Delivered record-breaking second quarter
performance in Total Revenues, Operating Profit and net new
adds
Total Revenues up 25%; System Sales grew 32%
in constant currency; Operating Profit increased
216%
Store openings accelerated, 655 net new adds in the
first half, on track for full-year net new store target
SHANGHAI, July 31,
2023 /PRNewswire/ -- Yum China Holdings, Inc.
(the "Company" or "Yum China")
(NYSE: YUMC and HKEX: 9987) today reported unaudited results for
the second quarter ended June 30,
2023.
Second Quarter Highlights
- Total revenues increased 25% year over year to
$2.65 billion from $2.13 billion (a 32% increase excluding foreign
currency translation ("F/X")).
- Total system sales increased 32% year over year, with
increases of 32% at KFC and 30% at Pizza Hut, excluding F/X. Growth
was mainly attributable to same-store sales, new unit contribution
and lapping of temporary store closures in the prior year.
- Same-store sales increased 15% year over year, with
increases of 15% at KFC and 13% at Pizza Hut, excluding F/X.
- Opened 422 net new stores during the quarter; total
store count reached 13,602, as of June 30,
2023.
- Operating Profit increased 216% year over year to
$257 million from $81 million (a 228% increase excluding F/X),
primarily driven by sales leveraging and margin expansion.
- Adjusted Operating Profit increased 215% year over year
to $259 million from $82 million (a 227% increase excluding F/X).
- Restaurant margin was 16.1%, compared with 12.1% in the
prior year period.
- Effective tax rate was 24.7%.
- Net Income increased 138% to $197
million from $83 million in
the prior year period, primarily due to the increase in Operating
Profit.
- Adjusted Net Income increased 137% to $199 million from $84
million in the prior year period (a 207% increase excluding
the net loss of $9 million in the
second quarter of 2023 and net gain of $16
million in the second quarter of 2022, from the
mark-to-market equity investment in Meituan; a 219% increase if
further excluding F/X).
- Diluted EPS increased 135% to $0.47 from $0.20 in
the prior year period.
- Adjusted Diluted EPS increased 135% to $0.47 from $0.20 in
the prior year period (a 206% increase excluding the net loss from
the mark-to-market equity investments in the second quarter of 2023
and net gain in the second quarter of 2022; a 219% increase if
further excluding F/X).
Key Financial Results
|
Second Quarter 2023
|
|
|
Year to Date Ended 6/30/2023
|
|
|
% Change
|
|
|
% Change
|
|
|
System
Sales
|
|
Same-Store
Sales
|
|
Net New
Units
|
|
Operating
Profit
|
|
|
System
Sales
|
|
Same-Store
Sales
|
|
Net New
Units
|
|
Operating
Profit
|
|
Yum China
|
+32
|
|
+15
|
|
+12
|
|
+216
|
|
|
+24
|
|
+11
|
|
+12
|
|
+147
|
|
KFC
|
+32
|
|
+15
|
|
+12
|
|
+125
|
|
|
+24
|
|
+11
|
|
+12
|
|
+103
|
|
Pizza
Hut
|
+30
|
|
+13
|
|
+13
|
|
+216
|
|
|
+23
|
|
+10
|
|
+13
|
|
+120
|
|
|
|
Second Quarter
|
|
|
|
Year to Date Ended 6/30
|
(in US$ million,
except
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
|
|
% Change
|
per share data and
percentages)
|
|
2023
|
|
|
2022
|
|
Reported
|
|
Ex F/X
|
|
|
|
2023
|
|
|
2022
|
Reported
|
|
Ex F/X
|
Operating
Profit
|
$
|
257
|
|
$
|
81
|
|
+216
|
|
+228
|
|
|
$
|
673
|
|
$
|
272
|
+147
|
|
+164
|
Adjusted Operating
Profit(1)
|
$
|
259
|
|
$
|
82
|
|
+215
|
|
+227
|
|
|
$
|
678
|
|
$
|
275
|
+146
|
|
+162
|
Net Income
|
$
|
197
|
|
$
|
83
|
|
+138
|
|
+147
|
|
|
$
|
486
|
|
$
|
183
|
+166
|
|
+184
|
Adjusted Net
Income(1)
|
$
|
199
|
|
$
|
84
|
|
+137
|
|
+147
|
|
|
$
|
491
|
|
$
|
186
|
+164
|
|
+181
|
Basic Earnings Per
Common Share
|
$
|
0.47
|
|
$
|
0.20
|
|
+135
|
|
+145
|
|
|
$
|
1.16
|
|
$
|
0.43
|
+170
|
|
+188
|
Adjusted Basic
Earnings
Per Common Share(1)
|
$
|
0.47
|
|
$
|
0.20
|
|
+135
|
|
+145
|
|
|
$
|
1.17
|
|
$
|
0.44
|
+166
|
|
+184
|
Diluted Earnings Per
Common Share
|
$
|
0.47
|
|
$
|
0.20
|
|
+135
|
|
+145
|
|
|
$
|
1.15
|
|
$
|
0.43
|
+167
|
|
+186
|
Adjusted Diluted
Earnings
Per Common Share(1)
|
$
|
0.47
|
|
$
|
0.20
|
|
+135
|
|
+145
|
|
|
$
|
1.16
|
|
$
|
0.44
|
+164
|
|
+182
|
(1) See "Reconciliation
of Reported GAAP Results to Non-GAAP Adjusted Measures" included in
the accompanying tables of this release for further
details.
|
Note: All
comparisons are versus the same period a year ago.
|
Percentages may not
recompute due to rounding.
|
System sales and
same-store sales percentages exclude the impact of F/X. Effective
January 1, 2018, temporary store closures are normalized in the
same-store sales calculation by excluding the period during
which stores are temporarily closed.
|
CEO and CFO Comments
Joey Wat, CEO of Yum China, commented, "We achieved outstanding
results, delivering substantial growth in the top-line and
bottom-line, in the second quarter, thanks to our teams' dedication
and creativity. This once again demonstrates our anti-fragile
business model and ability to capture opportunities in good times
and stay resilient in bad times. Our innovative products and
compelling value captured customer demand and drove double-digit
same-store sales growth. KFC's "K-zza" and Pizza Hut's new menu
items were hugely popular. Our exciting campaign with Genshin
Impact and fun toy offerings with Sanrio and Pokemon spurred strong
demand and brought consumers moments of joy. We registered record
daily transactions of 8.5 million on Children's Day. Our amazing
operations team, robust end-to-end digital capabilities and agile
supply chain enabled us to flexibly handle surges in customer
traffic through holiday periods and special marketing campaigns,
while maintaining consistent quality and customer service. As a
result of these collective efforts, our operating profit for the
first half of this year already exceeded the entire year of
2022."
Wat continued, "We accelerated the pace of new store openings in
the second quarter and celebrated two milestones. Pizza Hut
surpassed 3,000 stores in China
and KFC exceeded 500 stores in Shanghai alone. With 655 net new stores in the
first half of 2023, we are on track to meet our expansion goals for
the year. Importantly, new store payback periods remain healthy.
Furthermore, we see abundant white space in China. With a presence in 1,900 cities, we are
still tracking over 800 cities without a KFC. Similarly, Pizza Hut
has a great potential for expanding its footprint. With our
flexible store formats, we continue to expand addressable markets
across city tiers. By actively pursuing our RGM
(Resilience-Growth-Moat) strategy and leveraging our
industry-leading strengths, we are confident in our ability to
capture long-term growth opportunities."
Andy Yeung, CFO of Yum China, added, "We delivered record
second-quarter revenues and profits, despite challenging macro
conditions and an uptick of COVID infections during the quarter.
