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Items Affecting Comparability of Net Income and Cash Flows
 3 Months Ended
Mar. 31, 2017
Items Affecting Comparability of Net Income and Cash Flows [Abstract]  
Comparability of Prior Year Financial Data Items Affecting Comparability of Net Income and Cash Flows

Refranchising (Gain) Loss

The Refranchising (gain) loss by reportable segment is presented below. Given the size and volatility of refranchising initiatives, we do not allocate such gains and losses to our segments for performance reporting purposes.

During the quarter ended March 31, 2017 we refranchised 121 restaurants. We received $185 million in proceeds and recorded $111 million of net pre-tax refranchising gains related to refranchising activity during the quarter ended March 31, 2017.

 
 
Quarter ended
 
 
2017
 
2016
KFC Division
 
$
1

 
$
1

Pizza Hut Division
 
2

 
—

Taco Bell Division
 
(114
)
 
(1
)
Worldwide
 
$
(111
)
 
$
—



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 approximately $120 million from 2015 through 2018 primarily to fund new back-of-house equipment for franchisees and to provide incentives to accelerate franchisee store remodels. We recorded pre-tax charges of $3 million and $9 million for the quarters ended March 31, 2017, and 2016, respectively, for these investments. These amounts were recorded primarily as Franchise and license expenses. We recorded total pre-tax charges of $98 million during the two year period ended December 31, 2016 and we currently expect a total pre-tax charge of approximately $20 million in 2017 for these investments. These charges are not being allocated to the KFC Division segment operating results due to their size and unique and long-term brand building nature.

In addition to the investments above we agreed to fund $60 million of incremental system advertising from 2015 through 2018. During both of the quarters ended March 31, 2017 and 2016, we incurred $4 million in incremental system advertising expense. We funded approximately $30 million of such advertising during the two year period ended December 31, 2016. We currently expect to fund approximately $20 million of such advertising in 2017 and $10 million in 2018. All of these advertising amounts were recorded primarily in Franchise and license expenses and are included in the KFC Division segment operating results.

YUM's Strategic Transformation Initiatives

In October 2016, we announced our strategic transformation plans to drive global expansion of the KFC, Pizza Hut and Taco Bell brands ("YUM's Strategic Transformation Initiatives") following the then anticipated separation of our China business on October 31, 2016. Major features of the Company’s growth and transformation strategy involve being more focused on the development of our three brands, increasing our franchise ownership and creating a leaner, more efficient cost structure. We incurred pre-tax costs of $7 million within G&A expenses related to these initiatives during the quarter ended March 31, 2017, primarily for severance and relocation costs. Due to the scope of the initiatives as well as their significance, costs associated with the initiatives are not being allocated to any segment for performance reporting purposes.

Impact of Change in Reporting Calendar

As discussed in Note 1, we have changed our fiscal year from a year ending on the last Saturday of December to a year beginning on January 1 and ending on December 31 of each year commencing with the year ending December 31, 2017. We also removed the monthly or period reporting lags certain of our international subsidiaries historically used to report results. The impacts on our Financial Statements of retrospectively applying these changes are included below:

 
 
Quarter ended March 31, 2016
 
 
As Previously Reported
 
Adjustments
 
After Change in Reporting Calendar
Total Revenues
 
$
1,364

 
$
79

 
$
1,443

 
Operating profit
 
356

 
(6
)
 
350

(a) 
Net Income from continuing operations
 
240

 
(14
)
 
226

 
Income from discontinued operations, net of tax
 
151

 
(13
)
 
138

 
Net Income
 
$
391

 
$
(27
)
 
$
364

 
 
 
 
 
 
 
 
 
Diluted EPS from continuing operations
 
$
0.57

 
$
(0.03
)
 
$
0.54

 
Diluted EPS from discontinued operations
 
0.36

 
(0.03
)
 
0.33

 
Diluted EPS
 
$
0.93

 
$
(0.06
)
 
$
0.87

 

(a)
Amount does not reconcile to our Condensed Consolidated Statements of Income due to the $1 million impact of retrospectively adopting a new accounting standard on Benefit Costs. See Note 1.

The impact on Total Assets within the Condensed Consolidated Balance Sheet as of December 31, 2016, versus amounts previously reported, was a decrease of $25 million.

The impact on our March 31, 2016 Condensed Consolidated Statement of Cash Flows was an increase in cash provided by operating activities of $10 million, an increase in cash used in investing activities of $6 million and an increase in cash used in financing activities of $94 million versus amounts previously reported. The increase in cash used in financing activities is due to timing of borrowings against our revolving credit facilities.

Non-cash Pension Adjustment

During the quarter ended March 31, 2017, as a result of the completion of a pension data review and reconciliation, we recorded a non-cash, out-of-year charge of $22 million to Other pension (income) expense to adjust our historical U.S. pension liability related to our deferred vested participants.