YUMC Yum China Holdings Inc

 

 

 

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): February 6, 2024

 

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.)

 

101 East Park Boulevard, Suite 805 Plano, Texas 75074 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))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	YUMC	New York Stock Exchange
	9987	The Stock Exchange of Hong Kong Limited

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

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Item 2.02.	Results of Operations and Financial Condition.

 

On February 6, 2024, Yum China Holdings, Inc. issued a press release announcing its unaudited results for the full year and fourth quarter ended December 31, 2023. A copy of the press release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K.

 

Item 9.01.	Financial Statements and Exhibits.

 

(d) Exhibits.

 

The following exhibits are furnished with this report:

 

Exhibit No.		Exhibit Description
99.1		Press Release of Yum China Holdings, Inc. issued February 6, 2024.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

		YUM CHINA HOLDINGS, INC.
		By:		/s/ Pingping Liu
				Name:		Pingping Liu
				Title:		Chief Legal Officer
Date: February 6, 2024

 

 

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Exhibit 99.1

 

Yum China Reports Fourth Quarter Results, Increases Dividend by 23% and Steps Up 2024 Share Repurchases to $1.25 billion

Fourth Quarter System Sales Up 21%, Operating Profit Up 170% and Core Operating Profit Grew 324% 1

Full Year System Sales Up 21%, Operating Profit Up 76% to $1.1 Billion and Core Operating Profit Grew 79%

Record 2023 Results - Total Revenues of $11 Billion, Adjusted Operating Profit of $1.1 Billion and 1,697 Net New Stores Opened

14,644 Stores in Over 2,000 Cities

Shanghai, China (February 6, 2024) – Yum China Holdings, Inc. (the "Company" or "Yum China") (NYSE: YUMC and HKEX: 9987) today reported unaudited results for the fourth quarter and year ended December 31, 2023.

Fourth Quarter Highlights

Full Year Highlights

1 Core Operating Profit is defined as Operating Profit adjusted for Special Items, further excluding items affecting comparability and the impact of F/X. The Company uses Core Operating Profit for the purposes of evaluating the performance of its core operations. Please refer to "Reconciliation of Reported GAAP Results to Non-GAAP Measures" included in the accompanying tables of this release for further details.

2 Net new unit contribution refers to sales contribution from net new stores.

3 Digital sales refer to sales at company-owned stores where orderings were placed digitally.

 

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Increasing Dividends and Stepping Up Share Repurchases

 

Key Financial Results

 

	Fourth Quarter																	Full Year
									%/ppts Change																	%/ppts Change
	2023				2022				Reported				Ex F/X					2023				2022				Reported				Ex F/X
System Sales Growth (4) (%)		21				(4	)		NM				NM						21				(5	)		NM				NM
Same-Store Sales Growth (4) (%)		4				(4	)		NM				NM						7				(7	)		NM				NM
Operating Profit ($mn)		110				41				+170				+175					1,106				629				+76				+86
Adjusted Operating Profit (5) ($mn)		116				40				+193				+199					1,121				633				+77				+87
Core Operating Profit (5) (6) ($mn)		111				29			NM					+324					1,121				627			NM					+79
Net Income ($mn)		97				53				+81				+84					827				442				+87				+97
Adjusted Net Income (5) ($mn)		103				52				+96				+100					842				446				+89				+99
Diluted Earnings   Per Common Share ($)		0.23				0.13				+77				+85					1.97				1.04				+89				+100
Adjusted Diluted Earnings   Per Common Share (5) ($)		0.25				0.13				+92				+92					2.00				1.05				+90				+101

4 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.

5 See “Reconciliation of Reported GAAP Results to Non-GAAP Measures” included in the accompanying tables of this release for further details.

6 Current period amounts are derived by translating results at average exchange rates of the prior year period.

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

Percentages may not recompute due to rounding.

NM refers to not meaningful.

 

 

CEO Comments

 

Joey Wat, CEO of Yum China, commented, “2023 was a pivotal year for Yum China. Not only did we demonstrate strong resilience during the pandemic, but we also seized opportunities that arose from China’s reopening. In 2023, our system sales grew by 21%, surpassing the industry's growth rate, and we set new records for both revenue and profits. Our return to shareholders through cash dividends and share repurchases in 2023 was the highest since spinoff. Looking ahead, we remain very positive about the vast growth opportunities in China. Currently serving just one-third of China's population, our ambitious goal is to extend our reach to half of the population by 2026. Over half of our new stores are located in lower-tier cities, strategically positioned to capture the demand from long-term consumption upgrades there. We are also expanding our addressable market and capturing incremental sales across city tiers with innovative products, engaging campaigns and a wider range of price points. Leveraging our distinctive strengths, including brands deeply ingrained in China, remarkable agility and robust operational execution, we are well-positioned to achieve our growth targets for 2024-2026 and deliver excellent returns to our shareholders through increased cash dividends and stepped-up share buybacks.”

