Yum! Brands Reports Second-Quarter EPS

LOUISVILLE, Ky.–(hospitalitybusinessnews.com)–Yum! Brands, Inc. today reported results for the second quarter ended June 30, 2017. Second-quarter GAAP EPS was $0.58, a decrease of 10%. Second-quarter EPS excluding Special Items was $0.68, an increase of 21%.

GREG CREED COMMENTS

Greg Creed, CEO, said “I’m pleased Yum! Brands’ intensified focus on our four distinct growth drivers helped deliver another successful quarter. Core operating profit grew 19% and EPS excluding special items grew 21% during the second quarter. We are maintaining our full-year 2017 guidance and are on pace with our multi-year transformation strategy designed to further unlock shareholder value.”

SECOND-QUARTER HIGHLIGHTS

  • Worldwide system sales grew 6%, with KFC and Taco Bell at 7% and Pizza Hut at 2%.
  • We opened 174 net new units for 3% net new unit growth.
  • We refranchised 244 restaurants, including 40 KFC, 163 Pizza Hut and 41 Taco Bell units, for proceeds of $136 million. We recorded refranchising gains of $19 million in Special Items. As of quarter end, our global franchise ownership mix was 94%.
  • We repurchased 5.6 million shares totaling $384 million at an average price of $68. As of quarter end, there was approximately $1.1 billion remaining in share repurchase authorization through year end 2017.
  • Foreign currency translation negatively impacted GAAP operating profit by $6 million.
% Change
System Sales Same-Store Sales Net New Units

GAAP

Operating Profit

Core

Operating Profit

KFC Division +7 +3 +4 +19 +21
Pizza Hut Division +2 (1) +2 +4 +7
Taco Bell Division +7 +4 +3 +10 +10
Worldwide +6 +2 +3 +1 +19
Second Quarter Year-to-Date
2017 2016 % Change 2017 2016 % Change
GAAP EPS $0.58 $0.64 (10) $1.34 $1.18 +14
Special Items EPS1 $(0.10) $0.08 NM $0.01 $0.06 NM
EPS Excluding Special Items $0.68 $0.56 +21 $1.33 $1.12 +19

1 See Reconciliation of GAAP results to non-GAAP measurements within this release for further detail of Special Items.

System sales growth figures exclude foreign currency translation (“F/X”) and core operating profit growth figures exclude F/X and Special Items. Special Items are not allocated to any segment and therefore only impact worldwide GAAP results. See reconciliation of GAAP results to non-GAAP measurements within this release for further details.

All comparisons are versus the same period a year ago. Effective January 2017, we removed the reporting lags from our international subsidiary fiscal calendars. To accommodate these changes, Yum! Brands now reports on a monthly calendar basis though certain subsidiaries, including our U.S. subsidiaries, continue to be included in our consolidated results on a periodic basis with 3, 3, 3 & 4 periods in each quarter, respectively. Prior year figures in this earnings release have been restated to present comparable results. An 8-K was filed on April 13, 2017 with restated quarterly 2016 results.

KFC DIVISION

Second Quarter Year-to-Date
%/ppts Change %/ppts Change
2017 2016 Reported Ex F/X 2017 2016 Reported Ex F/X
Restaurants 20,854 20,125 +4 N/A 20,854 20,125 +4 N/A
System Sales Growth +5 +7 +4 +6
Same-Store Sales Growth (%) +3 +3 NM NM +3 +3 NM NM
Franchise & License Fees ($MM) 278 251 +11 +13 535 494 +8 +10
Restaurant Margin (%) 15.7 14.6 1.1 1.0 14.7 14.0 0.7 0.7
Operating Profit ($MM) 243 203 +19 +21 450 388 +16 +18
Operating Margin (%) 31.5 26.1 5.4 5.5 29.9 25.6 4.3 4.5
  • KFC Division system sales increased 7%, excluding foreign currency translation.
Second Quarter (% Change)
Int’l Emerging Markets Int’l Developed Markets U.S.
System Sales Growth (Ex F/X) +9 +7 +1
Same-Store Sales Growth +4 +4 +2
  • KFC Division opened 241 new international restaurants in 56 countries, including 202 units in emerging markets.
  • Operating margin increased 5.4 percentage points driven by same-store sales growth, refranchising, reduced G&A and higher initial and renewal fee income partially offset by higher restaurant operating costs.
  • Foreign currency translation negatively impacted GAAP operating profit by $4 million.
KFC Markets1

