Yum China Reports Second Quarter Results Download PDF 938.7 KB 08/05/2024 at 4:30 PM EDT Download PDF 938.7 KB Record Second Quarter Revenue Led by Same-store Transaction Growth and New Unit Growth Improved OP Margin and Achieved Record Second Quarter Operating Profit Operating Profit Grew 4%, Core Operating Profit1 Grew 12%, Diluted EPS Grew 17% Record First Half Openings of 779 Net New Stores and Cash Returns to Shareholders of Nearly $1 Billion SHANGHAI, China, Aug. 5, 2024 /PRNewswire/ -- Yum China Holdings, Inc. (the "Company" or "Yum China") (NYSE: YUMC and HKEX: 9987) today reported unaudited results for the second quarter ended June 30, 2024. Second Quarter Highlights Total system sales grew 4% year over year ("YoY"), excluding foreign currency translation ("F/X"), on top of last year's high base. The growth was primarily attributable to 8% of net new unit contribution.2 Total store count reached 15,423 as of June 30, 2024, including 10,931 KFC stores and 3,504 Pizza Hut stores. The Company opened 401 net new stores in the quarter. 99 net new stores, or 25%, were opened by franchisees. Total revenues increased 1% YoY to $2.68 billion, a record-high for the second quarter. Excluding F/X, total revenues would have been $85 million higher, or a 4% increase YoY. Same-store sales reached 96% of the prior year's level. Same-store transactions grew 4% YoY. Operating profit grew 4% YoY to $266 million, a record level for the second quarter. Excluding F/X, operating profit would have been $9 million higher, or a 7% increase YoY. Core operating profit1 grew 12% YoY to $275 million. OP Margin3 was 9.9%, an increase of 20 basis points YoY, supported by resilient restaurant margins and savings in G&A expenses. Restaurant margin was 15.5%. Excluding $12 million in items affecting comparability, restaurant margin was approximately the same as the second quarter last year. Improvement in operational efficiencies supported margin stability. Diluted EPS increased 17% YoY to $0.55, a record level for the second quarter, or up 19% YoY excluding F/X. Delivery sales grew 11% YoY, maintaining the double-digit growth Yum China has carried over the past decade. Delivery contributed approximately 38% of KFC and Pizza Hut's Company sales. Digital sales4 reached $2.2 billion, with digital ordering accounting for approximately 90% of total Company sales. Total membership of KFC and Pizza Hut exceeded 495 million. Member sales accounted for over 65% of KFC and Pizza Hut's system sales in aggregate. Yum China returned $249 million to shareholders in the second quarter through share repurchases and cash dividends. Year to date, the Company has returned nearly $1 billion to shareholders, exceeding its full-year 2023 returns. Joey Wat, CEO of Yum China, commented, "We achieved our most profitable second quarter since the spin-off, with core operating profit growing by 12% despite challenging industry dynamics. Our sharp focus on value-for-money and innovative new products worked well, driving robust same-store transaction growth. We took proactive actions to improve operational efficiency, stabilizing restaurant margin and expanding OP margin year over year." Wat added, "By reducing the complexity of menus and operations, and harnessing the power of automation and AI, we improved operational efficiency. These measures gave us the flexibility to invest in menu innovation and compete on value. KFC has successfully gained market share on delivery platforms by expanding its price range and lowering delivery fees. Pizza Hut attracted value-conscious customers with its entry-price pizzas and solo diners with its Pizza Dough Burger. Our business model breakthroughs enabled us to broaden our addressable market and capture more customer occasions. Our side-by-side KCOFFEE cafe and Pizza Hut WOW store model delivered incremental sales and showed great future potential. Our new stores maintained good returns, with a consistent payback period of 2 years for KFC and an improved level of 2 to 3 years for Pizza Hut. With