SHANGHAI, April 27, 2021 /PRNewswire/ -- Yum China
Holdings, Inc. (the "Company" or "Yum
China") (NYSE: YUMC and HKEX: 9987) today reported unaudited
results for the first quarter ended March 31, 2021.
Impact of COVID-19 Outbreak and Mitigation
Efforts
Yum China reported substantial
year-over-year growth in the first quarter, as the Company began to
lap prior year periods that were impacted by COVID-19. System sales
growth was mainly attributable to same-store sales growth, new unit
contribution and substantially fewer temporary store closures.
Operating Profit growth was further driven by lower commodity
prices and productivity gains.
First quarter sales were impacted by regional resurgences of
COVID-19 before the Chinese New Year and tightened public health
measures across China. The tightened measures and associated
consumer caution resulted in smaller gatherings and a noticeably
reduced volume of travel. Our transportation and tourist locations,
representing high single digits of our store mix, were
significantly affected by the decline in travel. According to
government statistics, the number of travelers was down
approximately 40% versus 2020, and down approximately 70% versus
2019, when compared to the corresponding 40-day Chinese New Year
holiday periods. These impacts were more pronounced for KFC, which
accounts for most of our stores in these locations.
The pandemic has also introduced volatility and uncertainty to
our operations. The Company acted and reacted nimbly to changing
conditions. By planning for a wide range of possible situations,
our team worked tirelessly to meet shifting demand across city
tiers, trade zones and sales channels. Leveraging our digital
capabilities, direct connection with consumers and in-house supply
chain, we were able to deftly adjust offers and promotions to
changing market conditions. We deployed resources flexibly to help
ensure the best possible levels of restaurant staffing and delivery
riders, as demand patterns shifted.
Looking ahead, the Company expects a full recovery of same-store
sales to pre-COVID-19 levels to take time, and the unevenness of
recovery to linger for several reasons. Public health measures and
social distancing behaviors persist as occasional outbreaks, such
as those in the first quarter and more recent outbreaks in
Yunnan province, remind people of
the lingering risks. Dine-in traffic, as well as sales at our
transportation locations, remains well below 2019 levels.
Accordingly, the Company will continue to focus on driving the
sales recovery while ensuring the safety of our employees and
customers.
First Quarter Highlights
- Total revenues increased 46% year over year to
$2.56 billion from $1.75 billion (a 36% increase excluding foreign
currency translation ("F/X")).
- Total system sales increased 34% year over year, with
increases of 24% at KFC and 57% at Pizza Hut, excluding F/X.
- Same-store sales increased 10% year over year, with
increases of 5% at KFC and 38% at Pizza Hut, excluding F/X.
- Opened 315 new stores during the quarter; total store count
reached 10,725 as of March 31,
2021.
- Restaurant margin was 18.7%, compared with 10.7% in the
prior year period.
- Operating Profit increased 250% year over year to
$342 million from $97 million (a 227% increase excluding F/X).
- Adjusted Operating Profit increased 249% year over year
to $345 million from $98 million (a 227% increase excluding F/X).
- Effective tax rate was 29.6%.
- Net Income increased 272% to $230 million from $62
million in the prior year period, primarily due to the
increase in Operating Profit.
- Adjusted Net Income increased 271% to $233 million from $63
million in the prior year period (a 249% increase excluding
the mark-to-market losses of $16
million and $8 million in the
first quarter of 2021 and 2020, respectively, from our equity
investments; a 225% increase if further excluding F/X).
- Diluted EPS increased 231% to $0.53 from $0.16 in
the prior year period.
- Adjusted Diluted EPS increased 238% to $0.54 from $0.16 in
the prior year period (a 217% increase excluding the mark-to-market
losses from our equity investments in the first quarter of 2021 and
2020; a 194% increase if further excluding F/X).
- Results include the consolidation of Huang Ji Huang since April 2020, and Suzhou KFC since August 2020.
Key Financial Results
|
First Quarter
2021
|
|
|
|
%
Change
|
|
|
|
System
Sales
|
|
|
Same-Store
Sales
|
|
|
Net New
Units
|
|
|
Operating
Profit
|
|
|
Yum China
|
|
+34
|
|
|
|
+10
|
|
|
|
+15
|
|
|
|
+250
|
|
|
KFC
|
|
+24
|
|
|
|
+5
|
|
|
|
+11
|
|
|
|
+113
|
|
|
Pizza
Hut
|
|
+57
|
|
|
|
+38
|
|
|
|
+5
|
|
|
NM
|
|
|
|
|
First
Quarter
|
|
|
(in US$ million,
except
|
|
|
|
|
|
|
|
|
|
|
%
Change
|
|
|
per share data and
percentages)
|
|
2021
|
|
|
|
2020
|
|
|
Reported
|
|
|
Ex F/X
|
|
|
Operating
Profit
|
$
|
|
342
|
|
|
$
|
|
97
|
|
|
|
+250
|
|
|
|
+227
|
|
|
Adjusted Operating
Profit(1)
|
$
|
|
345
|
|
|
$
|
|
98
|
|
|
|
+249
|
|
|
|
+227
|
|
|
Net Income
|
$
|
|
230
|
|
|
$
|
|
62
|
|
|
|
+272
|
|
|
|
+244
|
|
|
Adjusted Net
Income(1)
|
$
|
|
233
|
|
|
$
|
|
63
|
|
|
|
+271
|
|
|
|
+244
|
|
|
Basic Earnings Per
Common Share
|
$
|
|
0.55
|
|
|
$
|
|
0.16
|
|
|
|
+244
|
|
|
|
+219
|
|
|
Adjusted Basic
Earnings Per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Share(1)
|
$
|
|
0.55
|
|
|
$
|
|
0.17
|
|
|
|
+224
|
|
|
|
+200
|
|
|
Diluted Earnings Per
Common Share
|
$
|
|
0.53
|
|
|
$
|
|
0.16
|
|
|
|
+231
|
|
|
|
+206
|
|
|
Adjusted Diluted
Earnings Per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Share(1)
|
$
|
|
0.54
|
|
|
$
|
|
0.16
|
|
|
|
+238
|
|
|
|
+213
|
|
|
(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.