Percent of KFC

System Sales2

System Sales Growth Ex F/X
Second Quarter (%) Year-to-Date (%)
Emerging Markets
China3 26% +8 +6
Asia (e.g. Malaysia, Indonesia, Philippines) 6% +11 +9
Middle East / Turkey / North Africa 5% +3 +1
Latin America (e.g. Mexico, Peru) 4% +14 +13
Africa 4% +4 +5
Russia 3% +22 +25
Thailand 2% (2) +2
Continental Europe (e.g. Poland) 2% +17 +18
India 1% +9 +6
Developed Markets
U.S. 19% +1 +2
Asia (e.g. Japan, Korea, Taiwan) 7% +4 +1
Australia 7% +9 +8
U.K. 6% +6 +6
Continental Europe (e.g. France, Germany) 5% +11 +10
Canada 2% +5 +5
Latin America (e.g. Puerto Rico) 1% (2) Even

1 Refer to www.yum.com/investors for a list of the countries within each of the markets.

2 Reflects Full Year 2016.

3 Includes April, May and June; YUMC Q2 reported results include March, April and May.

PIZZA HUT DIVISION

Second Quarter Year-to-Date
%/ppts Change %/ppts Change
2017 2016 Reported Ex F/X 2017 2016 Reported Ex F/X
Restaurants 16,452 16,178 +2 N/A 16,452 16,178 +2 N/A
System Sales Growth Even +2 (1) +1
Same-Store Sales Growth (%) (1) (1) NM NM (2) (1) NM NM
Franchise & License Fees ($MM) 141 142 Even +1 285 288 (1) Even
Restaurant Margin (%) 8.5 9.4 (0.9) (1.0) 7.4 9.7 (2.3) (2.3)
Operating Profit ($MM) 85 81 +4 +7 168 172 (3) Even
Operating Margin (%) 38.1 30.3 7.8 8.1 36.8 31.4 5.4 5.8
  • Pizza Hut Division system sales increased 2%, excluding foreign currency translation.
Second Quarter (% Change)
Int’l Emerging Markets Int’l Developed Markets U.S.
System Sales Growth (Ex F/X) +8 +5 (4)
Same-Store Sales Growth +2 Even (3)
  • Pizza Hut Division opened 142 new international restaurants in 42 countries, including 103 units in emerging markets.
  • Operating margin increased 7.8 percentage points driven by refranchising partially offset by increased G&A related to litigation costs.
  • Foreign currency translation negatively impacted GAAP operating profit by $2 million.
Pizza Hut Markets1

Percent of Pizza

Hut System Sales2

System Sales Growth Ex F/X
Second Quarter (%) Year-to-Date (%)
Emerging Markets
China3 17% +6 +7
Latin America (e.g. Mexico, Peru) 5% +6 +5
Middle East / Turkey / Africa 4% +7 +5
Asia (e.g. Malaysia, Indonesia, Philippines) 4% +17 +12
India 1% +8 +7
Continental Europe (e.g. Poland) 1% +13 +10
Developed Markets
U.S. 48% (4) (5)
Asia (e.g. Japan, Korea, Taiwan) 7% +4 +2
U.K. 5% +4 +4
Continental Europe (e.g. France, Germany) 4% +4 +3
Canada 2% +5 +5
Australia 1% +19 +20
Latin America (e.g. Puerto Rico) 1% (5) +1