our industry-leading capabilities and scale, we are turning challenges to our competitive advantage. We believe that we are well positioned to capture the long-term growth opportunities in China and, ultimately, create enduring value for our shareholders." [1] Core operating profit is defined as operating profit adjusted for special items, further excluding items affecting comparability and the impact of F/X. The Company uses core operating profit for the purposes of evaluating the performance of its core operations. Please refer to "Reconciliation of Reported GAAP Results to Non-GAAP Measures" included in the accompanying tables of this release for further details. [2] Net new unit contribution refers to sales contribution from net new stores. [3] OP margin refers to operating profit as a percentage of total revenues. [4] Digital sales refer to sales at Company-owned stores where orderings were placed digitally. Key Financial Results Second Quarter Year to Date Ended 6/30 %/ppts Change %/ppts Change 2024 2023 Reported Ex F/X 2024 2023 Reported Ex F/X System Sales Growth (5) (%) 4 32 NM NM 5 24 NM NM Same-Store Sales Growth (5) (%) (4) 15 NM NM (3) 11 NM NM Operating Profit ($mn) 266 257 +4 +7 640 673 (5) — Adjusted Operating Profit (6) ($mn) 266 259 +3 +6 640 678 (6) (1) Core Operating Profit (6) (7) ($mn) 275 247 NM +12 671 639 NM +5 OP Margin (%) 9.9 9.7 +0.2 +0.2 11.4 12.1 (0.7) (0.7) Core OP Margin (6) (8) (%) 10.0 9.3 NM +0.7 11.4 11.5 NM (0.1) Net Income ($mn) 212 197 +8 +11 499 486 +3 +7 Adjusted Net Income (6) ($mn) 212 199 +7 +10 499 491 +2 +6 Diluted Earnings Per Common Share ($) 0.55 0.47 +17 +19 1.26 1.15 +10 +14 Adjusted Diluted Earnings Per Common Share (6) ($) 0.55 0.47 +17 +19 1.26 1.16 +9 +13 [5] System sales and same-store sales percentages exclude the impact of F/X. Effective January 1, 2018, temporary store closures are normalized in the same-store sales calculation by excluding the period during which stores are temporarily closed. [6] See "Reconciliation of Reported GAAP Results to Non-GAAP Measures" included in the accompanying tables of this release for further details. [7] Current period amounts are derived by translating results at average exchange rates of the prior year period. [8] Core OP margin refers to core operating profit as a percentage of total revenues excluding F/X. Note: All comparisons are versus the same period a year ago. Percentages may not recompute due to rounding. NM refers to not meaningful. KFC Second Quarter Year to Date Ended 6/30 %/ppts Change %/ppts Change 2024 2023 Reported Ex F/X 2024 2023 Reported Ex F/X Restaurants 10,931 9,562 +14 NM 10,931 9,562 +14 NM System Sales Growth (%) 5 32 NM NM 6 24 NM NM Same-Store Sales Growth (%) (3) 15 NM NM (3) 11 NM NM Total Revenues ($mn) 2,014 1,984 +2 +5 4,244 4,182 +2 +6 Operating Profit ($mn) 264 273 (3) — 636 693 (8) (4) Core Operating Profit ($mn) 273 263 NM +4 665 659 NM +1 Restaurant Margin (%) 16.2 17.3 (1.1) (1.1) 17.8 19.9 (2.1) (2.1) System sales for KFC grew 5% YoY for the quarter, on top of high base last year, primarily driven by net new unit contribution of 8%. KFC opened 328 net new stores during the quarter. 74 net new stores, or 23%, were opened by franchisees. Total store count reached 10,931 as of June 30, 2024. Operating profit was $264 million. Core operating profit was $273 million for the quarter, up 4% YoY. Restaurant margin was 16.2% for the quarter. Excluding items affecting comparability, restaurant margin decreased by 60 basis points against a strong comparison in the second quarter of 2023, primarily due to increased value-for-money offerings to drive traffic and wage inflation, partially offset by favorable commodity prices and improved operational efficiency. Delivery sales grew 12% YoY, contributing approximately 38% of KFC's Company sales for the quarter. Off-premises dining accounted for approximately 67% of KFC's Company sales. Pizza Hut Second Quarter Year to Date Ended 6/30 %/ppts Change %/ppts Change 2024 2023 Reported Ex F/X 2024 2023 Reported