When customer demand softened in May, we adjusted nimbly to address
consumer needs, captured holiday spending and successfully regained
sales momentum. Sales growth and proactive cost structure rebasing
helped us improve operating leverage, expanding restaurant margins
and delivering record operating profit in the quarter. Even though
same-store sales remained below 2019 levels, our revenue in the
second quarter has increased by 25% and operating profits have
risen by 26% compared to pre-pandemic levels in 2019."
"As we move into the third quarter, driving sales remains our
top priority. We have lined up exciting marketing campaigns and
resources to seize sales opportunities in the peak summer season.
Our efforts on efficiency improvement and cost structure rebasing
should continue to benefit profitability in the long run. But, it
is worth noting that last year's record third-quarter restaurant
margins set a relatively high benchmark, due to austerity measures
and temporary reliefs. We will continue to stay agile through
evolving market conditions, expand our store network and fortify
our competitive moat to drive sustainable long-term
growth," Yeung concluded.
Share Repurchases and Dividends
- During the second quarter, the Company repurchased
approximately 1 million shares of Yum
China common stock for $62
million at an average price of $60.23 per share. As of June 30, 2023, approximately $1 billion remained available for future share
repurchases under the current authorization.
- The Board declared a cash dividend of $0.13 per share on Yum
China's common stock, payable on September 18, 2023 to shareholders of record as
of the close of business on August 28,
2023.
Digital and Delivery
- The KFC and Pizza Hut loyalty programs exceeded 445 million
members combined, as of quarter-end. Member sales accounted for
approximately 66% of system sales in the second quarter of
2023.
- Delivery contributed approximately 35% of KFC and Pizza Hut's
Company sales in the second quarter of 2023, a decrease of 3%
compared with the prior year period.
- Digital orders, including delivery, mobile orders and kiosk
orders, accounted for approximately 90% of KFC and Pizza Hut's
Company sales in the second quarter of 2023.
KFC and Pizza Hut
Total
|
|
Second Quarter
|
|
|
Year to Date Ended 6/30
|
|
|
|
2023
|
|
2022
|
|
|
2023
|
|
2022
|
|
Member count (as of
period-end)
|
|
445 million+
|
|
385 million+
|
|
|
445 million+
|
|
385 million+
|
|
Member sales as % of
system sales
|
|
~66%
|
|
~62%
|
|
|
~64%
|
|
~62%
|
|
Delivery as % of
Company sales
|
|
~35%
|
|
~38%
|
|
|
~36%
|
|
~37%
|
|
Digital orders as % of
Company sales
|
|
~90%
|
|
~89%
|
|
|
~90%
|
|
~88%
|
|
New-Unit Development and Asset Upgrade
- The Company opened 422 net new stores in the second quarter of
2023, mainly driven by development of the KFC and Pizza Hut
brands.
- The Company remodeled 171 stores in the second quarter of
2023.
|
|
Net New Units
|
|
|
Restaurant Count
|
|
|
|
Second Quarter
|
|
Year to Date
|
|
|
As of June 30
|
|
|
|
2023
|
|
Ended 6/30/2023
|
|
|
2023
|
|
2022
|
|
Yum China
|
|
422
|
|
655
|
|
|
13,602
|
|
12,170
|
|
KFC
|
|
323
|
|
468
|
|
|
9,562
|
|
8,510
|
|
Pizza
Hut
|
|
89
|
|
169
|
|
|
3,072
|
|
2,711
|
|
Others(2)
|
|
10
|
|
18
|
|
|
968
|
|
949
|
|
(2) Others include Taco
Bell, Lavazza, Little Sheep, Huang Ji Huang, and, for 2022, COFFii
& JOY.
|
Restaurant Margin
- Restaurant margin was 16.1% in the second quarter of 2023
compared with 12.1% in the prior year period, driven primarily by
sales leveraging and ongoing benefits of cost
structure rebasing efforts; partially offset by lapping
austerity measures in the prior year, higher promotion costs, and
wage inflation.
|
Second Quarter
|
|
|
Year to Date Ended 6/30
|
|
|
|
2023
|
|
2022
|
|
ppts change
|
|
|
2023
|
|
2022
|
|
ppts change
|
|
Yum China
|
|
16.1 %
|
|
12.1 %
|
|
+4.0
|
|
|
18.3 %
|
|
13.0 %
|
|
+5.3
|
|
KFC
|
|
17.3 %
|
|
13.4 %
|
|
+3.9
|
|
|
19.9 %
|
|
14.4 %
|
|
+5.5
|
|
Pizza
Hut
|
|
12.4 %
|
|
8.6 %
|
|
+3.8
|
|
|
13.3 %
|
|
9.8 %
|
|
+3.5
|
|
2023 Outlook
The Company's fiscal year 2023 targets remain unchanged:
- To open approximately 1,100 to 1,300 net new stores.
- To make capital expenditures in the range of approximately
$700 million to $900 million.
Company Updates
- On July 17, 2023, the Company
announced the appointment of Mr. David
Hoffmann to the Board of the Directors. With this
appointment, the Board is now comprised of 10 directors, nine of
whom are independent.
Note on Non-GAAP 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. In addition, for the non-GAAP measures of Restaurant
profit and Restaurant margin, see "Reconciliation of GAAP Operating
Profit to Restaurant Profit" under "Segment Results" 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 Monday,
July 31, 2023 (8:00 a.m.
Beijing/Hong Kong Time on
Tuesday, August 1,
2023).
A live webcast of the call may be accessed at
https://edge.media-server.com/mmc/p/4rchbbk4/.
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/10031360-wcv829.html
A replay of the conference call will be available one hour after
the call ends until Tuesday, August 8,
2023 and may be accessed by phone at the following
numbers:
U.S.:
|
1 855 883
1031
|
Mainland
China:
|
400 1209 216
|
Hong Kong:
|
800 930 639
|
U.K.:
|
0800 031
4295
|
|
|
Replay access
code:
|
10031360
|
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 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
"2023 Outlook." We intend all forward-looking statements to be
covered by the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements generally
can be identified by the fact that they do not relate strictly to
historical or current facts and by the use of forward-looking words
such as "expect," "expectation," "believe," "anticipate," "may,"
"could," "intend," "belief," "plan," "estimate," "target,"
"predict," "project," "likely," "will," "continue," "should,"
"forecast," "outlook," "commit" or similar terminology. These
statements are based on current estimates and assumptions made by
us in light of our experience and perception of historical trends,
current conditions and expected future developments, as well as
other factors that we believe are appropriate and reasonable under
the circumstances, but there can be no assurance that such
estimates and assumptions will prove to be correct. Forward-looking
statements include, without limitation, statements regarding the
future strategies, growth, business plans, investment, dividend and
share repurchase plans, earnings, performance and returns of
Yum China, anticipated effects of
population and macroeconomic trends, the expected impact of the
COVID-19 pandemic, 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. 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 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 13,000 restaurants under six
brands across 1,900 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
|
Yum China Holdings, Inc.