|
NM refers to not
meaningful.
|
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.
|
CEO and CFO Comments
Joey Wat, CEO of Yum China, commented, "Our first quarter results
once again demonstrated the resilience of Yum China and were accomplished by our dedicated
and tireless team of over 400,000 people. We delivered solid sales
growth and operating profit amid challenging market conditions. Our
operations and supply chain teams overcame a wide array of
challenges and uncertainties, managed potential disruptions and
delivered robust operations for our stores. Our brands adapted
quickly to an unusual Chinese New Year, driving on- and off-premise
dining demand with compelling offers and flexible resource
planning. KFC continued its journey of accelerated growth, while
Pizza Hut made significant strides in making its business more
resilient."
Wat continued, "We remain optimistic about our long-term growth
opportunity in China, which is
reflected in our vigorous pace of investment. We accelerated store
network expansion, opening 315 new stores during the quarter. As
part of our end-to-end digitization initiatives, we are digitizing
and automating our restaurants to improve operational efficiency.
Leveraging emerging technologies, we have been enhancing our
ability to manage inventory, product quality and kitchen processes.
Furthermore, we continue to fortify our supply chain to give us
more operational flexibility, allow us to be more responsive and to
grow even faster. During the quarter, we took a 5% equity
interest in our largest poultry supplier Sunner to deepen
collaboration, and broke ground to build an intelligent supply
chain support center in Chengdu.
All these initiatives are essential to help accelerate our growth
in the years ahead."
Andy Yeung, CFO of Yum China, added, "While we are pleased with the
first quarter performance, sales were impacted by regional
outbreaks and significantly reduced travel volumes. The impacts of
COVID-19 are subsiding, but we continue to expect the recovery of
same-store sales to 2019 levels to take time and the recovery path
to remain uneven and non-linear. In the short term, the top
priority of our business is to drive consumer traffic back to our
stores. We plan to invest more in our marketing, value proposition,
digital engagement and customer service. On the other hand, we are
also seeing early signs of inflationary pressure in commodity
prices and wages as the economy continues to recover. Despite
the lingering effects of COVID-19, we will continue to invest to
drive sustainable long-term growth."
Dividends
- 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
June 18, 2021 to shareholders of
record as of the close of business on May
25, 2021.
Digital and Delivery
- The KFC and Pizza Hut loyalty programs exceeded 315 million
members combined as of quarter-end. Member sales increased to
approximately 61% of system sales in the first quarter of
2021.
- Delivery contributed approximately 29% of KFC and Pizza Hut's
Company sales in the first quarter of 2021, a decrease of
approximately six percentage points from the prior year period due
to recovery of dine-in volumes.
- Digital orders, including delivery, mobile orders and kiosk
orders, accounted for approximately 84% of KFC and Pizza Hut's
Company sales in the first quarter of 2021.
KFC and Pizza Hut
Total
|
|
First
Quarter
|
|
|
|
2021
|
|
|
2020
|
|
Member
count (as of period-end)
|
|
315
million+
|
|
|
250
million+
|
|
Member
sales as % of system sales
|
|
~61%
|
|
|
~59%
|
|
Delivery
as % of Company sales
|
|
~29%
|
|
|
~35%
|
|
Digital
orders as % of Company sales
|
|
~84%
|
|
|
~80%
|
|
New-Unit Development and Asset Upgrade
- The Company opened 315 new stores in the first quarter of 2021,
mainly driven by development of the KFC brand.