1 Refer to www.yum.com/investors for a list of the countries within each of the markets.

2 Reflects Full Year 2016.

3 Includes April, May and June; YUMC Q2 reported results include March, April and May.

TACO BELL DIVISION

Second Quarter Year-to-Date
%/ppts Change %/ppts Change
2017 2016 Reported Ex F/X 2017 2016 Reported Ex F/X
Restaurants 6,686 6,466 +3 N/A 6,686 6,466 +3 N/A
System Sales Growth +7 +7 +10 +10
Same-Store Sales Growth (%) +4 (1) NM NM +6 Even NM NM
Franchise & License Fees ($MM) 120 111 +8 +8 234 212 +11 +11
Restaurant Margin (%) 22.8 22.3 0.5 0.5 22.3 21.6 0.7 0.7
Operating Profit ($MM) 152 139 +10 +10 293 257 +14 +14
Operating Margin (%) 33.4 29.8 3.6 3.6 32.3 28.9 3.4 3.4
  • Taco Bell Division system sales increased 7%.
  • Taco Bell Division opened 56 new restaurants.
  • Restaurant margin was 22.8%, an increase of 0.5 percentage points, driven by same-store sales growth partially offset by food and labor inflation.
  • Operating margin increased 3.6 percentage points driven by same-store sales growth, reduced G&A including lower litigation costs and refranchising partially offset by food and labor inflation.

OTHER ITEMS

  • During the quarter, we recorded a non-cash charge of $16 million in Special Items related to the ongoing impact of share-based compensation award modifications made at the time of the separation of Yum China Holdings, Inc.
  • On May 1, 2017, we entered into a Transformation Agreement with Pizza Hut U.S. franchisees that will improve brand marketing alignment, accelerate enhancements to operations and technology and permanently increase advertising, digital and technology contributions from franchisees. In connection with this agreement, we recognized a Special Items charge of $12 million during the quarter primarily related to investments for digital initiatives.
  • On June 15, 2017, our Restricted Group subsidiaries that operate the company’s KFC, Pizza Hut and Taco Bell businesses issued $750 million aggregate principal amount of 4.75% Senior Notes due 2027.
  • Disclosures pertaining to outstanding debt in our Restricted Group capital structure will be provided at the time of the filing of the second quarter Form 10-Q.

YUM! Brands, Inc.

Condensed Consolidated Summary of Results

(amounts in millions, except per share amounts)

(unaudited)

Quarter ended % Change Year to date % Change
6/30/17 6/30/16 B/(W) 6/30/17 6/30/16 B/(W)
Company sales $ 909 $ 1,006 (10) $ 1,811 $ 1,959 (8)
Franchise and license fees and income 539 503 7 1,054 993 6
Total revenues 1,448 1,509 (4) 2,865 2,952 (3)
Company restaurant expenses
Food and paper 280 307 9 556 594 6
Payroll and employee benefits 239 263 9 483 520 7
Occupancy and other operating expenses 229 269 15 467 530 12
Company restaurant expenses 748 839 11 1,506 1,644 8
General and administrative expenses 247 254 3 484 497 3
Franchise and license expenses 54 54 (1) 100 105 4
Closures and impairment (income) expenses 1 7 84 2 9 78
Refranchising (gain) loss (19 ) (54 ) (65) (130 ) (54 ) NM
Other (income) expense (2 ) (6 ) (58) (13 ) (93)
Total costs and expenses, net 1,029 1,094 6 1,962 2,188 10
Operating Profit 419 415 1 903 764 18
Other pension (income) expense 4 NM 32 (1 ) NM
Interest expense, net 104 51 NM 213 93 NM
Income from continuing operations before income taxes 311 364 (15) 658 672 (2)
Income tax provision 105 98 (7) 172 180 4
Income from continuing operations 206 266 (23) 486 492 (1)
Income from discontinued operations, net of tax 70 NM 208 NM
Net Income 206 336 (39) 486 700 (31)

Effective tax rate from Continuing Operations

33.8 % 27.0 % (6.8 ppts.) 26.2 % 26.8 % 0.6 ppts.

Basic EPS from Continuing Operations

EPS $ 0.59 $ 0.65 (10) $ 1.37 $ 1.20 15
Average shares outstanding 350 408 14 354 411 14

Diluted EPS from Continuing Operations

EPS $ 0.58 $ 0.64 (10) $ 1.34 $ 1.18 14
Average shares outstanding 358 415 14 361 418 14

Basic EPS from Discontinued Operations

EPS N/A $ 0.17 NM N/A $ 0.51 NM
Average shares outstanding N/A 408 NM N/A 411 NM

Diluted EPS from Discontinued Operations

EPS N/A $ 0.17 NM N/A $ 0.50 NM
Average shares outstanding N/A 415 NM N/A 418 NM
Dividends declared per common share $ 0.30 $ 0.46 $ 0.60 $ 0.92

See accompanying notes.

