UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 29, 2019
Yum China Holdings, Inc.
(Exact Name of Registrant as Specified in its Charter)
|
Delaware |
|
001-37762 |
|
81-2421743 |
|
(State or other jurisdiction of incorporation or organization) |
|
(Commission File Number) |
|
(I.R.S. Employer Identification No.) |
|
7100 Corporate Drive Plano, Texas 75024 United States of America |
|
Yum China Building 20 Tian Yao Qiao Road Shanghai 200030 People’s Republic of China |
|
(Address, including zip code, of principal executive offices) |
||
(469) 980-2898
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
|
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
|
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
|
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
On April 29, 2019, Yum China Holdings, Inc. issued a press release announcing its unaudited results for the quarter ended March 31, 2019. A copy of the press release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K.
|
Item 9.01. |
Financial Statements and Exhibits. |
(d) Exhibits.
The following exhibits are furnished with this report:
|
Exhibit No. |
|
Exhibit Description |
|
|
|
|
|
99.1 |
|
Press Release of Yum China Holdings, Inc. issued April 29, 2019. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
|
YUM CHINA HOLDINGS, INC. |
||||
|
|
|
|
||||
|
|
|
By: |
|
/s/ Xueling Lu |
||
|
|
|
|
|
Name: |
|
Xueling Lu |
|
|
|
|
|
Title: |
|
Controller and Principal Accounting Officer |
|
Date: April 29, 2019 |
|
|
|
|
|
|
Exhibit 99.1
Yum China Reports First Quarter 2019 Results
Total revenues grew 4% or 10% in constant currency;
Total system sales grew 9% and same-store sales grew 4% in constant currency
Shanghai, China (April 30, 2019) – Yum China Holdings, Inc. (the "Company" or "Yum China") (NYSE: YUMC) today reported unaudited results for the first quarter ended March 31, 2019. Reported GAAP results include Special Items, which are excluded from adjusted measures. Special Items are not allocated to any segment and therefore only impact reported GAAP results of Yum China. See “Reconciliation of Reported GAAP Results to Adjusted Measures” within this release.
First Quarter Highlights
|
|
● |
Total revenues increased 4% year over year to $2.3 billion from $2.2 billion (10% year over year increase excluding foreign currency translation (“F/X”)). |
|
|
|
● |
Total system sales grew 9% year over year, with growth of 11% at KFC and 3% at Pizza Hut, excluding F/X. |
|
|
● |
Same-store sales grew 4% year over year, with growth of 5% at KFC and 1% at Pizza Hut, excluding F/X. |
|
|
● |
Restaurant margin was 18.5%, as compared with 17.9% in the prior year period. |
|
|
● |
Operating Profit decreased 23% year over year to $303 million from $395 million (18% year over year decrease excluding F/X), primarily due to lapping the gain of $98 million from the re-measurement of our previously held equity interest at Wuxi KFC in the first quarter 2018. Excluding the gain in 2018, Adjusted Operating Profit increased 2% year over year (9% year over year increase excluding F/X). |
|
|
|
● |
Net Income decreased 23% to $222 million from $288 million in the prior year period, primarily due to the Wuxi re-measurement gain in the first quarter 2018. |
|
|
● |
Due to the release of final regulations regarding the transition tax under the US Tax Cuts and Jobs Act, the Company recognized a tax charge of $8 million in the first quarter 2019. Excluding the Wuxi re-measurement gain and transition tax charge, Adjusted Net Income increased 7% to $230 million. |
|
|
● |
Effective tax rate was 28.9%. Excluding the transition tax charge, the effective tax rate was 26.5%. |
|
|
● |
Diluted EPS decreased 21% to $0.57 from $0.72 in the prior year period. Adjusted Diluted EPS increased 11% to $0.59 from $0.53 in the prior year period (8% year over year increase excluding the $0.02 per share mark to market gain of our equity investment in Meituan Dianping). |
|
|
● |
Opened 237 new restaurants during the quarter, bringing total store count to 8,653 across more than 1,300 cities. |
Key Financial Results
|
|
First Quarter 2019 |
|
|
|||||||||||||
|
|
% Change |
|
|
|||||||||||||
|
|
System Sales |
|
|
Same-Store Sales |
|
|
Net New Units |
|
|
Operating Profit |
|
|
||||
|
Yum China |
|
+9 |
|
|
|
+4 |
|
|
|
+7 |
|
|
|
(23 |
) |
|
|
KFC |
|
+11 |
|
|
|
+5 |
|
|
|
+8 |
|
|
|
(3 |
) |
|
|
Pizza Hut |
|
+3 |
|
|
|
+1 |
|
|
|
+2 |
|
|
|
+48 |
|
|
|
|
|
First Quarter |
|
|
||||||||||||||
|
(in US$ million, except |
|
|
|
|
|
|
|
|
|
|
% Change |
|
|
|||||
|
per share data and percentages) |
|
2019 |
|
|
|
2018 |
|
|
Reported |
|
|
Ex F/X |
|
|
||||
|
Operating Profit |
$ |
|
303 |
|
|
$ |
|
395 |
|
|
|
(23 |
) |
|
|
(18 |
) |
|
|
Adjusted Operating Profit1 |
$ |
|
303 |
|
|
$ |
|
297 |
|
|
|
+2 |
|
|
|
+9 |
|
|
|
Net Income |
$ |
|
222 |
|
|
$ |
|
288 |
|
|
|
(23 |
) |
|
|
(17 |
) |
|
|
Adjusted Net Income1 |
$ |
|
230 |
|
|
$ |
|
214 |
|
|
|
+7 |
|
|
|
+15 |
|
|
|
Basic Earnings Per Common Share |
$ |
|
0.59 |
|
|
$ |
|
0.75 |
|
|
|
(21 |
) |
|
|
(16 |
) |
|
|
Adjusted Basic Earnings Per |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Share1 |
$ |
|
0.61 |
|
|
$ |
|
0.55 |
|
|
|
+11 |
|
|
|
+18 |
|
|
|
Diluted Earnings Per Common Share |
$ |
|
0.57 |
|
|
$ |
|
0.72 |
|
|
|
(21 |
) |
|
|
(15 |
) |
|
|
Adjusted Diluted Earnings Per |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Share1 |
$ |
|
0.59 |
|
|
$ |
|
0.53 |
|
|
|
+11 |
|
|
|
+19 |
|
|
Yum China Holdings, Inc. • Shanghai, China • Website http://ir.yumchina.com
1 See “Reconciliation of Reported GAAP Results to Adjusted Measures” included in the accompanying tables of this release for further details.
