UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
(Exact Name of Registrant as Specified in its Charter)
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(State or other jurisdiction of incorporation or organization) |
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(Commission File Number) |
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(I.R.S. Employer Identification No.) |
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(Address, including zip code, of principal executive offices) |
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(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) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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9987 |
The Stock Exchange of Hong Kong Limited |
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. ☐
Item 2.02. |
Results of Operations and Financial Condition. |
On July 28, 2022, Yum China Holdings, Inc. issued a press release announcing its unaudited results for the second quarter ended June 30, 2022. 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. |
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Exhibit Description |
99.1 |
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Press Release of Yum China Holdings, Inc. issued July 28, 2022. |
104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
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.
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YUM CHINA HOLDINGS, INC. |
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By: |
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/s/ Joseph Chan |
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Name: |
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Joseph Chan |
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Title: |
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Chief Legal Officer |
Date: July 28, 2022 |
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Exhibit 99.1
Yum China Reports Second Quarter 2022 Results
Delivered $81 million Operating Profit. Extraordinary efforts partly mitigated impact from profound COVID-related disruptions
Sales recovery remains gradual and uneven as COVID outbreaks persist
Full year net new store target unchanged, powered by healthy new store performance
Shanghai, China (July 28, 2022) – 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, 2022.
Impact of COVID Outbreak and Mitigation Efforts
The most severe COVID outbreaks to date in China continued to significantly affect the restaurant industry and our operations in the second quarter. According to government statistics, the restaurant industry in China experienced a revenue decline of approximately 16% year over year in the quarter.
Yum China demonstrated exemplary resilience in the second quarter. In cities experiencing lockdowns, we reacted quickly by innovating and introducing initiatives to sustain operations. We immediately paused all promotional activities. Leveraging community purchasing as early as mid-March and packaged food products, we captured sharply changed consumer demand despite having a limited number of open stores and significant staff shortages. Our real-time inventory visibility from logistics centers to stores helped enable us to lessen supply disruptions with timely and accurate deployment of raw materials. We continued to rebase our cost structure to be more flexible. Across the country, we took prompt actions to rationalize advertising and promotional discounts, drive productivity gains with simplified menu offerings and shortened operating hours, as well as actively secure relief from landlords and government agencies. Through these extraordinary efforts we averted an operating loss, and delivered a profitable quarter, recording $81 million in operating profit for the period.
Entering the third quarter, we are seeing a gradual recovery. However, the COVID situation remains tenuous with potential intermittent outbreaks. We continue to expect the recovery of restaurant traffic to take time and likely be uneven and nonlinear. The number of cases has increased significantly in July, compared to June, as the highly transmissible new COVID sub-variant reached more cities. Many cities across a large swath of China have tightened COVID curbs or undergone full, partial lockdowns, or district-based control measures as new clusters have emerged. Nationwide, strict COVID-related health measures continue to restrict mobility, curtail travel and dampen consumer spending. As of the third week of July, approximately 2% of our stores remained temporarily closed or offered only delivery or takeaway services. Against this backdrop we remain committed to driving customer traffic with good food at great value. Moreover, we have developed multiple scenario-based operating plans with regional focus that are ready to be deployed. Moving forward we will be sharp-eyed in capturing consumer demand and further strengthening our business model to be more nimble and agile.
Yum China Holdings, Inc. • Shanghai, China • Website http://ir.yumchina.com
Second Quarter Highlights
Key Financial Results
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Second Quarter 2022 |
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Year to Date Ended 6/30/2022 |
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% Change |
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% Change |
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System Sales |
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Same-Store Sales |
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Net New Units |
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Operating Profit |
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System Sales |
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Same-Store Sales |
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Net New Units |
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Operating Profit |
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Yum China |
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(16 |
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(16 |
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+10 |
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(65 |
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(10 |
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(12 |
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+10 |
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(53 |
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KFC |
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(15 |
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(16 |
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+12 |
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(49 |
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(10 |
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(12 |
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+12 |
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(40 |
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Pizza Hut |
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(14 |
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(15 |
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+12 |
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(71 |
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(8 |
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(10 |
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+12 |
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(58 |
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Second Quarter |
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Year to Date Ended 6/30 |
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(in US$ million, except |
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% Change |
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% Change |
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per share data and percentages) |
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2022 |
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2021 |
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Reported |
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Ex F/X |
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2022 |
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2021 |
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Reported |
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Ex F/X |
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Operating Profit |
$ |
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81 |
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$ |
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233 |
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(65 |
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(63 |
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$ |
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272 |
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$ |
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575 |
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(53 |
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(53 |
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Adjusted Operating Profit(1) |
$ |
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82 |
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$ |
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237 |
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(65 |
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(63 |
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$ |
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275 |
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$ |
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582 |
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(53 |
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(53 |
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Net Income |
$ |
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83 |
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$ |
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181 |
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(54 |
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(52 |
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$ |
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183 |
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$ |
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411 |
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(56 |
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(55 |
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Adjusted Net Income(1) |
$ |
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84 |
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$ |
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185 |
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(55 |
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(53 |
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$ |
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186 |
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$ |
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418 |
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(56 |
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(55 |
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Basic Earnings Per Common Share |
$ |
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0.20 |
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$ |
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0.43 |
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(53 |
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(51 |
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$ |
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0.43 |
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$ |
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0.98 |
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(56 |
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(56 |
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Adjusted Basic Earnings |
$ |
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0.20 |
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$ |
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0.44 |
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(55 |
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(52 |
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$ |
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0.44 |
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$ |
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0.99 |
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(56 |
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(56 |
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Diluted Earnings Per Common Share |
$ |
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0.20 |
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$ |
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0.42 |
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(52 |
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(52 |
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$ |
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0.43 |
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$ |
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0.95 |
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(55 |
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(55 |
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Adjusted Diluted Earnings |
$ |
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0.20 |
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$ |
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0.42 |
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(52 |
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(50 |
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$ |
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0.44 |
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$ |
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0.96 |
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(54 |
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(54 |
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1 See “Reconciliation of Reported GAAP Results to non-GAAP Adjusted Measures” included in the accompanying tables of this release for further details.
Note: All comparisons are versus the same period a year ago.
Percentages may not recompute due to rounding.
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.
2
CEO and CFO Comments
Joey Wat, CEO of Yum China, commented, “We have been battling the pandemic for the past two and a half years. The second quarter was the most challenging to date. I could not be prouder of the morale and resilience demonstrated by our employees. Our dedicated teams collaborated across brands and functions. We worked around the clock to adapt to rapidly changing market conditions and quickly came up with innovative solutions. Even in the extremely difficult operating environment, we captured new opportunities and strengthened our business along the way. In cities under lockdown, we were able to sustain operations with an extremely lean work force through community purchasing, simplified menus and packaged food products. Some of these measures helped us think outside the box and provided us ideas to further grow and improve efficiency. I am also excited by the breakthroughs our emerging brands achieved during this period. By immediately launching packaged food offerings, leveraging Yum China’s infrastructure and adapting business models, Taco Bell, Lavazza and Little Sheep were able to capture meaningful sales with few stores open in Shanghai during lockdown periods. More importantly, throughout the period we have been strengthening our strong emotional connection with consumers and bringing some joy into their lives through good food and exciting marketing campaigns.”