 

 

 

 

 

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KFC

 

	Fourth Quarter															Full Year
									%/ppts Change															%/ppts Change
	2023				2022				Reported				Ex F/X			2023				2022				Reported				Ex F/X
Restaurants		10,296				9,094				+13			NM				10,296				9,094				+13			NM
System Sales Growth (%)		20				(1	)		NM				NM				20				(4	)		NM				NM
Same-Store Sales Growth (%)		3				(3	)		NM				NM				7				(7	)		NM				NM
Total Revenues ($mn)		1,872				1,591				+18				+19			8,240				7,219				+14				+20
Operating Profit ($mn)		167				117				+43				+45			1,202				787				+53				+60
Core Operating Profit ($mn)		164				115			NM					+43			1,211				806			NM					+50
Restaurant Margin (%)		12.0				12.7				(0.7	)			(0.7	)		17.7				15.7				+2.0				+2.0

 

 

Pizza Hut

 

	Fourth Quarter															Full Year
									%/ppts Change															%/ppts Change
	2023				2022				Reported				Ex F/X			2023				2022				Reported				Ex F/X
Restaurants		3,312				2,903				+14			NM				3,312				2,903				+14			NM
System Sales Growth (%)		24				(6	)		NM				NM				20				(3	)		NM				NM
Same-Store Sales Growth (%)		6				(8	)		NM				NM				6				(6	)		NM				NM
Total Revenues ($mn)		496				404				+23				+24			2,246				1,960				+15				+21
Operating Profit ($mn)		5				(20	)		NM				NM				142				70				+102				+117
Core Operating Profit ($mn)		4				(27	)		NM				NM				143				48			NM					+198
Restaurant Margin (%)		7.3				1.9				+5.4				+5.4			11.8				9.2				+2.6				+2.6

 

 

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Outlook

In 2024, Yum China plans to

From 2024 to 2026, Yum China targets to

Other Updates

 

Note on Non-GAAP Measures

Reported GAAP results include items that are excluded from non-GAAP measures. See “Reconciliation of Reported GAAP Results to Non-GAAP Measures” and “Segment Results” within this release for non-GAAP reconciliation details.

 

Conference Call

 

Yum China’s management will hold an earnings conference call at 7:00 p.m. U.S. Eastern Time on Tuesday, February 6, 2024 (8:00 a.m. Beijing/Hong Kong Time on Wednesday, February 7, 2024).

A live webcast of the call may be accessed at https://edge.media-server.com/mmc/p/rav3hcwk.

To join by phone, please register in advance of the conference through the link provided below. Upon registering, you will be provided with participant dial-in numbers, a passcode and a unique access PIN.

Pre-registration link: https://s1.c-conf.com/diamondpass/10035579-wp1ljg.html

A replay of the conference call will be available one hour after the call ends until Wednesday, February 14, 2024 and may be accessed by phone using the following numbers:

 

U.S.:	1 855 883 1031
Mainland China:	400 1209 216
Hong Kong:	800 930 639
U.K.:	0800 031 4295
Replay PIN:	10035579

 

Additionally, this earnings release, the accompanying slides, as well as the live and archived webcast of this conference call will be available at Yum China’s Investor Relations website at http://ir.yumchina.com.

 

For important news and information regarding Yum China, including our filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange, visit Yum China's Investor Relations website at http://ir.yumchina.com. Yum China uses this website as

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a primary channel for disclosing key information to its investors, some of which may contain material and previously non-public information.

 

 

Forward-Looking Statements

 

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including under “2024 Outlook.” We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the fact that they do not relate strictly to historical or current facts and by the use of forward-looking words such as “expect,” “expectation,” “believe,” “anticipate,” “may,” “could,” “intend,” “belief,” “plan,” “estimate,” “target,” “predict,” “project,” “likely,” “will,” “continue,” “should,” “forecast,” “outlook,” “commit” or similar terminology. These statements are based on current estimates and assumptions made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable under the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. Forward-looking statements include, without limitation, statements regarding the future strategies, growth, business plans, investments, store openings, capital expenditures, dividend and share repurchase plans, CAGR for system sales, operating profit and EPS, earnings, performance and returns of Yum China, anticipated effects of population and macroeconomic trends, pace of recovery of Yum China's business, the anticipated effects of our innovation, digital and delivery capabilities and investments on growth and beliefs regarding the long-term drivers of Yum China’s business. Forward-looking statements are not guarantees of performance and are inherently subject to known and unknown risks and uncertainties that are difficult to predict and could cause our actual results or events to differ materially from those indicated by those statements. We cannot assure you that any of our expectations, estimates or assumptions will be achieved. The forward-looking statements included in this press release are only made as of the date of this press release, and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law. Numerous factors could cause our actual results or events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: whether we are able to achieve development goals at the times and in the amounts currently anticipated, if at all, the success of our marketing campaigns and product innovation, our ability to maintain food safety and quality control systems, changes in public health conditions, including the COVID-19 pandemic, our ability to control costs and expenses, including tax costs, as well as changes in political, economic and regulatory conditions in China, and those set forth under the caption “Risk Factors” in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q). In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial could affect the accuracy of any such forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. You should consult our filings with the Securities and Exchange Commission (including the information set forth under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q) for additional detail about factors that could affect our financial and other results.

 

About Yum China Holdings, Inc.

 

Yum China is the largest restaurant company in China with a mission to make every life taste beautiful. The Company has over 400,000 employees and operates over 14,000 restaurants under six brands across 2,000 cities in China. KFC and Pizza Hut are the leading brands in the quick-service and casual dining restaurant spaces in China, respectively. Taco Bell offers innovative Mexican-inspired food. Yum China has also partnered with Lavazza to develop the Lavazza coffee concept in China. Little Sheep and Huang Ji Huang specialize in Chinese cuisine. Yum China has a world-class, digitalized supply chain which includes an extensive network of logistics centers nationwide and an in-house supply chain management system. Its strong digital capabilities and loyalty program enable the Company to reach customers faster and serve them better. Yum China is a Fortune 500 company with the vision to be the world’s most innovative pioneer in the restaurant industry. For more information, please visit http://ir.yumchina.com.

 

Investor Relations Contact:
		Tel: +86 21 2407 7556 / +852 2267 5801 IR@YumChina.com
Media Contact:
		Tel: +86 21 2407 7510 Media@YumChina.com

 

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Yum China Holdings, Inc.