Note: All comparisons are versus the same period a year ago.
NM refers to changes over 100%, from negative to positive amounts or from zero to an amount.
Percentages may not recompute due to rounding.
System sales and same-store sales percentages exclude the impact of F/X.
CEO and CFO Comments
“We are pleased to report a very strong start to 2019 as we delivered a 9% increase in system sales in constant currency in the first quarter, our tenth consecutive quarter of system sales growth since the spin-off,” said Joey Wat, CEO of Yum China. “This resilient growth was driven by another robust quarter at KFC, which successfully lapped three strong first quarters between 2016 and 2018, and a very encouraging quarter at Pizza Hut. Pizza Hut delivered positive same-store sales growth and a significant improvement in profitability in the first quarter, while continuing to make strategic investments in value offerings and multiple other initiatives to drive the ongoing revitalization of the brand.”
“During the first quarter, we opened 237 stores, led by an acceleration of KFC openings, as we continued to identify attractive opportunities to expand our presence in underserved markets. We also continued to invest in enhancing our digital and delivery capabilities, which are vital drivers of same-store sales growth across our portfolio of brands,” added Ms. Wat.
“We achieved a 9% increase in adjusted operating profit during the first quarter, excluding special items and F/X, as sales leverage at KFC and a notable improvement in Pizza Hut’s margin offset cost inflation and increased promotions,” said Jacky Lo, CFO of Yum China. “This enabled us to continue to generate significant cash flow and fund shareholder returns. During the quarter, we returned $111 million to shareholders in the form of share repurchases and cash dividends. Looking ahead, based on our current pipeline, we are confident that our 2019 gross new openings will exceed the top end of our original target of 600 to 650 stores. While we expect poultry inflation to weigh on margins for the rest of the year, and Pizza Hut’s revitalization program is still ongoing, the long-term outlook for growth remains positive and we remain committed to generating significant value for our shareholders.”
Dividend and Share Repurchase
|
|
● |
The Board of Directors declared a cash dividend of $0.12 per share on Yum China’s common stock, payable as of the close of business on June 17, 2019 to shareholders of record as of the close of business on May 28, 2019. |
|
|
● |
During the first quarter, we repurchased approximately 1.7 million shares of Yum China common stock for $64.7 million at an average price of $37.90 per share. |
Digital and Delivery
|
|
● |
As of March 31, 2019, the KFC loyalty program had over 175 million members and the Pizza Hut loyalty program had over 55 million members, an increase of 50 million and 15 million, respectively, year over year. |
|
|
● |
Digital payments accounted for 87% of Company sales in the quarter, an increase of 13 percentage points year over year. |
|
|
● |
Delivery contributed to 19% of Company sales in the first quarter of 2019, an increase of 3 percentage points year over year. Delivery services are now available in 1,160 cities, up from 972 cities in the prior year period. |
New-Unit Development and Asset Upgrade
|
|
● |
The Company opened 237 new restaurants and remodeled 96 restaurants in the first quarter of 2019. |
|
|
|
New Units |
|
|
Restaurant Count |
|
|
|||||
|
|
|
First Quarter |
|
|
As of March 31 |
|
|
|||||
|
|
|
2019 |
|
|
2019 |
|
|
2018 |
|
|
||
|
Yum China |
|
237 |
|
|
|
8,653 |
|
|
|
8,112 |
|
|
|
KFC |
|
191 |
|
|
|
6,078 |
|
|
|
5,602 |
|
|
|
Pizza Hut |
|
34 |
|
|
|
2,249 |
|
|
|
2,214 |
|
|
|
Others2 |
|
12 |
|
|
|
326 |
|
|
|
296 |
|
|
2 Others include Little Sheep, East Dawning, Taco Bell and COFFii & JOY.
2
Restaurant Margin
|
|
● |
In the first quarter of 2019, Yum China restaurant margin was 18.5%, as compared with 17.9% in the prior year period, primarily attributable to sales leverage, improved utility efficiency and labor productivity, partially offset by commodity and wage inflations and increased promotional activities during the period. |
|
|
First Quarter |
|
|
||||||||||
|
|
|
2019 |
|
|
2018 |
|
|
% pts change |
|
|
|||
|
Yum China |
|
|
18.5 |
% |
|
|
17.9 |
% |
|
|
+0.6 |
|
|
|
KFC |
|
|
20.0 |
% |
|
|
20.9 |
% |
|
|
(0.9 |
) |
|
|
Pizza Hut |
|
|
14.3 |
% |
|
|
10.5 |
% |
|
|
+3.8 |
|
|
Recently Adopted Accounting Pronouncement
|
|
● |
Effective January 1, 2019, we adopted a new accounting standard for leases using a modified retrospective method, under which prior period results were not retrospectively adjusted. |
|
|
● |
Upon adoption, we recognized right-of-use assets and lease liabilities of approximately $2.0 billion and $2.2 billion respectively. In addition, an impairment of $60 million (net of related impact on deferred taxes and noncontrolling interests) on right-of-use assets arising from existing operating leases as of January 1, 2019 was recorded as an adjustment to retained earnings, as the additional impairment charge would have been recorded before adoption had the operating lease right-of-use assets been recognized at the time of impairment. We performed an additional impairment evaluation of long-lived assets of restaurants as a result of adopting the new accounting standard and recorded an incremental impairment charge of $12 million in the first quarter of 2019. |
Conference Call
Yum China’s management will hold an earnings conference call at 8:00p.m. U.S. Eastern Time on Monday, April 29, 2019 (8:00a.m. Beijing/Hong Kong Time on Tuesday, April 30, 2019). A copy of the presentation will be available on the Yum China Holdings, Inc. website, http://ir.yumchina.com.
|
US: |
|
+1 845 675 0437 |
|
Hong Kong: |
|
+852 3018 6771 |
|
Mainland China: |
|
400 620 8038 or 800 819 0121 |
|
UK: |
|
+44 20 36214779 |
|
International: |
|
+65 6713 5090 |
|
Passcode: |
|
Yum China |
A replay of the conference call will be available two hours after the call ends until 10:00a.m. U.S. Eastern Time on Tuesday, May 7, 2019 (10:00p.m. Beijing/Hong Kong Time on Tuesday, May 7, 2019) and may be accessed by phone at the following numbers:
|
US: |
|
+1 855 452 5696 |
|
International: |
|
+61 2 9003 4211 |
|
Passcode: |
|
1893189 |
Additionally, a live webcast and an archived webcast of this conference call will be available at http://ir.yumchina.com.