Wat added, “We continue to make strides in reinforcing our RGM (Resilience-Growth-Moat) strategic framework. Our second quarter results have demonstrated business resilience. While we slowed new store openings in the second quarter, going forward we intend to expand our store network at a robust pace by focusing on small store formats, given the healthy payback and strong new unit economics. Our leading digital capabilities, in-house and tailor-made supply chain management system as well as hybrid delivery model gave us an edge in navigating the profound disruptions. We plan on further strengthening these elements of our strategic moat. We believe that these combined efforts will help enable us to maintain market leadership, drive long-term growth, and generate shareholder value in the years ahead.”
Andy Yeung, CFO of Yum China, stated “Sales in the second quarter were severely impacted by the significant disruptions brought by COVID. However, we were able to generate meaningful profit in the quarter that exceeded our expectations. We achieved that through swiftly adjusting offers and promotions as well as our tremendous efforts in driving productivity gains, securing one-time relief and rebasing the cost structure. As we look into the third quarter, we remain cautious on same-store sales, given COVID uncertainties, weakening consumer sentiment, downward economic pressure and commodity price inflation. We expect sales recovery to be gradual, uneven and potentially volatile. Our focus is to drive sales recovery through innovative products and marketing, strong value propositions and greater promotional activities. We are delighted with the better than planned cost savings in the second quarter, but we are dialing back some austerity measures to sustain long term growth and operational excellence. In addition, sales deleveraging impact will likely continue to impact our margins. Undeterred by the short-term challenges, we remain confident about our long-term prospects and will continue to invest for growth while fortifying resilience.”
Share Repurchases and Dividends
Digital and Delivery
KFC and Pizza Hut Total |
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Second Quarter |
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Year to Date Ended 6/30 |
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2022 |
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2021 |
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2022 |
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2021 |
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Member count (as of period-end) |
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385 million+ |
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330 million+ |
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385 million+ |
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330 million+ |
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Member sales as % of system sales |
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~62% |
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~64% |
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~62% |
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~64% |
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Delivery as % of Company sales |
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~38% |
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~30% |
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~37% |
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~31% |
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Digital orders as % of Company sales |
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~89% |
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~85% |
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~88% |
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~85% |
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3
New-Unit Development and Asset Upgrade
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Net New Units |
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Restaurant Count |
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Second Quarter |
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Year to Date |
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As of June 30 |
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2022 |
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Ended 6/30/2022 |
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2022 |
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2021 |
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Yum China |
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53 |
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382 |
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12,170 |
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11,023 |
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KFC |
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69 |
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342 |
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8,510 |
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7,609 |
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Pizza Hut |
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32 |
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121 |
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2,711 |
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2,425 |
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Others(2) |
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(48 |
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(81 |
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949 |
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989 |
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2 Others include Taco Bell, Little Sheep, Huang Ji Huang, East Dawning, COFFii & JOY and Lavazza.
Restaurant Margin
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Second Quarter |
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Year to Date Ended 6/30 |
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2022 |
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2021 |
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ppts change |
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2022 |
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2021 |
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ppts change |
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Yum China |
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12.1 |
% |
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15.8 |
% |
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(3.7 |
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13.0 |
% |
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17.3 |
% |
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(4.3 |
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KFC |
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13.4 |
% |
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16.8 |
% |
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(3.4 |
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14.4 |
% |
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18.4 |
% |
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(4.0 |
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Pizza Hut |
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8.6 |
% |
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13.1 |
% |
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(4.5 |
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9.8 |
% |
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14.2 |
% |
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(4.4 |
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2022 Outlook
Yum China remains focused on capturing long-term opportunities in China. The Company's fiscal year 2022 targets remain unchanged from those originally disclosed on February 8, 2022:
Other Updates
Note on Non-GAAP Adjusted Measures
Reported GAAP results include Special Items, which are excluded from non-GAAP 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 Non-GAAP Adjusted Measures” within this release.
4
Conference Call
Yum China’s management will hold an earnings conference call at 8:00 p.m. U.S. Eastern Time on Thursday, July 28, 2022 (8:00 a.m. Beijing/Hong Kong Time on Friday, July 29, 2022).
A live webcast of the call may be accessed at https://edge.media-server.com/mmc/p/p39fxxya.
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/10023458-dhsy7e.html
A replay of the conference call will be available one hour after the call ends until Thursday, August 4, 2022 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: 10023458
Additionally, this earnings release, the accompanying slides, a live webcast and an 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.
5
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 “2022 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, investment, dividend and share repurchase plans, earnings, performance and returns of Yum China, anticipated effects of population and macroeconomic trends, the expected impact of the COVID-19 pandemic, 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, including the COVID-19 pandemic and regional outbreaks caused by existing or new COVID-19 variants, 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 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 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, Huang Ji Huang and COFFii & JOY concepts outright. In addition, Yum China has partnered with Lavazza to explore and develop the Lavazza coffee shop concept in China. The Company had 12,170 restaurants in over 1,700 cities at the end of June 2022.
In 2021, Yum China was selected as a member of both Dow Jones Sustainability Indices (DJSI): World Index and Emerging Market Index. In 2022, Yum China ranked # 359 on the Fortune 500 list. The Company was also named to the Bloomberg Gender-Equality Index and was certified as a Top Employer 2022 in China by the Top Employers Institute, both for the fourth consecutive year. For more information, please visit http://ir.yumchina.com.
Investor Relations Contact: |
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Tel: +86 21 2407 7556 / +852 2267 5801 IR@YumChina.com
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Media Contact: |
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Tel: +86 21 2407 7510 Media@YumChina.com |
6
Yum China Holdings, Inc.
