UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 18, 2018
Yum China Holdings, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware |
|
001-37762 |
|
81-2421743 |
(State or other jurisdiction of incorporation or organization) |
|
(Commission File Number) |
|
(I.R.S. Employer Identification No.) |
7100 Corporate Drive Plano, Texas 75024 United States of America |
|
Yum China Building 20 Tian Yao Qiao Road Shanghai 200030 People’s Republic of China |
(Address, including zip code, of principal executive offices) |
(469) 980-2898
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Effective at the beginning of fiscal 2018, Yum China Holdings, Inc. (referred to herein as “Yum China” and, together with its subsidiaries the “Company,” “we,” “us,” and “our”) changed its fiscal calendar from two months in the first quarter, three months in the second and third quarters and four months in the fourth quarter, to four three-month quarters ending on March 31, June 30, September 30 and December 31 of each year. The change was made to align with how management now measures performance internally and to facilitate the comparability of our results with peers’ using calendar quarters.
In addition, effective at the same time, the Company revised its definition of same-store sales growth to represent the estimated percentage change in sales of food of all restaurants in the Company system that have been open prior to the first day of our prior fiscal year. We refer to these as our “base” stores. Previously, same-store sales growth represented the estimated percentage change in sales of all restaurants in the Company system that have been open for one year or more, and the base stores changed on a rolling basis from month to month. This revision was made to align with how management measures performance internally and focuses on trends of a more stable base of stores.
Exhibit 99.1 to this Form 8-K provides the Company’s recast summary of consolidated and combined statements of income and segment operating results for 2017 and 2016, as well as certain quarterly results within those periods, recast as if they had been reported under our new fiscal calendar. This Form 8-K also provides recast system and new same-store sales growth metrics as if they had been reported under the new calendar and new same-store-sales growth definition. The summary should be read in conjunction with the Company’s previously filed reports.
Additionally, these recast results reflect the impact of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), and related accounting interpretations, which we adopted in the first quarter of 2018 on a full retrospective basis.
The new standard does not have an impact on our recognition of revenue from Company-owned restaurants or our recognition of continuing fees from franchisees and unconsolidated affiliates while it changed the way we account for upfront fees. Upfront fees, such as initial and renewal fees from franchisees and unconsolidated affiliates, were previously recognized as revenue when we performed substantially all initial services required by the franchise agreement, generally upon the opening of a store or when a renewal agreement with a franchisee becomes effective. We recognize the upfront fees from franchisees and unconsolidated affiliates as revenue over the term of each franchise agreement as the franchise rights are accounted for as rights to access our symbolic intellectual property in accordance with the new standard. Any unamortized portion of fees received is presented in our Consolidated Balance Sheets as a contract liability.
The new standard also had an impact on certain transactions we entered into with franchisees and unconsolidated affiliates, such as contributions to and subsequent expenditures from advertising programs, inventory procurement and other services provided for franchisees and unconsolidated affiliates. These transactions were previously either not included or presented on a net basis in our statements of income or cash flows based on industry-specific guidance included in previous accounting guidance, which was superseded by the new standard. Under the new standard, we consider ourselves the principal in these arrangements as we have the ability to control a promised good or service before transferring that good or service to the customer. Therefore we include such transactions in revenues and expenses within our Consolidated and Combined Statements of Income with no significant impact to Net income.
Item 9.01 |
Financial Statements and Exhibits |
(d) Exhibits
The following exhibit is furnished with this report:
Exhibit No. |
|
Exhibit Description |
99.1 |
|
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/ Xueling Lu |
|
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Name: |
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Xueling Lu |
Date: April 18, 2018 |
|
Title: |
|
Controller and Principal Accounting Officer |
Exhibit 99.1
Yum China Holdings, Inc.
