Pizza Hut 2014 Annual Report Download - page 113

PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Special Items
Special Items, along with the reconciliation to the most comparable GAAP financial measure, are presented below.
Year
Detail of Special Items 2014 2013 2012
Little Sheep impairment (See Note 4) $ (463) $ (295) $ —
Gain upon acquisition of Little Sheep (See Note 4) — — 74
U.S. Refranchising gain (loss) (See Note 17) 6 91 $ 122
Pension settlement charges (See Note 4) — (10) (84)
Losses associated with the refranchising of the Pizza Hut UK dine-in business (See Note 4) — (1) (70)
Other Special Items Income (Expense)(a) 10 (7) 16
Special Items Income (Expense) – Operating Profit (447) (222) 58
Losses related to the extinguishment of debt – Interest Expense, net (See Note 4) — (118) —
Special Items Income (Expense) before income taxes (447) (340) 58
Tax Benefit (Expense) on Special Items(b) 72 41 1
Special Items Income (Expense), net of tax – including noncontrolling interests (375) (299) 59
Special Items Income (Expense), net of tax – noncontrolling interests 26 19 —
Special Items Income (Expense), net of tax – YUM! Brands, Inc. $ (349) $ (280) $ 59
Average diluted shares outstanding 453 461 473
Special Items diluted EPS $ (0.77) $ (0.61) $ 0.13
Reconciliation of Operating Profit Before Special Items to Reported Operating Profit
Operating Profit before Special Items $ 2,004 $ 2,020 $ 2,236
Special Items Income (Expense) – Operating Profit (447) (222) 58
Reported Operating Profit $ 1,557 $ 1,798 $ 2,294
Reconciliation of EPS Before Special Items to Reported EPS
Diluted EPS before Special Items $ 3.09 $ 2.97 $ 3.25
Special Items EPS (0.77) (0.61) 0.13
Reported EPS $ 2.32 $ 2.36 $ 3.38
Reconciliation of Effective Tax Rate Before Special Items to Reported Effective Tax Rate
Effective Tax Rate before Special Items 25.5% 28.0% 25.8%
Impact on Tax Rate as a result of Special Items(b) 3.0% 3.4% (0.8)%
Reported Effective Tax Rate 28.5% 31.4% 25.0%
(a) Other Special Items Income (Expense) in 2014 primarily includes gains of $7 million from real estate sales related to our previously refranchised Mexico business.
In connection with the refranchising of stores in the U.S., we have taken several measures to transform our U.S. business, including G&A productivity initiatives
and realignment of resources (primarily severance and early retirement costs). Other Special Items Income (Expense) in 2013 primarily includes charges relating
to these U.S. G&A productivity initiatives and realignment of resources of $5 million as well as $2 million of costs recorded in G&A that were part of the $120 million
charge related to the extinguishment of debt. Other Special Items Income (Expense) in 2012 primarily includes the depreciation reduction from the Pizza Hut UK
and KFC U.S. restaurants impaired upon our decision or offer to refranchise that remained Company stores for some or all of the period presented of $13 million
and $3 million, respectively, gains from real estate sales related to our previously refranchised Mexico business of $3 million and charges relating to U.S. G&A
productivity initiatives and realignment of resources of $5 million.
(b) The tax benefit (expense) was determined based upon the impact of the nature, as well as the jurisdiction of the respective individual components within Special
Items.
YUM! BRANDS, INC. - 2014 Form 10-K 19
13MAR201516053226
Form 10-K