Condensed Consolidated Statements of Income
(in US$ million, except per share data)
(unaudited)
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Quarter Ended |
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% Change |
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Year to Date Ended |
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% Change |
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6/30/2022 |
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6/30/2021 |
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B/(W) |
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6/30/2022 |
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6/30/2021 |
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B/(W) |
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Revenues |
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Company sales |
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$ |
2,026 |
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$ |
2,233 |
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(9 |
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$ |
4,574 |
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$ |
4,564 |
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— |
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Franchise fees and income |
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19 |
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38 |
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(50 |
) |
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43 |
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|
80 |
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(46 |
) |
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Revenues from transactions with |
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62 |
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164 |
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(62 |
) |
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|
139 |
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335 |
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|
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(59 |
) |
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Other revenues |
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|
21 |
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16 |
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31 |
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|
40 |
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|
29 |
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|
38 |
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Total revenues |
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2,128 |
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2,451 |
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(13 |
) |
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4,796 |
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|
5,008 |
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(4 |
) |
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Costs and Expenses, Net |
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||||||
Company restaurants |
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Food and paper |
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|
627 |
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|
|
686 |
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|
|
9 |
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|
|
|
1,419 |
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|
|
1,390 |
|
|
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(2 |
) |
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Payroll and employee benefits |
|
|
549 |
|
|
|
540 |
|
|
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(2 |
) |
|
|
|
1,216 |
|
|
|
1,084 |
|
|
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(12 |
) |
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Occupancy and other operating expenses |
|
|
605 |
|
|
|
653 |
|
|
|
7 |
|
|
|
|
1,343 |
|
|
|
1,301 |
|
|
|
(3 |
) |
|
Company restaurant expenses |
|
|
1,781 |
|
|
|
1,879 |
|
|
|
5 |
|
|
|
|
3,978 |
|
|
|
3,775 |
|
|
|
(5 |
) |
|
General and administrative expenses |
|
|
141 |
|
|
|
136 |
|
|
|
(4 |
) |
|
|
|
292 |
|
|
|
266 |
|
|
|
(10 |
) |
|
Franchise expenses |
|
|
8 |
|
|
|
16 |
|
|
|
48 |
|
|
|
|
18 |
|
|
|
33 |
|
|
|
45 |
|
|
Expenses for transactions with |
|
|
61 |
|
|
|
160 |
|
|
|
62 |
|
|
|
|
136 |
|
|
|
329 |
|
|
|
59 |
|
|
Other operating costs and expenses |
|
|
18 |
|
|
|
13 |
|
|
|
(39 |
) |
|
|
|
35 |
|
|
|
24 |
|
|
|
(45 |
) |
|
Closures and impairment expenses, net |
|
|
14 |
|
|
|
13 |
|
|
|
(6 |
) |
|
|
|
16 |
|
|
|
11 |
|
|
|
(39 |
) |
|
Other expenses (income), net |
|
|
24 |
|
|
|
1 |
|
|
NM |
|
|
|
|
49 |
|
|
|
(5 |
) |
|
NM |
|
|
||
Total costs and expenses, net |
|
|
2,047 |
|
|
|
2,218 |
|
|
|
8 |
|
|
|
|
4,524 |
|
|
|
4,433 |
|
|
|
(2 |
) |
|
Operating Profit |
|
|
81 |
|
|
|
233 |
|
|
|
(65 |
) |
|
|
|
272 |
|
|
|
575 |
|
|
|
(53 |
) |
|
Interest income, net |
|
|
14 |
|
|
|
16 |
|
|
|
(10 |
) |
|
|
|
26 |
|
|
|
31 |
|
|
|
(15 |
) |
|
Investment gain (loss) |
|
|
20 |
|
|
|
8 |
|
|
NM |
|
|
|
|
(17 |
) |
|
|
(4 |
) |
|
NM |
|
|
||
Income Before Income Taxes and |
|
|
115 |
|
|
|
257 |
|
|
|
(55 |
) |
|
|
|
281 |
|
|
|
602 |
|
|
|
(53 |
) |
|
Income tax provision |
|
|
(31 |
) |
|
|
(64 |
) |
|
|
52 |
|
|
|
|
(86 |
) |
|
|
(166 |
) |
|
|
48 |
|
|
Equity in net earnings (losses) from |
|
|
(1 |
) |
|
|
— |
|
|
NM |
|
|
|
|
(2 |
) |
|
|
— |
|
|
NM |
|
|
||
Net income – including noncontrolling interests |
|
|
83 |
|
|
|
193 |
|
|
|
(57 |
) |
|
|
|
193 |
|
|
|
436 |
|
|
|
(56 |
) |
|
Net income – noncontrolling interests |
|
|
— |
|
|
|
12 |
|
|
|
97 |
|
|
|
|
10 |
|
|
|
25 |
|
|
|
57 |
|
|
Net Income – Yum China Holdings, Inc. |
|
$ |
83 |
|
|
$ |
181 |
|
|
|
(54 |
) |
|
|
$ |
183 |
|
|
$ |
411 |
|
|
|
(56 |
) |
|
Effective tax rate |
|
|
26.5 |
% |
|
|
24.8 |
% |
|
|
(1.7 |
) |
ppts. |
|
|
30.4 |
% |
|
|
27.6 |
% |
|
|
(2.8 |
) |
ppts. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Basic Earnings Per Common Share |
|
$ |
0.20 |
|
|
$ |
0.43 |
|
|
|
|
|
|
$ |
0.43 |
|
|
$ |
0.98 |
|
|
|
|
|
||
Weighted-average shares outstanding |
|
|
421 |
|
|
|
421 |
|
|
|
|
|
|
|
423 |
|
|
|
420 |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Diluted Earnings Per Common Share |
|
$ |
0.20 |
|
|
$ |
0.42 |
|
|
|
|
|
|
$ |
0.43 |
|
|
$ |
0.95 |
|
|
|
|
|
||
Weighted-average shares outstanding |
|
|
424 |
|
|
|
435 |
|
|
|
|
|
|
|
427 |
|
|
|
434 |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash Dividends Declared Per Common Share |
|
$ |
0.12 |
|
|
$ |
0.12 |
|
|
|
|
|
|
$ |
0.24 |
|
|
$ |
0.24 |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Company sales |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
||
Food and paper |
|
|
30.9 |
|
|
|
30.7 |
|
|
|
(0.2 |
) |
ppts. |
|
|
31.0 |
|
|
|
30.5 |
|
|
|
(0.5 |
) |
ppts. |
Payroll and employee benefits |
|
|
27.1 |
|
|
|
24.2 |
|
|
|
(2.9 |
) |
ppts. |
|
|
26.6 |
|
|
|
23.8 |
|
|
|
(2.8 |
) |
ppts. |
Occupancy and other operating expenses |
|
|
29.9 |
|
|
|
29.3 |
|
|
|
(0.6 |
) |
ppts. |
|
|
29.4 |
|
|
|
28.4 |
|
|
|
(1.0 |
) |
ppts. |
Restaurant margin |
|
|
12.1 |
% |
|
|
15.8 |
% |
|
|
(3.7 |
) |
ppts. |
|
|
13.0 |
% |
|
|
17.3 |
% |
|
|
(4.3 |
) |
ppts. |
Operating margin |
|
|
4.0 |
% |
|
|
10.4 |
% |
|
|
(6.4 |
) |
ppts. |
|
|
6.0 |
% |
|
|
12.6 |
% |
|
|
(6.6 |
) |
ppts. |
Percentages may not recompute due to rounding. NM refers to not meaningful.
7
Yum China Holdings, Inc.