- The Company remodeled 108 stores in the first quarter of
2021.
|
|
New
Units
|
|
|
|
Restaurant
Count
|
|
|
|
|
First
Quarter
|
|
|
|
As of March
31
|
|
|
|
|
2021
|
|
|
|
2021
|
|
|
2020
|
|
|
Yum China
|
|
|
315
|
|
|
|
|
10,725
|
|
|
|
9,295
|
|
|
KFC
|
|
253
|
|
|
|
|
7,373
|
|
|
|
6,661
|
|
|
Pizza
Hut
|
|
44
|
|
|
|
|
2,382
|
|
|
|
2,271
|
|
|
Others(2)
|
|
|
18
|
|
|
|
|
970
|
|
|
|
363
|
|
|
(2) Others
include Taco Bell, Little Sheep, Huang Ji Huang, East Dawning,
COFFii & JOY and Lavazza.
|
Restaurant Margin
- Restaurant margin was 18.7% in the first quarter of 2021,
compared with 10.7% in the prior year period, primarily
attributable to sales leverage, lower commodity prices and higher
productivity, partially offset by increased value promotions, lower
temporary relief provided by landlords and government agencies and
wage inflation.
|
First
Quarter
|
|
|
|
|
2021
|
|
|
2020
|
|
|
ppts
change
|
|
|
Yum China
|
|
|
18.7
|
%
|
|
|
10.7
|
%
|
|
|
+8.0
|
|
|
KFC
|
|
|
19.9
|
%
|
|
|
13.6
|
%
|
|
|
+6.3
|
|
|
Pizza
Hut
|
|
|
15.3
|
%
|
|
|
0.3
|
%
|
|
|
+15.0
|
|
|
2021 Outlook
The Company's fiscal year 2021 targets remain unchanged:
- To open approximately 1,000 new stores (gross).
- To make capital expenditures of approximately $600 million.
Other Updates
- On March 16, 2021, the Company
announced that it acquired a 5% equity interest in Fujian Sunner
Development Co., Ltd. ("Sunner"), the Company's largest poultry
supplier, for total cash consideration of approximately
$261 million. This strategic
investment is intended to enhance the Company's supply chain
security and deepen its collaboration with Sunner, especially in
product development and menu innovation.
- On March 26, 2021, Yum China announced the beginning of
construction of its Southwest Supply Chain Support Center in
Chengdu with a total investment of
approximately $28 million. This
center is part of Yum China's
intelligent supply chain initiative that integrates Internet of
Things technology, big data platforms and high-quality cold chain
logistics facilities to support the Company's rapid
development.
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.
Conference Call
Yum China's management will hold
an earnings conference call at 8:00 p.m. U.S. Eastern Time on
Tuesday, April 27, 2021 (8:00 a.m. Beijing/Hong Kong Time on Wednesday, April 28, 2021).
Operator-assisted conference calls are not available at the
moment. 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 registrant
ID.
Pre-registration
Link:
http://apac.directeventreg.com/registration/event/2388999
Conference
ID: 2388999
A live webcast of the call may also be accessed
at https://edge.media-server.com/mmc/p/6urc2ev7.
A replay of the conference call will be available two hours
after the call ends until 10:00 a.m.
U.S. Eastern Time on Wednesday, May 5,
2021 (10:00 p.m. Beijing/Hong Kong Time on Wednesday, May 5, 2021) and may be accessed by
phone at the following numbers:
U.S.: 1
855 452 5696
Mainland
China:
400 602 2065 or 800 870 0206
Hong
Kong: +852
3051 2780
U.K.: 0808
234 0072
International:
+61 2 8199 0299
Replay access
code:
2388999
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.
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
"2021 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, 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 outbreak,
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 outbreak, 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, East Dawning 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 10,725 restaurants in
over 1,500 cities at the end of March
2021. Yum China ranked # 361 on the Fortune 500 list
for 2020. Yum China has been named
the Industry Leader for the Restaurant & Leisure Facilities
Industry in the 2020 Dow Jones Sustainability Indices. In 2021,
Yum China was named to the Bloomberg
Gender-Equality Index and was certified as a Top Employer 2021 in
China by the Top Employers
Institute, both for the third consecutive year. For more
information, please visit http://ir.yumchina.com.
Investor Relations
Contact:
|
|
|
Tel: +86 21 2407 7556
/ +852 2267 5801
IR@YumChina.com
|
|
|
mailto:
|
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
|
|
|
3/31/2021
|
|
3/31/2020
|
|
B/(W)
|
Revenues
|
|
|
|
|
|
|
|
Company
sales
|
|
$
2,331
|
|
$
1,548
|
|
51
|
|
Franchise fees and
income
|
|
42
|
|
35
|
|
17
|
|
Revenues from
transactions with
franchisees and unconsolidated affiliates
|
|
171
|
|
161
|
|
6
|
|
Other
revenues
|
|
13
|
|
10
|
|
29
|
|
Total
revenues
|
|
2,557
|
|
1,754
|
|
46
|
|
Costs and
Expenses, Net
|
|
|
|
|
|
|
|
Company
restaurants
|
|
|
|
|
|
|
|
Food and
paper
|
|
704
|
|
495
|
|
(42)
|
|
Payroll and employee
benefits
|
|
544
|
|
394
|
|
(38)
|
|
Occupancy and other
operating expenses
|
|
648
|
|
494
|
|
(31)
|
|
Company restaurant
expenses
|
|
1,896
|
|
1,383
|
|
(37)
|
|
General and
administrative expenses
|
|
130
|
|
99
|
|
(32)
|
|
Franchise
expenses
|
|
17
|
|
17
|
|
3
|
|
Expenses for
transactions with
franchisees and unconsolidated affiliates
|
|
169
|
|
156
|
|
(8)
|
|
Other operating costs
and expenses
|
|
11
|
|
10
|
|
(5)
|
|
Closures and
impairment (income) expenses, net
|
|
(2)
|
|
8
|
|
NM
|
|
Other income,
net
|
|
(6)
|
|
(16)
|
|
(63)
|
|
Total costs and
expenses, net
|
|
2,215
|
|
1,657
|
|
(34)
|
|
Operating
Profit
|
|
342
|
|
97
|
|
250
|
|
Interest income,
net
|
|
15
|
|
9
|
|
68
|
|
Investment
loss
|
|
(12)
|
|
(8)
|
|
(42)
|
|
Income Before
Income Taxes
|
|
345
|
|
98
|
|
251
|
|
Income tax
provision
|
|
(102)
|
|
(32)
|
|
(218)
|
|
Net income –
including noncontrolling interests
|
|
243
|
|
66
|
|
268
|
|
Net income –
noncontrolling interests
|
|
13
|
|
4
|
|
(206)
|
|
Net Income – Yum
China Holdings, Inc.
