百勝中國公佈2019年三季報 (英文版)
10/29/2019 at 4:30 PM EDT
Total revenues grew 5% or 8% in constant currency;
Total system sales grew 8% and same-store sales grew 2% in constant currency

SHANGHAI, Oct. 29, 2019 /PRNewswire/ -- Yum China Holdings, Inc. (the "Company" or "Yum China") (NYSE: YUMC) today reported unaudited results for the third quarter ended September 30, 2019. Reported GAAP results include Special Items, which are excluded from adjusted measures.  Special Items are not allocated to any segment and therefore only impact reported GAAP results of Yum China.  See "Reconciliation of Reported GAAP Results to Adjusted Measures" within this release.

Third Quarter Highlights

  • Total revenues increased 5% year over year to $2.3 billion from $2.2 billion (8% year over year increase excluding foreign currency translation ("F/X")).
  • Total system sales grew 8% year over year, with growth of 10% at KFC and 3% at Pizza Hut, excluding F/X.
  • Same-store sales grew 2% year over year, with a 3% increase at KFC and a 1% increase at Pizza Hut, excluding F/X.
  • Restaurant margin was 17.7%, compared with 17.6% in the prior year period.
  • Operating Profit increased 11% year over year to $300 million from $269 million (14% year over year increase excluding F/X).
  • Effective tax rate was 26.9%.
  • Net Income increased 11% to $223 million from $203 million in the prior year period, primarily due to the increase in operating profit and mark to market gain from our equity investment in Meituan Dianping.
  • Diluted EPS increased 14% to $0.58 from $0.51 in the prior year period (8% year over year increase excluding the $0.03 per share mark to market gain from our equity investment in Meituan Dianping).
  • Opened 231 new restaurants during the quarter, bringing total store count to 8,917 across more than 1,300 cities.

Key Financial Results

 

Third Quarter 2019

   

Year to Date Ended 9/30/2019

 

% Change

   

% Change

 

System Sales

 

Same-Store
Sales

 

Net New
Units

 

Operating
Profit

   

System Sales

 

Same-Store
Sales

 

Net New
Units

 

Operating
Profit

Yum China

+8

 

+2

 

+7

 

+11

   

+9

 

+4

 

+7

 

(6)

   KFC

+10

 

+3

 

+9

 

+12

   

+11

 

+4

 

+9

 

+4

   Pizza Hut

+3

 

+1

 

+2

 

(29)

   

+3

 

+1

 

+2

 

+9

 

 

   

Third Quarter

     

Year to Date Ended 9/30

(in US$ million, except

           

% Change

               

% Change

for per share data and percentages)

 

2019

   

2018

 

Reported

 

Ex F/X

   

2019

 

2018

 

Reported

 

Ex F/X

Operating Profit

$

300

 

$

269

 

+11

 

+14

   

$

807

 

$

857

 

(6)

 

(1)

Adjusted Operating Profit[1]

$

300

 

$

269

 

+11

 

+14

   

$

807

 

$

759

 

+6

 

+12

Net Income

$

223

 

$

203

 

+11

 

+14

   

$

623

 

$

634

 

(2)

 

+4

Adjusted Net Income[1]

$

223

 

$

203

 

+11

 

+14

   

$

631

 

$

560

 

+13

 

+19

Basic Earnings Per Common Share

$

0.59

 

$

0.53

 

+11

 

+15

   

$

1.65

 

$

1.64

 

+1

 

+6

Adjusted Basic Earnings Per

                                       

   Common Share[1]

$

0.59

 

$

0.53

 

+11

 

+15

   

$

1.67

 

$

1.45

 

+15

 

+21

Diluted Earnings Per Common Share

$

0.58

 

$

0.51

 

+14

 

+16

   

$

1.60

 

$

1.59

 

+1

 

+6

Adjusted Diluted Earnings Per

                                       

   Common Share[1]

$

0.58

 

$

0.51

 

+14

 

+16

   

$

1.62

 

$

1.41

 

+15

 

+21

[1]See "Reconciliation of Reported GAAP Results to Adjusted Measures" included in the accompanying tables of this release for further details.

Note:  All comparisons are versus the same period a year ago.

 

NM refers to changes over 100%, from negative to positive amounts or from zero to an amount.

Percentages may not recompute due to rounding.

System sales and same-store sales percentages exclude the impact of F/X.