Ex F/X Restaurants 3,504 3,072 +14 NM 3,504 3,072 +14 NM System Sales Growth (%) 1 30 NM NM 3 23 NM NM Same-Store Sales Growth (%) (8) 13 NM NM (7) 10 NM NM Total Revenues ($mn) 540 554 (2) +1 1,135 1,151 (1) +3 Operating Profit ($mn) 40 35 +13 +18 87 90 (4) +1 Core Operating Profit ($mn) 41 34 NM +23 91 86 NM +8 Restaurant Margin (%) 13.2 12.4 +0.8 +0.8 12.8 13.3 (0.5) (0.5) System sales for Pizza Hut grew 1% YoY for the quarter, on top of high base last year, primarily driven by net new unit contribution of 8%. Pizza Hut opened 79 net new stores during the quarter. Total store count reached 3,504 as of June 30, 2024. Operating profit grew 13% YoY to $40 million, a record level for the second quarter. Core operating profit was $41 million, up 23% YoY. Restaurant margin was 13.2% for the quarter. Excluding items affecting comparability, restaurant margin was up 110 basis points YoY. Higher operational efficiency offset the impact of increased value-for-money offerings and wage inflation, resulting in an increased margin. Delivery sales grew 6%, contributing approximately 38% of Pizza Hut's Company sales for the quarter. Off-premises dining accounted for approximately 48% of Pizza Hut's Company sales. Returns to Shareholders Yum China repurchased 5.1 million shares of common stock for $187 million in the quarter. As of June 30, 2024, $666 million remained available for future share repurchases under the current authorization program. Yum China's board of directors declared a cash dividend of $0.16 per share on Yum China's common stock, payable on September 17, 2024 to shareholders of record as of the close of business on August 27, 2024. In the first half of 2024, the Company returned a record $994 million to shareholders, including buying back 21.7 million shares of common stock, which is equivalent to over 5% of its outstanding shares as of December 31, 2023. Outlook The Company's targets for the 2024 fiscal year remain unchanged from the prior period's disclosures. Open approximately 1,500 to 1,700 net new stores. Make capital expenditures in the range of approximately $700 million to $850 million. Return a Company record-setting $1.5 billion to shareholders through quarterly cash dividends and share repurchases. Note on Non-GAAP Measures Reported GAAP results include items that are excluded from non-GAAP measures. See "Reconciliation of Reported GAAP Results to Non-GAAP Measures" and "Segment Results" within this release for non-GAAP reconciliation details. Conference Call Yum China's management will hold an earnings conference call at 8:00 p.m. U.S. Eastern Time on Monday, August 5, 2024 (8:00 a.m. Beijing/Hong Kong Time on Tuesday, August 6, 2024). A live webcast of the call may be accessed at https://edge.media-server.com/mmc/p/qibtjiz2. To join by phone, please register in advance of the conference through the link provided below. Upon registering, you will be provided with participant dial-in numbers, a passcode and a unique access PIN. Pre-registration link: https://s1.c-conf.com/diamondpass/10039799-9htky1.html A replay of the conference call will be available one hour after the call ends until Tuesday, August 13, 2024 and may be accessed by phone at the following numbers: U.S.: 1 855 883 1031 Mainland China: 400 1209 216 Hong Kong: 800 930 639 U.K.: 0800 031 4295 Replay PIN: 10039799 Additionally, this earnings release, the accompanying slides, as well as the live and archived webcast of this conference call will be available at Yum China's Investor Relations website at http://ir.yumchina.com. For important news and information regarding Yum China, including our filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange, visit Yum China's Investor Relations website at http://ir.yumchina.com. Yum China uses this website as a primary channel for disclosing key information to its investors, some of which may contain material and previously non-public information. 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, including under "2024 Outlook." 