3
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the fact that they do not relate strictly to historical or current facts and by the use of forward-looking words such as "expect," "expectation," "believe," "anticipate," "may," "could," "intend," "belief," "plan," "estimate," "target," "predict," "project," "likely," "will," "continue," "should," "forecast," "outlook" or similar terminology. These statements are based on current estimates and assumptions made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable under the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. Forward-looking statements include, without limitation, statements regarding the future business plans, earnings, performance and returns of Yum China, statements regarding the revitalization of Pizza Hut, anticipated effects of population and macroeconomic trends, the capital structure and effective tax rate of Yum China, the anticipated effects of our digital and delivery capabilities on growth and beliefs regarding the long-term drivers of Yum China's business. Forward-looking statements are not guarantees of performance and are inherently subject to known and unknown risks and uncertainties that are difficult to predict and could cause our actual results or events to differ materially from those indicated by those statements. We cannot assure you that any of our expectations, estimates or assumptions will be achieved. The forward-looking statements included in this press release are only made as of the date of this press release, and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law. Numerous factors could cause our actual results or events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: whether we are able to achieve development goals at the times and in the amounts currently anticipated, if at all, the success of our marketing campaigns and product innovation, our ability to maintain food safety and quality control systems, our ability to control costs and expenses, including tax costs, as well as changes in political, economic and regulatory conditions in China. In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial could affect the accuracy of any such forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. You should consult our filings with the Securities and Exchange Commission (including the information set forth under the captions "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K) for additional detail about factors that could affect our financial and other results.
About Yum China Holdings, Inc.
Yum China Holdings, Inc. is a licensee of Yum! Brands in mainland China. It has exclusive rights in mainland China to KFC, China's leading quick-service restaurant brand, Pizza Hut, the leading casual dining restaurant brand in China, and Taco Bell, a California-based restaurant chain serving innovative Mexican-inspired food. Yum China also owns the Little Sheep, East Dawning and COFFii & JOY concepts outright. The Company had more than 8,600 restaurants in over 1,300 cities at the end of March 2019. In 2019, Yum China was named to the Bloomberg Gender-Equality Index and was certified as a Top Employer 2019 in China by the Top Employers Institute. For more information, please visit http://ir.yumchina.com.
|
Investor Relations Contact: |
||
|
|
|
Tel: +86 21 2407 7556 IR@YumChina.com
|
|
|
|
|
|
Media Contact: |
||
|
|
|
Tel: +86 21 2407 7510 Media@YumChina.com |
4
Condensed Consolidated Statements of Income
(in US$ million, except per share data)
(unaudited)
|
|
|
Quarter Ended |
|
|
% Change |
||||||||
|
|
|
3/31/2019 |
|
|
3/31/2018 |
|
|
B/(W) |
|||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company sales |
|
$ |
2,089 |
|
|
$ |
2,016 |
|
|
|
4 |
|
|
|
Franchise fees and income |
|
|
39 |
|
|
|
40 |
|
|
|
(1 |
) |
|
|
Revenues from transactions with franchisees and unconsolidated affiliates |
|
|
170 |
|
|
|
161 |
|
|
|
5 |
|
|
|
Other revenues |
|
|
6 |
|
|
|
4 |
|
|
|
55 |
|
|
|
Total revenues |
|
|
2,304 |
|
|
|
2,221 |
|
|
|
4 |
|
|
|
Costs and Expenses, Net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company restaurants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food and paper |
|
|
638 |
|
|
|
594 |
|
|
|
(7 |
) |
|
|
Payroll and employee benefits |
|
|
466 |
|
|
|
442 |
|
|
|
(5 |
) |
|
|
Occupancy and other operating expenses |
|
|
599 |
|
|
|
619 |
|
|
|
3 |
|
|
|
Company restaurant expenses |
|
|
1,703 |
|
|
|
1,655 |
|
|
|
(3 |
) |
|
|
General and administrative expenses |
|
|
114 |
|
|
|
114 |
|
|
|
1 |
|
|
|
Franchise expenses |
|
|
20 |
|
|
|
20 |
|
|
|
— |
|
|
|
Expenses for transactions with franchisees and unconsolidated affiliates |
|
|
167 |
|
|
|
160 |
|
|
|
(5 |
) |
|
|
Other operating costs and expenses |
|
|
5 |
|
|
|
4 |
|
|
|
(16 |
) |
|
|
Closures and impairment expenses (income), net |
|
|
11 |
|
|
|
(1 |
) |
|
NM |
|
|
|
|
Other income, net |
|
|
(19 |
) |
|
|
(126 |
) |
|
|
(85 |
) |
|
|
Total costs and expenses, net |
|
|
2,001 |
|
|
|
1,826 |
|
|
|
(10 |
) |
|
|
Operating Profit |
|
|
303 |
|
|
|
395 |
|
|
|
(23 |
) |
|
|
Interest income, net |
|
|
9 |
|
|
|
8 |
|
|
|
17 |
|
|
|
Investment gain |
|
|
10 |
|
|
|
— |
|
|
NM |
|
|
|
|
Income Before Income Taxes |
|
|
322 |
|
|
|
403 |
|
|
|
(20 |
) |
|
|
Income tax provision |
|
|
(93 |
) |
|
|
(107 |
) |
|
|
13 |
|
|
|
Net income – including noncontrolling interests |
|
|
229 |
|
|
|
296 |
|
|
|
(23 |
) |
|
|
Net income – noncontrolling interests |
|
|
7 |
|
|
|
8 |
|
|
|
13 |
|
|
|
Net Income – Yum China Holdings, Inc. |
|
$ |
222 |
|
|
$ |
288 |
|
|
|
(23 |
) |
|
|
Effective tax rate |
|
|
28.9 |
% |
|
|
26.6 |
% |
|
|
(2.3 |
) |
ppts. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Common Share |
|
$ |
0.59 |
|
|
$ |
0.75 |
|
|
|
|
|
|
|
Weighted average shares outstanding (in millions) |
|
|
379 |
|
|
|
386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Common Share |
|
$ |
0.57 |
|
|
$ |
0.72 |
|
|
|
|
|
|
|
Weighted average shares outstanding (in millions) |
|
|
388 |
|
|
|
401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Dividends Declared Per Common Share |
|
$ |
0.12 |
|
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company sales |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
Food and paper |
|
|
30.5 |
|
|
|
29.4 |
|
|
|
(1.1 |
) |
ppts. |
|
Payroll and employee benefits |
|
|
22.3 |
|
|
|
21.9 |
|
|
|
(0.4 |
) |
ppts. |
|
Occupancy and other operating expenses |
|
|
28.7 |
|
|
|
30.8 |
|
|
|
2.1 |
|
ppts. |
|
Restaurant margin |
|
|
18.5 |
% |
|
|
17.9 |
% |
|
|
0.6 |
|
ppts. |
|
Operating margin |
|
|
14.5 |
% |
|
|
19.6 |
% |
|
|
(5.1 |
) |
ppts. |
Percentages may not recompute due to rounding.