CEO and CFO Comments

Joey Wat, CEO of Yum China, commented, "We are pleased with our continued strong performance in the third quarter, which was driven by our competitive positioning, leading digital capabilities and ongoing innovation across the business. We achieved our 12th consecutive quarter of system sales growth since the spin-off, highlighting the strength of our business model and demonstrating our ability to effectively adapt to changing market conditions. KFC delivered solid sales and profit growth as we strategically decreased promotion intensity to protect margins. Pizza Hut maintained positive sales momentum with a decline in margin during the quarter due to the important and necessary long-term investments in the revitalization program."

"We will continue to build on KFC's resilient business model, cement the revitalization of Pizza Hut, invest in the growth of our smaller brands and sharpen our industry-leading digital ecosystem, which enables us to meet customer demands and manage the business effectively," continued Ms. Wat. "We are cautiously optimistic about the future because we see significant growth opportunities in China, and we will focus on leveraging our competitive advantages to succeed in this dynamic environment."

Andy Yeung, CFO of Yum China, added, "I am very excited to have joined the Yum China team and am pleased to be reporting another strong set of quarterly results, which highlight Yum China's strength in many areas. We continued rapid expansion of our store network and maintained very healthy cash payback for our new stores. We also delivered strong sales, operating profit and EPS growth despite continued pressure from higher chicken and labor costs. In addition, we returned $109 million to shareholders through dividends and share repurchases in the quarter. Looking ahead, we will continue to focus on driving sales and managing costs while making prudent investments to drive long-term growth. As always, we remain committed to driving significant overall value to our shareholders."

Dividend and Share Repurchase

  • The Board of Directors declared a cash dividend of $0.12 per share on Yum China's common stock, payable as of the close of business on December 17, 2019 to shareholders of record as of the close of business on November 26, 2019.
  • During the third quarter, we repurchased approximately 1.4 million shares of Yum China common stock for $64.0 million at an average price of $44.70 per share.

Digital and Delivery 

  • As of September 30, 2019, the KFC loyalty program had over 200 million members and the Pizza Hut loyalty program had over 65 million members, an increase of 55 million and 15 million, respectively, year over year.
  • Digital payments accounted for 91% of Company sales in the quarter, an increase of 9 percentage points year over year.
  • Delivery contributed to 20% of Company sales in the third quarter of 2019, an increase of 3 percentage points year over year. Delivery services are now available in 1,225 cities, up from 1,063 cities at the end of the prior year period.

New-Unit Development and Asset Upgrade

  • The Company opened 231 new restaurants and remodeled 222 restaurants in the third quarter of 2019.
   

New Units

   

Restaurant Count

   

Third Quarter

 

Year to Date

   

As of 9/30

   

2019

 

Ended 9/30/2019

   

2019

 

2018

Yum China

 

231

 

646

   

8,917

 

8,313

   KFC

 

174

 

501

   

6,324

 

5,800

   Pizza Hut

 

24

 

84

   

2,255

 

2,215

   Others[2]

 

33

 

61

   

338

 

298

[2] Others include Little Sheep, East Dawning, Taco Bell and COFFii & JOY.

Restaurant Margin

  • In the third quarter of 2019, Yum China restaurant margin was 17.7%, as compared with 17.6% in the prior year period, primarily attributable to sales leverage, productivity improvement and other cost savings, partially offset by wage and commodity inflation and promotional activities.
 

Third Quarter

     

Year to Date Ended 9/30

   
   

2019

   

2018

   

% pts change

     

2019

   

2018

   

% pts change

   

Yum China

   

17.7

%

   

17.6

%

   

+0.1

       

17.0

%

   

16.9

%

   

+0.1

   

   KFC

   

20.1

%

   

19.2

%

   

+0.9

       

18.8

%

   

19.0

%

   

(0.2)

   

   Pizza Hut

   

11.4

%

   

13.8

%

   

(2.4)

       

12.4

%

   

11.8

%

   

+0.6

   

2019 Outlook

  • The Company continues to expect fiscal year 2019 targets as follows:
    • Between 800 and 850 gross new units.
    • Capital expenditures between $475 million and $525 million.
    • Effective tax rate below 28%, excluding any impact from the Company's equity investment in Meituan Dianping.

The Company provides its effective tax rate outlook excluding any impact from its investment in Meituan Dianping, which will be subject to mark to market accounting and may be significant.

Conference Call

Yum China's management will hold an earnings conference call at 8:00 p.m. U.S. Eastern Time on Tuesday, October 29, 2019 (8:00 a.m.Beijing/Hong Kong Time on Wednesday, October 30, 2019). A copy of the presentation will be available on the Yum China Holdings, Inc. website, http://ir.yumchina.com.