|
|
$
230
|
|
$
62
|
|
272
|
|
Effective tax
rate
|
|
29.6%
|
|
32.7%
|
|
3.1
|
ppts.
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Common Share
|
|
$
0.55
|
|
$
0.16
|
|
|
|
Weighted-average
shares outstanding
(in millions)
|
|
420
|
|
376
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings
Per Common Share
|
|
$
0.53
|
|
$
0.16
|
|
|
|
Weighted-average
shares outstanding
(in millions)
|
|
434
|
|
386
|
|
|
|
|
|
|
|
|
|
|
|
Cash Dividends
Declared Per Common Share
|
|
$
0.12
|
|
$
0.12
|
|
|
|
|
|
|
|
|
|
|
|
Company
sales
|
|
100.0%
|
|
100.0%
|
|
|
|
Food and
paper
|
|
30.2
|
|
32.0
|
|
1.8
|
ppts.
|
Payroll and employee
benefits
|
|
23.3
|
|
25.5
|
|
2.2
|
ppts.
|
Occupancy and other
operating expenses
|
|
27.8
|
|
31.8
|
|
4.0
|
ppts.
|
Restaurant
margin
|
|
18.7%
|
|
10.7%
|
|
8.0
|
ppts.
|
Operating
margin
|
|
14.7%
|
|
6.3%
|
|
8.4
|
ppts.
|
|
|
|
|
|
|
|
|
Percentages may not
recompute due to rounding.
|
Yum China
Holdings, Inc.
|
KFC Operating
Results
|
(in US$
million)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
%
Change
|
|
|
3/31/2021
|
|
3/31/2020
|
|
B/(W)
|
Revenues
|
|
|
|
|
|
|
|
Company
sales
|
|
$
1,783
|
|
$
1,220
|
|
46
|
|
Franchise fees and
income
|
|
33
|
|
33
|
|
(2)
|
|
Revenues from
transactions with
franchisees and unconsolidated affiliates
|
|
15
|
|
16
|
|
(6)
|
|
Other
revenues
|
|
1
|
|
—
|
|
NM
|
|
Total
revenues
|
|
1,832
|
|
1,269
|
|
44
|
|
Costs and
Expenses, Net
|
|
|
|
|
|
|
|
Company
restaurants
|
|
|
|
|
|
|
|
Food and
paper
|
|
540
|
|
392
|
|
(38)
|
|
Payroll and employee
benefits
|
|
398
|
|
287
|
|
(39)
|
|
Occupancy and other
operating expenses
|
|
490
|
|
375
|
|
(30)
|
|
Company restaurant
expenses
|
|
1,428
|
|
1,054
|
|
(36)
|
|
General and
administrative expenses
|
|
55
|
|
46
|
|
(19)
|
|
Franchise
expenses
|
|
16
|
|
16
|
|
3
|
|
Expenses for
transactions with
franchisees and unconsolidated affiliates
|
|
15
|
|
16
|
|
7
|
|
Closures and
impairment expenses, net
|
|
—
|
|
1
|
|
NM
|
|
Other income,
net
|
|
(9)
|
|
(17)
|
|
(45)
|
|
Total costs and
expenses, net
|
|
1,505
|
|
1,116
|
|
(35)
|
|
Operating
Profit
|
|
$
327
|
|
$
153
|
|
113
|
|
Company
sales
|
|
100.0%
|
|
100.0%
|
|
|
|
Food and
paper
|
|
30.3
|
|
32.1
|
|
1.8
|
ppts.
|
Payroll and employee
benefits
|
|
22.3
|
|
23.5
|
|
1.2
|
ppts.
|
Occupancy and other
operating expenses
|
|
27.5
|
|
30.8
|
|
3.3
|
ppts.
|
Restaurant
margin
|
|
19.9%
|
|
13.6%
|
|
6.3
|
ppts.
|
Operating
margin
|
|
18.3%
|
|
12.6%
|
|
5.7
|
ppts.
|
|
|
|
|
|
|
|
|
Percentages may not
recompute due to rounding.