Condensed Consolidated Statements of Income

(in US$ million, except per share data)

(unaudited)

 

		Quarter Ended								% Change					Year Ended								% Change
		12/31/2023				12/31/2022				B/(W)					12/31/2023				12/31/2022				B/(W)
Revenues
Company sales		$	2,343			$	1,975				19				$	10,391			$	9,110				14
Franchise fees and income			20				16				24					89				81				11
Revenues from transactions with franchisees			90				68				32					372				287				30
Other revenues			40				29				37					126				91				39
Total revenues			2,493				2,088				19					10,978				9,569				15
Costs and Expenses, Net
Company restaurants
Food and paper			758				630				(20	)				3,224				2,836				(14	)
Payroll and employee benefits			678				570				(19	)				2,725				2,389				(14	)
Occupancy and other operating expenses			654				570				(15	)				2,752				2,604				(6	)
Company restaurant expenses			2,090				1,770				(18	)				8,701				7,829				(11	)
General and administrative expenses			153				145				(5	)				638				594				(7	)
Franchise expenses			8				7				(9	)				36				34				(2	)
Expenses for transactions with franchisees			86				67				(28	)				356				279				(28	)
Other operating costs and expenses			35				25				(38	)				112				78				(43	)
Closures and impairment expenses, net			12				12				5					29				32				11
Other (income) expenses, net			(1	)			21			NM						—				94				100
Total costs and expenses, net			2,383				2,047				(16	)				9,872				8,940				(10	)
Operating Profit			110				41				170					1,106				629				76
Interest income, net			45				33				33					169				84				101
Investment (loss) gain			(17	)			6			NM						(49	)			(26	)			(91	)
Income Before Income Taxes and   Equity in Net Earnings (Losses) from   Equity Method Investments			138				80				71					1,226				687				78
Income tax provision			(33	)			(24	)			(39	)				(329	)			(207	)			(59	)
Equity in net earnings (losses) from    equity method investments			2				2				9					4				(2	)		NM
Net income – including noncontrolling interests			107				58				81					901				478				88
Net income – noncontrolling interests			10				5				(86	)				74				36				(106	)
Net Income – Yum China Holdings, Inc.		$	97			$	53				81				$	827			$	442				87
Effective tax rate			24.2	%			29.9	%			5.7		ppts.			26.9	%			30.1	%			3.2		ppts.
Basic Earnings Per Common Share		$	0.23			$	0.13								$	1.99			$	1.05
Weighted-average shares outstanding     (in millions)			411				419									416				421
Diluted Earnings Per Common Share		$	0.23			$	0.13								$	1.97			$	1.04
Weighted-average shares outstanding     (in millions)			415				423									420				425
Company sales			100.0	%			100.0	%								100.0	%			100.0	%
Food and paper			32.4				31.9				(0.5	)	ppts.			31.0				31.1				0.1		ppts.
Payroll and employee benefits			29.0				28.8				(0.2	)	ppts.			26.2				26.2				—		ppts.
Occupancy and other operating expenses			27.9				28.9				1.0		ppts.			26.5				28.6				2.1		ppts.
Restaurant margin			10.7	%			10.4	%			0.3		ppts.			16.3	%			14.1	%			2.2		ppts.
Operating margin			4.7	%			2.1	%			2.6		ppts.			10.6	%			6.9	%			3.7		ppts.

 

Percentages may not recompute due to rounding. NM refers to not meaningful.

 

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Yum China Holdings, Inc.

KFC Operating Results

(in US$ million)

(unaudited)

 

		Quarter Ended								% Change					Year Ended								% Change
		12/31/2023				12/31/2022				B/(W)					12/31/2023				12/31/2022				B/(W)
Revenues
Company sales		$	1,842			$	1,566				18				$	8,116			$	7,120				14
Franchise fees and income			14				12				14					62				56				10
Revenues from transactions with franchisees			12				9				35					45				33				37
Other revenues			4				4				(15	)				17				10				60
Total revenues			1,872				1,591				18					8,240				7,219				14
Costs and Expenses, Net
Company restaurants
Food and paper			598				496				(21	)				2,512				2,208				(14	)
Payroll and employee benefits			519				434				(20	)				2,057				1,797				(14	)
Occupancy and other operating expenses			504				437				(15	)				2,107				1,994				(6	)
Company restaurant expenses			1,621				1,367				(19	)				6,676				5,999				(11	)
General and administrative expenses			60				63				5					263				254				(4	)
Franchise expenses			7				6				(8	)				31				29				(2	)
Expenses for transactions with franchisees			10				8				(32	)				39				30				(33	)
Other operating costs and expenses			4				3				(1	)				15				7				(91	)
Closures and impairment expenses, net			3				5				47					12				16				28
Other expenses, net			—				22				99					2				97				98
Total costs and expenses, net			1,705				1,474				(16	)				7,038				6,432				(9	)
Operating Profit		$	167			$	117				43				$	1,202			$	787				53
Company sales			100.0	%			100.0	%								100.0	%			100.0	%
Food and paper			32.5				31.7				(0.8	)	ppts.			31.0				31.0				—		ppts.
Payroll and employee benefits			28.2				27.7				(0.5	)	ppts.			25.3				25.2				(0.1	)	ppts.
Occupancy and other operating expenses			27.3				27.9				0.6		ppts.			26.0				28.1				2.1		ppts.
Restaurant margin			12.0	%			12.7	%			(0.7	)	ppts.			17.7	%			15.7	%			2.0		ppts.
Operating margin			9.1	%			7.4	%			1.7		ppts.			14.8	%			11.0	%			3.8		ppts.