KFC Operating Results
(in US$ million)
(unaudited)
|
|
Quarter Ended |
|
|
% Change |
|
Year to Date Ended |
|
|
% Change |
||||||||||||||||
|
|
6/30/2022 |
|
|
6/30/2021 |
|
|
B/(W) |
|
6/30/2022 |
|
|
6/30/2021 |
|
|
B/(W) |
||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Company sales |
|
$ |
1,571 |
|
|
$ |
1,687 |
|
|
|
(7 |
) |
|
|
$ |
3,562 |
|
|
$ |
3,470 |
|
|
|
3 |
|
|
Franchise fees and income |
|
|
13 |
|
|
|
30 |
|
|
|
(57 |
) |
|
|
|
29 |
|
|
|
63 |
|
|
|
(54 |
) |
|
Revenues from transactions with |
|
|
7 |
|
|
|
14 |
|
|
|
(51 |
) |
|
|
|
15 |
|
|
|
29 |
|
|
|
(49 |
) |
|
Other revenues |
|
|
3 |
|
|
|
3 |
|
|
|
3 |
|
|
|
|
5 |
|
|
|
4 |
|
|
|
18 |
|
|
Total revenues |
|
|
1,594 |
|
|
|
1,734 |
|
|
|
(8 |
) |
|
|
|
3,611 |
|
|
|
3,566 |
|
|
|
1 |
|
|
Costs and Expenses, Net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Company restaurants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Food and paper |
|
|
484 |
|
|
|
522 |
|
|
|
7 |
|
|
|
|
1,105 |
|
|
|
1,062 |
|
|
|
(4 |
) |
|
Payroll and employee benefits |
|
|
413 |
|
|
|
391 |
|
|
|
(6 |
) |
|
|
|
914 |
|
|
|
789 |
|
|
|
(16 |
) |
|
Occupancy and other operating expenses |
|
|
464 |
|
|
|
490 |
|
|
|
5 |
|
|
|
|
1,031 |
|
|
|
980 |
|
|
|
(5 |
) |
|
Company restaurant expenses |
|
|
1,361 |
|
|
|
1,403 |
|
|
|
3 |
|
|
|
|
3,050 |
|
|
|
2,831 |
|
|
|
(8 |
) |
|
General and administrative expenses |
|
|
63 |
|
|
|
58 |
|
|
|
(7 |
) |
|
|
|
128 |
|
|
|
113 |
|
|
|
(13 |
) |
|
Franchise expenses |
|
|
6 |
|
|
|
15 |
|
|
|
53 |
|
|
|
|
15 |
|
|
|
31 |
|
|
|
50 |
|
|
Expenses for transactions with |
|
|
6 |
|
|
|
14 |
|
|
|
54 |
|
|
|
|
14 |
|
|
|
29 |
|
|
|
52 |
|
|
Other operating costs and expenses |
|
|
2 |
|
|
|
1 |
|
|
|
(59 |
) |
|
|
|
3 |
|
|
|
1 |
|
|
|
(38 |
) |
|
Closures and impairment expenses, net |
|
|
9 |
|
|
|
6 |
|
|
|
(30 |
) |
|
|
|
8 |
|
|
|
6 |
|
|
|
(23 |
) |
|
Other expenses (income), net |
|
|
25 |
|
|
|
(3 |
) |
|
NM |
|
|
|
|
51 |
|
|
|
(12 |
) |
|
NM |
|
|
||
Total costs and expenses, net |
|
|
1,472 |
|
|
|
1,494 |
|
|
|
2 |
|
|
|
|
3,269 |
|
|
|
2,999 |
|
|
|
(9 |
) |
|
Operating Profit |
|
$ |
122 |
|
|
$ |
240 |
|
|
|
(49 |
) |
|
|
$ |
342 |
|
|
$ |
567 |
|
|
|
(40 |
) |
|
Company sales |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
||
Food and paper |
|
|
30.8 |
|
|
|
30.9 |
|
|
|
0.1 |
|
ppts. |
|
|
31.0 |
|
|
|
30.6 |
|
|
|
(0.4 |
) |
ppts. |
Payroll and employee benefits |
|
|
26.3 |
|
|
|
23.2 |
|
|
|
(3.1 |
) |
ppts. |
|
|
25.7 |
|
|
|
22.7 |
|
|
|
(3.0 |
) |
ppts. |
Occupancy and other operating expenses |
|
|
29.5 |
|
|
|
29.1 |
|
|
|
(0.4 |
) |
ppts. |
|
|
28.9 |
|
|
|
28.3 |
|
|
|
(0.6 |
) |
ppts. |
Restaurant margin |
|
|
13.4 |
% |
|
|
16.8 |
% |
|
|
(3.4 |
) |
ppts. |
|
|
14.4 |
% |
|
|
18.4 |
% |
|
|
(4.0 |
) |
ppts. |
Operating margin |
|
|
7.7 |
% |
|
|
14.2 |
% |
|
|
(6.5 |
) |
ppts. |
|
|
9.6 |
% |
|
|
16.3 |
% |
|
|
(6.7 |
) |
ppts. |
Percentages may not recompute due to rounding. NM refers to not meaningful.
8
Yum China Holdings, Inc.
Pizza Hut Operating Results
(in US$ million)
(unaudited)
|
|
Quarter Ended |
|
|
% Change |
|
Year to Date Ended |
|
|
% Change |
|
||||||||||||||||
|
|
6/30/2022 |
|
|
6/30/2021 |
|
|
B/(W) |
|
6/30/2022 |
|
|
6/30/2021 |
|
|
B/(W) |
|
||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Company sales |
|
$ |
443 |
|
|
$ |
533 |
|
|
|
(17 |
) |
|
|
$ |
985 |
|
|
$ |
1,071 |
|
|
|
(8 |
) |
|
|
Franchise fees and income |
|
|
2 |
|
|
|
2 |
|
|
|
(1 |
) |
|
|
|
4 |
|
|
|
4 |
|
|
|
3 |
|
|
|
Revenues from transactions with |
|
|
1 |
|
|
|
2 |
|
|
|
(44 |
) |
|
|
|
2 |
|
|
|
3 |
|
|
|
(36 |
) |
|
|
Other revenues |
|
|
2 |
|
|
|
1 |
|
|
|
146 |
|
|
|
|
4 |
|
|
|
1 |
|
|
NM |
|
|
|
|
Total revenues |
|
|
448 |
|
|
|
538 |
|
|
|
(17 |
) |
|
|
|
995 |
|
|
|
1,079 |
|
|
|
(8 |
) |
|
|
Costs and Expenses, Net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Company restaurants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Food and paper |
|
|
139 |
|
|
|
160 |
|
|
|
13 |
|
|
|
|
305 |
|
|
|
320 |
|
|
|
5 |
|
|
|
Payroll and employee benefits |
|
|
131 |
|
|
|
146 |
|
|
|
10 |
|
|
|
|
288 |
|
|
|
289 |
|
|
|
— |
|
|
|
Occupancy and other operating expenses |
|
|
135 |
|
|
|
157 |
|
|
|
14 |
|
|
|
|
296 |
|
|
|
310 |
|
|
|
5 |
|
|
|
Company restaurant expenses |
|
|
405 |
|
|
|
463 |
|
|
|
13 |
|
|
|
|
889 |
|
|
|
919 |
|
|
|
3 |
|
|
|
General and administrative expenses |
|
|
28 |
|
|
|
28 |
|
|
|
(2 |
) |
|
|
|
57 |
|
|
|
53 |
|
|
|
(8 |
) |
|
|
Franchise expenses |
|
|
1 |
|
|
|
1 |
|
|
|
14 |
|
|
|
|
2 |
|
|
|
2 |
|
|
|
5 |
|
|
|
Expenses for transactions with |
|
|
1 |
|
|
|
2 |
|
|
|
42 |
|
|
|
|
2 |
|
|
|
3 |
|
|
|
35 |
|
|
|
Other operating costs and expenses |
|
|
2 |
|
|
|
— |
|
|
NM |
|
|
|
|
3 |
|
|
|
— |
|
|
NM |
|
|
|
||
Closures and impairment expenses, net |
|
|
— |
|
|
|
5 |
|
|
|
94 |
|
|
|
|
1 |
|
|
|
3 |
|
|
|
77 |
|
|
|
Total costs and expenses, net |
|
|
437 |
|
|
|
499 |
|
|
|
12 |
|
|
|
|
954 |
|
|
|
980 |
|
|
|
3 |
|
|
|
Operating Profit |
|
$ |
11 |
|
|
$ |
39 |
|
|
|
(71 |
) |
|
|
$ |
41 |
|
|
$ |
99 |
|
|
|
(58 |
) |
|
|
Company sales |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
||
Food and paper |
|
|
31.4 |
|
|
|
30.1 |
|
|
|
(1.3 |
) |
ppts. |
|
|
31.0 |
|
|
|
29.9 |
|
|
|
(1.1 |
) |
ppts. |
|
Payroll and employee benefits |
|
|
29.5 |
|
|
|
27.4 |
|
|
|
(2.1 |
) |
ppts. |
|
|
29.2 |
|
|
|
26.9 |
|
|
|
(2.3 |
) |
ppts. |
|
Occupancy and other operating expenses |
|
|
30.5 |
|
|
|
29.4 |
|
|
|
(1.1 |
) |
ppts. |
|
|
30.0 |
|
|
|
29.0 |
|
|
|
(1.0 |
) |
ppts. |
|
Restaurant margin |
|
|
8.6 |
% |
|
|
13.1 |
% |
|
|
(4.5 |
) |
ppts. |
|
|
9.8 |
% |
|
|
14.2 |
% |
|
|
(4.4 |
) |
ppts. |
|
Operating margin |
|
|
2.5 |
% |
|
|
7.2 |
% |
|
|
(4.7 |
) |
ppts. |
|
|
4.2 |
% |
|
|
9.2 |
% |
|
|
(5.0 |
) |
ppts. |
|
Percentages may not recompute due to rounding. NM refers to not meaningful.