|
Condensed Consolidated Statements of
Income
|
(in US$ million, except per share
data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
% Change
|
|
Year to Date Ended
|
|
% Change
|
|
|
6/30/2023
|
|
6/30/2022
|
|
B/(W)
|
|
6/30/2023
|
|
6/30/2022
|
|
B/(W)
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
sales
|
|
$ 2,517
|
|
$ 2,026
|
|
24
|
|
|
$ 5,289
|
|
$ 4,574
|
|
16
|
|
Franchise fees and
income
|
|
21
|
|
19
|
|
16
|
|
|
46
|
|
43
|
|
8
|
|
Revenues from
transactions with franchisees
|
|
89
|
|
62
|
|
43
|
|
|
182
|
|
139
|
|
31
|
|
Other
revenues
|
|
27
|
|
21
|
|
33
|
|
|
54
|
|
40
|
|
38
|
|
Total
revenues
|
|
2,654
|
|
2,128
|
|
25
|
|
|
5,571
|
|
4,796
|
|
16
|
|
Costs and Expenses, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
restaurants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food and
paper
|
|
773
|
|
627
|
|
(23)
|
|
|
1,608
|
|
1,419
|
|
(13)
|
|
Payroll and employee
benefits
|
|
665
|
|
549
|
|
(21)
|
|
|
1,348
|
|
1,216
|
|
(11)
|
|
Occupancy and other
operating expenses
|
|
675
|
|
605
|
|
(12)
|
|
|
1,366
|
|
1,343
|
|
(2)
|
|
Company restaurant
expenses
|
|
2,113
|
|
1,781
|
|
(19)
|
|
|
4,322
|
|
3,978
|
|
(9)
|
|
General and
administrative expenses
|
|
153
|
|
141
|
|
(9)
|
|
|
316
|
|
292
|
|
(8)
|
|
Franchise
expenses
|
|
9
|
|
8
|
|
(5)
|
|
|
19
|
|
18
|
|
(1)
|
|
Expenses for
transactions with franchisees
|
|
84
|
|
61
|
|
(40)
|
|
|
175
|
|
136
|
|
(29)
|
|
Other operating costs
and expenses
|
|
24
|
|
18
|
|
(29)
|
|
|
48
|
|
35
|
|
(36)
|
|
Closures and impairment
expenses, net
|
|
14
|
|
14
|
|
(7)
|
|
|
17
|
|
16
|
|
(12)
|
|
Other expenses,
net
|
|
—
|
|
24
|
|
99
|
|
|
1
|
|
49
|
|
97
|
|
Total costs and
expenses, net
|
|
2,397
|
|
2,047
|
|
(17)
|
|
|
4,898
|
|
4,524
|
|
(8)
|
|
Operating Profit
|
|
257
|
|
81
|
|
216
|
|
|
673
|
|
272
|
|
147
|
|
Interest income,
net
|
|
40
|
|
14
|
|
184
|
|
|
78
|
|
26
|
|
203
|
|
Investment (loss)
gain
|
|
(11)
|
|
20
|
|
NM
|
|
|
(28)
|
|
(17)
|
|
(69)
|
|
Income Before Income Taxes and
Equity in Net Earnings (Losses) from
Equity Method Investments
|
|
286
|
|
115
|
|
147
|
|
|
723
|
|
281
|
|
157
|
|
Income tax
provision
|
|
(71)
|
|
(31)
|
|
(131)
|
|
|
(196)
|
|
(86)
|
|
(128)
|
|
Equity in net earnings
(losses) from
equity method investments
|
|
(1)
|
|
(1)
|
|
45
|
|
|
—
|
|
(2)
|
|
90
|
|
Net income – including
noncontrolling interests
|
|
214
|
|
83
|
|
157
|
|
|
527
|
|
193
|
|
173
|
|
Net income –
noncontrolling interests
|
|
17
|
|
—
|
|
NM
|
|
|
41
|
|
10
|
|
(290)
|
|
Net Income – Yum China Holdings,
Inc.
|
|
$
197
|
|
$
83
|
|
138
|
|
|
$
486
|
|
$
183
|
|
166
|
|
Effective tax
rate
|
|
24.7 %
|
|
26.5 %
|
|
1.8
|
ppts.
|
|
27.0 %
|
|
30.4 %
|
|
3.4
|
ppts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Common Share
|
|
$
0.47
|
|
$
0.20
|
|
|
|
|
$
1.16
|
|
$
0.43
|
|
|
|
Weighted-average shares
outstanding
(in millions)
|
|
418
|
|
421
|
|
|
|
|
418
|
|
423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Common
Share
|
|
$
0.47
|
|
$
0.20
|
|
|
|
|
$
1.15
|
|
$
0.43
|
|
|
|
Weighted-average shares
outstanding
(in millions)
|
|
422
|
|
424
|
|
|
|
|
423
|
|
427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
sales
|
|
100.0 %
|
|
100.0 %
|
|
|
|
|
100.0 %
|
|
100.0 %
|
|
|
|
Food and
paper
|
|
30.7
|
|
30.9
|
|
0.2
|
ppts.
|
|
30.4
|
|
31.0
|
|
0.6
|
ppts.
|
Payroll and employee
benefits
|
|
26.4
|
|
27.1
|
|
0.7
|
ppts.
|
|
25.5
|
|
26.6
|
|
1.1
|
ppts.
|
Occupancy and other
operating expenses
|
|
26.8
|
|
29.9
|
|
3.1
|
ppts.
|
|
25.8
|
|
29.4
|
|
3.6
|
ppts.
|
Restaurant
margin
|
|
16.1 %
|
|
12.1 %
|
|
4.0
|
ppts.
|
|
18.3 %
|
|
13.0 %
|
|
5.3
|
ppts.
|
Operating
margin
|
|
10.2 %
|
|
4.0 %
|
|
6.2
|
ppts.
|
|
12.7 %
|
|
6.0 %
|
|
6.7
|
ppts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentages may not
recompute due to rounding. NM refers to not meaningful.
|
Yum China Holdings, Inc.
|
KFC Operating Results
|
(in US$ million)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
% Change
|
|
Year to Date Ended
|
|
% Change
|
|
|
6/30/2023
|
|
6/30/2022
|
|
B/(W)
|
|
6/30/2023
|
|
6/30/2022
|
|
B/(W)
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
sales
|
|
$ 1,954
|
|
$ 1,571
|
|
24
|
|
|
$ 4,120
|
|
$ 3,562
|
|
16
|
|
Franchise fees and
income
|
|
15
|
|
13
|
|
18
|
|
|
32
|
|
29
|
|
11
|
|
Revenues from
transactions with franchisees
|
|
11
|
|
7
|
|
45
|
|
|
21
|
|
15
|
|
36
|
|
Other
revenues
|
|
4
|
|
3
|
|
42
|
|
|
9
|
|
5
|
|
101
|
|
Total
revenues
|
|
1,984
|
|
1,594
|
|
24
|
|
|
4,182
|
|
3,611
|
|
16
|
|
Costs and Expenses, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
restaurants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food and
paper
|
|
602
|
|
484
|
|
(24)
|
|
|
1,248
|
|
1,105
|
|
(13)
|
|
Payroll and employee
benefits
|
|
498
|
|
413
|
|
(21)
|
|
|
1,010
|
|
914
|
|
(10)
|
|
Occupancy and other
operating expenses
|
|
516
|
|
464
|
|
(11)
|
|
|
1,043
|
|
1,031
|
|
(1)
|
|
Company restaurant
expenses
|
|
1,616
|
|
1,361
|
|
(19)
|
|
|
3,301
|
|
3,050
|
|
(8)
|
|
General and
administrative expenses
|
|
67
|
|
63
|
|
(6)
|
|
|
135
|
|
128
|
|
(5)
|
|
Franchise
expenses
|
|
7
|
|
6
|
|
(9)
|
|
|
16
|
|
15
|
|
(1)
|
|
Expenses for
transactions with franchisees
|
|
9
|
|
6
|
|
(41)
|
|
|
18
|
|
14
|
|
(32)
|
|
Other operating costs
and expenses
|
|
4
|
|
2
|
|
(61)
|
|
|
8
|
|
3
|
|
(143)
|
|
Closures and impairment
expenses, net
|
|
8
|
|
9
|
|
11
|
|
|
9
|
|
8
|
|
(15)
|
|
Other expenses,
net
|
|
—
|
|
25
|
|
99
|
|
|
2
|
|
51
|
|
96
|
|
Total costs and
expenses, net
|
|
1,711
|
|
1,472
|
|
(16)
|
|
|
3,489
|
|
3,269
|
|
(7)
|
|
Operating Profit
|
|
$
273
|
|
$
122
|
|
125
|
|
|
$
693
|
|
$
342
|
|
103
|
|
Company
sales
|
|
100.0 %
|
|
100.0 %
|
|
|
|
|
100.0 %
|
|
100.0 %
|
|
|
|
Food and
paper
|
|
30.8
|
|
30.8
|
|
—
|
ppts.