5
KFC Operating Results
(in US$ million)
(unaudited)
|
|
|
Quarter Ended |
|
|
% Change |
|
||||||||
|
|
|
3/31/2019 |
|
|
3/31/2018 |
|
|
B/(W) |
|
|||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company sales |
|
$ |
1,539 |
|
|
$ |
1,444 |
|
|
|
7 |
|
|
|
|
Franchise fees and income |
|
|
36 |
|
|
|
37 |
|
|
|
(3 |
) |
|
|
|
Revenues from transactions with franchisees and unconsolidated affiliates |
|
|
17 |
|
|
|
17 |
|
|
|
— |
|
|
|
|
Total revenues |
|
|
1,592 |
|
|
|
1,498 |
|
|
|
6 |
|
|
|
|
Costs and Expenses, Net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company restaurants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food and paper |
|
|
476 |
|
|
|
424 |
|
|
|
(13 |
) |
|
|
|
Payroll and employee benefits |
|
|
320 |
|
|
|
293 |
|
|
|
(9 |
) |
|
|
|
Occupancy and other operating expenses |
|
|
434 |
|
|
|
426 |
|
|
|
(2 |
) |
|
|
|
Company restaurant expenses |
|
|
1,230 |
|
|
|
1,143 |
|
|
|
(8 |
) |
|
|
|
General and administrative expenses |
|
|
49 |
|
|
|
46 |
|
|
|
(5 |
) |
|
|
|
Franchise expenses |
|
|
19 |
|
|
|
19 |
|
|
|
1 |
|
|
|
|
Expenses for transactions with franchisees and unconsolidated affiliates |
|
|
17 |
|
|
|
17 |
|
|
|
1 |
|
|
|
|
Closures and impairment expenses, net |
|
|
7 |
|
|
|
— |
|
|
NM |
|
|
|
|
|
Other income, net |
|
|
(18 |
) |
|
|
(23 |
) |
|
|
(24 |
) |
|
|
|
Total costs and expenses, net |
|
|
1,304 |
|
|
|
1,202 |
|
|
|
(9 |
) |
|
|
|
Operating Profit |
|
$ |
288 |
|
|
$ |
296 |
|
|
|
(3 |
) |
|
|
|
Company sales |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
Food and paper |
|
|
30.9 |
|
|
|
29.3 |
|
|
|
(1.6 |
) |
ppts. |
|
|
Payroll and employee benefits |
|
|
20.8 |
|
|
|
20.3 |
|
|
|
(0.5 |
) |
ppts. |
|
|
Occupancy and other operating expenses |
|
|
28.3 |
|
|
|
29.5 |
|
|
|
1.2 |
|
ppts. |
|
|
Restaurant margin |
|
|
20.0 |
% |
|
|
20.9 |
% |
|
|
(0.9 |
) |
ppts. |
|
|
Operating margin |
|
|
18.7 |
% |
|
|
20.6 |
% |
|
|
(1.9 |
) |
ppts. |
|
Percentages may not recompute due to rounding.