U.S.:                          +1 845 675 0437
Mainland China:        400 620 8038 or 800 819 0121
Hong Kong:               +852 3018 6771
U.K.:                          +44 20 36214779
International:             +65 6713 5090
Password:                 Yum China

A replay of the conference call will be available two hours after the call ends until 8:00 a.m. U.S. Eastern Time on Wednesday, November 6, 2019 (9:00 p.m.Beijing/Hong Kong Time on Wednesday, November 6, 2019) and may be accessed by phone at the following numbers:

U.S.:                          +1 855 452 5696
International:             +61 2 9003 4211
Passcode:                 7952028

Additionally, a live webcast and an archived webcast of this conference call will be available at http://ir.yumchina.com.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including under "2019 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" 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, business plans, investment plans, earnings, performance and returns of Yum China, statements regarding the revitalization of Pizza Hut, anticipated effects of population and macroeconomic trends, the capital structure and effective tax rate of Yum China, the anticipated effects of our digital and delivery capabilities on growth and beliefs regarding the long-term drivers of Yum China's business. Forward-looking statements are not guarantees of performance and are inherently subject to known and unknown risks and uncertainties that are difficult to predict and could cause our actual results or events to differ materially from those indicated by those statements. We cannot assure you that any of our expectations, estimates or assumptions will be achieved. The forward-looking statements included in this press release are only made as of the date of this press release, and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law. Numerous factors could cause our actual results or events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: whether we are able to achieve development goals at the times and in the amounts currently anticipated, if at all, the success of our marketing campaigns and product innovation, our ability to maintain food safety and quality control systems, our ability to control costs and expenses, including tax costs, as well as changes in political, economic and regulatory conditions in China. In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial could affect the accuracy of any such forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. You should consult our filings with the Securities and Exchange Commission (including the information set forth under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K) for additional detail about factors that could affect our financial and other results.

About Yum China Holdings, Inc.

Yum China Holdings, Inc. is a licensee of Yum! Brands in mainland China. It has exclusive rights in mainland China to KFC, China's leading quick-service restaurant brand, Pizza Hut, the leading casual dining restaurant brand in China, and Taco Bell, a California-based restaurant chain serving innovative Mexican-inspired food. Yum China also owns the Little Sheep, East Dawning and COFFii & JOY concepts outright. The Company had more than 8,900 restaurants in over 1,300 cities at the end of September 2019. In 2019, Yum China was named to the Bloomberg Gender-Equality Index and was certified as a Top Employer 2019 in China by the Top Employers Institute. For more information, please visit http://ir.yumchina.com.

Investor Relations Contact: 
              Tel: +86 21 2407 7556 
              IR@YumChina.com

Media Contact: 
              Tel: +86 21 2407 7510 
              Media@YumChina.com 

 

 

Yum China Holdings, Inc.

Condensed Consolidated Statements of Income

(in US$ million, except per share data)

(unaudited)

 
 

Quarter Ended

 

% Change

 

Year to Date Ended

 

% Change

 

9/30/2019

 

9/30/2018

 

B/(W)

 

9/30/2019

 

9/30/2018

 

B/(W)

Revenues

                                 

Company sales

$

2,097

 

$

2,008

 

4

   

$

6,112

 

$

5,912

 

3

 

Franchise fees and income

 

38

   

36

 

7

     

113

   

110

 

3

 

Revenues from transactions with

                                 

   franchisees and unconsolidated affiliates

 

172

   

159

 

8

     

496

   

461

 

8

 

Other revenues

 

12

   

9

 

39

     

26

   

18

 

45

 

Total revenues

 

2,319

   

2,212

 

5

     

6,747

   

6,501

 

4

 

Costs and Expenses, Net

                                 

Company restaurants

                                 

Food and paper

 

651

   

610

 

(7)

     

1,896

   

1,775

 

(7)

 

Payroll and employee benefits

 

455

   

430

 

(6)

     

1,371

   

1,296

 

(6)

 

Occupancy and other operating expenses

 

619

   

615

 

(1)

     

1,804

   

1,841

 

2

 

Company restaurant expenses

 

1,725

   

1,655

 

(4)

     

5,071

   

4,912

 

(3)

 

General and administrative expenses

 

117

   

119

 

     

340

   

334

 

(2)

 

Franchise expenses

 

19

   

18

 

(3)

     

55

   

55

 

1

 

Expenses for transactions with

                                 

   franchisees and unconsolidated affiliates

 

167

   

156

 

(7)

     

488

   

454

 

(7)

 

Other operating costs and expenses

 

9

   

6

 

(56)

     

20

   

17

 

(21)

 

Closures and impairment (income) expenses, net

 

(1)

   

(1)

 

18

     

14

   

15

 

6

 

Other income, net

 

