Yum China Reports First Quarter 2018 Results PDF Version 05/01/2018 at 4:30 PM EDT SHANGHAI, May 1, 2018 /PRNewswire/ -- Yum China Holdings, Inc. (the "Company" or "Yum China") (NYSE: YUMC) today reported unaudited results for the first quarter ended March 31, 2018. 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 15% year over year to $2.2 billion from $1.9 billion (6% year over year increase excluding foreign currency translation ("F/X")). Total system sales grew 6% year over year, with 9% growth at KFC partially offset by 1% decline at Pizza Hut, excluding F/X. Same-store sales grew 3% year over year, with an increase of 5% at KFC partially offset by a 5% decrease at Pizza Hut, excluding F/X. Restaurant margin was 17.9%, as compared with 20.4% in the prior year period. Operating Profit increased 33% year over year to $395 million from $296 million (22% year over year increase excluding F/X). Excluding Special Items, Adjusted Operating Profit was $297 million for the first quarter of 2018, as compared with $296 million in the prior year period (8% year over year decrease excluding F/X). Net Income increased 41% to $288 million from $204 million in the prior year period. Effective tax rate was 26.6%. Diluted EPS was $0.72, as compared with $0.52 in the prior year period. Excluding Special Items, Adjusted Diluted EPS was $0.53. Completed the acquisition of an additional 36% equity interest in an unconsolidated affiliate that operates KFC stores in Wuxi, China ("Wuxi KFC"), for cash consideration of approximately $98 million, bringing Yum China's equity interest in Wuxi KFC to 83%. A gain of $98 million was recorded from the re-measurement of our previously held equity interest. Opened 203 new restaurants during the quarter, bringing total store count to 8,112 across more than 1,200 cities. Online delivery contributed 16% to Company sales, up from 13% in the prior year period. Delivery services now available in 970 cities, up from 700 cities in the prior year period. As of March 31, 2018, the KFC loyalty program had more than 120 million members and the Pizza Hut loyalty program had over 40 million members. Mobile payment accounted for approximately 56% of Company sales in the first quarter of 2018, as compared to 31% in the prior year period. Key Financial Results First Quarter % Change System Sales Same-Store Sales Net New Units Operating Profit Yum China +6 +3 +6 +33 KFC +9 +5 +6 +21 Pizza Hut (1) (5) +5 (58) First Quarter (in US$ million, except % Change for per share data and percentages) 2018 2017 Reported Ex F/X Operating Profit $ 395 $ 296 +33 +22 Adjusted Operating Profit1 $ 297 $ 296 — (8) Net Income $ 288 $ 204 +41 +29 Basic Earnings Per Common Share $ 0.75 $ 0.53 +42 +28 Adjusted Basic EPS Per Common Share1 $ 0.55 $ 0.53 +4 (6) Diluted Earnings Per Common Share $ 0.72 $ 0.52 +38 +25 Adjusted Diluted EPS Per Common Share1 $ 0.53 $ 0.52 +2 (6) 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. Yum China's fiscal first quarter 2018 includes January, February and March results. Percentages may not recompute due to rounding. System sales and same-store sales percentages exclude the impact of F/X. Prior period results have been recast for the change of fiscal quarter, same-store sales growth definition and adoption of new revenue accounting standard. CEO and CFO Comments "We are pleased to start 2018 with positive system sales and same-store sales growth for the Company. The strong operational and financial performance of KFC is particularly encouraging as it successfully lapped two strong first quarters in 2017 and 2016. During the quarter, while Pizza Hut had some challenges with same-store sales growth and restaurant margin, we remain committed to our revitalization plan and key focus areas to drive sales growth. We believe our focus on food innovation and customer experience, together with the execution of strategic priorities in digital and delivery, has enabled us, and will continue to enable us, to build a stronger Yum China," said Joey Wat, CEO of Yum China. "As part of our capital allocation strategy