Recast Consolidated and Combined Statements of Income
(in US$ millions, except for per share data)
(unaudited)
|
|
2017 |
|
|
2016 |
|
||||||||||||||||||
|
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Quarter Ended March 31 |
|
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Quarter Ended June 30 |
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Quarter Ended September 30 |
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Quarter Ended December 31 |
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Year Ended December 31 |
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Year Ended December 31 |
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||||||
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company sales |
|
$ |
1,738 |
|
|
$ |
1,664 |
|
|
$ |
1,924 |
|
|
$ |
1,667 |
|
|
$ |
6,993 |
|
|
$ |
6,622 |
|
Franchise fees and rental income |
|
|
36 |
|
|
|
33 |
|
|
|
38 |
|
|
|
34 |
|
|
|
141 |
|
|
|
129 |
|
Revenues from transactions with franchisees and unconsolidated affiliates |
|
|
147 |
|
|
|
141 |
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|
|
160 |
|
|
|
151 |
|
|
|
599 |
|
|
|
299 |
|
Other revenues |
|
|
5 |
|
|
|
3 |
|
|
|
8 |
|
|
|
20 |
|
|
|
36 |
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|
|
25 |
|
Total revenues |
|
|
1,926 |
|
|
|
1,841 |
|
|
|
2,130 |
|
|
|
1,872 |
|
|
|
7,769 |
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|
|
7,075 |
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Costs and Expenses, Net |
|
|
|
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|
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|
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|
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Company restaurants |
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Food and paper |
|
|
486 |
|
|
|
483 |
|
|
|
560 |
|
|
|
505 |
|
|
|
2,034 |
|
|
|
1,921 |
|
Payroll and employee benefits |
|
|
368 |
|
|
|
366 |
|
|
|
403 |
|
|
|
406 |
|
|
|
1,543 |
|
|
|
1,432 |
|
Occupancy and other operating expenses |
|
|
530 |
|
|
|
539 |
|
|
|
614 |
|
|
|
562 |
|
|
|
2,245 |
|
|
|
2,259 |
|
Company restaurant expenses |
|
|
1,384 |
|
|
|
1,388 |
|
|
|
1,577 |
|
|
|
1,473 |
|
|
|
5,822 |
|
|
|
5,612 |
|
General and administrative expenses |
|
|
98 |
|
|
|
118 |
|
|
|
123 |
|
|
|
156 |
|
|
|
495 |
|
|
|
429 |
|
Franchise expenses |
|
|
18 |
|
|
|
17 |
|
|
|
19 |
|
|
|
17 |
|
|
|
71 |
|
|
|
72 |
|
Expenses for transactions with franchisees and unconsolidated affiliates |
|
|
147 |
|
|
|
137 |
|
|
|
159 |
|
|
|
149 |
|
|
|
592 |
|
|
|
295 |
|
Other operating costs |
|
|
3 |
|
|
|
3 |
|
|
|
8 |
|
|
|
14 |
|
|
|
28 |
|
|
|
15 |
|
Closures and impairment expenses, net |
|
|
— |
|
|
|
18 |
|
|
|
2 |
|
|
|
27 |
|
|
|
47 |
|
|
|
78 |
|
Refranchising gain, net |
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
|
|
(3 |
) |
|
|
(5 |
) |
|
|
(11 |
) |
Other income, net |
|
|
(19 |
) |
|
|
(11 |
) |
|
|
(21 |
) |
|
|
(8 |
) |
|
|
(59 |
) |
|
|
(49 |
) |
Total costs and expenses, net |
|
|
1,630 |
|
|
|
1,670 |
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|
|
1,866 |
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|
|
1,825 |
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|
|
6,991 |
|
|
|
6,441 |
|
Operating Profit |
|
|
296 |
|
|
|
171 |
|
|
|
264 |
|
|
|
47 |
|
|
|
778 |
|
|
|
634 |
|
Interest income, net |
|
|
4 |
|
|
|
4 |
|
|
|
8 |
|
|
|
9 |
|
|
|
25 |
|
|
|
11 |
|