(17)

   

(10)

 

73

     

(48)

   

(143)

 

(67)

 

Total costs and expenses, net

 

2,019

   

1,943

 

(4)

     

5,940

   

5,644

 

(5)

 

Operating Profit

 

300

   

269

 

11

     

807

   

857

 

(6)

 

Interest income, net

 

10

   

10

 

6

     

29

   

28

 

4

 

Investment gain

 

12

   

 

NM

     

39

   

 

NM

 

Income Before Income Taxes

 

322

   

279

 

15

     

875

   

885

 

(1)

 

Income tax provision

 

(87)

   

(67)

 

(28)

     

(226)

   

(227)

 

1

 

Net income – including noncontrolling interests

 

235

   

212

 

11

     

649

   

658

 

(1)

 

Net income – noncontrolling interests

 

12

   

9

 

(26)

     

26

   

24

 

(6)

 

Net Income – Yum China Holdings, Inc.

$

223

 

$

203

 

11

   

$

623

 

$

634

 

(2)

 

Effective tax rate

 

26.9%

   

24.2%

 

(2.7)

ppts.

   

25.8%

   

25.%7

 

(0.1)

ppts.

                                   

Basic Earnings Per Common Share

$

0.59

 

$

0.53

       

$

1.65

 

$

1.64

     

Weighted average shares outstanding

                                 

    (in millions)

 

377

   

384

         

378

   

386

     
                                   

Diluted Earnings Per Common Share

$

0.58

 

$

0.51

       

$

1.60

 

$

1.59

     

Weighted average shares outstanding

                                 

    (in millions)

 

388

   

394

         

389

   

398

     
                                   

Cash Dividends Declared Per Common Share

$

0.12

 

$

0.10

       

$

0.36

 

$

0.30

     
                                   

Company sales

 

100.0%

   

100.0%

         

100.0%

   

100.0%

     

Food and paper

 

31.0

   

30.4

 

(0.6)

ppts.

   

31.0

   

30.0

 

(1.0)

ppts.

Payroll and employee benefits

 

21.7

   

21.4

 

(0.3)

ppts.

   

22.4

   

21.9

 

(0.5)

ppts.

Occupancy and other operating expenses

 

29.6

   

30.6

 

1.0

ppts.

   

29.6

   

31.2

 

1.6

ppts.

Restaurant margin

 

17.7%

   

17.6%

 

0.1

ppts.

   

17.0%

   

16.9%

 

0.1

ppts.

Operating margin

 

14.3%

   

13.4%

 

0.9

ppts.

   

13.2%

   

14.5%

 

(1.3)

ppts.

 

Percentages may not recompute due to rounding.

 

 

Yum China Holdings, Inc.

KFC Operating Results

(in US$ million)

(unaudited)

 
 

Quarter Ended

 

% Change

 

Year to Date Ended

 

% Change

 

9/30/2019

 

9/30/2018

 

B/(W)

 

9/30/2019

 

9/30/2018

 

B/(W)

Revenues

                                 

Company sales

$

1,546

 

$

1,452

 

6

   

$

4,495

 

$

4,248

 

6

 

Franchise fees and income

 

35

   

34

 

4

     

104

   

104

 

1

 

Revenues from transactions with

                                 

   franchisees and unconsolidated affiliates

 

16

   

15

 

9

     

48

   

47

 

3

 

Other revenues

 

1

   

 

NM

     

1

   

 

NM

 

Total revenues

 

1,598

   

1,501

 

6

     

4,648

   

4,399

 

6

 

Costs and Expenses, Net

                                 

Company restaurants

                                 

Food and paper

 

477

   

444

 

(7)

     

1,403

   

1,281

 

(10)

 

Payroll and employee benefits

 

311

   

297

 

(5)

     

942

   

879

 

(7)

 

Occupancy and other operating expenses

 

447

   

432

 

(3)

     

1,305

   

1,281

 

(2)

 

Company restaurant expenses

 

1,235

   

1,173

 

(5)

     

3,650

   

3,441

 

(6)

 

General and administrative expenses

 

50

   

44

 

(16)

     

148

   

135

 

(10)

 

Franchise expenses

 

18

   

17

 

(2)

     

53

   

53

 

 

Expenses for transactions with

                                 

   franchisees and unconsolidated affiliates

 

16

   

15

 

(4)

     

48

   

47

 

(2)

 

Closures and impairment expenses, net

 

   

 

NM

     

7

   

6

 

(7)

 

Other income, net

 

(16)

   

(12)

 

34

     

(46)

   

(42)

 

7

 

Total costs and expenses, net

 

1,303

   

1,237

 

(5)

     

3,860

   

3,640

 

(6)

 

Operating Profit

$

295

 

$

264

 

12

   

$

788

 

$

759

 

4

 

Company sales

 

100.0%

   

100.0%

         

100.0%

   

100.0%

     

Food and paper

 

30.9

   

30.6

 

(0.3)

ppts.

