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Items Affecting Comparability of Net Income and Cash Flows | 12 Months Ended
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Dec. 26, 2015
Items Affecting Comparability Of Net Income And Cash Flows Disclosure [Abstract] |
Items Affecting Comparability of Net Income and Cash Flows | Items Affecting Comparability of Net Income and Cash Flows Little Sheep Impairment On February 1, 2012 we acquired an additional 66% interest in Little Sheep Group Limited (“Little Sheep”) for $540 million, net of cash acquired of $44 million, increasing our ownership to 93%. The primary assets recorded as a result of the acquisition and resulting consolidation of Little Sheep were the Little Sheep trademark and goodwill of approximately $400 million and $375 million, respectively. Sustained declines in sales and profits in 2013 resulted in a determination that the Little Sheep trademark, goodwill and certain restaurant level PP&E were impaired during the quarter ended September 7, 2013. As a result, we recorded impairment charges to the trademark, goodwill and PP&E of $69 million, $222 million and $4 million, respectively, during the quarter ended September 7, 2013. The Little Sheep business continued to underperform during 2014 with actual average-unit sales volumes and profit levels significantly below those assumed in our 2013 estimation of the Little Sheep trademark and reporting unit fair values. As a result, a significant number of Company-operated restaurants were closed or refranchised during 2014 with future plans calling for further focus on franchise-ownership for the Concept. We tested the Little Sheep trademark and goodwill for impairment in the fourth quarter of 2014 pursuant to our accounting policy. As a result of comparing the trademark’s 2014 fair value estimate of $58 million to its carrying value of $342 million, we recorded a $284 million impairment charge. Additionally, after determining the 2014 fair value estimate of the Little Sheep reporting unit was less than its carrying value we wrote off Little Sheep’s remaining goodwill balance of $160 million. The Company also evaluated other Little Sheep long-lived assets for impairment and recorded $14 million of restaurant-level PP&E impairment and a $5 million impairment of our equity method investment in a meat processing business that supplies lamb to Little Sheep. The losses related to Little Sheep that have occurred concurrent with our trademark and goodwill impairments in 2014 and 2013, none of which have been allocated to any segment for performance reporting purposes, are summarized below:
| 2014 |  | 2013 |  | Income Statement Classification
Impairment of Goodwill | $ | 160 |  |  | $ | 222 |  |  | Closures and Impairment (income) expense
Impairment of Trademark | 284 |  |  | 69 |  |  | Closures and Impairment (income) expense
Impairment of PP&E | 14 |  |  | 4 |  |  | Closures and Impairment (income) expense
Impairment of Investment in Little Sheep Meat | 5 |  |  | — |  |  | Closures and Impairment (income) expense
Tax Benefit | (76 | ) |  | (18 | ) |  | Income tax provision
Loss Attributable to Non-Controlling Interest | (26 | ) |  | (19 | ) |  | Net Income (loss) noncontrolling interests
Net loss | $ | 361 |  |  | $ | 258 |  |  | Net Income - YUM! Brands, Inc.
Losses Related to the Extinguishment of Debt During the fourth quarter of 2013, we completed a cash tender offer to repurchase $550 million of our Senior Unsecured Notes due either March 2018 or November 2037. This transaction resulted in $120 million of losses as a result of premiums paid and other costs, $118 million of which was classified as Interest expense, net in our Consolidated Statement of Income. The repurchase of the Senior Unsecured Notes was funded primarily by proceeds of $599 million received from the issuance of new Senior Unsecured Notes. Refranchising (Gain) Loss The Refranchising (gain) loss by reportable segment is presented below. We do not allocate such gains and losses to our segments for performance reporting purposes.
|  | Refranchising (gain) loss |  |  |  |  |
|  | 2015 |  | 2014 |  | 2013 |  |  |  |  |
China |  | $ | (13 | ) |  | $ | (17 | ) |  | $ | (5 | ) |  |  |  |  |
KFC Division(a) |  | 30 |  |  | (18 | ) |  | (8 | ) |  |  |  |  |
Pizza Hut Division(a)(b) |  | 55 |  |  | 4 |  |  | (3 | ) |  |  |  |  |
Taco Bell Division |  | (65 | ) |  | (4 | ) |  | (84 | ) |  |  |  |  |
India |  | 3 |  |  | 2 |  |  | — |  |  |  |  |  |
Worldwide |  | $ | 10 |  |  | $ | (33 | ) |  | $ | (100 | ) |  |  |  |  |
(a) | In 2010 we refranchised our then-remaining Company-operated restaurants in Mexico. To the extent we owned it, we did not sell the real estate related to certain of these restaurants, instead leasing it to the franchisee. During 2015, we sold the real estate for approximately $58 million. While these proceeds exceeded the book value of the real estate, the sale represented a substantial liquidation of our Mexican foreign entities under GAAP. As such, the accumulated translation losses associated with our Mexican business were included in our loss on the sale. We recorded charges of $80 million representing the excess of the sum of the book value of the real estate and other related assets and our accumulated translation losses over the sales price. Consistent with the classification of the original market refranchising transaction, these charges were classified as Refranchising (gain) loss. Refranchising losses of $40 million were associated with both the KFC and Pizza Hut Divisions.