Percentages may not recompute due to rounding.

YUM! Brands, Inc.

KFC DIVISION Operating Results

(amounts in millions)

(unaudited)

Quarter ended % Change Year to date % Change
6/30/17 6/30/16 B/(W) 6/30/17 6/30/16 B/(W)
Company sales $ 492 $ 528 (7) $ 967 $ 1,021 (5)
Franchise and license fees and income 278 251 11 535 494 8
Total revenues 770 779 (1) 1,502 1,515 (1)
Company restaurant expenses
Food and paper 169 181 6 332 348 4
Payroll and employee benefits 116 124 6 231 242 5
Occupancy and other operating expenses 130 146 11 262 288 9
Company restaurant expenses 415 451 8 825 878 6
General and administrative expenses 85 93 9 174 187 7
Franchise and license expenses 26 28 6 51 56 8
Closures and impairment (income) expenses 1 4 80 2 6 78
Other (income) expense NM NM
Total costs and expenses, net 527 576 9 1,052 1,127 7
Operating Profit $ 243 $ 203 19 $ 450 $ 388 16
Company sales 100.0 % 100.0 % 100.0 % 100.0 %
Food and paper 34.3 % 34.1 % (0.2 ppts.) 34.3 % 34.0 % (0.3 ppts.)
Payroll and employee benefits 23.5 % 23.4 % (0.1 ppts.) 23.9 % 23.7 % (0.2 ppts.)
Occupancy and other operating expenses 26.5 % 27.9 % 1.4 ppts. 27.1 % 28.3 % 1.2 ppts.
Restaurant margin 15.7 % 14.6 % 1.1 ppts. 14.7 % 14.0 % 0.7 ppts.
Operating margin 31.5 % 26.1 % 5.4 ppts. 29.9 % 25.6 % 4.3 ppts.

See accompanying notes.

Percentages may not recompute due to rounding.

YUM! Brands, Inc.

PIZZA HUT DIVISION Operating Results

(amounts in millions)

(unaudited)

Quarter ended % Change Year to date % Change
6/30/17 6/30/16 B/(W) 6/30/17 6/30/16 B/(W)
Company sales $ 81 $ 125 (36) $ 171 $ 260 (34)
Franchise and license fees and income 141 142 285 288 (1)
Total revenues 222 267 (17) 456 548 (17)
Company restaurant expenses
Food and paper 23 35 34 49 72 32
Payroll and employee benefits 26 39 34 55 81 33
Occupancy and other operating expenses 24 40 37 54 82 33
Company restaurant expenses 73 114 35 158 235 33
General and administrative expenses 54 56 5 107 115 7
Franchise and license expenses 10 14 27 23 24 3
Closures and impairment (income) expenses 2 NM 2 83
Other (income) expense NM NM
Total costs and expenses, net 137 186 26 288 376 23
Operating Profit $ 85 $ 81 4 $ 168 $ 172 (3)
Company sales 100.0 % 100.0 % 100.0 % 100.0 %
Food and paper 28.3 % 27.4 % (0.9 ppts.) 28.5 % 27.5 % (1.0 ppts.)
Payroll and employee benefits 32.2 % 31.5 % (0.7 ppts.) 32.1 % 31.3 % (0.8 ppts.)
Occupancy and other operating expenses 31.0 % 31.7 % 0.7 ppts. 32.0 % 31.5 % (0.5 ppts.)
Restaurant margin 8.5 % 9.4 % (0.9 ppts.) 7.4 % 9.7 % (2.3 ppts.)
Operating margin 38.1 % 30.3 % 7.8 ppts. 36.8 % 31.4 % 5.4 ppts.

See accompanying notes.

Percentages may not recompute due to rounding.

YUM! Brands, Inc.