to invest in and grow our core brands, we acquired an additional 36% interest in Wuxi KFC, increasing our total equity interest to 83%. In 2018, we now expect our annual new build to reach 600-650 units, increasing from the previously announced 550-600 units. We will continue to invest in digital and delivery, which we believe will drive long-term growth," remarked Jacky Lo, CFO of Yum China. Dividend and Share Repurchase The Board of Directors declared a cash dividend of $0.10 per share on Yum China's common stock, payable as of the close of business on June 20, 2018 to stockholders of record as of the close of business on May 30, 2018. Yum China did not repurchase any shares during the first quarter of 2018. New-Unit Development and Asset Upgrade We opened 203 new restaurants and remodeled 125 restaurants in the first quarter of 2018. New Units Restaurant Count First As of March 31 Quarter 2018 2017 Yum China 203 8,112 7,653 KFC 144 5,602 5,277 Pizza Hut 41 2,214 2,105 Little Sheep, East Dawning, Taco Bell 18 296 271 Restaurant Margin In the first quarter of 2018, Yum China restaurant margin was 17.9%, as compared with 20.4% in the prior year period, primarily attributable to the investment in product upgrades and promotions at Pizza Hut and its sales deleveraging. First Quarter 2018 2017 % ppts change Yum China 17.9 % 20.4 % (2.5) KFC 20.9 % 20.8 % +0.1 Pizza Hut 10.5 % 19.7 % (9.2) Digital and Delivery Over 120 million loyalty program members for KFC and over 40 million for Pizza Hut, an increase of 50 million and 20 million year over year, respectively. Mobile payments accounted for approximately 56% of Company sales in the quarter, an increase of 25 percentage points year over year. Delivery contributed to 16% of Company sales in the first quarter of 2018, an increase of 3 percentage points year over year. Conference Call Yum China Holdings, Inc. will host a conference call to review the Company's financial performance and strategies at 8:00 p.m. US Eastern Time on Tuesday, May 1, 2018 (8:00 a.m.Beijing/HK time on Wednesday, May 2, 2018). 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 International: +65-6713-5090 Passcode: Yum China A replay of the conference call may be accessed by phone at the following numbers until May 9, 2018: US: +1-855-452-5696 International: +61-2-8199-0299 Passcode: 6876657 The webcast and the playback can be accessed via the internet by visiting the Yum China Holdings, Inc. website, http://ir.yumchina.com Forward-Looking Statements 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 and performance of Yum China, anticipated effects of population and macroeconomic trends, statements regarding the capital structure of Yum China, 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 "Forward-Looking Statements" 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 Mexican-inspired quick-service restaurant brand. Yum China also owns the Little Sheep and East Dawning concepts outright. The Company had more than 8,100 restaurants and more than 450,000 employees in over 1,200 cities at the end of March 2018. For more information, please visit http://ir.yumchina.com Investor Relations Contacts: Millicent Tu, +86 21 2407 7905 Vice President, Investor Relations IR@YumChina.com Florence Lip, +86 21 2407 7678 Director, Investor Relations IR@YumChina.com Media Contact: Joanna Jiang, +86 21 2407 7510 Director, Financial Media Media@YumChina.com Yum China Holdings, Inc. Consolidated Statements of Income (amounts in US$ million, except for per share amounts) (unaudited) Quarter Ended % Change 3/31/2018 3/31/2017 B/(W) Revenues Company sales $ 2,016 $ 1,738 16 Franchise fees and income 40 36 11 Revenues from transactions with franchisees and unconsolidated affiliates 161 147 9 Other revenues 4 5 (23) Total revenues 2,221 1,926 15 Costs and Expenses, Net Company restaurants Food and paper 594 486 (22) Payroll and employee benefits 442 368 (20) Occupancy and other operating expenses 619 530 (17) Company restaurant expenses 1,655 1,384 (20) General and administrative expenses 114 98 (18) Franchise