NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in millions, except share data)

Note 17 - Commitments and Contingencies

We are subject to various claims an contingencies related to lawsuits, taxes, environmental and other matters arising out of the normal course of business.  We believe that the ultimate liability, if any, in excess of amounts already recognized arising from such claims or contingencies is not likely to have a material adverse effect on our annual results of operations, financial condition or cash flows.

We were directly or indirectly contingently liable in the amounts of $302 million and $150 million at year-end 1997 and 1996, respectively, for certain lease assignments and guarantees.  In connection with these contingent liabilities, after the Spin-off Date, we were required to maintain cash collateral balances at certain institutions of approximately $30 million, which is included in Other Assets in the accompanying Consolidated Balance Sheet.  At year-end 1997, $200 million represented contingent liabilities to lessors as a result of our assigning our interest in and obligations under real estate leases as a condition to the refranchising  of Company restaurants.  The $200 million represented the present value of the minimum payments of the assigned leases, excluding any renewal option periods, discounted at our pre-tax cost of debt.  On a  nominal basis, the contingent liabilities primarily reflected guarantees to support financial arrangements of certain unconsolidated affiliates and other restaurant franchisees.

We are currently and, for a significant portion of the  prior three years ended December 27, 1997, have been primarily self-insured for most workers' compensation, general liability and automotive liabitly losses, subject to per occurrence and aggregate annual liability limitations.  During 1997, prior to the Spin-off, we participated with PepsiCo in a guaranteed cost program for certain coverages.  We are also primarily self-insured for health care claims for eligible participating employees subject to certain deductibles and limitations.  We determine our liability for claims reported and for claims incurred but not reported on an actuarial basis.

Note 18 - Selected Quarterly Financial Data
(unaudited)

1997


First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Revenues:
   Company sales $2,123 $2,214 $2,164 $2,611 $9,112
   Franchise and license fees 114 139 136 180 569
Total costs and expenses 2,075 2,121 2,105 3,139 9,440
Operating profit (loss) 162 232 195 (348) 241
Net income (loss) 52 121 79 (363) (111)
Loss per common share(a) (2.39)
Net income (loss) attributable to:
   Facility actions net gain (loss) 6 65 43 (277) (163)
   Unusual charges (22) (12) (125) (159)

(a)  Earnings per share data has not been provided for periods prior to the fourth quarter of 1997 as we were not an independent, publicly owned Company prior to the Spin-off.

 

1996

First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Revenues:
   Company sales $2,171 $2,271 $2,329 $2,967 $9,738
   Franchise and license fees 102 111 119 162 494
Total costs and expenses 2,127 2,199 2,252 3,282 9,860
Operating profit (loss) 146 183 196 (153) 372
Net income (loss) 40 66 60 (219) (53)
Net income (loss) attributable to:
   Facility actions net gain (loss) 28 13 15 (35) 21
   Unusual charges (17) (172) (189)

See Note 4 for details of facility actions net gain (loss) and unusual charges.

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