 

Percentages may not recompute due to rounding.

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Yum China Holdings, Inc.

Pizza Hut Operating Results

(in US$ million)

(unaudited)

 

		Quarter Ended								% Change					Year Ended								% Change
		12/31/2023				12/31/2022				B/(W)					12/31/2023				12/31/2022				B/(W)
Revenues
Company sales		$	486			$	398				22				$	2,214			$	1,939				14
Franchise fees and income			1				1				25					7				7				9
Revenues from transactions with franchisees			1				1				9					4				4				11
Other revenues			8				4				90					21				10				114
Total revenues			496				404				23					2,246				1,960				15
Costs and Expenses, Net
Company restaurants
Food and paper			155				131				(18	)				692				612				(13	)
Payroll and employee benefits			153				135				(14	)				649				572				(14	)
Occupancy and other operating expenses			141				125				(13	)				610				577				(6	)
Company restaurant expenses			449				391				(15	)				1,951				1,761				(11	)
General and administrative expenses			29				26				(11	)				118				110				(7	)
Franchise expenses			1				1				(13	)				4				4				(8	)
Expenses for transactions with franchisees			1				—				(11	)				4				3				(11	)
Other operating costs and expenses			8				3				(117	)				19				8				(124	)
Closures and impairment expenses, net			3				3				1					8				4				(135	)
Total costs and expenses, net			491				424				(16	)				2,104				1,890				(11	)
Operating Profit		$	5			$	(20	)		NM					$	142			$	70				102
Company sales			100.0	%			100.0	%								100.0	%			100.0	%
Food and paper			32.0				32.9				0.9		ppts.			31.3				31.5				0.2		ppts.
Payroll and employee benefits			31.7				33.9				2.2		ppts.			29.3				29.5				0.2		ppts.
Occupancy and other operating expenses			29.0				31.3				2.3		ppts.			27.6				29.8				2.2		ppts.
Restaurant margin			7.3	%			1.9	%			5.4		ppts.			11.8	%			9.2	%			2.6		ppts.
Operating margin			1.1	%			(5.0	)%			6.1		ppts.			6.4	%			3.6	%			2.8		ppts.

 

Percentages may not recompute due to rounding. NM refers to not meaningful.

 

 

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Yum China Holdings, Inc.

Condensed Consolidated Balance Sheets

(in US$ million)

 

		12/31/2023				12/31/2022
		(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents		$	1,128			$	1,130
Short-term investments			1,472				2,022
Accounts receivable, net			68				64
Inventories, net			424				417
Prepaid expenses and other current assets			339				307
Total Current Assets			3,431				3,940
Property, plant and equipment, net			2,310				2,118
Operating lease right-of-use assets			2,217				2,219
Goodwill			1,932				1,988
Intangible assets, net			150				159
Long-term bank deposits and notes			1,265				680
Equity investments			332				361
Deferred income tax assets			129				113
Other assets			265				248
Total Assets			12,031				11,826
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY
Current Liabilities
Accounts payable and other current liabilities			2,164				2,096
Short-term borrowings			168				2
Income taxes payable			90				68
Total Current Liabilities			2,422				2,166
Non-current operating lease liabilities			1,899				1,906
Non-current finance lease liabilities			44				42
Deferred income tax liabilities			390				390
Other liabilities			157				162
Total Liabilities			4,912				4,666
Redeemable Noncontrolling Interest			13				12
Equity
Common stock, $0.01 par value; 1,000 million shares authorized;        407 million shares and 419 million shares issued and outstanding        at December 31, 2023 and 2022, respectively.			4				4
Additional paid-in capital			4,320				4,390
Retained earnings			2,310				2,191
Accumulated other comprehensive loss			(229	)			(103	)
Total Yum China Holdings, Inc. Stockholders' Equity			6,405				6,482
Noncontrolling interests			701				666
Total Equity			7,106				7,148
Total Liabilities, Redeemable Noncontrolling Interest and Equity		$	12,031			$	11,826

 

9

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Yum China Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(in US$ million)

(unaudited)

		Year Ended
		12/31/2023					12/31/2022
Cash Flows – Operating Activities
Net income – including noncontrolling interests		$	901				$	478
Depreciation and amortization			453					602
Non-cash operating lease cost			404					435
Closures and impairment expenses			29					32
Investment loss			49					26
Equity in net (earnings) losses from equity method investments			(4	)				2
Distributions of income received from equity method investments			11					7
Deferred income taxes			(10	)				(20	)
Share-based compensation expense			64					42
Changes in accounts receivable			(6	)				(1	)
Changes in inventories			(19	)				(19	)
Changes in prepaid expenses, other current assets and VAT assets			(35	)				207
Changes in accounts payable and other current liabilities			84					16
Changes in income taxes payable			25					25
Changes in non-current operating lease liabilities			(407	)				(396	)
Other, net			(66	)				(23	)
Net Cash Provided by Operating Activities			1,473					1,413
Cash Flows – Investing Activities
Capital spending			(710	)				(679	)
Purchases of short-term investments, long-term bank deposits and notes			(3,517	)				(5,189	)
Maturities of short-term investments, long-term bank deposits and notes			3,499					5,365
Acquisition of business, net of cash acquired			—					(23	)
Acquisition of equity investment			(20	)				—
Other, net			5					4
Net Cash Used in Investing Activities			(743	)				(522	)
Cash Flows – Financing Activities
Proceeds from short-term borrowings			264					2
Payment of short-term borrowings			(100	)				—
Repurchase of shares of common stock			(613	)				(466	)
Cash dividends paid on common stock			(216	)				(202	)
Dividends paid to noncontrolling interests			(77	)				(72	)
Acquisitions of noncontrolling interests			—					(113	)
Contributions from noncontrolling interests			35					18
Payment of acquisition related holdback			(3	)				(7	)
Other, net			(6	)				(4	)
Net Cash Used in Financing Activities			(716	)				(844	)
Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash			(16	)				(53	)
Net Decrease in Cash, Cash Equivalents and Restricted Cash			(2	)				(6	)
Cash, Cash Equivalents, and Restricted Cash - Beginning of Year			1,130					1,136
Cash, Cash Equivalents, and Restricted Cash - End of Year		$	1,128				$	1,130