expenses 20 18 (12) Expenses for transactions with franchisees and unconsolidated affiliates 160 147 (9) Other operating costs 4 3 (26) Other income, net (127) (20) NM Total costs and expenses, net 1,826 1,630 (12) Operating Profit 395 296 33 Interest income, net 8 4 99 Income Before Income Taxes 403 300 34 Income tax provision (107) (90) (19) Net income – including noncontrolling interests 296 210 41 Net income – noncontrolling interests 8 6 24 Net Income – Yum China Holdings, Inc. $ 288 $ 204 41 Effective tax rate 26.6 % 30.0 % 3.4 ppts. Basic Earnings Per Common Share $ 0.75 $ 0.53 Weighted average shares outstanding (in millions) 386 388 Diluted Earnings Per Common Share $ 0.72 $ 0.52 Weighted average shares outstanding (in millions) 401 395 Cash Dividends Declared Per Common Share $ 0.10 $ — Company sales 100.0 % 100.0 % Food and paper 29.4 27.9 (1.5) ppts. Payroll and employee benefits 21.9 21.2 (0.7) ppts. Occupancy and other operating expenses 30.8 30.5 (0.3) ppts. Restaurant margin 17.9 % 20.4 % (2.5) ppts. Operating margin 19.6 % 17.0 % 2.6 ppts. Percentages may not recompute due to rounding. Yum China Holdings, Inc. KFC Operating Results (amounts in US$ million) (unaudited) Quarter Ended % Change 3/31/2018 3/31/2017 B/(W) Revenues Company sales $ 1,444 $ 1,199 20 Franchise fees and income 37 34 10 Revenues from transactions with franchisees and unconsolidated affiliates 17 17 — Total revenues 1,498 1,250 20 Costs and Expenses, Net Company restaurants Food and paper 424 353 (20) Payroll and employee benefits 293 241 (21) Occupancy and other operating expenses 426 356 (20) Company restaurant expenses 1,143 950 (20) General and administrative expenses 46 39 (19) Franchise expenses 19 17 (12) Expenses for transactions with franchisees and unconsolidated affiliates 17 17 — Other income, net (23) (18) 27 Total costs and expenses, net 1,202 1,005 (20) Operating Profit $ 296 $ 245 21 Company sales 100.0 % 100.0 % Food and paper 29.3 29.4 0.1 ppts. Payroll and employee benefits 20.3 20.1 (0.2) ppts. Occupancy and other operating expenses 29.5 29.7 0.2 ppts. Restaurant margin 20.9 % 20.8 % 0.1 ppts. Operating margin 20.6 % 20.5 % 0.1 ppts. Percentages may not recompute due to rounding. Yum China Holdings, Inc. Pizza Hut Operating Results (amounts in US$ million) (unaudited) Quarter Ended % Change 3/31/2018 3/31/2017 B/(W) Revenues Company sales $ 564 $ 527 7 Franchise fees and income 1 1 25 Total revenues 565 528 7 Costs and Expenses, Net Company restaurants Food and paper 167 129 (29) Payroll and employee benefits 147 124 (19) Occupancy and other operating expenses 190 170 (12) Company restaurant expenses 504 423 (19) General and administrative expenses 28 25 (14) Franchise expenses 1 1 (20) Other income, net (2) (1) NM Total costs and expenses, net 531 448 (18) Operating Profit $ 34 $ 80 (58) Company sales 100.0 % 100.0 % Food and paper 29.7 24.5 (5.2) ppts. Payroll and employee benefits 26.1 23.5 (2.6) ppts. Occupancy and other operating expenses 33.7 32.3 (1.4) ppts. Restaurant margin 10.5 % 19.7 % (9.2) ppts. Operating margin 6.0 % 15.1 % (9.1) ppts. Percentages may not recompute due to rounding. Yum China Holdings, Inc. Consolidated Balance Sheets (amounts in US$ million) (unaudited) 3/31/2018 12/31/2017 ASSETS Current Assets Cash and cash equivalents $ 1,318 $ 1,059 Short-term investments 276 205 Accounts receivable, net 63 81 Inventories, net 261 297 Prepaid expenses and other current assets 203 160 Total Current Assets 2,121 1,802 Property, plant and equipment, net 1,755 1,691 Goodwill 291 108 Intangible assets, net 161 101 Investments in unconsolidated affiliates 44 95 Other assets 412 385 Deferred income taxes 110 105 Total Assets 4,894 4,287 LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY Current Liabilities Accounts payable and other current liabilities 1,114 985 Income taxes payable 106 39 Total Current Liabilities 1,220 1,024 Capital lease obligations 29 28 Other liabilities and deferred credits 442 388 Total Liabilities 1,691 1,440 Redeemable Noncontrolling Interest 5 5 Equity Common stock, $0.01 par