9
Yum China Holdings, Inc.
Condensed Consolidated Balance Sheets
(in US$ million)
|
|
6/30/2022 |
|
|
12/31/2021 |
|
||
|
|
(Unaudited) |
|
|
|
|
||
ASSETS |
|
|
|
|
|
|
||
Current Assets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
1,147 |
|
|
$ |
1,136 |
|
Short-term investments |
|
|
2,506 |
|
|
|
2,860 |
|
Accounts receivable, net |
|
|
79 |
|
|
|
67 |
|
Inventories, net |
|
|
353 |
|
|
|
432 |
|
Prepaid expenses and other current assets |
|
|
491 |
|
|
|
221 |
|
Total Current Assets |
|
|
4,576 |
|
|
|
4,716 |
|
Property, plant and equipment, net |
|
|
2,065 |
|
|
|
2,251 |
|
Operating lease right-of-use assets |
|
|
2,306 |
|
|
|
2,612 |
|
Goodwill |
|
|
2,047 |
|
|
|
2,142 |
|
Intangible assets, net |
|
|
213 |
|
|
|
272 |
|
Investments in unconsolidated affiliates |
|
|
287 |
|
|
|
292 |
|
Deferred income tax assets |
|
|
103 |
|
|
|
106 |
|
Other assets |
|
|
457 |
|
|
|
832 |
|
Total Assets |
|
|
12,054 |
|
|
|
13,223 |
|
|
|
|
|
|
|
|
||
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY |
|
|
|
|
|
|
||
Current Liabilities |
|
|
|
|
|
|
||
Accounts payable and other current liabilities |
|
|
2,099 |
|
|
|
2,332 |
|
Income taxes payable |
|
|
54 |
|
|
|
51 |
|
Total Current Liabilities |
|
|
2,153 |
|
|
|
2,383 |
|
Non-current operating lease liabilities |
|
|
2,000 |
|
|
|
2,286 |
|
Non-current finance lease liabilities |
|
|
39 |
|
|
|
40 |
|
Deferred income tax liabilities |
|
|
400 |
|
|
|
425 |
|
Other liabilities |
|
|
160 |
|
|
|
167 |
|
Total Liabilities |
|
|
4,752 |
|
|
|
5,301 |
|
|
|
|
|
|
|
|
||
Redeemable Noncontrolling Interest |
|
|
13 |
|
|
|
14 |
|
|
|
|
|
|
|
|
||
Equity |
|
|
|
|
|
|
||
Common stock, $0.01 par value; 1,000 million shares authorized; 420 million shares and |
|
|
4 |
|
|
|
4 |
|
Treasury stock |
|
|
— |
|
|
|
(803 |
) |
Additional paid-in capital |
|
|
4,402 |
|
|
|
4,695 |
|
Retained earnings |
|
|
2,083 |
|
|
|
2,892 |
|
Accumulated other comprehensive income |
|
|
40 |
|
|
|
268 |
|
Total Yum China Holdings, Inc. Stockholders' Equity |
|
|
6,529 |
|
|
|
7,056 |
|
Noncontrolling interests |
|
|
760 |
|
|
|
852 |
|
Total Equity |
|
|
7,289 |
|
|
|
7,908 |
|
Total Liabilities, Redeemable Noncontrolling Interest and Equity |
|
$ |
12,054 |
|
|
$ |
13,223 |
|
|
|
|
|
|
|
|
||
10
Yum China Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(in US$ million)
(unaudited)
|
|
Year to Date Ended |
||||||||
|
|
6/30/2022 |
|
6/30/2021 |
||||||
Cash Flows – Operating Activities |
|
|
|
|
|
|
|
|
||
Net income – including noncontrolling interests |
|
$ |
193 |
|
|
|
$ |
436 |
|
|
Depreciation and amortization |
|
|
317 |
|
|
|
|
252 |
|
|
Non-cash operating lease cost |
|
|
230 |
|
|
|
|
204 |
|
|
Closures and impairment expenses |
|
|
16 |
|
|
|
|
11 |
|
|
Investment loss |
|
|
17 |
|
|
|
|
4 |
|
|
Equity income from investments in unconsolidated affiliates |
|
|
— |
|
|
|
|
(27 |
) |
|
Distributions of income received from unconsolidated affiliates |
|
|
— |
|
|
|
|
21 |
|
|
Deferred income taxes |
|
|
(7 |
) |
|
|
|
29 |
|
|
Share-based compensation expense |
|
|
21 |
|
|
|
|
25 |
|
|
Changes in accounts receivable |
|
|
(17 |
) |
|
|
|
(5 |
) |
|
Changes in inventories |
|
|
59 |
|
|
|
|
22 |
|
|
Changes in prepaid expenses, other current assets and VAT assets |
|
|
24 |
|
|
|
|
8 |
|
|
Changes in accounts payable and other current liabilities |
|
|
(51 |
) |
|
|
|
16 |
|
|
Changes in income taxes payable |
|
|
6 |
|
|
|
|
1 |
|
|
Changes in non-current operating lease liabilities |
|
|
(198 |
) |
|
|
|
(204 |
) |
|
Other, net |
|
|
(1 |
) |
|
|
|
(20 |
) |
|
Net Cash Provided by Operating Activities |
|
|
609 |
|
|
|
|
773 |
|
|
Cash Flows – Investing Activities |
|
|
|
|
|
|
|
|
||
Capital spending |
|
|
(347 |
) |
|
|
|
(303 |
) |
|
Purchases of short-term investments |
|
|
(2,145 |
) |
|
|
|
(2,824 |
) |
|
Purchase of long-term time deposits |
|
|
— |
|
|
|
|
(25 |
) |
|
Maturities of short-term investments |
|
|
2,461 |
|
|
|
|
2,801 |
|
|
Acquisition of business, net of cash acquired |
|
|
(23 |
) |
|
|
|
— |
|
|
Acquisition of equity investment |
|
|
— |
|
|
|
|
(261 |
) |
|
Other, net |
|
|
2 |
|
|
|
|
1 |
|
|
Net Cash Used in Investing Activities |
|
|
(52 |
) |
|
|
|
(611 |
) |
|
Cash Flows – Financing Activities |
|
|
|
|
|
|
|
|
||
Repurchase of shares of common stock |
|
|
(400 |
) |
|
|
|
— |
|
|
Cash dividends paid on common stock |
|
|
(101 |
) |
|
|
|
(101 |
) |
|
Dividends paid to noncontrolling interests |
|
|
(23 |
) |
|
|
|
(14 |
) |
|
Contribution from noncontrolling interests |
|
|
18 |
|
|
|
|
— |
|
|
Payment of acquisition related holdback |
|
|
(6 |
) |
|
|
|
— |
|
|
Other, net |
|
|
(1 |
) |
|
|
|
(4 |
) |
|
Net Cash Used in Financing Activities |
|
|
(513 |
) |
|
|
|