 

10

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In this press release:

11

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Unit Count by Brand

 

KFC

 

		12/31/2022				New Builds				Closures				Acquired				Refranchised				12/31/2023
Company-owned			8,214				1,246				(222	)			2				(3	)			9,237
Franchisees			880				193				(15	)			(2	)			3				1,059
Total			9,094				1,439				(237	)			—				—				10,296

 

Pizza Hut

 

		12/31/2022				New Builds				Closures				Refranchised				12/31/2023
Company-owned			2,760				515				(118	)			(2	)			3,155
Franchisees			143				16				(4	)			2				157
Total			2,903				531				(122	)			—				3,312

 

Others

 

		12/31/2022				New Builds				Closures				12/31/2023
Company-owned			187				93				(24	)			256
Franchisees			763				142				(125	)			780
Total			950				235				(149	)			1,036

 

 

12

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Reconciliation of Reported GAAP Results to Non-GAAP 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 the following non-GAAP measures:

 

These non-GAAP 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 non-GAAP 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 core operations.

With respect to non-GAAP measures adjusted for Special Items, the Company excludes impact from Special Items for the purpose of evaluating performance internally and uses them as factors in determining compensation for certain employees. Special Items are not included in any of our segment results.

Adjusted EBITDA is defined as net income including noncontrolling interests adjusted for equity in net earnings (losses) from equity method investments, income tax, interest income, net, investment gain or loss, 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 items.

Restaurant Profit is defined as Company sales less expenses incurred directly by our Company-owned restaurants in generating Company sales, including cost of food and paper, restaurant-level payroll and employee benefits, rent, depreciation and amortization of restaurant-level assets, advertising expenses, and other operating expenses. Restaurant margin is defined as Restaurant profit divided by Company sales. We also use Restaurant profit and Restaurant margin for the purposes of internally evaluating the performance of our Company-owned restaurants and we believe they provide useful information to investors as to the profitability of our Company-owned restaurants.

Core Operating Profit is defined as Operating Profit adjusted for Special Items, and further excluding Items Affecting Comparability and the impact of F/X. We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Items such as charges, gains and accounting changes which are viewed by management as significantly impacting the current period or the comparable period, due to changes in policy or other external factors, or non-cash items pertaining to underlying activities that are different from or unrelated to our core operations, are generally considered “Items Affecting Comparability.” Examples of Items Affecting Comparability include, but are not limited to: temporary relief from landlords and government agencies, VAT deductions due to tax policy changes, and amortization of reacquired franchise rights recognized upon acquisitions. We believe presenting Core Operating Profit provides additional information to further enhance comparability of our operating results, and we use this measure for the purposes of evaluating the performance of our core operations.

13

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The following tables set forth the reconciliation of the most directly comparable GAAP financial measures to the non-GAAP financial measures. The reconciliation of GAAP Operating Profit to Restaurant Profit and Core Operating Profit by segment is presented in Segment Results within this release.

 

		Quarter Ended								Year Ended
		12/31/2023				12/31/2022				12/31/2023				12/31/2022
Non-GAAP Reconciliations
Reconciliation of Operating Profit to Adjusted Operating Profit
Operating Profit		$	110			$	41			$	1,106			$	629
Special Items, Operating Profit			(6	)			1				(15	)			(4	)
Adjusted Operating Profit		$	116			$	40			$	1,121			$	633
Reconciliation of Net Income to Adjusted Net Income
Net Income – Yum China Holdings, Inc.		$	97			$	53			$	827			$	442
Special Items, Net Income –Yum China Holdings, Inc.			(6	)			1				(15	)			(4	)
Adjusted Net Income – Yum China Holdings, Inc.		$	103			$	52			$	842			$	446
Reconciliation of EPS to Adjusted EPS
Basic Earnings Per Common Share		$	0.23			$	0.13			$	1.99			$	1.05
Special Items, Basic Earnings Per Common Share			(0.02	)			—				(0.03	)			(0.01	)
Adjusted Basic Earnings Per Common Share		$	0.25			$	0.13			$	2.02			$	1.06
Diluted Earnings Per Common Share		$	0.23			$	0.13			$	1.97			$	1.04
Special Items, Diluted Earnings Per Common Share			(0.02	)			—				(0.03	)			(0.01	)
Adjusted Diluted Earnings Per Common Share		$	0.25			$	0.13			$	2.00			$	1.05
Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate
Effective tax rate			24.2	%			29.9	%			26.9	%			30.1	%
Impact on effective tax rate as a result of Special Items			1.0	%			(0.4	)%			0.4	%			0.2	%
Adjusted effective tax rate			23.2	%			30.3	%			26.5	%			29.9	%

 