|
Yum China
Holdings, Inc.
|
Pizza Hut
Operating Results
|
(in US$
million)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
%
Change
|
|
|
3/31/2021
|
|
3/31/2020
|
|
B/(W)
|
Revenues
|
|
|
|
|
|
|
|
Company
sales
|
|
$
538
|
|
$
322
|
|
67
|
|
Franchise fees and
income
|
|
2
|
|
1
|
|
90
|
|
Revenues from
transactions with
franchisees and unconsolidated affiliates
|
|
1
|
|
1
|
|
91
|
|
Total
revenues
|
|
541
|
|
324
|
|
67
|
|
Costs and
Expenses, Net
|
|
|
|
|
|
|
|
Company
restaurants
|
|
|
|
|
|
|
|
Food and
paper
|
|
160
|
|
102
|
|
(58)
|
|
Payroll and employee
benefits
|
|
143
|
|
104
|
|
(36)
|
|
Occupancy and other
operating expenses
|
|
153
|
|
115
|
|
(34)
|
|
Company restaurant
expenses
|
|
456
|
|
321
|
|
(42)
|
|
General and
administrative expenses
|
|
25
|
|
24
|
|
(6)
|
|
Franchise
expenses
|
|
1
|
|
1
|
|
(38)
|
|
Expenses for
transactions with
franchisees and unconsolidated affiliates
|
|
1
|
|
1
|
|
(75)
|
|
Closures and
impairment (income) expenses, net
|
|
(2)
|
|
5
|
|
NM
|
|
Total costs and
expenses, net
|
|
481
|
|
352
|
|
(37)
|
|
Operating Profit
(Loss)
|
|
$
60
|
|
$
(28)
|
|
NM
|
|
Company
sales
|
|
100.0%
|
|
100.0%
|
|
|
|
Food and
paper
|
|
29.8
|
|
31.6
|
|
1.8
|
ppts.
|
Payroll and employee
benefits
|
|
26.4
|
|
32.4
|
|
6.0
|
ppts.
|
Occupancy and other
operating expenses
|
|
28.5
|
|
35.7
|
|
7.2
|
ppts.
|
Restaurant
margin
|
|
15.3%
|
|
0.3%
|
|
15.0
|
ppts.
|
Operating
margin
|
|
11.1%
|
|
(8.7)%
|
|
19.8
|
ppts.
|
|
|
|
|
|
|
|
|
Percentages may not
recompute due to rounding.
|
Yum China
Holdings, Inc.
|
Condensed
Consolidated Balance Sheets
|
(in US$
million)
|
|
|
|
|
|
|
|
3/31/2021
|
|
12/31/2020
|
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
1,084
|
|
$
1,158
|
Short-term
investments
|
|
3,026
|
|
3,105
|
Accounts receivable,
net
|
|
102
|
|
99
|
Inventories,
net
|
|
345
|
|
398
|
Prepaid expenses and
other current assets
|
|
199
|
|
176
|
Total Current
Assets
|
|
4,756
|
|
4,936
|
Property, plant and
equipment, net
|
|
1,749
|
|
1,765
|
Operating lease
right-of-use assets
|
|
2,140
|
|
2,164
|
Goodwill
|
|
829
|
|
832
|
Intangible assets,
net
|
|
234
|
|
246
|
Deferred income tax
assets
|
|
83
|
|
98
|
Investments in
unconsolidated affiliates
|
|
48
|
|
85
|
Other
assets
|
|
998
|
|
749
|
Total
Assets
|
|
10,837
|
|
10,875
|
|
|
|
|
|
LIABILITIES,
REDEEMABLE NONCONTROLLING INTEREST
AND EQUITY
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Accounts payable and
other current liabilities
|
|
1,800
|
|
1,995
|
Income taxes
payable
|
|
122
|
|
72
|
Total Current
Liabilities
|
|
1,922
|
|
2,067
|
Non-current operating
lease liabilities
|
|
1,882
|
|
1,915
|
Non-current finance
lease obligations
|
|
28
|
|
28
|
Deferred income tax
liabilities
|
|
227
|
|
227
|
Other
liabilities
|
|
165
|
|
167
|
Total
Liabilities
|
|
4,224
|
|
4,404
|
|
|
|
|
|
Redeemable
Noncontrolling Interest
|
|
12
|
|
12
|
|
|
|
|
|
Equity
|
|
|
|
|
Common stock,
$0.01 par value; 1,000 million shares authorized; 440 million
shares and
440 million shares issued at March 31, 2021 and
December 31, 2020, respectively; 420
million shares and 420 million shares
outstanding at March 31, 2021 and December 31,
2020, respectively
|
|
4
|
|
4
|
Treasury
stock
|
|
(728)
|
|
(728)
|
Additional paid-in
capital
|
|
4,664
|
|
4,658
|
Retained
earnings
|
|
2,285
|
|
2,105
|
Accumulated other
comprehensive income
|
|
150
|
|
167
|
Total Yum China
Holdings, Inc. Stockholders' Equity
|
|
6,375
|
|
6,206
|
Noncontrolling
interests
|
|
226
|
|
253
|
Total
Equity
|
|
6,601
|
|
6,459
|
Total Liabilities,
Redeemable Noncontrolling Interest and Equity
|
|
$
10,837
|
|
$
10,875
|
Yum China