6
Pizza Hut Operating Results
(in US$ million)
(unaudited)
|
|
|
Quarter Ended |
|
|
% Change |
|
||||||||
|
|
|
3/31/2019 |
|
|
3/31/2018 |
|
|
B/(W) |
|
|||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company sales |
|
$ |
541 |
|
|
$ |
564 |
|
|
|
(4 |
) |
|
|
|
Franchise fees and income |
|
|
1 |
|
|
|
1 |
|
|
|
45 |
|
|
|
|
Revenues from transactions with franchisees and unconsolidated affiliates |
|
|
1 |
|
|
|
— |
|
|
NM |
|
|
|
|
|
Total revenues |
|
|
543 |
|
|
|
565 |
|
|
|
(4 |
) |
|
|
|
Costs and Expenses, Net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company restaurants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food and paper |
|
|
159 |
|
|
|
167 |
|
|
|
5 |
|
|
|
|
Payroll and employee benefits |
|
|
143 |
|
|
|
147 |
|
|
|
3 |
|
|
|
|
Occupancy and other operating expenses |
|
|
162 |
|
|
|
190 |
|
|
|
15 |
|
|
|
|
Company restaurant expenses |
|
|
464 |
|
|
|
504 |
|
|
|
8 |
|
|
|
|
General and administrative expenses |
|
|
24 |
|
|
|
28 |
|
|
|
14 |
|
|
|
|
Franchise expenses |
|
|
1 |
|
|
|
1 |
|
|
|
(50 |
) |
|
|
|
Expenses for transactions with franchisees and unconsolidated affiliates |
|
|
1 |
|
|
|
— |
|
|
NM |
|
|
|
|
|
Closures and impairment expenses (income), net |
|
|
3 |
|
|
|
(1 |
) |
|
NM |
|
|
|
|
|
Other income, net |
|
|
— |
|
|
|
(1 |
) |
|
|
(100 |
) |
|
|
|
Total costs and expenses, net |
|
|
493 |
|
|
|
531 |
|
|
|
7 |
|
|
|
|
Operating Profit |
|
$ |
50 |
|
|
$ |
34 |
|
|
|
48 |
|
|
|
|
Company sales |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
Food and paper |
|
|
29.4 |
|
|
|
29.7 |
|
|
|
0.3 |
|
ppts. |
|
|
Payroll and employee benefits |
|
|
26.4 |
|
|
|
26.1 |
|
|
|
(0.3 |
) |
ppts. |
|
|
Occupancy and other operating expenses |
|
|
29.9 |
|
|
|
33.7 |
|
|
|
3.8 |
|
ppts. |
|
|
Restaurant margin |
|
|
14.3 |
% |
|
|
10.5 |
% |
|
|
3.8 |
|
ppts. |
|
|
Operating margin |
|
|
9.2 |
% |
|
|
6.0 |
% |
|
|
3.2 |
|
ppts. |
|
Percentages may not recompute due to rounding.
7
Condensed Consolidated Balance Sheets
(in US$ million)
|
|
|
3/31/2019 |
|
|
12/31/2018 |
|
||
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,247 |
|
|
$ |
1,266 |
|
|
Short-term investments |
|
|
284 |
|
|
|
122 |
|
|
Accounts receivable, net |
|
|
77 |
|
|
|
80 |
|
|
Inventories, net |
|
|
280 |
|
|
|
307 |
|
|
Prepaid expenses and other current assets |
|
|
179 |
|
|
|
177 |
|
|
Total Current Assets |
|
|
2,067 |
|
|
|
1,952 |
|
|
Property, plant and equipment, net |
|
|
1,620 |
|
|
|
1,615 |
|
|
Operating lease right-of-use assets |
|
|
2,016 |
|
|
|
— |
|
|
Goodwill |
|
|
273 |
|
|
|
266 |
|
|
Intangible assets, net |
|
|
111 |
|
|
|
116 |
|
|
Deferred income taxes |
|
|
104 |
|
|
|
89 |
|
|
Investments in unconsolidated affiliates |
|
|
44 |
|
|
|
81 |
|
|
Other assets |
|
|
527 |
|
|
|
491 |
|
|
Total Assets |
|
|
6,762 |
|
|
|
4,610 |
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY |
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
Accounts payable and other current liabilities |
|
|
1,507 |
|
|
|
1,199 |
|
|
Income taxes payable |
|
|
80 |
|
|
|
54 |
|
|
Total Current Liabilities |
|
|
1,587 |
|
|
|
1,253 |
|
|
Non-current operating lease liabilities |
|
|
1,869 |
|
|
|
— |
|
|
Capital lease obligations |
|
|
23 |
|
|
|
25 |
|
|
Other liabilities |
|
|
220 |
|
|
|
355 |
|
|
Total Liabilities |
|
|
3,699 |
|
|
|
1,633 |
|
|
Redeemable Noncontrolling Interest |
|
|
1 |
|
|
|
1 |
|
|
Equity |
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; 1,000 million shares authorized; 394 million shares and 392 million shares issued at March 31, 2019 and December 31, 2018, respectively; 379 million shares and 379 million shares outstanding at March 31, 2019 and December 31, 2018, respectively |
|
|
4 |
|
|
|
4 |
|
|
Treasury stock |
|
|
(525 |
) |
|
|
(460 |
) |
|
Additional paid-in capital |
|
|
2,408 |
|
|
|
2,402 |
|
|
Retained earnings |
|
|
1,060 |
|
|
|
944 |
|
|
Accumulated other comprehensive income (loss) |
|
|
39 |
|
|
|
(17 |
) |
|
Total Equity – Yum China Holdings, Inc. |
|
|
2,986 |
|
|
|
2,873 |
|
|
Noncontrolling interests |
|
|
76 |
|
|
|
103 |
|
|
Total Equity |
|
|
3,062 |
|
|
|
2,976 |
|
|
Total Liabilities, Redeemable Noncontrolling Interest and Equity |
|
$ |
6,762 |
|
|
$ |
4,610 |
|
|
|
|
|
|
|
|
|
|
|
8
Condensed Consolidated Statements of Cash Flows
(in US$ million)
(unaudited)
|
|
|
Quarter Ended |
||||||||
|
|
|
3/31/2019 |
|
3/31/2018 |
||||||
|
Cash Flows – Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
Net income – including noncontrolling interests |
|
$ |
229 |
|
|
|
$ |
296 |
|
|
|
Depreciation and amortization |
|
|
111 |
|
|
|
|
118 |
|
|
|
Amortization of operating lease right-of-use assets |
|
|
83 |
|
|
|
|
— |
|
|
|
Closures and impairment expenses (income) |
|
|
11 |
|
|
|
|
(1 |
) |
|
|
Gain from re-measurement of equity interest upon acquisition |
|
|
— |
|
|
|
|
(98 |
) |
|
|
Investment gain |
|
|
(10 |
) |
|
|
|
— |
|
|
|
Equity income from investments in unconsolidated affiliates |
|
|
(23 |
) |
|
|
|
(23 |
) |
|
|
Distributions of income received from unconsolidated affiliates |
|
|
28 |
|
|
|
|
36 |
|
|
|
Deferred income taxes |
|
|
6 |
|
|
|
|
23 |
|
|
|
Share-based compensation expense |
|
|
6 |
|
|
|
|
6 |
|
|
|
Changes in accounts receivable |
|
|
5 |
|
|
|
|
11 |
|
|
|
Changes in inventories |
|
|
34 |
|
|
|
|
48 |
|
|
|
Changes in prepaid expenses and other current assets |
|
|
(3 |
) |
|
|
|
(7 |
) |
|
|
Changes in accounts payable and other current liabilities |
|
|
(39 |
) |
|
|
|
85 |
|
|
|
Changes in income taxes payable |
|
|
24 |
|
|
|
|
63 |
|
|
|
Changes in non-current operating lease liabilities |
|
|
(103 |
) |
|
|
|
— |
|