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

		Quarter Ended								Year Ended
		12/31/2023				12/31/2022				12/31/2023				12/31/2022
Reconciliation of Net Income to Adjusted EBITDA
Net Income – Yum China Holdings, Inc.		$	97			$	53			$	827			$	442
Net income – noncontrolling interests			10				5				74				36
Equity in net (earnings) losses from equity method investments			(2	)			(2	)			(4	)			2
Income tax provision			33				24				329				207
Interest income, net			(45	)			(33	)			(169	)			(84	)
Investment loss (gain)			17				(6	)			49				26
Operating Profit			110				41				1,106				629
Special Items, Operating Profit			6				(1	)			15				4
Adjusted Operating Profit			116				40				1,121				633
Depreciation and amortization			114				135				453				602
Store impairment charges			13				14				37				51
Adjusted EBITDA		$	243			$	189			$	1,611			$	1,286

 

Details of Special Items are presented below:

 

		Quarter Ended								Year Ended
		12/31/2023				12/31/2022				12/31/2023				12/31/2022
Share-based compensation expense for Partner PSU Awards(1)		$	(6	)		$	1			$	(15	)		$	(4	)
Special Items, Operating Profit			(6	)			1				(15	)			(4	)
Tax effect on Special Items(2)			—				—				—				—
Special Items, net income – including noncontrolling interests			(6	)			1				(15	)			(4	)
Special Items, net income – noncontrolling interests			—				—				—				—
Special Items, Net Income –Yum China Holdings, Inc.		$	(6	)		$	1			$	(15	)		$	(4	)
Weighted-average Diluted Shares Outstanding (in millions)			415				423				420				425
Special Items, Diluted Earnings Per Common Share		$	(0.02	)		$	—			$	(0.03	)		$	(0.01	)

 

14

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Operating Profit, along with the reconciliation to Core Operating Profit, is presented below:

 

	Quarter ended								% Change					Year ended								% Change
	12/31/2023				12/31/2022				B/(W)					12/31/2023				12/31/2022				B/(W)
Reconciliation of Operating Profit to Core Operating Profit
Operating profit	$	110			$	41				170				$	1,106			$	629				76
Special Items, Operating Profit		6				(1	)								15				4
Adjusted Operating Profit	$	116			$	40				193				$	1,121			$	633				77
Items Affecting Comparability
Temporary relief from landlords(1)		(1	)			(12	)								(11	)			(39	)
Temporary relief from government agencies(2)		(3	)			(14	)								(7	)			(48	)
VAT deductions(3)		(2	)			(8	)								(44	)			(16	)
Amortization of reacquired franchise rights(4)		—				23									2				97
F/X impact		1				—									60				—
Core Operating Profit	$	111			$	29				324				$	1,121			$	627				79

 

15

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Yum China Holdings, Inc.

Segment Results

(in US$ million)

(unaudited)

		Quarter Ended 12/31/2023
		KFC				Pizza Hut				All Other Segments				Corporate and Unallocated(1)				Elimination				Total
Company sales		$	1,842			$	486			$	15			$	—			$	—			$	2,343
Franchise fees and income			14				1				5				—				—				20
Revenues from transactions with franchisees(2)			12				1				18				59				—				90
Other revenues			4				8				156				12				(140	)			40
Total revenues		$	1,872			$	496			$	194			$	71			$	(140	)		$	2,493
Company restaurant expenses			1,621				449				20				—				—				2,090
General and administrative expenses			60				29				11				53				—				153
Franchise expenses			7				1				—				—				—				8
Expenses for transactions with franchisees(2)			10				1				17				58				—				86
Other operating costs and expenses			4				8				151				12				(140	)			35
Closures and impairment expenses, net			3				3				6				—				—				12
Other expenses (income), net			—				—				—				(1	)			—				(1	)
Total costs and expenses, net			1,705				491				205				122				(140	)			2,383
Operating Profit (Loss)		$	167			$	5			$	(11	)		$	(51	)		$	—			$	110

 

Reconciliation of GAAP Operating Profit to Restaurant Profit

 

		Quarter Ended 12/31/2023
		KFC				Pizza Hut				All Other Segments				Corporate and Unallocated(1)				Elimination				Total
GAAP Operating Profit (Loss)		$	167			$	5			$	(11	)		$	(51	)		$	—			$	110
Less:
Franchise fees and income			14				1				5				—				—				20
Revenues from transactions with franchisees(2)			12				1				18				59				—				90
Other revenues			4				8				156				12				(140	)			40
Add:
General and administrative expenses			60				29				11				53				—				153
Franchise expenses			7				1				—				—				—				8
Expenses for transactions with franchisees(2)			10				1				17				58				—				86
Other operating costs and expenses			4				8				151				12				(140	)			35
Closures and impairment expenses, net			3				3				6				—				—				12
Other expenses (income), net			—				—				—				(1	)			—				(1	)
Restaurant profit (loss)		$	221			$	37			$	(5	)		$	—			$	—			$	253
Company sales			1,842				486				15				—				—				2,343
Restaurant margin %			12.0	%			7.3	%			(35.9	)%		N/A				N/A					10.7	%

 

Reconciliation of GAAP Operating Profit to Core Operating Profit

 

		Quarter Ended 12/31/2023
		KFC				Pizza Hut				All Other Segments				Corporate and Unallocated(1)				Elimination				Total
GAAP Operating Profit (Loss)		$	167			$	5			$	(11	)		$	(51	)		$	—			$	110
Special Items, Operating Profit			—				—				—				6				—				6
Adjusted Operating Profit		$	167			$	5			$	(11	)		$	(45	)		$	—			$	116
Items Affecting Comparability
Temporary relief from landlords			(1	)			—				—				—				—				(1	)
Temporary relief from government agencies			(2	)			(1	)			—				—				—				(3	)
VAT deductions			(2	)			—				—				—				—				(2	)
Amortization of reacquired franchise rights			—				—				—				—				—				—
F/X impact			2				—				—				(1	)			—				1
Core Operating Profit (Loss)		$	164			$	4			$	(11	)		$	(46	)		$	—			$	111