|
|
30.3
|
|
31.0
|
|
0.7
|
ppts.
|
Payroll and employee
benefits
|
|
25.5
|
|
26.3
|
|
0.8
|
ppts.
|
|
24.5
|
|
25.7
|
|
1.2
|
ppts.
|
Occupancy and other
operating expenses
|
|
26.4
|
|
29.5
|
|
3.1
|
ppts.
|
|
25.3
|
|
28.9
|
|
3.6
|
ppts.
|
Restaurant
margin
|
|
17.3 %
|
|
13.4 %
|
|
3.9
|
ppts.
|
|
19.9 %
|
|
14.4 %
|
|
5.5
|
ppts.
|
Operating
margin
|
|
14.0 %
|
|
7.7 %
|
|
6.3
|
ppts.
|
|
16.8 %
|
|
9.6 %
|
|
7.2
|
ppts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentages may not
recompute due to rounding. NM refers to not meaningful.
|
Yum China Holdings, Inc.
|
Pizza Hut Operating Results
|
(in US$ million)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
% Change
|
|
Year to Date Ended
|
|
% Change
|
|
|
6/30/2023
|
|
6/30/2022
|
|
B/(W)
|
|
6/30/2023
|
|
6/30/2022
|
|
B/(W)
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
sales
|
|
$
546
|
|
$
443
|
|
23
|
|
|
$ 1,137
|
|
$
985
|
|
15
|
|
Franchise fees and
income
|
|
2
|
|
2
|
|
(1)
|
|
|
4
|
|
4
|
|
1
|
|
Revenues from
transactions with franchisees
|
|
1
|
|
1
|
|
17
|
|
|
2
|
|
2
|
|
11
|
|
Other
revenues
|
|
5
|
|
2
|
|
186
|
|
|
8
|
|
4
|
|
136
|
|
Total
revenues
|
|
554
|
|
448
|
|
24
|
|
|
1,151
|
|
995
|
|
16
|
|
Costs and Expenses, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
restaurants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food and
paper
|
|
166
|
|
139
|
|
(19)
|
|
|
350
|
|
305
|
|
(15)
|
|
Payroll and employee
benefits
|
|
162
|
|
131
|
|
(24)
|
|
|
329
|
|
288
|
|
(14)
|
|
Occupancy and other
operating expenses
|
|
151
|
|
135
|
|
(12)
|
|
|
307
|
|
296
|
|
(4)
|
|
Company restaurant
expenses
|
|
479
|
|
405
|
|
(18)
|
|
|
986
|
|
889
|
|
(11)
|
|
General and
administrative expenses
|
|
30
|
|
28
|
|
(5)
|
|
|
59
|
|
57
|
|
(3)
|
|
Franchise
expenses
|
|
1
|
|
1
|
|
(6)
|
|
|
2
|
|
2
|
|
(3)
|
|
Expenses for
transactions with franchisees
|
|
1
|
|
1
|
|
(19)
|
|
|
2
|
|
2
|
|
(11)
|
|
Other operating costs
and expenses
|
|
4
|
|
2
|
|
(187)
|
|
|
7
|
|
3
|
|
(130)
|
|
Closures and impairment
expenses, net
|
|
4
|
|
—
|
|
NM
|
|
|
5
|
|
1
|
|
(603)
|
|
Total costs and
expenses, net
|
|
519
|
|
437
|
|
(19)
|
|
|
1,061
|
|
954
|
|
(11)
|
|
Operating Profit
|
|
$
35
|
|
$
11
|
|
216
|
|
|
$
90
|
|
$
41
|
|
120
|
|
Company
sales
|
|
100.0 %
|
|
100.0 %
|
|
|
|
|
100.0 %
|
|
100.0 %
|
|
|
|
Food and
paper
|
|
30.3
|
|
31.4
|
|
1.1
|
ppts.
|
|
30.8
|
|
31.0
|
|
0.2
|
ppts.
|
Payroll and employee
benefits
|
|
29.7
|
|
29.5
|
|
(0.2)
|
ppts.
|
|
28.9
|
|
29.2
|
|
0.3
|
ppts.
|
Occupancy and other
operating expenses
|
|
27.6
|
|
30.5
|
|
2.9
|
ppts.
|
|
27.0
|
|
30.0
|
|
3.0
|
ppts.
|
Restaurant
margin
|
|
12.4 %
|
|
8.6 %
|
|
3.8
|
ppts.
|
|
13.3 %
|
|
9.8 %
|
|
3.5
|
ppts.
|
Operating
margin
|
|
6.4 %
|
|
2.5 %
|
|
3.9
|
ppts.
|
|
7.9 %
|
|
4.2 %
|
|
3.7
|
ppts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentages may not
recompute due to rounding. NM refers to not meaningful.
|
|
Yum China Holdings, Inc.
|
Condensed Consolidated Balance
Sheets
|
(in US$ million)
|
|
|
|
|
|
|
|
6/30/2023
|
|
12/31/2022
|
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
|
Current Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
1,189
|
|
$
1,130
|
Short-term
investments
|
|
1,762
|
|
2,022
|
Accounts receivable,
net
|
|
59
|
|
64
|
Inventories,
net
|
|
396
|
|
417
|
Prepaid expenses and
other current assets
|
|
281
|
|
307
|
Total Current Assets
|
|
3,687
|
|
3,940
|
Property, plant and
equipment, net
|
|
2,049
|
|
2,118
|
Operating lease
right-of-use assets
|
|
2,066
|
|
2,219
|
Goodwill
|
|
1,891
|
|
1,988
|
Intangible assets,
net
|
|
148
|
|
159
|
Long-term bank deposits
and notes
|
|
1,179
|
|
680
|
Equity
investments
|
|
323
|
|
361
|
Deferred income tax
assets
|
|
72
|
|
113
|
Other assets
|
|
260
|
|
248
|
Total Assets
|
|
11,675
|
|
11,826
|
|
|
|
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND
EQUITY
|
|
|
|
|
Current Liabilities
|
|
|
|
|
Accounts payable and
other current liabilities
|
|
2,064
|
|
2,098
|
Income taxes
payable
|
|
88
|
|
68
|
Total Current Liabilities
|
|
2,152
|
|
2,166
|
Non-current operating
lease liabilities
|
|
1,773
|
|
1,906
|
Non-current finance
lease liabilities
|
|
41
|
|
42
|
Deferred income tax
liabilities
|
|
350
|
|
390
|
Other
liabilities
|
|
142
|
|
162
|
Total Liabilities
|
|
4,458
|
|
4,666
|
|
|
|
|
|
Redeemable Noncontrolling
Interest
|
|
12
|
|
12
|
|
|
|
|
|
Equity
|
|
|
|
|
Common stock,
$0.01 par value; 1,000 million shares authorized;
417 million shares and 419 million shares issued and
outstanding
at June 30, 2023 and December 31, 2022, respectively
|
|
4
|
|
4
|
Additional paid-in
capital
|
|
4,396
|
|
4,390
|
Retained
earnings
|
|
2,465
|
|
2,191
|
Accumulated other
comprehensive loss
|
|
(316)
|
|
(103)
|
Total Yum China Holdings, Inc. Stockholders'
Equity
|
|
6,549
|
|
6,482
|
Noncontrolling
interests
|
|
656
|
|
666
|
Total Equity
|
|
7,205
|
|
7,148
|
Total Liabilities, Redeemable Noncontrolling Interest
and Equity
|
|
$ 11,675
|
|
$
11,826
|
Yum China Holdings, Inc.