Holdings, Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(in US$
million)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
3/31/2021
|
|
3/31/2020
|
Cash Flows –
Operating Activities
|
|
|
|
|
|
|
Net income –
including noncontrolling interests
|
|
|
$
243
|
|
|
$
66
|
Depreciation and
amortization
|
|
|
128
|
|
|
109
|
Non-cash operating
lease cost
|
|
|
101
|
|
|
88
|
Closures and
impairment (income) expenses
|
|
|
(2)
|
|
|
8
|
Investment
loss
|
|
|
12
|
|
|
8
|
Equity income from
investments in unconsolidated affiliates
|
|
|
(17)
|
|
|
(20)
|
Distributions of
income received from unconsolidated affiliates
|
|
|
11
|
|
|
8
|
Deferred income
taxes
|
|
|
15
|
|
|
2
|
Share-based
compensation expense
|
|
|
10
|
|
|
7
|
Changes in accounts
receivable
|
|
|
(3)
|
|
|
9
|
Changes in
inventories
|
|
|
52
|
|
|
57
|
Changes in prepaid
expenses and other current assets
|
|
|
20
|
|
|
10
|
Changes in accounts
payable and other current liabilities
|
|
|
(175)
|
|
|
(192)
|
Changes in income
taxes payable
|
|
|
51
|
|
|
5
|
Changes in
non-current operating lease liabilities
|
|
|
(104)
|
|
|
(102)
|
Other, net
|
|
|
(11)
|
|
|
(3)
|
Net Cash Provided
by Operating Activities
|
|
|
331
|
|
|
60
|
Cash Flows –
Investing Activities
|
|
|
|
|
|
|
Capital
spending
|
|
|
(165)
|
|
|
(87)
|
Purchases of
short-term investments
|
|
|
(1,180)
|
|
|
(275)
|
Maturities of
short-term investments
|
|
|
1,258
|
|
|
390
|
Prepayment for
investment
|
|
|
—
|
|
|
(27)
|
Investment in equity
securities
|
|
|
(261)
|
|
|
—
|
Other, net
|
|
|
1
|
|
|
1
|
Net Cash (Used in)
Provided by Investing Activities
|
|
|
(347)
|
|
|
2
|
Cash Flows –
Financing Activities
|
|
|
|
|
|
|
Repurchase of shares
of common stock
|
|
|
—
|
|
|
(8)
|
Cash dividends paid
on common stock
|
|
|
(50)
|
|
|
(45)
|
Dividends paid to
noncontrolling interests
|
|
|
(1)
|
|
|
—
|
Other, net
|
|
|
(4)
|
|
|
1
|
Net Cash Used in
Financing Activities
|
|
|
(55)
|
|
|
(52)
|
Effect of Exchange
Rates on Cash, Cash Equivalents and Restricted Cash
|
|
|
(3)
|
|
|
(8)
|
Net (Decrease)
Increase in Cash, Cash Equivalents and Restricted
Cash
|
|
|
(74)
|
|
|
2
|
Cash, Cash
Equivalents, and Restricted Cash - Beginning of
Period
|
|
|
1,158
|
|
|
1,055
|
Cash, Cash
Equivalents, and Restricted Cash - End of Period
|
|
|
$
1,084
|
|
|
$
1,057
|
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, excluding the period during
which stores are temporarily closed. We refer to these as our
"base" stores. Previously, same-store sales growth represented the
estimated percentage change in sales of all restaurants in the
Company system that have been open for one year or more, including
stores temporarily closed, and the base stores changed on a rolling
basis from month to month. This revision was made to align with how
management measures performance internally and focuses on trends of
a more stable base of stores.
- Company sales represent revenues from Company-owned
restaurants. 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 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 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
|
|
|
3/31/2021
|
|
3/31/2020
|
Non-GAAP
Reconciliations
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Operating Profit to Adjusted Operating Profit
|
|
|
|
|
Operating
Profit
|
|
$
342
|
|
$
97
|
Special Items,
Operating Profit
|
|
(3)
|
|
(1)
|
Adjusted Operating
Profit
|
|
$
345
|
|
$
98
|
Reconciliation of
Net Income to Adjusted Net Income
|
|
|
|
|
Net Income – Yum
China Holdings, Inc.
|
|
$
230
|
|
$
62
|
Special Items, Net
Income –Yum China Holdings, Inc.
|
|
(3)
|
|
(1)
|
Adjusted Net Income –
Yum China Holdings, Inc.