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," "commit" 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 strategies, growth, business plans, investments, store openings, capital expenditures, dividend and share repurchase plans, CAGR for system sales, operating profit and EPS, earnings, performance and returns of Yum China, anticipated effects of population and macroeconomic trends, pace of recovery of Yum China's business, the anticipated effects of our innovation, digital and delivery capabilities and investments 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, changes in public health conditions, our ability to control costs and expenses, including tax costs, as well as changes in political, economic and regulatory conditions in China, and those set forth under the caption "Risk Factors" in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q). 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 caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q) for additional detail about factors that could affect our financial and other results. About Yum China Holdings, Inc. Yum China is the largest restaurant company in China with a mission to make every life taste beautiful. The Company has approximately 400,000 employees and operates over 15,000 restaurants under six brands across more than 2,100 cities in China. KFC and Pizza Hut are the leading brands in the quick-service and casual dining restaurant spaces in China, respectively. In addition, Yum China has partnered with Lavazza to develop the Lavazza coffee concept in China. Little Sheep and Huang Ji Huang specialize in Chinese cuisine. Taco Bell offers innovative Mexican-inspired food. Yum China has a world-class, digitalized supply chain, which includes an extensive network of logistics centers nationwide and an in-house supply chain management system. Its strong digital capabilities and loyalty program enable the Company to reach customers faster and serve them better. Yum China is a Fortune 500 company with the vision to be the world's most innovative pioneer in the restaurant industry. For more information, please visit http://ir.yumchina.com. Contacts Investor Relations Contact: Tel: +86 21 2407 7556 IR@YumChina.com Media Contact: Tel: +86 21 2407 8288 / +852 2267 5807 Media@YumChina.com Yum China Holdings, Inc. Condensed Consolidated Statements of Income (in US$ million, except per share data) (unaudited) Quarter Ended % Change Year to Date Ended % Change 6/30/2024 6/30/2023 B/(W) 6/30/2024 6/30/2023 B/(W) Revenues Company sales $ 2,528 $ 2,517 — $ 5,322 $ 5,289 1 Franchise fees and income 22 21 — 47 46 1 Revenues from transactions with franchisees 96 89 8 203 182 11 Other revenues 33 27 20 65 54 19 Total revenues 2,679 2,654 1 5,637 5,571 1 Costs and Expenses, Net Company restaurants Food and paper 797 773 (3) 1,693 1,608 (5) Payroll and employee benefits 666 665 — 1,374 1,348 (2) Occupancy and other operating expenses 674 675 — 1,371 1,366 — Company restaurant expenses 2,137 2,113 (1) 4,438 4,322 (3) General and administrative expenses 133 153 13 273 316 14 Franchise expenses 9 9 (6) 19 19 (3) Expenses for transactions with franchisees 92 84 (8) 196 175 (11) Other operating costs and expenses 29 24 (22) 58 48 (21) Closures and impairment expenses, net 13 14 13 14 17 18 Other (income) expenses, net — — NM (1) 1 NM Total costs and expenses, net 2,413 2,397 (1) 4,997 4,898 (2) Operating Profit 266 257 4 640 673 (5) Interest income, net 31 40 (21) 69 78 (11) Investment gain (loss) 8 (11) NM 16 (28) NM Income Before Income Taxes and Equity in Net Earnings (Losses) from Equity Method Investments 305 286 7 725 723 — Income tax provision (77) (71) (9) (190) (196) 3 Equity in net earnings (losses) from equity method investments — (1) 47 — — 8 Net income – including noncontrolling interests 228 214 7 535 527 2 Net income – noncontrolling interests 16 17 5 36 41 12 Net Income – Yum China Holdings, Inc. $ 212 $ 197 8 $ 499 $ 486 3 Effective tax rate 25.2 % 24.7 % (0.5) ppts. 26.2 % 27.0 % 0.8 ppts. Basic Earnings Per Common