|
Condensed Consolidated Statements of Cash
Flows
|
(in US$ million)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Year to Date Ended
|
|
|
|
6/30/2023
|
|
|
6/30/2022
|
Cash Flows – Operating
Activities
|
|
|
|
|
|
|
Net income – including
noncontrolling interests
|
|
|
$
527
|
|
|
$
193
|
Depreciation and
amortization
|
|
|
228
|
|
|
317
|
Non-cash operating
lease cost
|
|
|
202
|
|
|
230
|
Closures and impairment
expenses
|
|
|
17
|
|
|
16
|
Investment
loss
|
|
|
28
|
|
|
17
|
Equity in net
(earnings) losses from equity method investments
|
|
|
—
|
|
|
2
|
Distributions of income
received from equity method investments
|
|
|
8
|
|
|
—
|
Deferred income
taxes
|
|
|
13
|
|
|
(7)
|
Share-based
compensation expense
|
|
|
29
|
|
|
21
|
Changes in accounts
receivable
|
|
|
2
|
|
|
(17)
|
Changes in
inventories
|
|
|
1
|
|
|
59
|
Changes in prepaid
expenses, other current assets and VAT assets
|
|
|
19
|
|
|
24
|
Changes in accounts
payable and other current liabilities
|
|
|
54
|
|
|
(51)
|
Changes in income taxes
payable
|
|
|
25
|
|
|
6
|
Changes in non-current
operating lease liabilities
|
|
|
(193)
|
|
|
(198)
|
Other, net
|
|
|
(36)
|
|
|
(3)
|
Net Cash Provided by Operating
Activities
|
|
|
924
|
|
|
609
|
|
|
|
|
|
|
|
Cash Flows – Investing
Activities
|
|
|
|
|
|
|
Capital
spending
|
|
|
(332)
|
|
|
(347)
|
Purchases of short-term
investments, long-term bank deposits and notes
|
|
|
(2,172)
|
|
|
(2,145)
|
Maturities of
short-term investments, long-term bank deposits and
notes
|
|
|
1,904
|
|
|
2,461
|
Acquisition of
business, net of cash acquired
|
|
|
—
|
|
|
(23)
|
Other, net
|
|
|
2
|
|
|
2
|
Net Cash Used in Investing
Activities
|
|
|
(598)
|
|
|
(52)
|
|
|
|
|
|
|
|
Cash Flows – Financing
Activities
|
|
|
|
|
|
|
Repurchase of shares of
common stock
|
|
|
(122)
|
|
|
(400)
|
Cash dividends paid on
common stock
|
|
|
(108)
|
|
|
(101)
|
Dividends paid to
noncontrolling interests
|
|
|
(28)
|
|
|
(23)
|
Contributions from
noncontrolling interests
|
|
|
35
|
|
|
18
|
Payment of acquisition
related holdback
|
|
|
(3)
|
|
|
(6)
|
Other, net
|
|
|
(4)
|
|
|
(1)
|
Net Cash Used in Financing
Activities
|
|
|
(230)
|
|
|
(513)
|
Effect of Exchange Rates on Cash, Cash Equivalents
and Restricted Cash
|
|
|
(37)
|
|
|
(33)
|
Net Increase in Cash, Cash Equivalents and Restricted
Cash
|
|
|
59
|
|
|
11
|
Cash, Cash Equivalents, and Restricted Cash -
Beginning of Period
|
|
|
1,130
|
|
|
1,136
|
Cash, Cash Equivalents, and Restricted Cash - End of
Period
|
|
|
$
1,189
|
|
|
$
1,147
|
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 an average 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, 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. Company
restaurant margin percentage is defined as Restaurant profit
divided by Company sales.
- Certain comparative items in the Condensed Consolidated
Financial Statements have been reclassified to conform to the
current period's presentation to facilitate comparison.
Reconciliation of Reported GAAP Results to
Non-GAAP Adjusted Measures
(in millions, except per share
data)
(unaudited)
In addition to the results provided in accordance with U.S.
Generally Accepted Accounting Principles ("GAAP") in this press
release, the Company provides non-GAAP measures adjusted for
Special Items, which include Adjusted Operating Profit, Adjusted
Net Income, Adjusted Earnings Per Common Share ("EPS"), Adjusted
Effective Tax Rate and Adjusted EBITDA, which we define as net
income including noncontrolling interests adjusted for equity in
net earnings (losses) from equity method investments, income tax,
interest income, net, investment gain or loss, certain non-cash
expenses, consisting of depreciation and amortization as well as
store impairment charges, and Special Items. We also use Restaurant
profit and Restaurant margin (as defined above) for the purposes of
internally evaluating the performance of our Company-owned
restaurants and we believe Restaurant profit and Restaurant margin
provide useful information to investors as to the profitability of
our Company-owned restaurants.
The following table set forth the reconciliation of the most
directly comparable GAAP financial measures to the non-GAAP
adjusted financial measures. The reconciliation of GAAP Operating
Profit to Restaurant Profit is presented in Segment Results within
this release.
|
|
Quarter Ended
|
|
Year to Date Ended
|
|
|
6/30/2023
|
|
6/30/2022
|
|
6/30/2023
|
|
6/30/2022
|
Non-GAAP Reconciliations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Operating Profit to Adjusted
Operating Profit
|
|
|
|
|
|
|
|
|
Operating
Profit
|
|
$
257
|
|
$
81
|
|
$
673
|
|
$
272
|
Special Items,
Operating Profit
|
|
(2)
|
|
(1)
|
|
(5)
|
|
(3)
|
Adjusted Operating
Profit
|
|
$
259
|
|
$
82
|
|
$
678
|
|
$
275
|
Reconciliation of Net Income to Adjusted Net
Income
|
|
|
|
|
|
|
|
|
Net Income – Yum China
Holdings, Inc.
|
|
$
197
|
|
$
83
|
|
$
486
|
|
$
183
|
Special Items, Net
Income –Yum China Holdings, Inc.
|
|
(2)
|
|
(1)
|
|
(5)
|
|
(3)
|
Adjusted Net Income –
Yum China Holdings, Inc.