 

16

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		Quarter Ended 12/31/2022
		KFC				Pizza Hut				All Other Segments				Corporate and Unallocated(1)				Elimination				Total
Company sales		$	1,566			$	398			$	11			$	—			$	—			$	1,975
Franchise fees and income			12				1				3				—				—				16
Revenues from transactions with franchisees(2)			9				1				10				48				—				68
Other revenues			4				4				156				11				(146	)			29
Total revenues		$	1,591			$	404			$	180			$	59			$	(146	)		$	2,088
Company restaurant expenses			1,367				391				15				—				(3	)			1,770
General and administrative expenses			63				26				10				46				—				145
Franchise expenses			6				1				—				—				—				7
Expenses for transactions with franchisees(2)			8				—				11				48				—				67
Other operating costs and expenses			3				3				151				11				(143	)			25
Closures and impairment expenses, net			5				3				4				—				—				12
Other expenses (income), net			22				—				—				(1	)			—				21
Total costs and expenses, net			1,474				424				191				104				(146	)			2,047
Operating Profit (Loss)		$	117			$	(20	)		$	(11	)		$	(45	)		$	—			$	41

 

Reconciliation of GAAP Operating Profit to Restaurant Profit

 

		Quarter Ended 12/31/2022
		KFC				Pizza Hut				All Other Segments				Corporate and Unallocated(1)				Elimination				Total
GAAP Operating Profit (Loss)		$	117			$	(20	)		$	(11	)		$	(45	)		$	—			$	41
Less:
Franchise fees and income			12				1				3				—				—				16
Revenues from transactions with franchisees(2)			9				1				10				48				—				68
Other revenues			4				4				156				11				(146	)			29
Add:
General and administrative expenses			63				26				10				46				—				145
Franchise expenses			6				1				—				—				—				7
Expenses for transactions with franchisees(2)			8				—				11				48				—				67
Other operating costs and expenses			3				3				151				11				(143	)			25
Closures and impairment expenses, net			5				3				4				—				—				12
Other expenses (income), net			22				—				—				(1	)			—				21
Restaurant profit (loss)		$	199			$	7			$	(4	)		$	—			$	3			$	205
Company sales			1,566				398				11				—				—				1,975
Restaurant margin %			12.7	%			1.9	%			(42.6	)%		N/A				N/A					10.4	%

 

Reconciliation of GAAP Operating Profit to Core Operating Profit

 

		Quarter Ended 12/31/2022
		KFC				Pizza Hut				All Other Segments				Corporate and Unallocated(1)				Elimination				Total
GAAP Operating Profit (Loss)		$	117			$	(20	)		$	(11	)		$	(45	)		$	—			$	41
Special Items, Operating Profit			—				—				—				(1	)			—				(1	)
Adjusted Operating Profit		$	117			$	(20	)		$	(11	)		$	(46	)		$	—			$	40
Items Affecting Comparability
Temporary relief from landlords			(10	)			(2	)			—				—				—				(12	)
Temporary relief from government agencies			(10	)			(4	)			—				—				—				(14	)
VAT deductions			(5	)			(1	)			(2	)			—				—				(8	)
Amortization of reacquired franchise rights			23				—				—				—				—				23
F/X impact			—				—				—				—				—				—
Core Operating Profit (Loss)		$	115			$	(27	)		$	(13	)		$	(46	)		$	—			$	29

 

17

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		Year Ended 12/31/2023
		KFC				Pizza Hut				All Other Segments				Corporate and Unallocated(1)				Elimination				Total
Company sales		$	8,116			$	2,214			$	61			$	—			$	—			$	10,391
Franchise fees and income			62				7				20				—				—				89
Revenues from transactions with franchisees(2)			45				4				74				249				—				372
Other revenues			17				21				624				44				(580	)			126
Total revenues		$	8,240			$	2,246			$	779			$	293			$	(580	)		$	10,978
Company restaurant expenses			6,676				1,951				76				—				(2	)			8,701
General and administrative expenses			263				118				43				214				—				638
Franchise expenses			31				4				1				—				—				36
Expenses for transactions with franchisees(2)			39				4				67				246				—				356
Other operating costs and expenses			15				19				614				42				(578	)			112
Closures and impairment expenses, net			12				8				9				—				—				29
Other expenses (income), net			2				—				—				(2	)			—				—
Total costs and expenses, net			7,038				2,104				810				500				(580	)			9,872
Operating Profit (Loss)		$	1,202			$	142			$	(31	)		$	(207	)		$	—			$	1,106

 

Reconciliation of GAAP Operating Profit to Restaurant Profit

 

		Year Ended 12/31/2023
		KFC				Pizza Hut				All Other Segments				Corporate and Unallocated(1)				Elimination				Total
GAAP Operating Profit (Loss)		$	1,202			$	142			$	(31	)		$	(207	)		$	—			$	1,106
Less:
Franchise fees and income			62				7				20				—				—				89
Revenues from transactions with franchisees(2)			45				4				74				249				—				372
Other revenues			17				21				624				44				(580	)			126
Add:
General and administrative expenses			263				118				43				214				—				638
Franchise expenses			31				4				1				—				—				36
Expenses for transactions with franchisees(2)			39				4				67				246				—				356
Other operating costs and expenses			15				19				614				42				(578	)			112
Closures and impairment expenses, net			12				8				9				—				—				29
Other expenses (income), net			2				—				—				(2	)			—				—
Restaurant profit (loss)		$	1,440			$	263			$	(15	)		$	—			$	2			$	1,690
Company sales			8,116				2,214				61				—				—				10,391
Restaurant margin %			17.7	%			11.8	%			(25.1	)%		N/A				N/A					16.3	%