value; 1,000 million shares authorized; 390 million shares and 389 million shares issued at March 31, 2018 and December 31, 2017, respectively; 386 million shares and 385 million shares outstanding at March 31, 2018 and December 31, 2017, respectively 4 4 Treasury stock (148) (148) Additional paid-in capital 2,381 2,375 Retained earnings 646 397 Accumulated other comprehensive income 224 137 Total Equity – Yum China Holdings, Inc. 3,107 2,765 Noncontrolling interests 91 77 Total Equity 3,198 2,842 Total Liabilities, Redeemable Noncontrolling Interest and Equity $ 4,894 $ 4,287 Yum China Holdings, Inc. Consolidated Statements of Cash Flows (amounts in US$ million) (unaudited) Quarter Ended 3/31/2018 3/31/2017 Cash Flows - Operating Activities Net income – including noncontrolling interests $ 296 $ 210 Depreciation and amortization 118 96 Gain from re-measurement of equity interest upon acquisition (98) — Deferred income taxes 23 (1) Equity income earned from investments in unconsolidated affiliates (23) (21) Distributions received from unconsolidated affiliates 36 27 Share-based compensation 6 5 Changes in accounts receivable 11 14 Changes in inventories 48 26 Changes in prepaid expenses and other current assets (7) 4 Changes in accounts payable and other current liabilities 85 (63) Changes in income taxes payable 63 58 Other, net (7) (19) Net Cash Provided by Operating Activities 551 336 Cash Flows - Investing Activities Capital spending (111) (112) Purchases of short-term investments (160) (100) Maturities of short-term investments 93 — Proceeds from refranchising of restaurants 1 2 Acquisition of business, net of cash acquired (88) — Other, net (2) (1) Net Cash Used in Investing Activities (267) (211) Cash Flows - Financing Activities Payment of capital lease obligation — (1) Payment of short-term borrowings assumed from acquisition (10) — Cash dividends paid (39) — Other, net (2) (10) Net Cash Used in Financing Activities (51) (11) Effect of Exchange Rates on Cash and Cash Equivalents 26 4 Net Increase in Cash and Cash Equivalents 259 118 Cash and Cash Equivalents – Beginning of Period 1,059 885 Cash and Cash Equivalents – End of Period $ 1,318 $ 1,003 Reconciliation of Reported GAAP Results to Adjusted Measures (amounts in US$ million, except for per share amounts) (unaudited) In this press release: 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 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 on the 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. Prior period results have been recast accordingly. 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. 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 Diluted Earnings Per Common Share, Adjusted Effective Tax Rate and Adjusted EBITDA, which we define as net income including noncontrolling interests adjusted for income tax, interest income, depreciation, amortization and other items, including store impairment charges. The Special Item for the quarter ended March 31, 2018 represents a gain recognized from the re-measurement of our previously held equity interest 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. 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 its 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 Consolidated Statements of Income and other information presented herein. A reconciliation of the most directly comparable GAAP measures to adjusted measures follows. Quarter Ended 3/31/2018 3/31/2017 Detail of Special Items Gain from re-measurement of equity interest upon acquisition(b) 98 — Special Items Income - Operating Profit 98 — Tax Expenses on Special Items(c) (24) — Special Items Income, net of tax – including noncontrolling interests 74 — Special Items Income, net of tax – noncontrolling interests — — Special Items Income, net of tax –Yum China Holdings, Inc. 74 — Weighted Average Diluted Shares Outstanding 401 395 Special Items Diluted Earnings Per Common Share 0.19 — Reconciliation of Operating Profit to Adjusted Operating Profit Operating Profit 395 296 Special Items Income - Operating Profit 98 — Adjusted Operating