(119 |
) |
|
Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash |
|
|
(33 |
) |
|
|
|
8 |
|
|
Net Increase in Cash, Cash Equivalents and Restricted Cash |
|
|
11 |
|
|
|
|
51 |
|
|
Cash, Cash Equivalents, and Restricted Cash - Beginning of Period |
|
|
1,136 |
|
|
|
|
1,158 |
|
|
Cash, Cash Equivalents, and Restricted Cash - End of Period |
|
$ |
1,147 |
|
|
|
$ |
1,209 |
|
|
11
In this press release:
12
Reconciliation of Reported GAAP Results to Non-GAAP Adjusted Measures
(in millions, except per share data)
(unaudited)
In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) in this press release, the Company provides non-GAAP measures adjusted for Special Items, which include Adjusted Operating Profit, Adjusted Net Income, Adjusted Earnings Per Common Share ("EPS"), Adjusted Effective Tax Rate and Adjusted EBITDA, which we define as net income including noncontrolling interests adjusted for equity in net earnings (losses) from equity method investments, income tax, interest income, net, investment gain or loss, certain non-cash expenses, consisting of depreciation and amortization as well as store impairment charges, and Special Items.
The following table set forth the reconciliation of the most directly comparable GAAP financial measures to the non-GAAP adjusted financial measures.
|
|
Quarter Ended |
|
|
Year to Date Ended |
|
|
||||||||||
|
|
6/30/2022 |
|
|
6/30/2021 |
|
|
6/30/2022 |
|
|
6/30/2021 |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-GAAP Reconciliations |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reconciliation of Operating Profit to Adjusted Operating Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Profit |
|
$ |
81 |
|
|
$ |
233 |
|
|
$ |
272 |
|
|
$ |
575 |
|
|
Special Items, Operating Profit |
|
|
(1 |
) |
|
|
(4 |
) |
|
|
(3 |
) |
|
|
(7 |
) |
|
Adjusted Operating Profit |
|
$ |
82 |
|
|
$ |
237 |
|
|
$ |
275 |
|
|
$ |
582 |
|
|
Reconciliation of Net Income to Adjusted Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Income – Yum China Holdings, Inc. |
|
$ |
83 |
|
|
$ |
181 |
|
|
$ |
183 |
|
|
$ |
411 |
|
|
Special Items, Net Income –Yum China Holdings, Inc. |
|
|
(1 |
) |
|
|
(4 |
) |
|
|
(3 |
) |
|
|
(7 |
) |
|
Adjusted Net Income – Yum China Holdings, Inc. |
|
$ |
84 |
|
|
$ |
185 |
|
|
$ |
186 |
|
|
$ |
418 |
|
|
Reconciliation of EPS to Adjusted EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic Earnings Per Common Share |
|
$ |
0.20 |
|
|
$ |
0.43 |
|
|
$ |
0.43 |
|
|
$ |
0.98 |
|
|
Special Items, Basic Earnings Per Common Share |
|
|
— |
|
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
Adjusted Basic Earnings Per Common Share |
|
$ |
0.20 |
|
|
$ |
0.44 |
|
|
$ |
0.44 |
|
|
$ |
0.99 |
|
|
Diluted Earnings Per Common Share |
|
$ |
0.20 |
|
|
$ |
0.42 |
|
|
$ |
0.43 |
|
|
$ |
0.95 |
|
|
Special Items, Diluted Earnings Per Common Share |
|
|
— |
|
|
|
— |
|
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
Adjusted Diluted Earnings Per Common Share |
|
$ |
0.20 |
|
|
$ |
0.42 |
|
|
$ |
0.44 |
|
|
$ |
0.96 |
|
|
Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effective tax rate |
|
|
26.5 |
% |
|
|
24.8 |
% |
|
|
30.4 |
% |
|
|
27.6 |
% |
|
Impact on effective tax rate as a result of Special Items |
|
|
0.2 |
% |
|
|
0.3 |
% |
|
|
0.3 |
% |
|
|
0.4 |
% |
|
Adjusted effective tax rate |
|
|
26.3 |
% |
|
|
24.5 |
% |
|
|
30.1 |
% |
|
|
27.2 |
% |
|
Net income, along with the reconciliation to Adjusted EBITDA, is presented below:
|
|
Quarter Ended |
|
|
Year to Date Ended |
|
|
||||||||||
|
|
6/30/2022 |
|
|
6/30/2021 |
|
|
6/30/2022 |
|
|
6/30/2021 |
|
|
||||
Reconciliation of Net Income to Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Income – Yum China Holdings, Inc. |
|
$ |
83 |
|
|
$ |
181 |
|
|
$ |
183 |
|
|
$ |
411 |
|
|
Net income – noncontrolling interests |
|
|
— |
|
|
|
12 |
|
|
|
10 |
|
|
|
25 |
|
|
Equity in net (earnings) losses from equity method investments |
|
|
1 |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
|
Income tax provision |
|
|
31 |
|
|
|
64 |
|
|
|
86 |
|
|
|
166 |
|
|
Interest income, net |
|
|
(14 |
) |
|
|
(16 |
) |
|
|
(26 |
) |
|
|
(31 |
) |
|
Investment (gain) loss |
|
|
(20 |
) |
|
|
(8 |
) |
|
|
17 |
|
|
|
4 |
|
|
Operating Profit |
|
|
81 |
|
|
|
233 |
|
|
|
272 |
|
|
|
575 |
|
|
Special Items, Operating Profit |
|
|
1 |
|
|
|
4 |
|
|
|
3 |
|
|
|
7 |
|
|
Adjusted Operating Profit |
|
|
82 |
|
|
|
237 |
|
|
|
275 |
|
|
|
582 |
|
|
Depreciation and amortization |
|
|
153 |
|
|
|
124 |
|
|
|
317 |
|
|
|
252 |
|
|
Store impairment charges |
|
|
22 |
|
|
|
16 |
|
|
|
30 |
|
|
|
19 |
|
|
Adjusted EBITDA |
|
$ |
257 |
|
|
$ |
377 |
|
|
$ |
622 |
|
|
$ |
853 |
|
|
13
Details of Special Items are presented below:
|
|
Quarter Ended |