|
|
Other, net |
|
|
(15 |
) |
|
|
|
(6 |
) |
|
|
Net Cash Provided by Operating Activities |
|
|
344 |
|
|
|
|
551 |
|
|
|
Cash Flows – Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
Capital spending |
|
|
(110 |
) |
|
|
|
(111 |
) |
|
|
Purchases of short-term investments |
|
|
(235 |
) |
|
|
|
(160 |
) |
|
|
Maturities of short-term investments |
|
|
76 |
|
|
|
|
93 |
|
|
|
Acquisition of business, net of cash acquired |
|
|
— |
|
|
|
|
(88 |
) |
|
|
Other, net |
|
|
2 |
|
|
|
|
(1 |
) |
|
|
Net Cash Used in Investing Activities |
|
|
(267 |
) |
|
|
|
(267 |
) |
|
|
Cash Flows – Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
Repayment of short-term borrowings assumed from acquisition |
|
|
— |
|
|
|
|
(10 |
) |
|
|
Repurchase of shares of common stock |
|
|
(68 |
) |
|
|
|
— |
|
|
|
Cash dividends paid on common stock |
|
|
(46 |
) |
|
|
|
(39 |
) |
|
|
Other, net |
|
|
1 |
|
|
|
|
(2 |
) |
|
|
Net Cash Used in Financing Activities |
|
|
(113 |
) |
|
|
|
(51 |
) |
|
|
Effect of Exchange Rates on Cash and Cash Equivalents |
|
|
17 |
|
|
|
|
26 |
|
|
|
Net (Decrease) Increase in Cash and Cash Equivalents |
|
|
(19 |
) |
|
|
|
259 |
|
|
|
Cash and Cash Equivalents - Beginning of Period |
|
|
1,266 |
|
|
|
|
1,059 |
|
|
|
Cash and Cash Equivalents - End of Period |
|
$ |
1,247 |
|
|
|
$ |
1,318 |
|
|
9
|
|
● |
The Company provides certain percentage changes excluding the impact of foreign currency translation (“F/X”). These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the F/X impact provides better year-to-year comparability without the distortion of foreign currency fluctuations. |
|
|
● |
System sales growth reflects the results of all restaurants regardless of ownership, including Company-owned, franchise and unconsolidated affiliate restaurants that operate our restaurant concepts, except for non-Company-owned restaurants for which we do not receive a sales-based royalty. Sales of franchise and unconsolidated affiliate restaurants typically generate ongoing franchise fees for the Company at a rate of approximately 6% of system sales. Franchise and unconsolidated affiliate restaurant sales are not included in Company sales in the Condensed Consolidated Statements of Income; however, the franchise fees are included in the Company’s revenues. We believe system sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates all of our revenue drivers, Company and franchise same-store sales as well as net unit growth. |
|
|
● |
Effective January 1, 2018, the Company revised its definition of same-store sales growth to represent the estimated percentage change in sales of food of all restaurants in the Company system that have been open prior to the first day of our prior fiscal year. We refer to these as our “base” stores. Previously, same-store sales growth represented the estimated percentage change in sales of all restaurants in the Company system that have been open for one year or more, and the base stores changed on a rolling basis from month to month. This revision was made to align with how management measures performance internally and focuses on trends of a more stable base of stores. |
|
|
● |
Company Restaurant profit (“Restaurant profit”) is defined as Company sales less expenses incurred directly by our Company-owned restaurants in generating Company sales. Company restaurant margin percentage is defined as Restaurant profit divided by Company sales. |
10
Reconciliation of Reported GAAP Results to Adjusted Measures
(in US$ million, except for per share data)
(unaudited)
In addition to the results provided in accordance with US Generally Accepted Accounting Principles (“GAAP”) in this press release, the Company provides measures adjusted for Special Items, which include Adjusted Operating Profit, Adjusted Net Income, Adjusted EPS, Adjusted Effective Tax Rate and Adjusted EBITDA, which we define as net income including noncontrolling interests adjusted for income tax, interest income, net, investment gain or loss, depreciation, amortization and other items, including store impairment charges and Special Items. The Special Item for the quarter ended March 31, 2019 represents impact from the US Tax Cuts and Jobs Act (the “Tax Act”) , as described in the accompanying notes. The Special Item for the quarter ended March 31, 2018 represents a gain recognized from the re-measurement of our previously held equity interest in Wuxi KFC at fair value upon acquisition, as described in the accompanying notes. The Company excludes impact from Special Items for the purpose of evaluating performance internally. Special Items are not included in any of our segment results. In addition, the Company provides Adjusted EBITDA because we believe that investors and analysts may find it useful in measuring operating performance without regard to items such as income tax, interest income, net, investment gain or loss, depreciation, amortization and other items, including store impairment charges. These adjusted measures are not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of these adjusted measures provide additional information to investors to facilitate the comparison of past and present results, excluding those items that the Company does not believe are indicative of our ongoing operations due to their nature. These adjusted measures should not be considered in isolation or as a substitute for GAAP financial results, but should be read in conjunction with the unaudited Condensed Consolidated Statements of Income and other information presented herein. A reconciliation of the most directly comparable GAAP measures to adjusted measures follows.