   

31.2

   

30.2

 

(1.0)

ppts.

Payroll and employee benefits

 

20.1

   

20.4

 

0.3

ppts.

   

21.0

   

20.7

 

(0.3)

ppts.

Occupancy and other operating expenses

 

28.9

   

29.8

 

0.9

ppts.

   

29.0

   

30.1

 

1.1

ppts.

Restaurant margin

 

20.1%

   

19.2%

 

0.9

ppts.

   

18.8%

   

19%.0

 

(0.2)

ppts.

Operating margin

 

19.1%

   

18.1%

 

1.0

ppts.

   

17.%5

   

17.8%

 

(0.3)

ppts.

 

Percentages may not recompute due to rounding.

 

 

Yum China Holdings, Inc.

Pizza Hut Operating Results

(in US$ million)

(unaudited)

 
 

Quarter Ended

 

% Change

 

Year to Date Ended

 

% Change

 

9/30/2019

 

9/30/2018

 

B/(W)

 

9/30/2019

 

9/30/2018

 

B/(W)

Revenues

                                   

Company sales

$

540

 

$

548

 

(1)

   

$

1,588

 

$

1,640

   

(3)

 

Franchise fees and income

 

1

   

1

 

NM

     

3

   

2

   

68

 

Revenues from transactions with

                                   

   franchisees and unconsolidated affiliates

 

1

   

1

 

NM

     

3

   

1

   

NM

 

Other revenues

 

   

 

NM

     

1

   

   

NM

 

Total revenues

 

542

   

550

 

(1)

     

1,595

   

1,643

   

(3)

 

Costs and Expenses, Net

                                   

Company restaurants

                                   

Food and paper

 

170

   

163

 

(5)

     

484

   

486

   

 

Payroll and employee benefits

 

140

   

130

 

(8)

     

420

   

410

   

(2)

 

Occupancy and other operating expenses

 

168

   

179

 

7

     

487

   

551

   

12

 

Company restaurant expenses

 

478

   

472

 

(1)

     

1,391

   

1,447

   

4

 

General and administrative expenses

 

25

   

24

 

(6)

     

76

   

80

   

5

 

Franchise expenses

 

1

   

1

 

(73)

     

2

   

2

   

(34)

 

Expenses for transactions with

                                   

   franchisees and unconsolidated affiliates

 

1

   

1

 

NM

     

3

   

1

   

NM

 

Other operating costs and expenses

 

   

 

NM

     

1

   

   

NM

 

Closures and impairment (income) expenses, net

 

(1)

   

(1)

 

77

     

5

   

9

   

38

 

Other income, net

 

   

 

NM

     

   

(2)

   

NM

 

Total costs and expenses, net

 

504

   

497

 

(2)

     

1,478

   

1,537

   

4

 

Operating Profit

$

38

 

$

53

 

(29)

   

$

117

 

$

106

   

9

 

Company sales

 

100.0%

   

100.0%

         

100.0%

   

100.0%

       

Food and paper

 

31.5

   

29.7

 

(1.8)

ppts.

   

30.5

   

29.6

   

(0.9)

ppts.

Payroll and employee benefits

 

26.0

   

23.8

 

(2.2)

ppts.

   

26.5

   

25.0

   

(1.5)

ppts.

Occupancy and other operating expenses

 

31.1

   

32.7

 

1.6

ppts.

   

30.6

   

33.6

   

3

ppts.

Restaurant margin

 

11.4%

   

13.8%

 

(2.4)

ppts.

   

12.4%

   

11.8%

   

0.6

ppts.

Operating margin

 

7.0%

   

9.8%

 

(2.8)

ppts.

   

7.4%

   

6.5%

   

0.9

ppts.

 

Percentages may not recompute due to rounding.

 

 

Yum China Holdings, Inc.