TACO BELL DIVISION Operating Results

(amounts in millions)

(unaudited)

Quarter ended % Change Year to date % Change
6/30/17 6/30/16 B/(W) 6/30/17 6/30/16 B/(W)
Company sales $ 336 $ 353 (5) $ 673 $ 678 (1)
Franchise and license fees and income 120 111 8 234 212 11
Total revenues 456 464 (2) 907 890 2
Company restaurant expenses
Food and paper 88 91 4 175 174 (1)
Payroll and employee benefits 97 100 3 197 197
Occupancy and other operating expenses 75 83 10 151 160 6
Company restaurant expenses 260 274 6 523 531 2
General and administrative expenses 39 46 15 81 93 13
Franchise and license expenses 5 5 (1) 10 9 (9)
Closures and impairment (income) expenses 1 51 1 58
Other (income) expense (1 ) (47) (1 ) (59)
Total costs and expenses, net 304 325 7 614 633 3
Operating Profit $ 152 $ 139 10 $ 293 $ 257 14
Company sales 100.0 % 100.0 % 100.0 % 100.0 %
Food and paper 26.2 % 25.9 % (0.3 ppts.) 26.1 % 25.7 % (0.4 ppts.)
Payroll and employee benefits 28.9 % 28.4 % (0.5 ppts.) 29.2 % 29.1 % (0.1 ppts.)
Occupancy and other operating expenses 22.1 % 23.4 % 1.3 ppts. 22.4 % 23.6 % 1.2 ppts.
Restaurant margin 22.8 % 22.3 % 0.5 ppts. 22.3 % 21.6 % 0.7 ppts.
Operating margin 33.4 % 29.8 % 3.6 ppts. 32.3 % 28.9 % 3.4 ppts.

See accompanying notes.

Percentages may not recompute due to rounding.

YUM! Brands, Inc.

Condensed Consolidated Balance Sheets

(amounts in millions)

(unaudited)

6/30/17 12/31/16
ASSETS
Current Assets
Cash and cash equivalents $ 970 $ 725
Accounts and notes receivable, less allowance: $19 in 2017 and $14 in 2016 356 370
Inventories 31 37
Prepaid expenses and other current assets 267 236
Advertising cooperative assets, restricted 161 137
Total Current Assets 1,785 1,505

Property, plant and equipment, net of accumulated depreciation and amortization of $1,990 in 2017 and $1,995 in 2016

2,021 2,113
Goodwill 540 536
Intangible assets, net 147 151
Other assets 340 376
Deferred income taxes 763 772
Total Assets $ 5,596 $ 5,453
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and other current liabilities $ 929 $ 1,067
Income taxes payable 13 32
Short-term borrowings 375 66
Advertising cooperative liabilities 161 137
Total Current Liabilities 1,478 1,302
Long-term debt 9,474 9,059
Other liabilities and deferred credits 746 704
Total Liabilities 11,698 11,065
Shareholders’ Deficit
Common stock, no par value, 750 shares authorized; 345 shares and 355 shares issued in 2017 and 2016, respectively
Retained earnings (accumulated deficit) (5,710 ) (5,158 )
Accumulated other comprehensive income (loss) (392 ) (454 )
Total Shareholders’ Deficit (6,102 ) (5,612 )
Total Liabilities and Shareholders’ Deficit $ 5,596 $ 5,453

See accompanying notes.

YUM! Brands, Inc.

Condensed Consolidated Statements of Cash Flows

(amounts in millions)

(unaudited)

Year to Date
6/30/17 6/30/16
Cash Flows – Operating Activities from Continuing Operations
Net income $ 486 $ 700
Income from discontinued operations, net of tax (208 )
Depreciation and amortization 135 147
Closures and impairment (income) expenses 2 9
Refranchising (gain) loss (130 ) (54 )
Contributions to defined benefit pension plans (12 ) (6 )
Deferred income taxes 10 (19 )
Share-based compensation expense 25 22
Changes in accounts and notes receivable 30 34
Changes in inventories 4 4
Changes in prepaid expenses and other current assets (1 ) 15
Changes in accounts payable and other current liabilities (143 )

