Items Income (Expense), net of tax - noncontrolling interests
 
$
—

 
$
19

 
$
—

 
$
19

Special Items Income (Expense), net of tax - Yum Brands, Inc.
 
$
10

 
$
(236
)
 
$
12

 
$
(206
)
Average diluted shares outstanding
 
452

 
461

 
455

 
463

Special Items diluted EPS
 
$
0.02

 
$
(0.52
)
 
$
0.02

 
$
(0.45
)
 
 
 
 
 
 
 
 
 
Reconciliation of Operating Profit Before Special Items to Reported Operating Profit
 
 
 
 
 
 
 
 
Operating Profit Before Special Items
 
$
535

 
$
617

 
$
1,582

 
$
1,449

Special Items Income (Expense)
 
15

 
(267
)
 
18

 
(222
)
Reported Operating Profit
 
$
550

 
$
350

 
$
1,600

 
$
1,227

 
 
 
 
 
 
 
 
 
Reconciliation of EPS Before Special Items to Reported EPS
 
 
 
 
 
 
 
 
Diluted EPS Before Special Items
 
$
0.87

 
$
0.85

 
$
2.48

 
$
2.11

Special Items EPS
 
0.02

 
(0.52
)
 
0.02

 
(0.45
)
Reported EPS
 
$
0.89

 
$
0.33

 
$
2.50

 
$
1.66

 
 
 
 
 
 
 
 
 
Reconciliation of Effective Tax Rate Before Special Items to Reported Effective Tax Rate
 
 
 
 
 
 
 
 
Effective Tax Rate Before Special Items
 
22.4
%
 
33.1
%
 
24.4
%
 
28.2
%
Impact on Tax Rate as a result of Special Items
 
0.3
%
 
24.1
%
 
0.1
%
 
5.7
%
Reported Effective Tax Rate
 
22.7
%
 
57.2
%
 
24.5
%
 
33.9
%


15

YUM! Brands, Inc.
Segment Results
(amounts in millions)
(unaudited)

Quarter Ended 9/6/14
China
 
KFC
 
Pizza Hut
 
Taco Bell
 
India
 
Corporate and Unallocated
 
Consolidated
Total revenues
$
1,840

 
$
771

 
$
264

 
$
443

 
$
36

 
$
—

 
$
3,354

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Company restaurant expenses
1,540

 
490

 
127

 
274

 
31

 
—

 
2,462

General and administrative expenses
95

 
91

 
58

 
40

 
6

 
33

 
323

Franchise and license expenses
5

 
20

 
11

 
4

 
2

 
—

 
42

Closures and impairment (income) expenses
4

 
1

 
—

 
1

 
—

 
—

 
6

Refranchising (gain) loss
—

 
—

 
—

 
—

 
—

 
(20
)
 
(20
)
Other (income) expense
(6
)
 
—

 
—

 
—

 
—

 
(3
)
 
(9
)
 
1,638

 
602

 
196

 
319

 
39

 
10

 
2,804

Operating Profit (loss)
$
202

 
$
169

 
$
68

 
$
124

 
$
(3
)
 
$
(10
)
 
$
550



Quarter Ended 9/7/13
China
 
KFC
 
Pizza Hut
 
Taco Bell
 
India
 
Corporate and Unallocated
 
Consolidated
Total revenues
$
2,033

 
$
704

 
$
264

 
$
435

 
$
30

 
$
—

 
$
3,466

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Company restaurant expenses
1,612

 
449

 
126

 
276

 
27

 
—

 
2,490

General and administrative expenses
88

 
88

 
54

 
45

 
6

 
46

 
327

Franchise and license expenses
3

 
20

 
14

 
6

 
1

 
—

 
44

Closures and impairment (income) expenses
6

 
—

 
(1
)
 
—

 
—

 
295

 
300

Refranchising (gain) loss
—

 
—

 
—

 
—

 
—

 
(38
)
 
(38
)
Other (income) expense
(11
)
 
—

 
—

 
(1
)
 
—

 
5

 
(7
)
 
1,698

 
557

 
193

 
326

 
34

 
308

 
3,116

Operating Profit (loss)
$
335

 
$
147

 
$
71

 
$
109

 
$
(4
)
 
$
(308
)
 
$
350



The above tables reconcile segment information, which is based on management responsibility, with our Condensed Consolidated Summary of Results.  Corporate and unallocated expenses comprise items that are not allocated to segments for performance reporting purposes.

The Corporate and Unallocated column in the above tables includes, among other amounts, all amounts that we have deemed Special Items. See Reconciliation of Non-GAAP Measurements to GAAP Results.