|
|
Year to Date Ended |
|
|
||||||||||
|
|
6/30/2022 |
|
|
6/30/2021 |
|
|
6/30/2022 |
|
|
6/30/2021 |
|
|
||||
Share-based compensation expense for Partner PSU awards(1) |
|
$ |
(1 |
) |
|
$ |
(4 |
) |
|
$ |
(3 |
) |
|
$ |
(7 |
) |
|
Special Items, Operating Profit |
|
|
(1 |
) |
|
|
(4 |
) |
|
|
(3 |
) |
|
|
(7 |
) |
|
Tax effect on Special Items(2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Special Items, net income – including noncontrolling interests |
|
|
(1 |
) |
|
|
(4 |
) |
|
|
(3 |
) |
|
|
(7 |
) |
|
Special Items, net income – noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Special Items, Net Income –Yum China Holdings, Inc. |
|
$ |
(1 |
) |
|
$ |
(4 |
) |
|
$ |
(3 |
) |
|
$ |
(7 |
) |
|
Weighted-average Diluted Shares Outstanding (in millions) |
|
|
424 |
|
|
|
435 |
|
|
|
427 |
|
|
|
434 |
|
|
Special Items, Diluted Earnings Per Common Share |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
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 equity in net earnings (losses) from equity method investments, income tax, interest income, net, investment gain or loss, depreciation and amortization, store impairment charges, and Special Items. Store impairment charges included as an adjustment item in Adjusted EBITDA primarily resulted from our semi-annual impairment evaluation of long-lived assets of individual restaurants, and additional impairment evaluation whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. If these restaurant-level assets were not impaired, depreciation of the assets would have been recorded and included in EBITDA. Therefore, store impairment charges were a non-cash item similar to depreciation and amortization of our long-lived assets of restaurants. The Company believes that investors and analyst may find it useful in measuring operating performance without regard to such non-cash item.
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 provides 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.
14
Unit Count by Brand
KFC
|
|
12/31/2021 |
|
|
New Builds |
|
|
Closures |
|
|
Acquired |
|
|
6/30/2022 |
|
|||||
Company-owned |
|
|
7,437 |
|
|
|
452 |
|
|
|
(174 |
) |
|
|
5 |
|
|
|
7,720 |
|
Franchisees |
|
|
731 |
|
|
|
73 |
|
|
|
(9 |
) |
|
|
(5 |
) |
|
|
790 |
|
Total |
|
|
8,168 |
|
|
|
525 |
|
|
|
(183 |
) |
|
|
— |
|
|
|
8,510 |
|
Pizza Hut
|
|
12/31/2021 |
|
|
New Builds |
|
|
Closures |
|
|
Acquired |
|
|
6/30/2022 |
|
|||||
Company-owned |
|
|
2,452 |
|
|
|
178 |
|
|
|
(62 |
) |
|
|
5 |
|
|
|
2,573 |
|
Franchisees |
|
|
138 |
|
|
|
6 |
|
|
|
(1 |
) |
|
|
(5 |
) |
|
|
138 |
|
Total |
|
|
2,590 |
|
|
|
184 |
|
|
|
(63 |
) |
|
|
— |
|
|
|
2,711 |
|
Others
|
|
12/31/2021 |
|
|
New Builds |
|
|
Closures |
|
|
Acquired |
|
|
6/30/2022 |
|
|||||
Company-owned |
|
|
162 |
|
|
|
31 |
|
|
|
(26 |
) |
|
|
1 |
|
|
|
168 |
|
Franchisees |
|
|
868 |
|
|
|
28 |
|
|
|
(114 |
) |
|
|
(1 |
) |
|
|
781 |
|
Total |
|
|
1,030 |
|
|
|
59 |
|
|
|
(140 |
) |
|
|
— |
|
|
|
949 |
|
15
Yum China Holdings, Inc.
Segment Results
(in US$ million)
(unaudited)
Quarter Ended 6/30/2022 |
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Corporate |
|
|
Elimination |
|
|
Total |
|
||||||
Company sales |
|
$ |
1,571 |
|
|
$ |
443 |
|
|
$ |
12 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,026 |
|
Franchise fees and income |
|
|
13 |
|
|
|
2 |
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
|
|
19 |
|
Revenues from transactions with |
|
|
7 |
|
|
|
1 |
|
|
|
7 |
|
|
|
47 |
|
|
|
— |
|
|
|
62 |
|
Other revenues |
|
|
3 |
|
|
|
2 |
|
|
|
119 |
|
|
|
9 |
|
|
|
(112 |
) |
|
|
21 |
|
Total revenues |
|
$ |
1,594 |
|
|
$ |
448 |
|
|
$ |
142 |
|
|
$ |
56 |
|
|
$ |
(112 |
) |
|
$ |
2,128 |
|
Company restaurant expenses |
|
|
1,361 |
|
|
|
405 |
|
|
|
15 |
|
|
|
— |
|
|
|
— |
|
|
|
1,781 |
|
General and administrative expenses |
|
|
63 |
|
|
|
28 |
|
|
|
11 |
|
|
|
39 |
|
|
|
— |
|
|
|
141 |
|
Franchise expenses |
|
|
6 |
|
|
|
1 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
Expenses for transactions with |
|
|
6 |
|
|
|
1 |
|
|
|
6 |
|
|
|
48 |
|
|
|
— |
|
|
|
61 |
|
Other operating costs and expenses |
|
|
2 |
|
|
|
2 |
|
|
|
117 |
|
|
|
9 |
|
|
|
(112 |
) |
|
|
18 |
|
Closures and impairment expenses, net |
|
|
9 |
|
|
|
— |
|
|
|
5 |
|
|
|
— |
|
|
|
— |
|
|
|
14 |
|
Other expenses (income), net |
|
|
25 |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
24 |
|
Total costs and expenses, net |
|
|
1,472 |
|
|
|
437 |
|
|
|
155 |
|
|
|
95 |
|
|
|
(112 |
) |
|
|
2,047 |
|
Operating Profit (Loss) |
|
$ |
122 |
|
|
$ |
11 |
|
|
$ |
(13 |
) |
|
$ |
(39 |
) |
|
$ |
— |
|
|
$ |
81 |
|
Quarter Ended 6/30/2021 |
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Corporate |
|
|
Elimination |
|
|
Total |