Changes in fair value of financial instruments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
21 |
|
Income Before Income Taxes |
|
|
300 |
|
|
|
175 |
|
|
|
272 |
|
|
|
56 |
|
|
|
803 |
|
|
|
666 |
|
Income tax provision |
|
|
(90 |
) |
|
|
(43 |
) |
|
|
(87 |
) |
|
|
(159 |
) |
|
|
(379 |
) |
|
|
(156 |
) |
Net income (loss) – including noncontrolling interests |
|
|
210 |
|
|
|
132 |
|
|
|
185 |
|
|
|
(103 |
) |
|
|
424 |
|
|
|
510 |
|
Net income – noncontrolling interests |
|
|
6 |
|
|
|
7 |
|
|
|
9 |
|
|
|
4 |
|
|
|
26 |
|
|
|
12 |
|
Net Income (Loss) – Yum China Holdings, Inc. |
|
|
204 |
|
|
|
125 |
|
|
|
176 |
|
|
|
(107 |
) |
|
|
398 |
|
|
|
498 |
|
Weighted-average common shares outstanding: (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
388 |
|
|
|
387 |
|
|
|
386 |
|
|
|
386 |
|
|
|
387 |
|
|
|
368 |
|
Diluted |
|
|
395 |
|
|
|
399 |
|
|
|
398 |
|
|
|
386 |
|
|
|
398 |
|
|
|
369 |
|
Basic Earnings (Loss) Per Common Share |
|
|
0.53 |
|
|
|
0.32 |
|
|
|
0.46 |
|
|
|
(0.28 |
) |
|
|
1.03 |
|
|
|
1.35 |
|
Diluted Earnings (Loss) Per Common Share |
|
|
0.52 |
|
|
|
0.31 |
|
|
|
0.44 |
|
|
|
(0.28 |
) |
|
|
1.00 |
|
|
|
1.35 |
|
Recast Consolidated Balance Sheets
(in US$ millions)
(unaudited)
|
|
12/31/2017 |
|
12/31/2016 |
||||||
ASSETS |
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|||
Current Assets |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,059 |
|
|
|
$ |
885 |
|
|
Short-term investments |
|
|
205 |
|
|
|
|
79 |
|
|
Accounts receivable, net |
|
|
81 |
|
|
|
|
74 |
|
|
Inventories, net |
|
|
297 |
|
|
|
|
268 |
|
|
Prepaid expenses and other current assets |
|
|
160 |
|
|
|
|
120 |
|
|
Total Current Assets |
|
|
1,802 |
|
|
|
|
1,426 |
|
|
Property, plant and equipment, net |
|
|
1,691 |
|
|
|
|
1,647 |
|
|
Goodwill |
|
|
108 |
|
|
|
|
79 |
|
|
Intangible assets, net |
|
|
101 |
|
|
|
|
88 |
|
|
Investments in unconsolidated affiliates |
|
|
95 |
|
|
|
|
77 |
|
|
Other assets |
|
|
385 |
|
|
|
|
267 |
|
|
Deferred income taxes |
|
|
105 |
|
|
|
|
166 |
|
|
Total Assets |
|
$ |
4,287 |
|
|
|
$ |
3,750 |
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY |
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
Accounts payable and other current liabilities |
|
$ |
979 |
|
|
|
$ |
971 |
|
|
Income taxes payable |
|
|
39 |
|
|
|
|
33 |
|
|
Total Current Liabilities |
|
|
1,018 |
|
|
|
|
1,004 |
|
|
Capital lease obligations |
|
|
28 |
|
|
|
|
28 |
|
|
Other liabilities and deferred credits |
|
|
394 |
|
|
|
|
285 |
|
|
Total Liabilities |
|
|
1,440 |
|
|
|
|
1,317 |
|
|
Redeemable Noncontrolling Interest |
|
|
5 |
|
|
|
|
— |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; 1,000 million shares authorized; 389 million shares and 383 million shares issued at December 31, 2017 and 2016, respectively; 385 million shares and 383 million shares outstanding at December 31, 2017 and 2016, respectively |
|
|
4 |
|
|
|
|
4 |
|
|
Treasury stock |
|
|
(148 |
) |
|
|
|
(20 |
) |
|
Additional paid-in capital |
|
|
2,375 |
|
|
|
|
2,345 |
|
|
Retained earnings |
|
|
397 |
|
|
|
|
38 |
|
|
Accumulated other comprehensive income |
|
|
137 |
|
|
|
|
— |
|
|
Total Equity – Yum China Holdings, Inc. |
|
|
2,765 |
|
|
|
|
2,367 |
|
|
Noncontrolling interests |
|
|
77 |
|
|
|
|
66 |
|
|
Total Equity |
|
|
2,842 |
|
|
|
|
2,433 |
|
|
Total Liabilities, Redeemable Noncontrolling Interest and Equity |
|
$ |
4,287 |
|
|
|
$ |
3,750 |
|
|
2
Recast Annual Segment Operating Results
