Income Taxes

8 Months Ended

Sep. 03, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

	Quarter ended						Year to date
	2016			2015			2016			2015
Income tax (benefit) provision	$	(65	)	$	145		$	183		$	358
Effective tax rate	(11.6		)%	25.3		%	11.8		%	25.9		%

Our effective tax rate is generally lower than the U.S. federal statutory rate of 35% due to the majority of our income being earned outside the U.S. where tax rates are generally lower than the U.S. rate.

During the quarter ended September 3, 2016, we recorded a tax benefit of $233 million related to previously recorded losses associated with our Little Sheep business. The tax benefit associated with these losses was able to be recognized as a result of

legal entity restructuring completed in anticipation of the China spin-off. The cash tax savings associated with this benefit will be realized as we recognize future U.S. refranchising gains.

Our third quarter and year to date effective tax rates were lower than the prior year primarily due to the recognition of the aforementioned Little Sheep tax benefits, lapping a valuation allowance charge resulting from a change in judgment regarding the future use of certain deferred tax assets in a foreign market, partially offset by the increased cost of repatriating current year foreign earnings.