|
||||||
Company sales |
|
$ |
1,687 |
|
|
$ |
533 |
|
|
$ |
13 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,233 |
|
Franchise fees and income |
|
|
30 |
|
|
|
2 |
|
|
|
6 |
|
|
|
— |
|
|
|
— |
|
|
|
38 |
|
Revenues from transactions with |
|
|
14 |
|
|
|
2 |
|
|
|
23 |
|
|
|
125 |
|
|
|
— |
|
|
|
164 |
|
Other revenues |
|
|
3 |
|
|
|
1 |
|
|
|
64 |
|
|
|
2 |
|
|
|
(54 |
) |
|
|
16 |
|
Total revenues |
|
$ |
1,734 |
|
|
$ |
538 |
|
|
$ |
106 |
|
|
$ |
127 |
|
|
$ |
(54 |
) |
|
$ |
2,451 |
|
Company restaurant expenses |
|
|
1,403 |
|
|
|
463 |
|
|
|
14 |
|
|
|
— |
|
|
|
(1 |
) |
|
|
1,879 |
|
General and administrative expenses |
|
|
58 |
|
|
|
28 |
|
|
|
10 |
|
|
|
40 |
|
|
|
— |
|
|
|
136 |
|
Franchise expenses |
|
|
15 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16 |
|
Expenses for transactions with |
|
|
14 |
|
|
|
2 |
|
|
|
21 |
|
|
|
123 |
|
|
|
— |
|
|
|
160 |
|
Other operating costs and expenses |
|
|
1 |
|
|
|
— |
|
|
|
63 |
|
|
|
2 |
|
|
|
(53 |
) |
|
|
13 |
|
Closures and impairment expenses, net |
|
|
6 |
|
|
|
5 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
13 |
|
Other (income) expenses, net |
|
|
(3 |
) |
|
|
— |
|
|
|
2 |
|
|
|
2 |
|
|
|
— |
|
|
|
1 |
|
Total costs and expenses, net |
|
|
1,494 |
|
|
|
499 |
|
|
|
112 |
|
|
|
167 |
|
|
|
(54 |
) |
|
|
2,218 |
|
Operating Profit (Loss) |
|
$ |
240 |
|
|
$ |
39 |
|
|
$ |
(6 |
) |
|
$ |
(40 |
) |
|
$ |
— |
|
|
$ |
233 |
|
16
Year to Date Ended 6/30/2022 |
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Corporate |
|
|
Elimination |
|
|
Total |
|
||||||
Company sales |
|
$ |
3,562 |
|
|
$ |
985 |
|
|
$ |
27 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
4,574 |
|
Franchise fees and income |
|
|
29 |
|
|
|
4 |
|
|
|
10 |
|
|
|
— |
|
|
|
— |
|
|
|
43 |
|
Revenues from transactions with |
|
|
15 |
|
|
|
2 |
|
|
|
18 |
|
|
|
104 |
|
|
|
— |
|
|
|
139 |
|
Other revenues |
|
|
5 |
|
|
|
4 |
|
|
|
250 |
|
|
|
19 |
|
|
|
(238 |
) |
|
|
40 |
|
Total revenues |
|
$ |
3,611 |
|
|
$ |
995 |
|
|
$ |
305 |
|
|
$ |
123 |
|
|
$ |
(238 |
) |
|
$ |
4,796 |
|
Company restaurant expenses |
|
|
3,050 |
|
|
|
889 |
|
|
|
37 |
|
|
|
— |
|
|
|
2 |
|
|
|
3,978 |
|
General and administrative expenses |
|
|
128 |
|
|
|
57 |
|
|
|
24 |
|
|
|
83 |
|
|
|
— |
|
|
|
292 |
|
Franchise expenses |
|
|
15 |
|
|
|
2 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
18 |
|
Expenses for transactions with |
|
|
14 |
|
|
|
2 |
|
|
|
15 |
|
|
|
105 |
|
|
|
— |
|
|
|
136 |
|
Other operating costs and expenses |
|
|
3 |
|
|
|
3 |
|
|
|
251 |
|
|
|
18 |
|
|
|
(240 |
) |
|
|
35 |
|
Closures and impairment expenses, net |
|
|
8 |
|
|
|
1 |
|
|
|
7 |
|
|
|
— |
|
|
|
— |
|
|
|
16 |
|
Other expenses (income), net |
|
|
51 |
|
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
49 |
|
Total costs and expenses, net |
|
|
3,269 |
|
|
|
954 |
|
|
|
335 |
|
|
|
204 |
|
|
|
(238 |
) |
|
|
4,524 |
|
Operating Profit (Loss) |
|
$ |
342 |
|
|
$ |
41 |
|
|
$ |
(30 |
) |
|
$ |
(81 |
) |
|
$ |
— |
|
|
$ |
272 |
|
Year to Date Ended 6/30/2021 |
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Corporate |
|
|
Elimination |
|
|
Total |
|
||||||
Company sales |
|
$ |
3,470 |
|
|
$ |
1,071 |
|
|
$ |
23 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
4,564 |
|
Franchise fees and income |
|
|
63 |
|
|
|
4 |
|
|
|
13 |
|
|
|
— |
|
|
|
— |
|
|
|
80 |
|
Revenues from transactions with |
|
|
29 |
|
|
|
3 |
|
|
|
49 |
|
|
|
254 |
|
|
|
— |
|
|
|
335 |
|
Other revenues |
|
|
4 |
|
|
|
1 |
|
|
|
99 |
|
|
|
4 |
|
|
|
(79 |
) |
|
|
29 |
|
Total revenues |
|
$ |
3,566 |
|
|
$ |
1,079 |
|
|
$ |
184 |
|
|
$ |
258 |
|
|
$ |
(79 |
) |
|
$ |
5,008 |
|
Company restaurant expenses |
|
|
2,831 |
|
|
|
919 |
|
|
|
26 |
|
|
|
— |
|
|
|
(1 |
) |
|
|
3,775 |
|
General and administrative expenses |
|
|
113 |
|
|
|
53 |
|
|
|
19 |
|
|
|
81 |
|
|
|
— |
|
|
|
266 |
|
Franchise expenses |
|
|
31 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
33 |
|
Expenses for transactions with |
|
|
29 |
|
|
|
3 |
|
|
|
45 |
|
|
|
252 |
|
|
|
— |
|
|
|
329 |
|
Other operating costs and expenses |
|
|
1 |
|
|
|
— |
|
|
|
96 |
|
|
|
5 |
|
|
|
(78 |
) |
|
|
24 |
|
Closures and impairment expenses, net |
|
|
6 |
|
|
|
3 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
11 |
|
Other (income) expenses, net |
|
|
(12 |
) |
|
|
— |
|
|
|
5 |
|
|
|
2 |
|
|
|
— |
|
|
|
(5 |
) |
Total costs and expenses, net |
|
|
2,999 |
|
|
|
980 |
|
|
|
193 |
|
|
|
340 |
|
|
|
(79 |
) |
|
|
4,433 |
|
Operating Profit (Loss) |
|
$ |
567 |
|
|
$ |
99 |
|
|
$ |
(9 |
) |
|
$ |
(82 |
) |
|
$ |
— |
|
|
$ |
575 |
|
The above tables reconcile segment information, which is based on management responsibility, with our Condensed Consolidated Statements of Income.
17