|
|
|
Quarter Ended |
|
|
|||||
|
|
|
3/31/2019 |
|
|
3/31/2018 |
|
|
||
|
Detail of Special Items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain from re-measurement of equity interest upon acquisition(b) |
|
$ |
— |
|
|
$ |
98 |
|
|
|
Special Items, Operating Profit |
|
|
— |
|
|
|
98 |
|
|
|
Tax effect on Special Items(c) |
|
|
— |
|
|
|
(24 |
) |
|
|
Impact from the Tax Act(d) |
|
|
(8 |
) |
|
|
— |
|
|
|
Special Items, net income – including noncontrolling interests |
|
|
(8 |
) |
|
|
74 |
|
|
|
Special Items, net income – noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
Special Items, Net Income –Yum China Holdings, Inc. |
|
$ |
(8 |
) |
|
$ |
74 |
|
|
|
Weighted Average Diluted Shares Outstanding |
|
|
388 |
|
|
|
401 |
|
|
|
Special Items, Diluted Earnings Per Common Share |
|
$ |
(0.02 |
) |
|
$ |
0.19 |
|
|
|
Reconciliation of Operating Profit to Adjusted Operating Profit |
|
|
|
|
|
|
|
|
|
|
Operating Profit |
|
$ |
303 |
|
|
$ |
395 |
|
|
|
Special Items, Operating Profit |
|
|
— |
|
|
|
98 |
|
|
|
Adjusted Operating Profit |
|
$ |
303 |
|
|
$ |
297 |
|
|
|
Reconciliation of Net Income to Adjusted Net Income |
|
|
|
|
|
|
|
|
|
|
Net Income – Yum China Holdings, Inc. |
|
$ |
222 |
|
|
$ |
288 |
|
|
|
Special Items, Net Income –Yum China Holdings, Inc. |
|
|
(8 |
) |
|
|
74 |
|
|
|
Adjusted Net Income – Yum China Holdings, Inc. |
|
$ |
230 |
|
|
$ |
214 |
|
|
|
Reconciliation of EPS to Adjusted EPS |
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Common Share |
|
$ |
0.59 |
|
|
$ |
0.75 |
|
|
|
Special Items, Basic Earnings Per Common Share |
|
|
(0.02 |
) |
|
|
0.20 |
|
|
|
Adjusted Basic Earnings Per Common Share |
|
$ |
0.61 |
|
|
$ |
0.55 |
|
|
|
Diluted Earnings Per Common Share |
|
$ |
0.57 |
|
|
$ |
0.72 |
|
|
|
Special Items, Diluted Earnings Per Common Share |
|
|
(0.02 |
) |
|
|
0.19 |
|
|
|
Adjusted Diluted Earnings Per Common Share |
|
$ |
0.59 |
|
|
$ |
0.53 |
|
|
|
Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate |
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
28.9 |
% |
|
|
26.6 |
% |
|
|
Impact on effective tax rate as a result of Special Items |
|
|
2.4 |
% |
|
|
(0.5 |
)% |
|
|
Adjusted effective tax rate |
|
|
26.5 |
% |
|
|
27.1 |
% |
|
11
Reconciliation of Net Income to Adjusted EBITDA
(in US$ million)
(unaudited)
Net income, along with the reconciliation to Adjusted EBITDA, is presented below.
|
|
|
Quarter Ended |
|
|
|||||
|
|
|
3/31/2019 |
|
|
3/31/2018 |
|
|
||
|
Reconciliation of Net Income to Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
Net Income – Yum China Holdings, Inc. |
|
$ |
222 |
|
|
$ |
288 |
|
|
|
Net income – noncontrolling interests |
|
|
7 |
|
|
|
8 |
|
|
|
Income tax provision |
|
|
93 |
|
|
|
107 |
|
|
|
Interest income, net |
|
|
(9 |
) |
|
|
(8 |
) |
|
|
Investment gain |
|
|
(10 |
) |
|
|
— |
|
|
|
Operating Profit |
|
|
303 |
|
|
|
395 |
|
|
|
Special Items, Operating Profit |
|
|
— |
|
|
|
(98 |
) |
|
|
Adjusted Operating Profit |
|
|
303 |
|
|
|
297 |
|
|
|
Depreciation and amortization |
|
|
111 |
|
|
|
118 |
|
|
|
Store impairment charges |
|
|
14 |
|
|
|
2 |
|
|
|
Adjusted EBITDA |
|
$ |
428 |
|
|
$ |
417 |
|
|
12
KFC
|
|
|
12/31/2018 |
|
|
New Builds |
|
|
Closures |
|
|
Refranchised |
|
|
3/31/2019 |
|
|||||
|
Company-owned |
|
|
4,597 |
|
|
|
153 |
|
|
|
(17 |
) |
|
|
(1 |
) |
|
|
4,732 |
|
|
Unconsolidated affiliates |
|
|
811 |
|
|
|
27 |
|
|
|
(4 |
) |
|
|
— |
|
|
|
834 |
|
|
Franchise |
|
|
502 |
|
|
|
11 |
|
|
|
(2 |
) |
|
|
1 |
|
|
|
512 |
|
|
Total |
|
|
5,910 |
|
|
|
191 |
|
|
|
(23 |
) |
|
|
— |
|
|
|
6,078 |
|
Pizza Hut
|
|
|
12/31/2018 |
|
|
New Builds |
|
|
Closures |
|
|
Refranchised |
|
|
3/31/2019 |
|
|||||
|
Company-owned |
|
|
2,188 |
|
|
|
33 |
|
|
|
(24 |
) |
|
|
(7 |
) |
|
|
2,190 |
|
|
Franchise |
|
|
52 |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
7 |
|
|
|
59 |
|
|
Total |
|
|
2,240 |
|
|
|
34 |
|
|
|
(25 |
) |
|
|
— |
|
|
|
2,249 |
|
Others
|
|
|
12/31/2018 |
|
|
New Builds |
|
|
Closures |
|
|
Refranchised |
|
|
3/31/2019 |
|
|||||
|
Company-owned |
|
|
47 |
|
|
|
6 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
52 |
|
|
Franchise |
|
|
287 |
|
|
|
6 |
|
|
|
(19 |
) |
|
|
— |
|
|
|
274 |
|
|
Total |
|
|
334 |
|
|
|
12 |
|
|
|
(20 |
) |
|
|
— |
|
|
|
326 |
|
13
Segment Results
(in US$ million)
(unaudited)
|
Quarter Ended 3/31/2019 |
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments(1) |
|
|
Corporate and Unallocated(2) |
|
|
Elimination |
|
|
Total |
|
||||||
|
Company sales |
|
$ |
1,539 |
|
|
$ |
541 |
|
|
$ |
9 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,089 |
|
|
Franchise fees and income |
|
|
36 |
|
|
|
1 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
39 |
|
|