Share $ 0.55 $ 0.47 $ 1.27 $ 1.16 Weighted-average shares outstanding (in millions) 389 418 395 418 Diluted Earnings Per Common Share $ 0.55 $ 0.47 $ 1.26 $ 1.15 Weighted-average shares outstanding (in millions) 391 422 397 423 Company sales 100.0 % 100.0 % 100.0 % 100.0 % Food and paper 31.5 30.7 (0.8) ppts. 31.8 30.4 (1.4) ppts. Payroll and employee benefits 26.3 26.4 0.1 ppts. 25.8 25.5 (0.3) ppts. Occupancy and other operating expenses 26.7 26.8 0.1 ppts. 25.8 25.8 — ppts. Restaurant margin 15.5 % 16.1 % (0.6) ppts. 16.6 % 18.3 % (1.7) ppts. Percentages may not recompute due to rounding. NM refers to not meaningful. Yum China Holdings, Inc. KFC Operating Results (in US$ million) (unaudited) Quarter Ended % Change Year to Date Ended % Change 6/30/2024 6/30/2023 B/(W) 6/30/2024 6/30/2023 B/(W) Revenues Company sales $ 1,983 $ 1,954 1 $ 4,176 $ 4,120 1 Franchise fees and income 16 15 7 34 32 7 Revenues from transactions with franchisees 12 11 22 26 21 26 Other revenues 3 4 (21) 8 9 (14) Total revenues 2,014 1,984 2 4,244 4,182 2 Costs and Expenses, Net Company restaurants Food and paper 626 602 (4) 1,320 1,248 (6) Payroll and employee benefits 513 498 (3) 1,055 1,010 (4) Occupancy and other operating expenses 524 516 (1) 1,059 1,043 (2) Company restaurant expenses 1,663 1,616 (3) 3,434 3,301 (4) General and administrative expenses 60 67 10 121 135 10 Franchise expenses 8 7 (5) 17 16 (3) Expenses for transactions with franchisees 11 9 (18) 23 18 (22) Other operating costs and expenses 2 4 32 6 8 18 Closures and impairment expenses, net 6 8 14 7 9 14 Other expenses, net — — 5 — 2 89 Total costs and expenses, net 1,750 1,711 (2) 3,608 3,489 (3) Operating Profit $ 264 $ 273 (3) $ 636 $ 693 (8) Company sales 100.0 % 100.0 % 100.0 % 100.0 % Food and paper 31.6 30.8 (0.8) ppts. 31.6 30.3 (1.3) ppts. Payroll and employee benefits 25.9 25.5 (0.4) ppts. 25.3 24.5 (0.8) ppts. Occupancy and other operating expenses 26.3 26.4 0.1 ppts. 25.3 25.3 — ppts. Restaurant margin 16.2 % 17.3 % (1.1) ppts. 17.8 % 19.9 % (2.1) ppts. Percentages may not recompute due to rounding. Yum China Holdings, Inc. Pizza Hut Operating Results (in US$ million) (unaudited) Quarter Ended % Change Year to Date Ended % Change 6/30/2024 6/30/2023 B/(W) 6/30/2024 6/30/2023 B/(W) Revenues Company sales $ 530 $ 546 (3) $ 1,117 $ 1,137 (2) Franchise fees and income 2 2 4 4 4 2 Revenues from transactions with franchisees 1 1 6 2 2 (1) Other revenues 7 5 36 12 8 55 Total revenues 540 554 (2) 1,135 1,151 (1) Costs and Expenses, Net Company restaurants Food and paper 167 166 (1) 365 350 (4) Payroll and employee benefits 150 162 8 312 329 5 Occupancy and other operating expenses 143 151 5 297 307 3 Company restaurant expenses 460 479 4 974 986 1 General and administrative expenses 27 30 9 54 59 8 Franchise expenses 1 1 (5) 2 2 (1) Expenses for transactions with franchisees 1 1 4 2 2 7 Other operating costs and expenses 6 4 (46) 11 7 (68) Closures and impairment expenses, net 5 4 (6) 5 5 1 Total costs and expenses, net 500 519 4 1,048 1,061 1 Operating Profit $ 40 $ 35 13 $ 87 $ 90 (4) Company sales 100.0 % 100.0 % 100.0 % 100.0 % Food and paper 31.6 30.3 (1.3) ppts. 32.7 30.8 (1.9) ppts. Payroll and employee benefits 28.3 29.7 1.4 ppts. 27.9 28.9 1.0 ppts. Occupancy and other operating expenses 26.9 27.6 0.7 ppts. 26.6 27.0 0.4 ppts. Restaurant margin 13.2 % 12.4 % 0.8 ppts. 12.8 % 13.3 % (0.5) ppts. Percentages may not recompute due to rounding. Yum China Holdings, Inc. Condensed Consolidated Balance Sheets (in US$ million) 6/30/2024 12/31/2023 (Unaudited) ASSETS Current Assets Cash and cash equivalents $ 1,043 $ 1,128 Short-term investments 1,434 1,472 Accounts receivable, net 74 68 Inventories, net 362 424 Prepaid expenses and other current assets 368 339 Total Current Assets 3,281 3,431 Property, plant and equipment, net 2,314 2,310 Operating lease right-of-use assets 2,151 2,217 Goodwill 1,888 1,932 Intangible assets, net 146 150 Long-term bank deposits and notes 1,051 1,265 Equity investments 343 332 Deferred income tax