(66

)
Changes in income taxes payable (83 ) 12
Other, net

116

(3

)
Net Cash Provided by Operating Activities from Continuing Operations

439

587

Cash Flows – Investing Activities from Continuing Operations
Capital spending (150 ) (186 )
Proceeds from refranchising of restaurants 321 84
Other, net 2 12
Net Cash Provided by (Used in) Investing Activities from Continuing Operations 173 (90 )
Cash Flows – Financing Activities from Continuing Operations
Proceeds from long-term debt 1,072 6,900
Repayments of long-term debt (344 ) (304 )
Revolving credit facilities, three months or less, net (685 )
Short-term borrowings by original maturity
More than three months – proceeds 1,400
More than three months – payments (2,000 )
Three months or less, net
Repurchase shares of Common Stock (856 ) (2,067 )
Dividends paid on Common Stock (211 ) (379 )
Debt issuance costs (32 ) (86 )

Net transfers from discontinued operations

70
Other, net

(39

) (29 )

Net Cash Provided by (Used in) Financing Activities from Continuing Operations

(410

) 2,820
Effect of Exchange Rate on Cash and Cash Equivalents 23 (1 )

Net Increase in Cash and Cash Equivalents, Restricted Cash and Restricted Cash Equivalents – Continuing Operations

225

3,316

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents – Beginning of Period 831

351

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents – End of Period $ 1,056 $ 3,667
Cash Provided by Operating Activities from Discontinued Operations $ $ 376
Cash Used in Investing Activities from Discontinued Operations (214 )

Cash Used in Financing Activities from Discontinued Operations

(71 )

See accompanying notes.

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 Diluted Earnings Per Share from Continuing Operations excluding Special Items, our Effective Tax Rate excluding Special Items and Core Operating Profit. Core Operating Profit excludes Special Items and foreign currency translation and we use Core Operating Profit for the purposes of evaluating performance internally. Special Items are not included in any of our division segment results, and we believe the elimination of the foreign currency translation impact provides better year-to-year comparability without the distortion of foreign currency fluctuations. The Special Items are described in (b), (c), (d), (e), (f) and (g) in the accompanying notes.

These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of Diluted Earnings Per Share from Continuing Operations excluding Special Items, our Effective Tax Rate excluding Special Items and Core Operating Profit provide additional information to investors to facilitate the comparison of past and present operations, excluding items in the quarters and years to date ended June 30, 2017 and June 30, 2016 that the Company does not believe are indicative of our ongoing operations due to their size and/or nature.

Quarter ended Year to date
6/30/17 6/30/16 6/30/17 6/30/16
Detail of Special Items
Refranchising initiatives(b) $ 19 $ 54 $ 130 $ 54
YUM’s Strategic Transformation Initiatives(c) (4 ) (4 ) (11 ) (4 )
Costs associated with Pizza Hut U.S. Transformation Agreement(d) (12 ) (12 )
Costs associated with KFC U.S. Acceleration Agreement(e) (5 ) (8 ) (8 ) (17 )
Non-cash charges associated with share-based compensation(f) (16 ) (18 )
Other Special Items Income (Expense) (2 ) (2 ) (2 ) (2 )
Special Items Income (Expense) – Operating Profit (20 ) 40 79 31
Deferred vested pension liability adjustment(g) – Other Pension Income (Expense) (22 )
Special Items Income (Expense) from Continuing Operations before Income Taxes (20 ) 40 57 31
Tax Benefit (Expense) on Special Items (17 ) (7 ) (51 ) (5 )
Special Items Income (Expense), net of tax (37 ) 33 6 26
Average diluted shares outstanding 358 415 361 418
Special Items diluted EPS $ (0.10 ) $ 0.08 $ 0.01 $ 0.06
Reconciliation of GAAP Operating Profit to Core Operating Profit
Consolidated
GAAP Operating Profit $ 419 $ 415 $ 903 764
Special Items Income (Expense) (20 ) 40 79 31
Foreign Currency Impact on Reported Operating Profit (6 ) N/A (11 ) N/A
Core Operating Profit $ 445 $ 375 $ 835 $ 733
KFC Division
GAAP Operating Profit $ 243 $ 203 $ 450 $ 388
Foreign Currency Impact on Reported Operating Profit (4 ) N/A (7 ) N/A
Core Operating Profit $ 247 $ 203 $ 457 $ 388
Pizza Hut Division
GAAP Operating Profit $ 85 $ 81 $ 168 $ 172
Foreign Currency Impact on Reported Operating Profit (2 ) N/A (4 ) N/A
Core Operating Profit $ 87 $ 81 $ 172 $ 172
Taco Bell Division
GAAP Operating Profit $ 152 $ 139 $ 293 $ 257
Foreign Currency Impact on Reported Operating Profit N/A N/A
Core Operating Profit $ 152 $ 139 $ 293 $ 257
Reconciliation of Diluted EPS from Continuing Operations to Diluted EPS from Continuing Operations excluding Special Items
Diluted EPS from Continuing Operations $ 0.58 $ 0.64 $ 1.34 $ 1.18
Special Items EPS (0.10 ) 0.08 0.01 0.06
Diluted EPS from Continuing Operations excluding Special Items $ 0.68 $ 0.56 $ 1.33 $ 1.12
Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items
GAAP Effective Tax Rate 33.8 % 27.0 % 26.2 % 26.8 %
Impact on Tax Rate as a result of Special Items 7.5 % (0.9 )% 6.1 % (0.5 )%
Effective Tax Rate excluding Special Items 26.3 % 27.9 % 20.1 % 27.3 %