Condensed Consolidated Balance Sheets

(in US$ million)

 
 

9/30/2019

 

12/31/2018

 

(Unaudited)

     

ASSETS

         

Current Assets

         

Cash and cash equivalents

$

1,355

 

$

1,266

Short-term investments

 

364

   

122

Accounts receivable, net

 

79

   

80

Inventories, net

 

317

   

307

Prepaid expenses and other current assets

 

141

   

177

Total Current Assets

 

2,256

   

1,952

Property, plant and equipment, net

 

1,506

   

1,615

Operating lease right-of-use assets

 

1,893

   

Goodwill

 

256

   

266

Intangible assets, net

 

97

   

116

Deferred income taxes

 

89

   

89

Investments in unconsolidated affiliates

 

74

   

81

Other assets

 

539

   

491

Total Assets

 

6,710

   

4,610

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY

         

Current Liabilities

         

Accounts payable and other current liabilities

 

1,566

   

1,199

Income taxes payable

 

82

   

54

Total Current Liabilities

 

1,648

   

1,253

Non-current operating lease liabilities

 

1,729

   

Capital lease obligations

 

23

   

25

Other liabilities

 

195

   

355

Total Liabilities

 

3,595

   

1,633

Redeemable Noncontrolling Interest

 

1

   

1

Equity

         

Common stock, $0.01 par value; 1,000 million shares authorized;

  394 million shares and 392 million shares issued at September 30, 2019 and December 31,

  2018, respectively; 376 million shares and 379 million shares outstanding at September 30,

  2019 and December 31, 2018, respectively

 

4

   

4

Treasury stock

 

(664)

   

(460)

Additional paid-in capital

 

2,423

   

2,402

Retained earnings

 

1,371

   

944

Accumulated other comprehensive loss

 

(109)

   

(17)

Total Equity – Yum China Holdings, Inc.

 

3,025

   

2,873

Noncontrolling interests

 

89

   

103

Total Equity

 

3,114

   

2,976

Total Liabilities, Redeemable Noncontrolling Interest and Equity

$

6,710

 

$

4,610

           

 

 

Yum China Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(in US$ million)

(unaudited)

 
 

Year to Date Ended

 

9/30/2019

 

9/30/2018

Cash Flows – Operating Activities

         

Net income – including noncontrolling interests

$

649

 

$

658

Depreciation and amortization

 

322

   

343

Amortization of operating lease right-of-use assets

 

251

   

Closures and impairment expenses

 

14

   

15

Gain from re-measurement of equity interest upon acquisition

 

   

(98)

Investment gain

 

(39)

   

Equity income from investments in unconsolidated affiliates

 

(56)

   

(52)

Distributions of income received from unconsolidated affiliates

 

50

   

51

Deferred income taxes

 

12

   

46

Share-based compensation expense

 

21

   

18

Changes in accounts receivable

 

(2)

   

2

Changes in inventories

 

(22)

   

14

Changes in prepaid expenses and other current assets

 

7

   

(13)

Changes in accounts payable and other current liabilities

 

118

   

184

Changes in income taxes payable

 

32

   

41

Changes in non-current operating lease liabilities

 

(280)

   

Other, net

 

(32)

   

(36)

Net Cash Provided by Operating Activities

 

1,045

   

1,173

Cash Flows – Investing Activities

         

Capital spending

 

(310)

   

(359)

Purchases of short-term investments

 

(619)

   

(513)

Maturities of short-term investments

 

366

   

513

Acquisition of business, net of cash acquired

 

   

(91)

Investment in equity securities

 

   

(74)

Other, net

 

10

   

(3)

Net Cash Used in Investing Activities

 

(553)

   

(527)

Cash Flows – Financing Activities

         

Repayment of short-term borrowings assumed from acquisition

 

   

(10)

Repurchase of shares of common stock

 

(207)

   

(161)

Cash dividends paid on common stock

 

(136)

   

(115)

Dividends paid to noncontrolling interests

 

(25)

   

(29)

Other, net

 

   

(3)

Net Cash Used in Financing Activities

 

(368)

   

(318)

Effect of Exchange Rates on Cash and Cash Equivalents and Restricted Cash

 

(26)

   

(53)

Net Increase in Cash, Cash Equivalents and Restricted Cash

 

98

   

275

Cash, Cash Equivalents and Restricted Cash - Beginning of Period

 

1,266

   

1,059

Cash, Cash Equivalents and Restricted Cash - End of Period

$

1,364

 

$

1,334

In this press release:

  • The Company provides certain percentage changes excluding the impact of foreign currency translation ("F/X"). These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the F/X impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.
  • System sales growth reflects the results of all restaurants regardless of ownership, including Company-owned, franchise and unconsolidated affiliate restaurants that operate our restaurant concepts, except for non-Company-owned restaurants for which we do not receive a sales-based royalty. Sales of franchise and unconsolidated affiliate restaurants typically generate ongoing franchise fees for the Company at a rate of approximately 6% of system sales. Franchise and unconsolidated affiliate restaurant sales are not included in Company sales in the Condensed Consolidated Statements of Income; however, the franchise fees are included in the Company's revenues. We believe system sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates all of our revenue drivers, Company and franchise same-store sales as well as net unit growth.
  • Effective January 1, 2018, the Company revised its definition of same-store sales growth to represent the estimated percentage change in sales of food of all restaurants in the Company system that have been open prior to the first day of our prior fiscal year. We refer to these as our "base" stores. Previously, same-store sales growth represented the estimated percentage change in sales of all restaurants in the Company system that have been open for one year or more, and the base stores changed on a rolling basis from month to month. This revision was made to align with how management measures performance internally and focuses on trends of a more stable base of stores.
  • Company Restaurant profit ("Restaurant profit") is defined as Company sales less expenses incurred directly by our Company-owned restaurants in generating Company sales. Company restaurant margin percentage is defined as Restaurant profit divided by Company sales.

Reconciliation of Reported GAAP Results to Adjusted Measures
(in millions, except per share data)
(unaudited)

In addition to the results provided in accordance with US Generally Accepted Accounting Principles ("GAAP") in this press release, the Company provides measures adjusted for Special Items, which include Adjusted Operating Profit, Adjusted Net Income, Adjusted EPS, Adjusted Effective Tax Rate and Adjusted EBITDA, which we define as net income including noncontrolling interests adjusted for income tax, interest income, net, investment gain or loss, depreciation, amortization and other items, including store impairment charges and Special Items. The Special Item for the year to date ended September 30, 2019 represents the impact from the US Tax Cuts and Jobs Act (the "Tax Act"), as described in the accompanying notes. The Special Item for the year to date ended September 30, 2018 represents a gain recognized from the re-measurement of our previously held equity interest in Wuxi KFC at fair value upon acquisition, as described in the accompanying notes. The Company excludes impact from Special Items for the purpose of evaluating performance internally. Special Items are not included in any of our segment results. In addition, the Company provides Adjusted EBITDA because we believe that investors and analysts may find it useful in measuring operating performance without regard to items such as income tax, interest income, net, investment gain or loss, depreciation, amortization and other items, including store impairment charges and Special Items. These adjusted measures are not intended to replace the presentation of our financial results in accordance with GAAP.  Rather, the Company believes that the presentation of these adjusted measures provide additional information to investors to facilitate the comparison of past and present results, excluding those items that the Company does not believe are indicative of our ongoing operations due to their nature.  These adjusted measures should not be considered in isolation or as a substitute for GAAP financial results, but should be read in conjunction with the unaudited Condensed Consolidated Statements of Income and other information presented herein. A reconciliation of the most directly comparable GAAP measures to adjusted measures follows.

 

Quarter Ended

 

Year to Date Ended

 

9/30/2019

 

9/30/2018

 

9/30/2019

 

9/30/2018

Detail of Special Items

                     
                       

Gain from re-measurement of equity interest upon acquisition(b)

$

 

$

 

$

 

$

98

Special Items, Operating Profit

 

   

   

   

98

Tax effect on Special Items(c)

 

   

   

   

(24)

Impact from the Tax Act(d)

 

   

   

(8)

   

Special Items, net income – including noncontrolling interests

 

   

   

(8)

   

74

Special Items, net income – noncontrolling interests

 

   

   

   

Special Items, Net Income –Yum China Holdings, Inc.

$

 

$

 

$

(8)

 

$

74

Weighted Average Diluted Shares Outstanding

 

388

   

394

   

389

   

398

Special Items, Diluted Earnings Per Common Share

$

 

$

 

$

(0.02)

 

$

0.18

Reconciliation of Operating Profit to Adjusted Operating Profit

                     

Operating Profit

$

300

 

$

269

 

$

807

 

$

857

Special Items, Operating Profit

 

   

   

   

98

Adjusted Operating Profit

$

300

 

$

269

 

$

807

 

$

759

Reconciliation of Net Income to Adjusted Net Income

                     

Net Income – Yum China Holdings, Inc.

$

223

 

$

203

 

$

623

 

$

634

Special Items, Net Income –Yum China Holdings, Inc.

 

   

   

(8)

   

74

Adjusted Net Income – Yum China Holdings, Inc.