|
|
$
199
|
|
$
84
|
|
$
491
|
|
$
186
|
Reconciliation of EPS to Adjusted
EPS
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Common Share
|
|
$
0.47
|
|
$
0.20
|
|
$
1.16
|
|
$
0.43
|
Special Items, Basic
Earnings Per Common Share
|
|
—
|
|
—
|
|
(0.01)
|
|
(0.01)
|
Adjusted Basic Earnings
Per Common Share
|
|
$
0.47
|
|
$
0.20
|
|
$
1.17
|
|
$
0.44
|
Diluted Earnings Per
Common Share
|
|
$
0.47
|
|
$
0.20
|
|
$
1.15
|
|
$
0.43
|
Special Items, Diluted
Earnings Per Common Share
|
|
—
|
|
—
|
|
(0.01)
|
|
(0.01)
|
Adjusted Diluted
Earnings Per Common Share
|
|
$
0.47
|
|
$
0.20
|
|
$
1.16
|
|
$
0.44
|
Reconciliation of Effective Tax Rate to Adjusted
Effective Tax Rate
|
|
|
|
|
|
|
|
|
Effective tax
rate
|
|
24.7 %
|
|
26.5 %
|
|
27.0 %
|
|
30.4 %
|
Impact on effective tax
rate as a result of Special Items
|
|
0.1 %
|
|
0.2 %
|
|
0.1 %
|
|
0.3 %
|
Adjusted effective tax
rate
|
|
24.6 %
|
|
26.3 %
|
|
26.9 %
|
|
30.1 %
|
Net income, along with the reconciliation to Adjusted EBITDA, is
presented below:
|
|
Quarter Ended
|
|
Year to Date Ended
|
|
|
6/30/2023
|
|
6/30/2022
|
|
6/30/2023
|
|
6/30/2022
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income to Adjusted
EBITDA
|
|
|
|
|
|
|
|
|
Net Income – Yum China
Holdings, Inc.
|
|
$
197
|
|
$
83
|
|
$
486
|
|
$
183
|
Net income –
noncontrolling interests
|
|
17
|
|
—
|
|
41
|
|
10
|
Equity in net
(earnings) losses from equity method investments
|
|
1
|
|
1
|
|
—
|
|
2
|
Income tax
provision
|
|
71
|
|
31
|
|
196
|
|
86
|
Interest income,
net
|
|
(40)
|
|
(14)
|
|
(78)
|
|
(26)
|
Investment loss
(gain)
|
|
11
|
|
(20)
|
|
28
|
|
17
|
Operating
Profit
|
|
257
|
|
81
|
|
673
|
|
272
|
Special Items,
Operating Profit
|
|
2
|
|
1
|
|
5
|
|
3
|
Adjusted Operating
Profit
|
|
259
|
|
82
|
|
678
|
|
275
|
Depreciation and
amortization
|
|
112
|
|
153
|
|
228
|
|
317
|
Store impairment
charges
|
|
17
|
|
22
|
|
21
|
|
30
|
Adjusted
EBITDA
|
|
$
388
|
|
$
257
|
|
$
927
|
|
$
622
|
Details of Special Items are presented below:
|
|
Quarter Ended
|
|
Year to Date Ended
|
|
|
6/30/2023
|
|
6/30/2022
|
|
6/30/2023
|
|
6/30/2022
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense for Partner PSU
Awards(1)
|
|
$
(2)
|
|
$
(1)
|
|
$
(5)
|
|
$
(3)
|
Special Items,
Operating Profit
|
|
(2)
|
|
(1)
|
|
(5)
|
|
(3)
|
Tax effect on Special
Items(2)
|
|
—
|
|
—
|
|
—
|
|
—
|
Special Items, net
income – including noncontrolling interests
|
|
(2)
|
|
(1)
|
|
(5)
|
|
(3)
|
Special Items, net
income – noncontrolling interests
|
|
—
|
|
—
|
|
—
|
|
—
|
Special Items, Net
Income –Yum China Holdings, Inc.
|
|
$
(2)
|
|
$
(1)
|
|
$
(5)
|
|
$
(3)
|
Weighted-average
Diluted Shares Outstanding (in millions)
|
|
422
|
|
424
|
|
423
|
|
427
|
Special Items, Diluted
Earnings Per Common Share
|
|
$
—
|
|
$
—
|
|
$ (0.01)
|
|
$ (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.
(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 equity in net earnings (losses)
from equity method investments, income tax, interest income, net,
investment gain or loss, depreciation and amortization, store
impairment charges, and Special Items. Store impairment charges
included as an adjustment item in Adjusted EBITDA primarily
resulted from our semi-annual impairment evaluation of long-lived
assets of individual restaurants, and additional impairment
evaluation whenever events or changes in circumstances indicate
that the carrying value of the assets may not be recoverable. If
these restaurant-level assets were not impaired, depreciation of
the assets would have been recorded and included in EBITDA.
Therefore, store impairment charges were a non-cash item similar to
depreciation and amortization of our long-lived assets of
restaurants. The Company believes that investors and analyst may
find it useful in measuring operating performance without regard to
such non-cash item.
These adjusted measures are not intended to replace the
presentation of our financial results in accordance with
GAAP. Rather, the Company believes that the presentation of
these adjusted measures provides additional information to
investors to facilitate the comparison of past and present results,
excluding those items that the Company does not believe are
indicative of our ongoing operations due to their nature.
Unit Count by Brand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KFC
|
|
|
12/31/2022
|
|
New Builds
|
|
Closures
|
|
Refranchised
|
|
6/30/2023
|
|
|
|
Company-owned
|
|
8,214
|
|
516
|
|
(115)
|
|
(3)
|
|
8,612
|
|
|
|
Franchisees
|
|
880
|
|
75
|
|
(8)
|
|
3
|
|
950
|
|
|
|
Total
|
|
9,094
|
|
591
|
|
(123)
|
|
—
|
|
9,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pizza Hut
|
|
|
12/31/2022
|
|
New Builds
|
|
Closures
|
|
Refranchised
|
|
6/30/2023
|
|
|
|
Company-owned
|
|
2,760
|
|
216
|
|
(49)
|
|
(2)
|
|
2,925
|
|
|
|
Franchisees
|
|
143
|
|
3
|
|
(1)
|
|
2
|
|
147
|
|
|
|
Total
|
|
2,903
|
|
219
|
|
(50)
|
|
—
|
|
3,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others
|
|
|
12/31/2022
|
|
New Builds
|
|
Closures
|
|
6/30/2023
|
|
|
|
|
|
Company-owned
|
|
187
|
|
35
|
|
(12)
|
|
210
|
|
|
|
|
|
Franchisees
|
|
763
|
|
53
|
|
(58)
|
|
758
|
|
|
|
|
|
Total
|
|
950
|
|
88
|
|
(70)
|
|
968
|
|
|
|
|
|
Yum China Holdings, Inc.