 

Reconciliation of GAAP Operating Profit to Core Operating Profit

 

		Year Ended 12/31/2023
		KFC				Pizza Hut				All Other Segments				Corporate and Unallocated(1)				Elimination				Total
GAAP Operating Profit (Loss)		$	1,202			$	142			$	(31	)		$	(207	)		$	—			$	1,106
Special Items, Operating Profit			—				—				—				15				—				15
Adjusted Operating Profit		$	1,202			$	142			$	(31	)		$	(192	)		$	—			$	1,121
Items Affecting Comparability
Temporary relief from landlords			(9	)			(2	)			—				—				—				(11	)
Temporary relief from government agencies			(5	)			(2	)			—				—				—				(7	)
VAT deductions			(36	)			(6	)			(2	)			—				—				(44	)
Amortization of reacquired franchise rights			2				—				—				—				—				2
F/X impact			57				11				(2	)			(6	)			—				60
Core Operating Profit (Loss)		$	1,211			$	143			$	(35	)		$	(198	)		$	—			$	1,121

 

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		Year Ended 12/31/2022
		KFC				Pizza Hut				All Other Segments				Corporate and Unallocated(1)				Elimination				Total
Company sales		$	7,120			$	1,939			$	51			$	—			$	—			$	9,110
Franchise fees and income			56				7				18				—				—				81
Revenues from transactions with franchisees(2)			33				4				39				211				—				287
Other revenues			10				10				563				42				(534	)			91
Total revenues		$	7,219			$	1,960			$	671			$	253			$	(534	)		$	9,569
Company restaurant expenses			5,999				1,761				70				—				(1	)			7,829
General and administrative expenses			254				110				46				184				—				594
Franchise expenses			29				4				1				—				—				34
Expenses for transactions with franchisees(2)			30				3				35				211				—				279
Other operating costs and expenses			7				8				557				39				(533	)			78
Closures and impairment expenses, net			16				4				12				—				—				32
Other expenses (income), net			97				—				—				(3	)			—				94
Total costs and expenses, net			6,432				1,890				721				431				(534	)			8,940
Operating Profit (Loss)		$	787			$	70			$	(50	)		$	(178	)		$	—			$	629

 

Reconciliation of GAAP Operating Profit to Restaurant Profit

 

		Year Ended 12/31/2022
		KFC				Pizza Hut				All Other Segments				Corporate and Unallocated(1)				Elimination				Total
GAAP Operating Profit (Loss)		$	787			$	70			$	(50	)		$	(178	)		$	—			$	629
Less:
Franchise fees and income			56				7				18				—				—				81
Revenues from transactions with franchisees(2)			33				4				39				211				—				287
Other revenues			10				10				563				42				(534	)			91
Add:
General and administrative expenses			254				110				46				184				—				594
Franchise expenses			29				4				1				—				—				34
Expenses for transactions with franchisees(2)			30				3				35				211				—				279
Other operating costs and expenses			7				8				557				39				(533	)			78
Closures and impairment expenses, net			16				4				12				—				—				32
Other expenses (income), net			97				—				—				(3	)			—				94
Restaurant profit (loss)		$	1,121			$	178			$	(19	)		$	—			$	1			$	1,281
Company sales			7,120				1,939				51				—				—				9,110
Restaurant margin %			15.7	%			9.2	%			(37.6	)%		N/A				N/A					14.1	%

 

Reconciliation of GAAP Operating Profit to Core Operating Profit

 

		Year Ended 12/31/2022
		KFC				Pizza Hut				All Other Segments				Corporate and Unallocated(1)				Elimination				Total
GAAP Operating Profit (Loss)		$	787			$	70			$	(50	)		$	(178	)		$	—			$	629
Special Items, Operating Profit			—				—				—				4				—				4
Adjusted Operating Profit		$	787			$	70			$	(50	)		$	(174	)		$	—			$	633
Items Affecting Comparability
Temporary relief from landlords			(32	)			(6	)			(1	)			—				—				(39	)
Temporary relief from government agencies			(34	)			(14	)			—				—				—				(48	)
VAT deductions			(12	)			(2	)			(2	)			—				—				(16	)
Amortization of reacquired franchise rights			97				—				—				—				—				97
F/X impact			—				—				—				—				—				—
Core Operating Profit (Loss)		$	806			$	48			$	(53	)		$	(174	)		$	—			$	627

 

19

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The above tables reconcile segment information, which is based on management responsibility, with our Condensed Consolidated Statements of Income.

 

20

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v3.24.0.1

Document And Entity Information	Feb. 06, 2024
Document And Entity Information [Line Items]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Feb. 06, 2024
Entity Registrant Name	Yum China Holdings, Inc.
Entity Central Index Key	0001673358
Entity Emerging Growth Company	false
Entity File Number	001-37762
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	81-2421743
Entity Address, Address Line One	101 East Park Boulevard, Suite 805
Entity Address, City or Town	Plano
Entity Address, State or Province	TX
Entity Address, Country	US
Entity Address, Postal Zip Code	75074
City Area Code	469
Local Phone Number	980-2898
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of each class	Common Stock, par value $0.01 per share
Trading Symbol	YUMC
Name of each exchange on which registered	NYSE
Other Address [Member]
Document And Entity Information [Line Items]
Entity Address, Address Line One	Yum China Building
Entity Address, Address Line Two	20 Tian Yao Qiao Road
Entity Address, City or Town	Shanghai
Entity Address, Country	CN
Entity Address, Postal Zip Code	200030

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