(in US$ millions)
(unaudited)
|
|
Year Ended 12/31/2017 |
|
|||||||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Corporate & Unallocated(1) |
|
|
Total |
|
|||||
Total revenues |
|
|
5,066 |
|
|
|
2,093 |
|
|
|
106 |
|
|
|
504 |
|
|
|
7,769 |
|
Company restaurant expenses |
|
|
3,986 |
|
|
|
1,798 |
|
|
|
38 |
|
|
|
— |
|
|
|
5,822 |
|
General and administrative expenses |
|
|
176 |
|
|
|
108 |
|
|
|
26 |
|
|
|
185 |
|
|
|
495 |
|
Franchise expenses |
|
|
69 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
71 |
|
Expenses for transactions with franchisees and unconsolidated affiliates |
|
|
70 |
|
|
|
1 |
|
|
|
21 |
|
|
|
500 |
|
|
|
592 |
|
Other operating costs |
|
|
— |
|
|
|
— |
|
|
|
28 |
|
|
|
— |
|
|
|
28 |
|
Closures and impairment expenses, net |
|
|
20 |
|
|
|
27 |
|
|
|
— |
|
|
|
— |
|
|
|
47 |
|
Refranchising gain, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5 |
) |
|
|
(5 |
) |
Other (income) expenses, net |
|
|
(57 |
) |
|
|
— |
|
|
|
2 |
|
|
|
(4 |
) |
|
|
(59 |
) |
Total costs and expenses, net |
|
|
4,264 |
|
|
|
1,936 |
|
|
|
115 |
|
|
|
676 |
|
|
|
6,991 |
|
Operating Profit (Loss) |
|
|
802 |
|
|
|
157 |
|
|
|
(9 |
) |
|
|
(172 |
) |
|
|
778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 12/31/2016 |
|
|||||||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Corporate & Unallocated(1) |
|
|
Total |
|
|||||
Total revenues |
|
|
4,757 |
|
|
|
1,996 |
|
|
|
100 |
|
|
|
222 |
|
|
|
7,075 |
|
Company restaurant expenses |
|
|
3,829 |
|
|
|
1,727 |
|
|
|
57 |
|
|
|
(1 |
) |
|
|
5,612 |
|
General and administrative expenses |
|
|
162 |
|
|
|
99 |
|
|
|
15 |
|
|
|
153 |
|
|
|
429 |
|
Franchise expenses |
|
|
69 |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
72 |
|
Expenses for transactions with franchisees and unconsolidated affiliates |
|
|
61 |
|
|
|
1 |
|
|
|
14 |
|
|
|
219 |
|
|
|
295 |
|
Other operating costs |
|
|
— |
|
|
|
— |
|
|
|
15 |
|
|
|
— |
|
|
|
15 |
|
Closures and impairment expenses, net |
|
|
41 |
|
|
|
17 |
|
|
|
3 |
|
|
|
17 |
|
|
|
78 |
|
Refranchising gain, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11 |
) |
|
|
(11 |
) |
Other (income) expenses, net |
|
|
(46 |
) |
|
|
— |
|
|
|
1 |
|
|
|
(4 |
) |
|
|
(49 |
) |
Total costs and expenses, net |
|
|
4,116 |
|
|
|
1,847 |
|
|
|
105 |
|
|
|
373 |
|
|
|
6,441 |
|
Operating Profit (Loss) |
|
|
641 |
|
|
|
149 |
|
|
|
(5 |
) |
|
|
(151 |
) |
|
|
634 |
|
(1) |
Amount includes revenues and expenses associated with transactions with franchisees and unconsolidated affiliates such as inventory procurement and other services provided to franchisees and unconsolidated affiliates. |
3
Recast Quarterly Segment Operating Results
(in US$ millions)
(unaudited)
|
|
Quarter Ended 3/31/2017 |
|
|||||||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Corporate & Unallocated(1) |
|
|
Total |
|
|||||
Total revenues |
|
|
1,250 |
|
|
|
528 |
|
|
|
23 |
|
|
|
125 |
|
|
|
1,926 |
|
Company restaurant expenses |
|
|
950 |
|
|
|
423 |
|
|
|
11 |
|
|
|
— |
|
|
|
1,384 |
|
General and administrative expenses |
|
|
39 |
|
|
|
25 |
|
|
|
3 |
|
|
|
31 |
|
|
|
98 |
|
Franchise expenses |
|
|
17 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
18 |
|
Expenses for transactions with franchisees and unconsolidated affiliates |
|
|
17 |
|
|
|
— |
|
|
|
5 |
|
|
|
125 |
|
|
|
147 |
|
Other operating costs |
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
3 |
|
Closures and impairment expenses (income), net |