|
Segment Results
|
(in US$ million)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended 6/30/2023
|
|
|
KFC
|
|
Pizza Hut
|
|
All Other
Segments
|
|
Corporate
and
Unallocated(1)
|
|
Elimination
|
|
Total
|
Company
sales
|
|
$ 1,954
|
|
$
546
|
|
$
17
|
|
$
—
|
|
$
—
|
|
$ 2,517
|
Franchise fees and
income
|
|
15
|
|
2
|
|
4
|
|
—
|
|
—
|
|
21
|
Revenues from
transactions with franchisees(2)
|
|
11
|
|
1
|
|
17
|
|
60
|
|
—
|
|
89
|
Other
revenues
|
|
4
|
|
5
|
|
144
|
|
10
|
|
(136)
|
|
27
|
Total
revenues
|
|
$ 1,984
|
|
$
554
|
|
$
182
|
|
$
70
|
|
$
(136)
|
|
$ 2,654
|
Company restaurant
expenses
|
|
1,616
|
|
479
|
|
18
|
|
—
|
|
—
|
|
2,113
|
General and
administrative expenses
|
|
67
|
|
30
|
|
10
|
|
46
|
|
—
|
|
153
|
Franchise
expenses
|
|
7
|
|
1
|
|
1
|
|
—
|
|
—
|
|
9
|
Expenses for
transactions with franchisees(2)
|
|
9
|
|
1
|
|
15
|
|
59
|
|
—
|
|
84
|
Other operating costs
and expenses
|
|
4
|
|
4
|
|
142
|
|
10
|
|
(136)
|
|
24
|
Closures and impairment
expenses, net
|
|
8
|
|
4
|
|
2
|
|
—
|
|
—
|
|
14
|
Total costs and
expenses, net
|
|
1,711
|
|
519
|
|
188
|
|
115
|
|
(136)
|
|
2,397
|
Operating Profit
(Loss)
|
|
$
273
|
|
$
35
|
|
$
(6)
|
|
$
(45)
|
|
$
—
|
|
$
257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP Operating Profit to Restaurant
Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended 6/30/2023
|
|
|
KFC
|
|
Pizza Hut
|
|
All Other
Segments
|
|
Corporate
and
Unallocated
|
|
Elimination
|
|
Total
|
GAAP Operating Profit
(Loss)
|
|
$
273
|
|
$
35
|
|
$
(6)
|
|
$
(45)
|
|
$
—
|
|
$
257
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise fees and
income
|
|
15
|
|
2
|
|
4
|
|
—
|
|
—
|
|
21
|
Revenues from
transactions with franchisees
|
|
11
|
|
1
|
|
17
|
|
60
|
|
—
|
|
89
|
Other
revenues
|
|
4
|
|
5
|
|
144
|
|
10
|
|
(136)
|
|
27
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative expenses
|
|
67
|
|
30
|
|
10
|
|
46
|
|
—
|
|
153
|
Franchise
expenses
|
|
7
|
|
1
|
|
1
|
|
—
|
|
—
|
|
9
|
Expenses for
transactions with franchisees
|
|
9
|
|
1
|
|
15
|
|
59
|
|
—
|
|
84
|
Other operating costs
and expenses
|
|
4
|
|
4
|
|
142
|
|
10
|
|
(136)
|
|
24
|
Closures and impairment
expenses, net
|
|
8
|
|
4
|
|
2
|
|
—
|
|
—
|
|
14
|
Restaurant profit
(loss)
|
|
$
338
|
|
$
67
|
|
$
(1)
|
|
$
—
|
|
$
—
|
|
$
404
|
Company
sales
|
|
1,954
|
|
546
|
|
17
|
|
—
|
|
—
|
|
2,517
|
Restaurant margin
%
|
|
17.3 %
|
|
12.4 %
|
|
(9.6) %
|
|
N/A
|
|
N/A
|
|
16.1 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended 6/30/2022
|
|
|
KFC
|
|
Pizza Hut
|
|
All Other
Segments
|
|
Corporate
and
Unallocated(1)
|
|
Elimination
|
|
Total
|
Company
sales
|
|
$ 1,571
|
|
$
443
|
|
$
12
|
|
$
—
|
|
$
—
|
|
$ 2,026
|
Franchise fees and
income
|
|
13
|
|
2
|
|
4
|
|
—
|
|
—
|
|
19
|
Revenues from
transactions with franchisees(2)
|
|
7
|
|
1
|
|
7
|
|
47
|
|
—
|
|
62
|
Other
revenues
|
|
3
|
|
2
|
|
119
|
|
9
|
|
(112)
|
|
21
|
Total
revenues
|
|
$ 1,594
|
|
$
448
|
|
$
142
|
|
$
56
|
|
$
(112)
|
|
$ 2,128
|
Company restaurant
expenses
|
|
1,361
|
|
405
|
|
15
|
|
—
|
|
—
|
|
1,781
|
General and
administrative expenses
|
|
63
|
|
28
|
|
11
|
|
39
|
|
—
|
|
141
|
Franchise
expenses
|
|
6
|
|
1
|
|
1
|
|
—
|
|
—
|
|
8
|
Expenses for
transactions with franchisees(2)
|
|
6
|
|
1
|
|
6
|
|
48
|
|
—
|
|
61
|
Other operating costs
and expenses
|
|
2
|
|
2
|
|
117
|
|
9
|
|
(112)
|
|
18
|
Closures and impairment
expenses, net
|
|
9
|
|
—
|
|
5
|
|
—
|
|
—
|
|
14
|
Other expenses
(income), net
|
|
25
|
|
—
|
|
—
|
|
(1)
|
|
—
|
|
24
|
Total costs and
expenses, net
|
|
1,472
|
|
437
|
|
155
|
|
95
|
|
(112)
|
|
2,047
|
Operating Profit
(Loss)
|
|
$
122
|
|
$
11
|
|
$
(13)
|
|
$
(39)
|
|
$
—
|
|
$
81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP Operating Profit to Restaurant
Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended 6/30/2022
|
|
|
KFC
|
|
Pizza Hut
|
|
All Other
Segments
|
|
Corporate
and
Unallocated
|
|
Elimination
|
|
Total
|
GAAP Operating Profit
(Loss)
|
|
$
122
|
|
$
11
|
|
$
(13)
|
|
$
(39)
|
|
$
—
|
|
$
81
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise fees and
income
|
|
13
|
|
2
|
|
4
|
|
—
|
|
—
|
|
19
|
Revenues from
transactions with franchisees
|
|
7
|
|
1
|
|
7
|
|
47
|
|
—
|
|
62
|
Other
revenues
|
|
3
|
|
2
|
|
119
|
|
9
|
|
(112)
|
|
21
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative expenses
|
|
63
|
|
28
|
|
11
|
|
39
|
|
—
|
|
141
|
Franchise
expenses
|
|
6
|
|
1
|
|
1
|
|
—
|
|
—
|
|
8
|
Expenses for
transactions with franchisees
|
|
6
|
|
1
|
|
6
|
|
48
|
|
—
|
|
61
|
Other operating costs
and expenses
|
|
2
|
|
2
|
|
117
|
|
9
|
|
(112)
|
|
18
|
Closures and impairment
expenses, net
|
|
9
|
|
—
|
|
5
|
|
—
|
|
—
|
|
14
|
Other expenses
(income), net
|
|
25
|
|
—
|
|
—
|
|
(1)
|
|
—
|
|
24
|
Restaurant profit
(loss)
|
|
$
210
|
|
$
38
|
|
$
(3)
|
|
$
—
|
|
$
—
|
|
$
245
|
Company
sales
|
|
1,571
|
|
443
|
|
12
|
|
—
|
|
—
|
|
2,026
|
Restaurant margin
%
|
|
13.4 %
|
|
8.6 %
|
|
(24.5) %
|
|
N/A
|
|
N/A
|
|
12.1 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to Date Ended 6/30/2023
|
|
|
KFC
|
|
Pizza Hut
|
|
All Other
Segments
|
|
Corporate
and
Unallocated(1)
|
|
Elimination
|
|
Total
|
Company
sales
|
|
$ 4,120
|
|
$ 1,137
|
|
$
32
|
|
$
—
|
|
$
—
|
|
$ 5,289
|
Franchise fees and
income
|
|
32
|
|
4
|
|
10
|
|
—
|
|
—
|
|
46
|
Revenues from
transactions with franchisees(2)
|
|
21
|
|
2
|
|
36
|
|
123
|
|
—
|
|
182
|
Other
revenues
|
|
9
|
|
8
|
|
306
|
|