Revenues from transactions with franchisees and unconsolidated affiliates |
|
|
17 |
|
|
|
1 |
|
|
|
7 |
|
|
|
145 |
|
|
|
— |
|
|
|
170 |
|
|
Other revenues |
|
|
— |
|
|
|
— |
|
|
|
14 |
|
|
|
1 |
|
|
|
(9 |
) |
|
|
6 |
|
|
Total revenues |
|
$ |
1,592 |
|
|
$ |
543 |
|
|
$ |
32 |
|
|
$ |
146 |
|
|
$ |
(9 |
) |
|
$ |
2,304 |
|
|
Company restaurant expenses |
|
|
1,230 |
|
|
|
464 |
|
|
|
10 |
|
|
|
— |
|
|
|
(1 |
) |
|
|
1,703 |
|
|
General and administrative expenses |
|
|
49 |
|
|
|
24 |
|
|
|
8 |
|
|
|
33 |
|
|
|
— |
|
|
|
114 |
|
|
Franchise expenses |
|
|
19 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
20 |
|
|
Expenses for transactions with franchisees and unconsolidated affiliates |
|
|
17 |
|
|
|
1 |
|
|
|
6 |
|
|
|
143 |
|
|
|
— |
|
|
|
167 |
|
|
Other operating costs and expenses |
|
|
— |
|
|
|
— |
|
|
|
12 |
|
|
|
1 |
|
|
|
(8 |
) |
|
|
5 |
|
|
Closures and impairment expenses, net |
|
|
7 |
|
|
|
3 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
11 |
|
|
Other income, net |
|
|
(18 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(19 |
) |
|
Total costs and expenses, net |
|
|
1,304 |
|
|
|
493 |
|
|
|
37 |
|
|
|
176 |
|
|
|
(9 |
) |
|
|
2,001 |
|
|
Operating Profit (Loss) |
|
$ |
288 |
|
|
$ |
50 |
|
|
$ |
(5 |
) |
|
$ |
(30 |
) |
|
$ |
— |
|
|
$ |
303 |
|
|
Quarter Ended 3/31/2018 |
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments(1) |
|
|
Corporate and Unallocated(2) |
|
|
Elimination |
|
|
Total |
|
||||||
|
Company sales |
|
$ |
1,444 |
|
|
$ |
564 |
|
|
$ |
8 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,016 |
|
|
Franchise fees and income |
|
|
37 |
|
|
|
1 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
40 |
|
|
Revenues from transactions with franchisees and unconsolidated affiliates |
|
|
17 |
|
|
|
— |
|
|
|
7 |
|
|
|
137 |
|
|
|
— |
|
|
|
161 |
|
|
Other revenues |
|
|
— |
|
|
|
— |
|
|
|
4 |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
4 |
|
|
Total revenues |
|
$ |
1,498 |
|
|
$ |
565 |
|
|
$ |
21 |
|
|
$ |
138 |
|
|
$ |
(1 |
) |
|
$ |
2,221 |
|
|
Company restaurant expenses |
|
|
1,143 |
|
|
|
504 |
|
|
|
8 |
|
|
|
— |
|
|
|
— |
|
|
|
1,655 |
|
|
General and administrative expenses |
|
|
46 |
|
|
|
28 |
|
|
|
7 |
|
|
|
33 |
|
|
|
— |
|
|
|
114 |
|
|
Franchise expenses |
|
|
19 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
20 |
|
|
Expenses for transactions with franchisees and unconsolidated affiliates |
|
|
17 |
|
|
|
— |
|
|
|
6 |
|
|
|
137 |
|
|
|
— |
|
|
|
160 |
|
|
Other operating costs and expenses |
|
|
— |
|
|
|
— |
|
|
|
4 |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
4 |
|
|
Closures and impairment income, net |
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
Other income, net |
|
|
(23 |
) |
|
|
(1 |
) |
|
|
— |
|
|
|
(102 |
) |
|
|
— |
|
|
|
(126 |
) |
|
Total costs and expenses, net |
|
|
1,202 |
|
|
|
531 |
|
|
|
25 |
|
|
|
69 |
|
|
|
(1 |
) |
|
|
1,826 |
|
|
Operating Profit (Loss) |
|
$ |
296 |
|
|
$ |
34 |
|
|
$ |
(4 |
) |
|
$ |
69 |
|
|
$ |
— |
|
|
$ |
395 |
|
The above tables reconcile segment information, which is based on management responsibility, with our Condensed Consolidated Statements of Income.
|
(1) |
Starting from the first quarter of 2019, our newly developed COFFii & JOY concept and e-commerce business became operating segments, as their financial results started being regularly reviewed by the Company’s chief operating decision maker. Accordingly, our six non-reportable operating segments, including the operations of East Dawning, Little Sheep, Taco Bell, Daojia, COFFii & JOY and e-commerce business, are combined and referred to as All Other Segments, as those operating segments are insignificant both individually and in the aggregate. Segment financial information for prior quarters has been recast to align with this change in segment reporting. There was no impact on the condensed consolidated financial statements of the Company as a result of this change. |
14
15
Notes to the Condensed Consolidated Statements of Income, Condensed Consolidated Balance Sheets,
Condensed Consolidated Statements of Cash Flows and Reconciliation of Reported GAAP Results to Adjusted Measures
(in US$ million)
(unaudited)
|
|
(a) |
Amounts presented as of and for the quarter ended March 31, 2019 and March 31, 2018 are unaudited. |
|
|
(c) |
The tax expense was determined based upon the nature, as well as the jurisdiction, of each Special Item at the applicable tax rate. |
|
|
(d) |
We completed the evaluation of the impact on our transition tax computation based on the final regulations released by the US Treasury Department and the IRS in the first quarter of 2019 and recorded an additional amount of $8 million for the transition tax accordingly. |
16