|
|
1 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Refranchising gain, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
Other income, net |
|
|
(19 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(19 |
) |
Total costs and expenses, net |
|
|
1,005 |
|
|
|
448 |
|
|
|
22 |
|
|
|
155 |
|
|
|
1,630 |
|
Operating Profit (Loss) |
|
|
245 |
|
|
|
80 |
|
|
|
1 |
|
|
|
(30 |
) |
|
|
296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended 6/30/2017 |
|
|||||||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Corporate & Unallocated(1) |
|
|
Total |
|
|||||
Total revenues |
|
|
1,206 |
|
|
|
498 |
|
|
|
16 |
|
|
|
121 |
|
|
|
1,841 |
|
Company restaurant expenses |
|
|
956 |
|
|
|
423 |
|
|
|
9 |
|
|
|
— |
|
|
|
1,388 |
|
General and administrative expenses |
|
|
38 |
|
|
|
26 |
|
|
|
4 |
|
|
|
50 |
|
|
|
118 |
|
Franchise expenses |
|
|
17 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
17 |
|
Expenses for transactions with franchisees and unconsolidated affiliates |
|
|
15 |
|
|
|
1 |
|
|
|
3 |
|
|
|
118 |
|
|
|
137 |
|
Other operating costs |
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
3 |
|
Closures and impairment expenses, net |
|
|
9 |
|
|
|
9 |
|
|
|
— |
|
|
|
— |
|
|
|
18 |
|
Other income, net |
|
|
(11 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11 |
) |
Total costs and expenses, net |
|
|
1,024 |
|
|
|
459 |
|
|
|
19 |
|
|
|
168 |
|
|
|
1,670 |
|
Operating Profit (Loss) |
|
|
182 |
|
|
|
39 |
|
|
|
(3 |
) |
|
|
(47 |
) |
|
|
171 |
|
(1) |
Amount includes revenues and expenses associated with transactions with franchisees and unconsolidated affiliates such as inventory procurement and other services provided to franchisees and unconsolidated affiliates. |
4
Recast Quarterly Segment Operating Results
(in US$ millions)
(unaudited)
|
|
Quarter Ended 9/30/2017 |
|
|||||||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Corporate & Unallocated(1) |
|
|
Total |
|
|||||
Total revenues |
|
|
1,402 |
|
|
|
569 |
|
|
|
23 |
|
|
|
136 |
|
|
|
2,130 |
|
Company restaurant expenses |
|
|
1,082 |
|
|
|
487 |
|
|
|
8 |
|
|
|
— |
|
|
|
1,577 |
|
General and administrative expenses |
|
|
44 |
|
|
|
27 |
|
|
|
9 |
|
|
|
43 |
|
|
|
123 |
|
Franchise expenses |
|
|
19 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
19 |
|
Expenses for transactions with franchisees and unconsolidated affiliates |
|
|
19 |
|
|
|
— |
|
|
|
4 |
|
|
|
136 |
|
|
|
159 |
|
Other operating costs |
|
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
— |
|
|
|
8 |
|
Closures and impairment expenses, net |
|
|
— |
|
|
|
1 |
|
|
|
1 |
|
|
|
— |
|
|
|
2 |
|
Refranchising gain, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
Other income, net |
|
|
(18 |
) |
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
|
|
(21 |
) |
Total costs and expenses, net |
|
|
1,146 |
|
|
|
515 |
|
|
|
30 |
|
|
|
175 |
|
|
|
1,866 |
|
Operating Profit (Loss) |
|
|
256 |
|
|
|
54 |
|
|
|
(7 |
) |
|
|
(39 |
) |
|
|
264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended 12/31/2017 |
|
|||||||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Corporate & Unallocated(1) |
|
|
Total |
|
|||||
Total revenues |
|
|
1,208 |
|
|
|
498 |
|
|
|
44 |
|
|
|
122 |
|
|
|
1,872 |
|
Company restaurant expenses |
|
|
998 |
|
|
|
465 |
|
|
|
10 |
|
|
|
— |
|
|
|
1,473 |
|
General and administrative expenses |
|
|
55 |
|
|
|
30 |
|
|
|
10 |
|
|
|
61 |
|
|
|
156 |
|
Franchise expenses |