|
|
$
233
|
|
$
63
|
Reconciliation of
EPS to Adjusted EPS
|
|
|
|
|
Basic Earnings Per
Common Share
|
|
$
0.55
|
|
$
0.16
|
Special Items, Basic
Earnings Per Common Share
|
|
—
|
|
(0.01)
|
Adjusted Basic
Earnings Per Common Share
|
|
$
0.55
|
|
$
0.17
|
Diluted Earnings Per
Common Share
|
|
$
0.53
|
|
$
0.16
|
Special Items,
Diluted Earnings Per Common Share
|
|
(0.01)
|
|
—
|
Adjusted Diluted
Earnings Per Common Share
|
|
$
0.54
|
|
$
0.16
|
Reconciliation of
Effective Tax Rate to Adjusted Effective Tax Rate
|
|
|
|
|
Effective tax
rate
|
|
29.6%
|
|
32.7%
|
Impact on effective
tax rate as a result of Special Items
|
|
0.3%
|
|
0.3%
|
Adjusted effective
tax rate
|
|
29.3%
|
|
32.4%
|
Net income, along with the reconciliation to Adjusted EBITDA, is
presented below:
|
|
Quarter
Ended
|
|
|
3/31/2021
|
|
3/31/2020
|
|
|
|
|
|
Reconciliation of
Net Income to Adjusted EBITDA
|
|
|
|
|
Net Income – Yum
China Holdings, Inc.
|
|
$
230
|
|
$
62
|
Net income –
noncontrolling interests
|
|
13
|
|
4
|
Income tax
provision
|
|
102
|
|
32
|
Interest income,
net
|
|
(15)
|
|
(9)
|
Investment
loss
|
|
12
|
|
8
|
Operating
Profit
|
|
342
|
|
97
|
Special Items,
Operating Profit
|
|
3
|
|
1
|
Adjusted Operating
Profit
|
|
345
|
|
98
|
Depreciation and
amortization
|
|
128
|
|
109
|
Store impairment
charges
|
|
3
|
|
12
|
Adjusted
EBITDA
|
|
$
476
|
|
$
219
|
Details of Special Items are presented below:
|
|
Quarter
Ended
|
|
|
3/31/2021
|
|
3/31/2020
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense for Partner PSU
awards(1)
|
|
$
(3)
|
|
$
(1)
|
Special Items,
Operating Profit
|
|
(3)
|
|
(1)
|
Tax effect on Special
Items(2)
|
|
-
|
|
-
|
Special Items, net
income – including noncontrolling interests
|
|
(3)
|
|
(1)
|
Special Items, net
income – noncontrolling interests
|
|
-
|
|
-
|
Special Items, Net
Income –Yum China Holdings, Inc.
|
|
$
(3)
|
|
$
(1)
|
Weighted-average
Diluted Shares Outstanding (in millions)
|
|
434
|
|
386
|
Special Items,
Diluted Earnings Per Common Share
|
|
$
(0.01)
|
|
$
—
|
(1) In February
2020, the Company granted Partner PSU Awards to select
employees who were deemed critical to the Company's execution of
its strategic operating plan. These PSU awards will only vest if
threshold performance goals are achieved over a four-year
performance period, with the payout ranging from 0% to 200% of the
target number of shares subject to the PSU awards. Partner PSU
Awards were granted to address increased competition for executive
talent, motivate transformational performance and encourage
management retention. Given the unique nature of these grants, the
Compensation Committee does not intend to grant similar, special
grants to the same employees during the performance period. The
impact from these special awards is excluded from metrics that
management uses to assess the Company's performance. The Company
recognized share-based compensation cost of $3 million and $1
million associated with the Partner PSU Awards for the
quarter ended March 31, 2021 and
2020, respectively.
(2) The tax expense was determined based upon
the nature, as well as the jurisdiction, of each Special Item at
the applicable tax rate.
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 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.
Unit Count by
Brand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KFC
|
|
|
12/31/2020
|
|
New Builds
|
|
Closures
|
|
Refranchised
|
|
3/31/2021
|
|
|
|
|
Company-owned
|
|
5,872
|
|
197
|
|
(38)
|
|
(1)
|
|
6,030
|
|
|
|
|
Unconsolidated
affiliates
|
|
677
|
|
31
|
|
(4)
|
|
—
|
|
704
|
|
|
|
|
Franchisees
|
|
617
|
|
25
|
|
(4)
|
|
1
|
|
639
|
|
|
|
|
Total
|
|
7,166
|
|
253
|
|
(46)
|
|
—
|
|
7,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pizza
Hut
|
|
|
12/31/2020
|
|
New Builds
|
|
Closures
|
|
3/31/2021
|
|
|
|
|
|
|
Company-owned
|
|
2,230
|
|
42
|
|
(17)
|
|
2,255
|
|
|
|
|
|
|
Franchisees
|
|
125
|
|
2
|
|
—
|
|
127
|
|
|
|
|
|
|
Total
|
|
2,355
|
|
44
|
|
(17)
|
|
2,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others
|
|
|
12/31/2020
|
|
New Builds
|
|
Closures
|
|
3/31/2021
|
|
|
|
|
|
|
Company-owned
|
|
88
|
|
2
|
|
(4)
|
|
86
|
|
|
|
|
|
|
Unconsolidated
affiliates
|
|
4
|
|
1
|
|
—
|
|
5
|
|
|
|
|
|
|
Franchisees
|
|
893
|
|
15
|
|
(29)
|
|
879
|
|
|
|
|
|
|
Total
|
|
985
|
|
18
|
|
(33)
|
|
970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yum China
Holdings, Inc.