16

YUM! Brands, Inc.
Segment Results
(amounts in millions)
(unaudited)

Year to Date 9/6/14
China
 
KFC
 
Pizza Hut
 
Taco Bell
 
India
 
Corporate and Unallocated
 
Consolidated
Total revenues
$
4,928

 
$
2,189

 
$
796

 
$
1,273

 
$
96

 
$
—

 
$
9,282

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Company restaurant expenses
3,979

 
1,384

 
384

 
813

 
83

 
—

 
6,643

General and administrative expenses
259

 
261

 
165

 
128

 
17

 
116

 
946

Franchise and license expenses
11

 
54

 
29

 
13

 
2

 
—

 
109

Closures and impairment (income) expenses
23

 
2

 
2

 
2

 
1

 
—

 
30

Refranchising (gain) loss
—

 
—

 
—

 
—

 
—

 
(27
)
 
(27
)
Other (income) expense
(25
)
 
1

 
1

 
—

 
—

 
4

 
(19
)
 
4,247

 
1,702

 
581

 
956

 
103

 
93

 
7,682

Operating Profit (loss)
$
681

 
$
487

 
$
215

 
$
317

 
$
(7
)
 
$
(93
)
 
$
1,600



Year to Date 9/7/13
China
 
KFC
 
Pizza Hut
 
Taco Bell
 
India
 
Corporate and Unallocated
 
Consolidated
Total revenues
$
4,633

 
$
2,066

 
$
798

 
$
1,325

 
$
83

 
$
—

 
$
8,905

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Company restaurant expenses
3,834

 
1,297

 
368

 
849

 
72

 
—

 
6,420

General and administrative expenses
233

 
261

 
150

 
138

 
18

 
133

 
933

Franchise and license expenses
8

 
51

 
32

 
15

 
2

 
—

 
108

Closures and impairment (income) expenses
14

 
—

 
(1
)
 
1

 
1

 
295

 
310

Refranchising (gain) loss
—

 
—

 
—

 
—

 
—

 
(87
)
 
(87
)
Other (income) expense
(13
)
 
—

 
(1
)
 
2

 
—

 
6

 
(6
)
 
4,076

 
1,609

 
548

 
1,005

 
93

 
347

 
7,678

Operating Profit (loss)
$
557

 
$
457

 
$
250

 
$
320

 
$
(10
)
 
$
(347
)
 
$
1,227



The above tables reconcile segment information, which is based on management responsibility, with our Condensed Consolidated Summary of Results.  Corporate and unallocated expenses comprise items that are not allocated to segments for performance reporting purposes.

The Corporate and Unallocated column in the above tables includes, among other amounts, all amounts that we have deemed Special Items. See Reconciliation of Non-GAAP Measurements to GAAP Results.



17

Notes to the Condensed Consolidated Summary of Results, Condensed Consolidated Balance Sheets
and Condensed Consolidated Statements of Cash Flows
(amounts in millions)
(unaudited)


(a)
Amounts presented as of and for the quarter and year to date ended September 6, 2014 are preliminary.

(b)
Other (income) expense for the China Division primarily consists of equity income (loss) from investments in unconsolidated affiliates.

(c)
Previously, our reporting segments consisted of YUM Restaurants International, the United States, China and India. In the first quarter of 2014, we combined our YUM Restaurants International and United States reporting segments and began reporting this information by three new reporting segments: KFC Division, Pizza Hut Division and Taco Bell Division. China and India remain separate reporting segments. This new structure is designed to drive greater global brand focus, enabling us to more effectively share know-how and accelerate growth. While our consolidated results have not been impacted, we have restated our comparable segment information for consistent presentation.

(d)
During the quarters ended September 6, 2014 and September 7, 2013, we recorded gains of $8 million and $37 million, respectively, related to refranchising in the U.S. During the years to date ended September 6, 2014 and September 7, 2013, we recorded gains of $11 million and $82 million, respectively, related to refranchising in the U.S. We have traditionally not allocated refranchising (gains) losses for segment reporting purposes.  Additionally, U.S. refranchising (gains) losses have been reflected as Special Items for certain performance measures (see accompanying reconciliation to reported results) consistent with our historical presentation.  

(e)
During the quarter ended September 7, 2013, we recorded an impairment charge related to Little Sheep totaling $258 million (net of income tax benefit of $18 million and amounts allocated to noncontrolling interests of $19 million). This charge was driven by a write down in goodwill from $384 million to $162 million and a write down in trademark from $415 million to $345 million. The impairment charge was not allocated for segment reporting purposes and was reflected as a Special Item for certain performance measures (see accompanying reconciliation to reported results).



18