|
|
16 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
17 |
|
Expenses for transactions with franchisees and unconsolidated affiliates |
|
|
19 |
|
|
|
— |
|
|
|
9 |
|
|
|
121 |
|
|
|
149 |
|
Other operating costs |
|
|
— |
|
|
|
— |
|
|
|
14 |
|
|
|
— |
|
|
|
14 |
|
Closures and impairment expenses (income), net |
|
|
10 |
|
|
|
18 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
27 |
|
Refranchising gain, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
|
|
(3 |
) |
Other (income) expenses, net |
|
|
(9 |
) |
|
|
— |
|
|
|
2 |
|
|
|
(1 |
) |
|
|
(8 |
) |
Total costs and expenses, net |
|
|
1,089 |
|
|
|
514 |
|
|
|
44 |
|
|
|
178 |
|
|
|
1,825 |
|
Operating Profit (Loss) |
|
|
119 |
|
|
|
(16 |
) |
|
|
— |
|
|
|
(56 |
) |
|
|
47 |
|
(1) |
Amount includes revenues and expenses associated with transactions with franchisees and unconsolidated affiliates such as inventory procurement and other services provided to franchisees and unconsolidated affiliates. |
5
Recast Annual System and Same-Store Sales Growth
(unaudited)
System sales growth includes the results of all restaurants regardless of ownership, including company-owned, unconsolidated affiliate and franchise restaurants that operate our concepts, except for non-company-owned restaurants for which we do not receive a sales-based royalty. Sales of unconsolidated affiliate and franchise restaurants typically generate ongoing franchise fees for the Company at a rate of approximately 6% of system sales. Sales of unconsolidated affiliate and franchise restaurants are not included in the Company sales in the Consolidated and Combined Statements of Income (Loss); 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.
Same-store sales growth represents 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.
|
|
Year Ended 12/31/2017 |
|
|||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Total |
|
||||
System Sales Growth (Decline) |
|
|
7 |
% |
|
|
5 |
% |
|
|
(31 |
)% |
|
|
6 |
% |
System Sales Growth (Decline), excluding F/X(2) |
|
|
9 |
% |
|
|
7 |
% |
|
|
(29 |
)% |
|
|
8 |
% |
Same-Store Sales Growth (Decline) |
|
|
5 |
% |
|
|
1 |
% |
|
|
(6 |
)% |
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 12/31/2016 |
|
|||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Total |
|
||||
System Sales Growth (Decline) |
|
|
— |
% |
|
|
(2 |
)% |
|
|
(41 |
)% |
|
|
(1 |
)% |
System Sales Growth (Decline), excluding F/X(2) |
|
|
6 |
% |
|
|
4 |
% |
|
|
(37 |
)% |
|
|
5 |
% |
Same-Store Sales Growth (Decline) |
|
|
3 |
% |
|
|
(7 |
)% |
|
|
(3 |
)% |
|
|
— |
% |
(2) |
The Company provides system sales growth (decline), excluding the impact of foreign currency translation (“F/X”). These amounts are derived by translating current year results at prior year average exchange rates. The Company believes the elimination of the F/X impact provides better year-to-year comparability without the distortion of foreign currency fluctuations. |
6
Recast Quarterly System and Same-Store Sales Growth
(unaudited)
|
|
Quarter Ended 3/31/2017 |
|
|||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Total |
|
||||
System Sales (Decline) Growth |
|
|
(2 |
)% |
|
|
3 |
% |
|
|
(42 |
)% |
|
|
(1 |
)% |
System Sales Growth (Decline), excluding F/X(2) |
|
|
3 |
% |
|
|
9 |
% |
|
|
(38 |
)% |
|
|
4 |
% |
Same-Store Sales Growth (Decline) |
|
|
1 |
% |
|
|
3 |
% |
|
|
(1 |
)% |
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended 6/30/2017 |