Our KFC and Pizza Hut Divisions earned approximately $2 million and $1 million, respectively, of rental income in 2015 and $3 million and $1 million, respectively, of rental income in 2014 related to this real estate that transferred to the buyer subsequent to the sale of the real estate. We continue to earn U.S. dollar-denominated franchise fees, most of which are sales-based royalties, under our existing franchise contracts with our Mexico franchisee.
(b) | During 2015 we recognized charges of $16 million within Refranchising (gain) loss associated with the refranchising of our company-owned Pizza Hut restaurants in Korea. While additional gains or losses may occur as the refranchising plans move forward, such amounts are not expected to be material at this time.
KFC U.S. Acceleration Agreement During 2015 we reached an agreement with our KFC U.S. franchisees that gave us brand marketing control as well as an accelerated path to expanded menu offerings, improved assets and enhanced customer experience. In connection with this agreement we anticipate investing a total of approximately $125 million through 2017 primarily to fund new back-of-house equipment for franchisees and to provide incentives to accelerate franchisee store remodels. We recorded expenses for the portion of these investments made in 2015 of $71 million and $1 million within Franchise and license expense and Occupancy and other operating expenses, respectively, with the remaining investments to occur in 2016 and 2017. These charges are not being allocated to the KFC Division for performance reporting purposes due to their unique and long-term brand-building nature. In addition to the investments above we have agreed to fund incremental system advertising dollars of $60 million. We funded approximately $10 million of such advertising in 2015 with the remaining funding to occur in 2016 and 2017. These amounts are being recorded in the KFC Division segment operating results. Store Closure and Impairment Activity Store closure (income) costs and Store impairment charges by reportable segment are presented below. These tables exclude $463 million and $295 million of Little Sheep impairment losses in 2014 and 2013, respectively which were not allocated to any segment for performance reporting purposes.
|  | 2015
|  | China |  | KFC |  | Pizza Hut |  | Taco Bell |  | India |  | Worldwide
Store closure (income) costs(a) |  | $ | (6 | ) |  | $ | 1 |  |  | $ | (2 | ) |  | $ | (1 | ) |  | $ | — |  |  | $ | (8 | )
Store impairment charges |  | 70 |  |  | 7 |  |  | 5 |  |  | 4 |  |  | 1 |  |  | 87 |
Closure and impairment (income) expenses |  | $ | 64 |  |  | $ | 8 |  |  | $ | 3 |  |  | 3 |  |  | $ | 1 |  |  | $ | 79 |
|  | 2014
|  | China |  | KFC |  | Pizza Hut |  | Taco Bell |  | India |  | Worldwide
Store closure (income) costs(a) |  | $ | — |  |  | $ | 2 |  |  | $ | 1 |  |  | $ | — |  |  | $ | — |  |  | $ | 3 |
Store impairment charges |  | 54 |  |  | 7 |  |  | 4 |  |  | 3 |  |  | 1 |  |  | 69 |
Closure and impairment (income) expenses |  | $ | 54 |  |  | $ | 9 |  |  | $ | 5 |  |  | $ | 3 |  |  | $ | 1 |  |  | $ | 72 |
|  | 2013
|  | China |  | KFC |  | Pizza Hut |  | Taco Bell |  | India |  | Worldwide
Store closure (income) costs(a) |  | $ | (1 | ) |  | $ | (1 | ) |  | $ | (3 | ) |  | $ | — |  |  | $ | — |  |  | $ | (5 | )
Store impairment charges |  | 31 |  |  | 4 |  |  | 3 |  |  | 1 |  |  | 2 |  |  | 41 |
Closure and impairment (income) expenses |  | $ | 30 |  |  | $ | 3 |  |  | $ | — |  |  | $ | 1 |  |  | $ | 2 |  |  | $ | 36 |
(a) | Store closure (income) costs include the net gain or loss on sales of real estate on which we formerly operated a Company-owned restaurant that was closed, lease reserves established when we cease using a property under an operating lease and subsequent adjustments to those reserves and other facility-related expenses from previously closed stores. Remaining lease obligations for closed stores were not material at December 26, 2015 or December 27, 2014.

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