Profit 297 296 Reconciliation of EPS to Adjusted EPS Diluted Earnings Per Common Share 0.72 0.52 Special Items Diluted Earnings Per Common Share 0.19 — Adjusted Diluted Earnings Per Common Share 0.53 0.52 Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate Effective Tax Rate 26.6 % 30.0 % Impact on Effective Tax Rate as a result of Special Items (0.5) % (0.0) % Adjusted Effective Tax Rate 27.1 % 30.0 % Reconciliation of Net Income to Adjusted EBITDA (amounts in US$ million) (unaudited) Net income, along with the reconciliation to Adjusted EBITDA, is presented below. Quarter Ended 3/31/2018 3/31/2017 Reconciliation of Net Income to Adjusted EBITDA Net Income – Yum China Holdings, Inc. 288 204 Net income – noncontrolling interests $ 8 $ 6 Income tax provision 107 90 Interest income, net (8) (4) Operating Profit 395 296 Depreciation and amortization 118 96 Store impairment charges 2 4 Special Items Income - Operating Profit (98) — Adjusted EBITDA $ 417 $ 396 Unit Count by Brand KFC 2017 New Builds Closures Refranchised Others 2018 Company-owned 4,112 108 (22) (2) 157 4,353 Unconsolidated affiliates 891 33 (5) — (157) 762 Franchise 485 3 (3) 2 — 487 Total 5,488 144 (30) — — 5,602 Pizza Hut 2017 New Builds Closures Refranchised 2018 Company-owned 2,166 40 (22) (1) 2,183 Franchise 29 1 — 1 31 Total 2,195 41 (22) — 2,214 All Other Segments 2017 New Builds Closures 2018 Company-owned 29 1 (3) 27 Franchise 271 17 (19) 269 Total 300 18 (22) 296 Yum China Holdings, Inc. Segment Results (amounts in US$ million) (unaudited) Quarter Ended 3/31/18 KFC Pizza Hut All Other Segments Corporate and Unallocated(1) 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 — — 3 1 4 Total revenues $ 1,498 $ 565 $ 20 $ 138 $ 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 — — 3 1 4 Other income, net (23) (2) — (102) (127) 1,202 531 24 69 1,826 Operating Profit (Loss) $ 296 $ 34 $ (4) $ 69 $ 395 Quarter Ended 3/31/17 KFC Pizza Hut All Other Segments Corporate and Unallocated(1) Total Company sales $ 1,199 $ 527 $ 12 $ — $ 1,738 Franchise fees and income 34 1 1 — 36 Revenues from transactions with franchisees and unconsolidated affiliates 17 — 5 125 147 Other revenues — — 5 — 5 Total revenues $ 1,250 $ 528 $ 23 $ 125 $ 1,926 Company restaurant expenses 950 423 11 — 1,384 General and administrative expenses 39 25 3 31 98 Franchise expenses 17 1 — — 18 Expenses for transactions with franchisees and unconsolidated affiliates 17 — 5 125 147 Other operating costs — — 3 — 3 Other income, net (18) (1) — (1) (20) Total costs and expenses, net 1,005 448 22 155 1,630 Operating Profit (Loss) $ 245 $ 80 $ 1 $ (30) $ 296 The above tables reconcile segment information, which is based on management responsibility, with our Consolidated Statements of Income. (1) Corporate and unallocated expenses comprise items that are not allocated to segments for performance reporting purposes. Amount includes revenues and expenses associated with transactions with franchisees and unconsolidated affiliates such as inventory procurement and other services provided to franchisees and unconsolidated affiliates. The Corporate and Unallocated column in the above tables includes, among other amounts, all amounts that we have deemed Special Items. See "Reconciliation of Reported GAAP Results to Adjusted Measures". Notes to the Consolidated Statements of Income, Consolidated Balance Sheets and Consolidated Statements of Cash Flows (amounts in US$ million) (unaudited) (a) Amounts presented as of and for the quarter ended March 31, 2018 are unaudited. (b) As a result of the acquisition of Wuxi KFC, the Company recognized a gain of $98 million from the re-measurement of our previously held 47% equity interest at fair value, which was not allocated to any segment for performance reporting purposes. (c) The tax expense was determined based upon the nature as well as the jurisdiction of each Special Item at the applicable tax rate. View original content:http://www.prnewswire.com/news-releases/yum-china-reports-first-quarter-2018-results-300639915.html SOURCE Yum China Holdings, Inc