YUM! Brands, Inc.

Segment Results

(amounts in millions)

(unaudited)

Quarter Ended 6/30/17 KFC Pizza Hut Taco Bell

Corporate
and
Unallocated

Consolidated
Total revenues $ 770 $ 222 $ 456 $ $ 1,448
Company restaurant expenses 415 73 260 748
General and administrative expenses 85 54 39 69 247
Franchise and license expenses 26 10 5 13 54
Closures and impairment (income) expenses 1 1
Refranchising (gain) loss (19 ) (19 )
Other (income) expense (2 ) (2 )
527 137 304 61 1,029
Operating Profit (loss) $ 243 $ 85 $ 152 $ (61 ) $ 419
Quarter Ended 6/30/16 KFC Pizza Hut Taco Bell

Corporate
and
Unallocated

Consolidated
Total revenues $ 779 $ 267 $ 464 $ (1 ) $ 1,509
Company restaurant expenses 451 114 274 839
General and administrative expenses 93 56 46 59 254
Franchise and license expenses 28 14 5 7 54
Closures and impairment (income) expenses 4 2 1 7
Refranchising (gain) loss (54 ) (54 )
Other (income) expense (1 ) (5 ) (6 )
576 186 325 7 1,094
Operating Profit (loss) $ 203 $ 81 $ 139 $ (8 ) $ 415

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.

YUM! Brands, Inc.

Segment Results

(amounts in millions)

(unaudited)

Year to Date 6/30/17 KFC Pizza Hut Taco Bell

Corporate
and
Unallocated

Consolidated
Total revenues $ 1,502 $ 456 $ 907 $ $ 2,865
Company restaurant expenses 825 158 523 1,506
General and administrative expenses 174 107 81 122 484
Franchise and license expenses 51 23 10 16 100
Closures and impairment (income) expenses 2 2
Refranchising (gain) loss (130 ) (130 )
Other (income) expense
1,052 288 614 8 1,962
Operating Profit (loss) $ 450 $ 168 $ 293 $ (8 ) $ 903
Year to Date 6/30/16 KFC Pizza Hut Taco Bell

Corporate
and
Unallocated

Consolidated
Total revenues $ 1,515 $ 548 $ 890 $ (1 ) $ 2,952
Company restaurant expenses 878 235 531 1,644
General and administrative expenses 187 115 93 102 497
Franchise and license expenses 56 24 9 16 105
Closures and impairment (income) expenses 6 2 1 9
Refranchising (gain) loss (54 ) (54 )
Other (income) expense (1 ) (12 ) (13 )
1,127 376 633 52 2,188
Operating Profit (loss) $ 388 $ 172 $ 257 $ (53 ) $ 764

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.

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