assets 132 129 Other assets 262 265 Total Assets 11,568 12,031 LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY Current Liabilities Accounts payable and other current liabilities 2,149 2,164 Short-term borrowings 416 168 Income taxes payable 113 90 Total Current Liabilities 2,678 2,422 Non-current operating lease liabilities 1,827 1,899 Non-current finance lease liabilities 46 44 Deferred income tax liabilities 386 390 Other liabilities 149 157 Total Liabilities 5,086 4,912 Redeemable Noncontrolling Interest 13 13 Equity Common stock, $0.01 par value; 1,000 million shares authorized; 387 million shares and 407 million shares issued at June 30, 2024 and December 31, 2023, respectively; 386 million shares and 407 million shares outstanding at June 30 2024 and December 31, 2023, respectively. 4 4 Treasury stock (17) — Additional paid-in capital 4,103 4,320 Retained earnings 2,048 2,310 Accumulated other comprehensive loss (326) (229) Total Yum China Holdings, Inc. Stockholders' Equity 5,812 6,405 Noncontrolling interests 657 701 Total Equity 6,469 7,106 Total Liabilities, Redeemable Noncontrolling Interest and Equity $ 11,568 $ 12,031 Yum China Holdings, Inc. Condensed Consolidated Statements of Cash Flows (in US$ million) (unaudited) Year to Date Ended 6/30/2024 6/30/2023 Cash Flows – Operating Activities Net income – including noncontrolling interests $ 535 $ 527 Depreciation and amortization 235 228 Non-cash operating lease cost 203 202 Closures and impairment expenses 14 17 Investment (gain) loss (16) 28 Equity in net (earnings) losses from equity method investments — — Distributions of income received from equity method investments 7 8 Deferred income taxes (2) 13 Share-based compensation expense 23 29 Changes in accounts receivable (5) 2 Changes in inventories 52 1 Changes in prepaid expenses, other current assets and value-added tax assets (28) 19 Changes in accounts payable and other current liabilities 27 54 Changes in income taxes payable 25 25 Changes in non-current operating lease liabilities (206) (193) Other, net (21) (36) Net Cash Provided by Operating Activities 843 924 Cash Flows – Investing Activities Capital spending (358) (332) Purchases of short-term investments, long-term bank deposits and notes (1,479) (2,172) Maturities of short-term investments, long-term bank deposits and notes 1,702 1,904 Other, net 3 2 Net Cash Used in Investing Activities (132) (598) Cash Flows – Financing Activities Proceeds from short-term borrowings 307 — Repayment of short-term borrowings (52) — Repurchase of shares of common stock (869) (122) Cash dividends paid on common stock (126) (108) Dividends paid to noncontrolling interests (28) (28) Contributions from noncontrolling interests — 35 Payment of acquisition related holdback — (3) Other, net (17) (4) Net Cash Used in Financing Activities (785) (230) Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash (11) (37) Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash (85) 59 Cash, Cash Equivalents, and Restricted Cash - Beginning of Period 1,128 1,130 Cash, Cash Equivalents, and Restricted Cash - End of Period $ 1,043 $ 1,189 In this press release: Certain performance metrics and non-GAAP measures are presented 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 and franchise 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 restaurants typically generate ongoing franchise fees for the Company at an average rate of approximately 6% of system sales. Franchise 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, excluding the period during which stores are temporarily closed. 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, including stores temporarily closed, 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. Unit Count by Brand KFC 12/31/2023 New Builds Closures Acquired 6/30/2024 Company-owned 9,237 614 (112) 1 9,740 Franchisees 1,059 144 (11) (1) 1,191 Total 10,296 758 (123) — 10,931 Pizza Hut 12/31/2023 New Builds Closures 6/30/2024 Company-owned 3,155 246 (60) 3,341 Franchisees 157 10 (4) 163 Total