|
Segment
Results
|
(in US$
million)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
3/31/2021
|
|
KFC
|
|
Pizza Hut
|
|
All Other
Segments
|
|
Corporate
and
Unallocated(1)
|
|
Elimination
|
|
Total
|
Company
sales
|
|
$
1,783
|
|
$
538
|
|
$
10
|
|
$
—
|
|
$
—
|
|
$
2,331
|
Franchise fees and
income
|
|
33
|
|
2
|
|
7
|
|
—
|
|
—
|
|
42
|
Revenues from
transactions with
franchisees and unconsolidated
affiliates(2)
|
|
15
|
|
1
|
|
26
|
|
129
|
|
—
|
|
171
|
Other
revenues
|
|
1
|
|
—
|
|
35
|
|
2
|
|
(25)
|
|
13
|
Total
revenues
|
|
$
1,832
|
|
$
541
|
|
$
78
|
|
$
131
|
|
$
(25)
|
|
$
2,557
|
Company restaurant
expenses
|
|
1,428
|
|
456
|
|
12
|
|
—
|
|
—
|
|
1,896
|
General and
administrative expenses
|
|
55
|
|
25
|
|
9
|
|
41
|
|
—
|
|
130
|
Franchise
expenses
|
|
16
|
|
1
|
|
—
|
|
—
|
|
—
|
|
17
|
Expenses for
transactions with
franchisees and unconsolidated
affiliates(2)
|
|
15
|
|
1
|
|
24
|
|
129
|
|
—
|
|
169
|
Other operating costs
and expenses
|
|
—
|
|
—
|
|
33
|
|
3
|
|
(25)
|
|
11
|
Closures and
impairment income, net
|
|
—
|
|
(2)
|
|
—
|
|
—
|
|
—
|
|
(2)
|
Other (income)
expenses, net
|
|
(9)
|
|
—
|
|
3
|
|
—
|
|
—
|
|
(6)
|
Total costs and
expenses, net
|
|
1,505
|
|
481
|
|
81
|
|
173
|
|
(25)
|
|
2,215
|
Operating Profit
(Loss)
|
|
$
327
|
|
$
60
|
|
$
(3)
|
|
$
(42)
|
|
$
—
|
|
$
342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
3/31/2020
|
|
KFC
|
|
Pizza Hut
|
|
All Other
Segments
|
|
Corporate
and
Unallocated(1)
|
|
Elimination
|
|
Total
|
Company
sales
|
|
$
1,220
|
|
$
322
|
|
$
6
|
|
$
—
|
|
$
—
|
|
$
1,548
|
Franchise fees and
income
|
|
33
|
|
1
|
|
1
|
|
—
|
|
—
|
|
35
|
Revenues from
transactions with
franchisees and unconsolidated
affiliates(2)
|
|
16
|
|
1
|
|
5
|
|
139
|
|
—
|
|
161
|
Other
revenues
|
|
—
|
|
—
|
|
16
|
|
1
|
|
(7)
|
|
10
|
Total
revenues
|
|
$
1,269
|
|
$
324
|
|
$
28
|
|
$
140
|
|
$
(7)
|
|
$
1,754
|
Company restaurant
expenses
|
|
1,054
|
|
321
|
|
9
|
|
—
|
|
(1)
|
|
1,383
|
General and
administrative expenses
|
|
46
|
|
24
|
|
8
|
|
21
|
|
—
|
|
99
|
Franchise
expenses
|
|
16
|
|
1
|
|
—
|
|
—
|
|
—
|
|
17
|
Expenses for
transactions with
franchisees and unconsolidated
affiliates(2)
|
|
16
|
|
1
|
|
4
|
|
135
|
|
—
|
|
156
|
Other operating costs
and expenses
|
|
—
|
|
—
|
|
15
|
|
1
|
|
(6)
|
|
10
|
Closures and
impairment expenses, net
|
|
1
|
|
5
|
|
2
|
|
—
|
|
—
|
|
8
|
Other income,
net
|
|
(17)
|
|
—
|
|
—
|
|
1
|
|
—
|
|
(16)
|
Total costs and
expenses, net
|
|
1,116
|
|
352
|
|
38
|
|
158
|
|
(7)
|
|
1,657
|
Operating Profit
(Loss)
|
|
$
153
|
|
$
(28)
|
|
$
(10)
|
|
$
(18)
|
|
$
—
|
|
$
97
|
The above tables reconcile segment information, which is based
on management responsibility, with our Condensed Consolidated
Statements of Income.
(1) Amounts have not been allocated to any segment for
purpose of making operating decision or assessing financial
performance as the transactions are deemed corporate revenues and
expenses in nature.
(2) Primarily includes revenues and associated expenses of
transactions with franchisees and unconsolidated affiliates
derived from the Company's central procurement model whereby the
Company centrally purchases substantially all food and paper
products from suppliers and then sells and delivers to KFC and
Pizza Hut restaurants, including franchisees and unconsolidated
affiliates.
View original
content:http://www.prnewswire.com/news-releases/yum-china-reports-first-quarter-2021-results-301277506.html
SOURCE Yum China Holdings, Inc.