|
|||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Total |
|
||||
System Sales Growth (Decline) |
|
|
3 |
% |
|
|
1 |
% |
|
|
(35 |
)% |
|
|
2 |
% |
System Sales Growth (Decline), excluding F/X(2) |
|
|
8 |
% |
|
|
6 |
% |
|
|
(32 |
)% |
|
|
7 |
% |
Same-Store Sales Growth (Decline) |
|
|
4 |
% |
|
|
— |
% |
|
|
(2 |
)% |
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended 9/30/2017 |
|
|||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Total |
|
||||
System Sales Growth (Decline) |
|
|
14 |
% |
|
|
7 |
% |
|
|
(34 |
)% |
|
|
12 |
% |
System Sales Growth (Decline), excluding F/X(2) |
|
|
14 |
% |
|
|
7 |
% |
|
|
(33 |
)% |
|
|
12 |
% |
Same-Store Sales Growth (Decline) |
|
|
10 |
% |
|
|
1 |
% |
|
|
(5 |
)% |
|
|
8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended 12/31/2017 |
|
|||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Total |
|
||||
System Sales (Decline) Growth |
|
|
14 |
% |
|
|
10 |
% |
|
|
(4 |
)% |
|
|
13 |
% |
System Sales Growth (Decline), excluding F/X(2) |
|
|
11 |
% |
|
|
6 |
% |
|
|
(6 |
)% |
|
|
9 |
% |
Same-Store Sales Decline |
|
|
6 |
% |
|
|
1 |
% |
|
|
(3 |
)% |
|
|
5 |
% |
(2) |
The Company provides system sales growth (decline), excluding the impact of foreign currency translation (“F/X”). These amounts are derived by translating current year results at prior year average exchange rates. The Company believes the elimination of the F/X impact provides better year-to-year comparability without the distortion of foreign currency fluctuations. |
7
Recast Restaurant Count and New Unit Activity
(unaudited)
KFC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned |
|
|
Unconsolidated affiliates |
|
|
Franchise |
|
|
Total |
|
||||
As of 12/31/2016 |
|
|
3,913 |
|
|
|
836 |
|
|
|
475 |
|
|
|
5,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Unit Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2017 |
|
|
46 |
|
|
|
12 |
|
|
|
(5 |
) |
|
|
53 |
|
Q2 2017 |
|
|
32 |
|
|
|
15 |
|
|
|
— |
|
|
|
47 |
|
Q3 2017 |
|
|
50 |
|
|
|
17 |
|
|
|
2 |
|
|
|
69 |
|
Q4 2017 |
|
|
71 |
|
|
|
11 |
|
|
|
13 |
|
|
|
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of 12/31/2017 |
|
|
4,112 |
|
|
|
891 |
|
|
|
485 |
|
|
|
5,488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pizza Hut |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned |
|
|
Franchise |
|
|
Total |
|
|||
As of 12/31/2016 |
|
|
|
|
|
|
2,057 |
|
|
|
24 |
|
|
|
2,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Unit Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2017 |
|
|
|
|
|
|
21 |
|
|
|
3 |
|
|
|
24 |
|
Q2 2017 |
|
|
|
|
|
|
16 |
|
|
|
1 |
|
|
|
17 |
|
Q3 2017 |
|
|
|
|
|
|
34 |
|
|
|
1 |
|
|
|
35 |
|
Q4 2017 |
|
|
|
|
|
|
38 |
|
|
|
— |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of 12/31/2017 |
|
|
|
|
|
|
2,166 |
|
|
|
29 |
|
|
|
2,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Segments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned |
|
|
Franchise |
|
|
Total |
|
|||
As of 12/31/2016 |
|
|
|
|
|
|
38 |
|
|
|
219 |
|
|
|
257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Unit Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2017 |
|
|
|
|
|
|
(1 |
) |
|
|
15 |
|
|
|
14 |
|
Q2 2017 |
|
|
|
|
|
|
(9 |
) |
|
|
(4 |
) |
|
|
(13 |
) |
Q3 2017 |
|
|
|
|
|
|
— |
|
|
|
5 |
|
|
|
5 |
|
Q4 2017 |
|
|
|
|
|
|
1 |
|
|
|
36 |
|
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of 12/31/2017 |
|
|
|
|
|
|
29 |
|
|
|
271 |
|
|
|
300 |
|
8