$

223

 

$

203

 

$

631

 

$

560

Reconciliation of EPS to Adjusted EPS

                     

Basic Earnings Per Common Share

$

0.59

 

$

0.53

 

$

1.65

 

$

1.64

Special Items, Basic Earnings Per Common Share

 

   

   

(0.02)

   

0.19

Adjusted Basic Earnings Per Common Share

$

0.59

 

$

0.53

 

$

1.67

 

$

1.45

Diluted Earnings Per Common Share

$

0.58

 

$

0.51

 

$

1.6

 

$

1.59

Special Items, Diluted Earnings Per Common Share

 

   

   

(0.02)

   

0.18

Adjusted Diluted Earnings Per Common Share

$

0.58

 

$

0.51

 

$

1.62

 

$

1.41

Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate

                     

Effective tax rate

 

26.9%

   

24.2%

   

25.8%

   

25.7%

Impact on effective tax rate as a result of Special Items

 

   

   

0.9%

   

(0.1)%

Adjusted effective tax rate

 

26.9%

   

24.2%

   

24.9%

   

25.8%

 

Notes to the Condensed Consolidated Statements of Income, Condensed Consolidated Balance Sheets,
Condensed Consolidated Statements of Cash Flows and Reconciliation of Reported GAAP Results to Adjusted Measures
(in US$ million)
(unaudited)

(a)      Amounts presented as of and for the quarters and years to date ended September 30, 2019 and 2018 are unaudited.
(b)      As a result of the acquisition of Wuxi KFC in the first quarter of 2018, the Company recognized a gain of $98 million from the re-measurement of our previously held 47% equity interest at fair value, which was not allocated to any segment for performance reporting purposes.
(c)      The tax expense was determined based upon the nature, as well as the jurisdiction, of each Special Item at the applicable tax rate.
(d)      We completed the evaluation of the impact on our transition tax computation based on the final regulations released by the US Treasury Department and the IRS in the first quarter of 2019 and recorded an additional amount of $8 million for the transition tax accordingly.

Reconciliation of Net Income to Adjusted EBITDA

(in US$ million)

(unaudited)

Net income, along with the reconciliation to Adjusted EBITDA, is presented below.

 
 

Quarter Ended

 

Year to Date Ended

 

9/30/2019

 

9/30/2018

 

9/30/2019

 

9/30/2018

Reconciliation of Net Income to Adjusted EBITDA

                     

Net Income – Yum China Holdings, Inc.

$

223

 

$

203

 

$

623

 

$

634

Net income – noncontrolling interests

 

12

   

9

   

26

   

24

Income tax provision

 

87

   

67

   

226

   

227

Interest income, net

 

(10)

   

(10)

   

(29)

   

(28)

Investment gain

 

(12)

   

   

(39)

   

Operating Profit

 

300

   

269

   

807

   

857

Special Items, Operating Profit

 

   

   

   

(98)

Adjusted Operating Profit

 

300

   

269

   

807

   

759

Depreciation and amortization

 

105

   

108

   

322

   

343

Store impairment charges

 

2

   

2

   

27

   

23

Adjusted EBITDA

$

407

 

$

379

 

$

1,156

 

$

1,125

 

 

Unit Count by Brand

 

KFC

 
   

12/31/2018

   

New Builds

   

Closures

   

Refranchised

   

9/30/2019

 

Company-owned

   

4,597

     

398

     

(62)

     

(8)

     

4,925

 

Unconsolidated affiliates

   

811

     

69

     

(17)

             

863

 

Franchisees

   

502

     

34

     

(8)

     

8

     

536

 

Total

   

5,910

     

501

     

(87)

     

     

6,324

 
 
 

Pizza Hut

 
   

12/31/2018

   

New Builds

   

Closures

   

Refranchised

   

9/30/2019

 

Company-owned

   

2,188

     

75

     

(68)

     

(30)

     

2,165

 

Franchisees

   

52

     

9

     

(1)

     

30

     

90

 

Total

   

2,240

     

84

     

(69)

     

     

2,255

 
 
 

Others

 
   

12/31/2018

   

New Builds

   

Closures

   

Refranchised

   

9/30/2019

 

Company-owned

   

47

     

38

     

(2)

     

(2)

     

81

 

Franchisees

   

287

     

23

     

(55)

     

2

     

257

 

Total

   

334

     

61

     

(57)

     

     

338

 

 

 

Yum China Holdings, Inc.

Segment Results

(in US$ million)

(unaudited)

 

Quarter Ended 9/30/2019

 

KFC

   

Pizza Hut

   

All Other
Segments(1)

   

Corporate

and

Unallocated(2)

   

Elimination

   

Total

 

Company sales

 

$

1,546

   

$

540

   

$

11

   

$

   

$

   

$

2,097

 

Franchise fees and income

   

35

     

1

     

2

     

     

     

38

 

Revenues from transactions with

   franchisees and unconsolidated affiliates

   

16

     

1

     

8

     

147

     

     

172

 

Other revenues

   

1

     

     

19

     

1