20
|
|
(289)
|
|
54
|
Total
revenues
|
|
$ 4,182
|
|
$ 1,151
|
|
$
384
|
|
$
143
|
|
$
(289)
|
|
$ 5,571
|
Company restaurant
expenses
|
|
3,301
|
|
986
|
|
36
|
|
—
|
|
(1)
|
|
4,322
|
General and
administrative expenses
|
|
135
|
|
59
|
|
21
|
|
101
|
|
—
|
|
316
|
Franchise
expenses
|
|
16
|
|
2
|
|
1
|
|
—
|
|
—
|
|
19
|
Expenses for
transactions with franchisees(2)
|
|
18
|
|
2
|
|
33
|
|
122
|
|
—
|
|
175
|
Other operating costs
and expenses
|
|
8
|
|
7
|
|
303
|
|
18
|
|
(288)
|
|
48
|
Closures and impairment
expenses, net
|
|
9
|
|
5
|
|
3
|
|
—
|
|
—
|
|
17
|
Other expenses
(income), net
|
|
2
|
|
—
|
|
—
|
|
(1)
|
|
—
|
|
1
|
Total costs and
expenses, net
|
|
3,489
|
|
1,061
|
|
397
|
|
240
|
|
(289)
|
|
4,898
|
Operating Profit
(Loss)
|
|
$
693
|
|
$
90
|
|
$
(13)
|
|
$
(97)
|
|
$
—
|
|
$
673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP Operating Profit to Restaurant
Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to Date Ended 6/30/2023
|
|
|
KFC
|
|
Pizza Hut
|
|
All Other Segments
|
|
Corporate
and
Unallocated
|
|
Elimination
|
|
Total
|
GAAP Operating Profit
(Loss)
|
|
$
693
|
|
$
90
|
|
$
(13)
|
|
$
(97)
|
|
$
—
|
|
$
673
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise fees and
income
|
|
32
|
|
4
|
|
10
|
|
—
|
|
—
|
|
46
|
Revenues from
transactions with franchisees
|
|
21
|
|
2
|
|
36
|
|
123
|
|
—
|
|
182
|
Other
revenues
|
|
9
|
|
8
|
|
306
|
|
20
|
|
(289)
|
|
54
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative expenses
|
|
135
|
|
59
|
|
21
|
|
101
|
|
—
|
|
316
|
Franchise
expenses
|
|
16
|
|
2
|
|
1
|
|
—
|
|
—
|
|
19
|
Expenses for
transactions with franchisees
|
|
18
|
|
2
|
|
33
|
|
122
|
|
—
|
|
175
|
Other operating costs
and expenses
|
|
8
|
|
7
|
|
303
|
|
18
|
|
(288)
|
|
48
|
Closures and impairment
expenses, net
|
|
9
|
|
5
|
|
3
|
|
—
|
|
—
|
|
17
|
Other expenses
(income), net
|
|
2
|
|
—
|
|
—
|
|
(1)
|
|
—
|
|
1
|
Restaurant profit
(loss)
|
|
$
819
|
|
$
151
|
|
$
(4)
|
|
$
—
|
|
$
1
|
|
$
967
|
Company
sales
|
|
4,120
|
|
1,137
|
|
32
|
|
—
|
|
—
|
|
5,289
|
Restaurant margin
%
|
|
19.9 %
|
|
13.3 %
|
|
(15.1) %
|
|
N/A
|
|
N/A
|
|
18.3 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to Date Ended 6/30/2022
|
|
|
KFC
|
|
Pizza Hut
|
|
All Other
Segments
|
|
Corporate
and
Unallocated(1)
|
|
Elimination
|
|
Total
|
Company
sales
|
|
$ 3,562
|
|
$
985
|
|
$
27
|
|
$
—
|
|
$
—
|
|
$ 4,574
|
Franchise fees and
income
|
|
29
|
|
4
|
|
10
|
|
—
|
|
—
|
|
43
|
Revenues from
transactions with franchisees(2)
|
|
15
|
|
2
|
|
18
|
|
104
|
|
—
|
|
139
|
Other
revenues
|
|
5
|
|
4
|
|
250
|
|
19
|
|
(238)
|
|
40
|
Total
revenues
|
|
$ 3,611
|
|
$
995
|
|
$
305
|
|
$
123
|
|
$
(238)
|
|
$ 4,796
|
Company restaurant
expenses
|
|
3,050
|
|
889
|
|
37
|
|
—
|
|
2
|
|
3,978
|
General and
administrative expenses
|
|
128
|
|
57
|
|
24
|
|
83
|
|
—
|
|
292
|
Franchise
expenses
|
|
15
|
|
2
|
|
1
|
|
—
|
|
—
|
|
18
|
Expenses for
transactions with franchisees(2)
|
|
14
|
|
2
|
|
15
|
|
105
|
|
—
|
|
136
|
Other operating costs
and expenses
|
|
3
|
|
3
|
|
251
|
|
18
|
|
(240)
|
|
35
|
Closures and impairment
expenses, net
|
|
8
|
|
1
|
|
7
|
|
—
|
|
—
|
|
16
|
Other expenses
(income), net
|
|
51
|
|
—
|
|
—
|
|
(2)
|
|
—
|
|
49
|
Total costs and
expenses, net
|
|
3,269
|
|
954
|
|
335
|
|
204
|
|
(238)
|
|
4,524
|
Operating Profit
(Loss)
|
|
$
342
|
|
$
41
|
|
$
(30)
|
|
$
(81)
|
|
$
—
|
|
$
272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP Operating Profit to Restaurant
Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to Date Ended 6/30/2022
|
|
|
KFC
|
|
Pizza Hut
|
|
All Other
Segments
|
|
Corporate
and
Unallocated
|
|
Elimination
|
|
Total
|
GAAP Operating Profit
(Loss)
|
|
$
342
|
|
$
41
|
|
$
(30)
|
|
$
(81)
|
|
$
—
|
|
$
272
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise fees and
income
|
|
29
|
|
4
|
|
10
|
|
—
|
|
—
|
|
43
|
Revenues from
transactions with franchisees
|
|
15
|
|
2
|
|
18
|
|
104
|
|
—
|
|
139
|
Other
revenues
|
|
5
|
|
4
|
|
250
|
|
19
|
|
(238)
|
|
40
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative expenses
|
|
128
|
|
57
|
|
24
|
|
83
|
|
—
|
|
292
|
Franchise
expenses
|
|
15
|
|
2
|
|
1
|
|
—
|
|
—
|
|
18
|
Expenses for
transactions with franchisees
|
|
14
|
|
2
|
|
15
|
|
105
|
|
—
|
|
136
|
Other operating costs
and expenses
|
|
3
|
|
3
|
|
251
|
|
18
|
|
(240)
|
|
35
|
Closures and impairment
expenses, net
|
|
8
|
|
1
|
|
7
|
|
—
|
|
—
|
|
16
|
Other expenses
(income), net
|
|
51
|
|
—
|
|
—
|
|
(2)
|
|
—
|
|
49
|
Restaurant profit
(loss)
|
|
$
512
|
|
$
96
|
|
$
(10)
|
|
$
—
|
|
$
(2)
|
|
$
596
|
Company
sales
|
|
3,562
|
|
985
|
|
27
|
|
—
|
|
—
|
|
4,574
|
Restaurant margin
%
|
|
14.4 %
|
|
9.8 %
|
|
(39.1) %
|
|
N/A
|
|
N/A
|
|
13.0 %
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The above tables
reconcile segment information, which is based on management
responsibility, with our Condensed Consolidated
Statements of Income.
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(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.
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(2) Primarily
includes
revenues and associated expenses of
transactions with franchisees 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.
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View original
content:https://www.prnewswire.com/news-releases/yum-china-reports-second-quarter-2023-results-301889130.html
SOURCE Yum China Holdings, Inc.