EX-99.1 3 yumc-ex99_1.htm EX-99.1 EX-99.1

Exhibit 99.1

img85703795_0.jpg 

Yum China Reports Second Quarter Results

Record Second Quarter Revenue Led by Same-store Transaction Growth and New Unit Growth

Improved OP Margin and Achieved Record Second Quarter Operating Profit

Operating Profit Grew 4%, Core Operating Profit1 Grew 12%, Diluted EPS Grew 17%

Record First Half Openings of 779 Net New Stores and Cash Returns to Shareholders of Nearly $1 Billion

 

Shanghai, China (August 5, 2024) – 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, 2024.

Second Quarter Highlights

•
Total system sales grew 4% year over year ("YoY"), excluding foreign currency translation (“F/X”), on top of last year’s high base. The growth was primarily attributable to 8% of net new unit contribution.2
•
Total store count reached 15,423 as of June 30, 2024, including 10,931 KFC stores and 3,504 Pizza Hut stores. The Company opened 401 net new stores in the quarter. 99 net new stores, or 25%, were opened by franchisees.
•
Total revenues increased 1% YoY to $2.68 billion, a record-high for the second quarter. Excluding F/X, total revenues would have been $85 million higher, or a 4% increase YoY.
•
Same-store sales reached 96% of the prior year's level. Same-store transactions grew 4% YoY.
•
Operating profit grew 4% YoY to $266 million, a record level for the second quarter. Excluding F/X, operating profit would have been $9 million higher, or a 7% increase YoY. Core operating profit1 grew 12% YoY to $275 million.
•
OP Margin3 was 9.9%, an increase of 20 basis points YoY, supported by resilient restaurant margins and savings in G&A expenses.
•
Restaurant margin was 15.5%. Excluding $12 million in items affecting comparability, restaurant margin was approximately the same as the second quarter last year. Improvement in operational efficiencies supported margin stability.
•
Diluted EPS increased 17% YoY to $0.55, a record level for the second quarter, or up 19% YoY excluding F/X.
•
Delivery sales grew 11% YoY, maintaining the double-digit growth Yum China has carried over the past decade. Delivery contributed approximately 38% of KFC and Pizza Hut's Company sales.
•
Digital sales4 reached $2.2 billion, with digital ordering accounting for approximately 90% of total Company sales.
•
Total membership of KFC and Pizza Hut exceeded 495 million. Member sales accounted for over 65% of KFC and Pizza Hut’s system sales in aggregate.
•
Yum China returned $249 million to shareholders in the second quarter through share repurchases and cash dividends. Year to date, the Company has returned nearly $1 billion to shareholders, exceeding its full-year 2023 returns.

 

Joey Wat, CEO of Yum China, commented, “We achieved our most profitable second quarter since the spin-off, with core operating profit growing by 12% despite challenging industry dynamics. Our sharp focus on value-for-money and innovative new products worked well, driving robust same-store transaction growth. We took proactive actions to improve operational efficiency, stabilizing restaurant margin and expanding OP margin year over year.”

Wat added, “By reducing the complexity of menus and operations, and harnessing the power of automation and AI, we improved operational efficiency. These measures gave us the flexibility to invest in menu innovation and compete on value. KFC has successfully gained market share on delivery platforms by expanding its price range and lowering delivery fees. Pizza Hut attracted value-conscious customers with its entry-price pizzas and solo diners with its Pizza Dough Burger. Our business model breakthroughs enabled us to broaden our addressable market and capture more customer occasions. Our side-by-side KCOFFEE cafe and Pizza Hut WOW store model delivered incremental sales and showed great future potential. Our new stores maintained good returns, with a consistent payback period of 2 years for KFC and an improved level of 2 to 3 years for Pizza Hut. With our industry-leading capabilities and scale, we are turning challenges to our competitive advantage. We believe that we are well positioned to capture the long-term growth opportunities in China and, ultimately, create enduring value for our shareholders.”

 

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 OP margin refers to operating profit as a percentage of total revenues.

4 Digital sales refer to sales at Company-owned stores where orderings were placed digitally.

1

 

 

 

Key Financial Results

 

Second Quarter

 

 

 

Year to Date Ended 6/30

 

 

 

 

 

 

%/ppts Change

 

 

 

 

 

 

 

 

%/ppts Change

 

 

2024

 

 

2023

 

 

Reported

 

 

Ex F/X

 

 

 

2024

 

 

2023

 

 

Reported

 

 

Ex F/X

 

System Sales Growth (5) (%)

 

4

 

 

 

32

 

 

NM

 

 

NM

 

 

 

 

5

 

 

 

24

 

 

NM

 

 

NM

 

Same-Store Sales Growth (5) (%)

 

(4

)

 

 

15

 

 

NM

 

 

NM

 

 

 

 

(3

)

 

 

11

 

 

NM

 

 

NM

 

Operating Profit ($mn)

 

266

 

 

 

257

 

 

 

+4

 

 

 

+7

 

 

 

 

640

 

 

 

673

 

 

 

(5

)

 

 

—

 

Adjusted Operating Profit (6) ($mn)

 

266

 

 

 

259

 

 

 

+3

 

 

 

+6

 

 

 

 

640

 

 

 

678

 

 

 

(6

)

 

 

(1

)

Core Operating Profit (6) (7) ($mn)

 

275

 

 

 

247

 

 

NM

 

 

 

+12

 

 

 

 

671

 

 

 

639

 

 

NM

 

 

 

+5

 

OP Margin (%)

 

9.9

 

 

 

9.7

 

 

 

+0.2

 

 

 

+0.2

 

 

 

 

11.4

 

 

 

12.1

 

 

 

(0.7

)

 

 

(0.7

)

Core OP Margin (6) (8) (%)

 

10.0

 

 

 

9.3

 

 

NM

 

 

 

+0.7

 

 

 

 

11.4

 

 

 

11.5

 

 

NM

 

 

 

(0.1

)

Net Income ($mn)

 

212

 

 

 

197

 

 

 

+8

 

 

 

+11

 

 

 

 

499

 

 

 

486

 

 

 

+3

 

 

 

+7

 

Adjusted Net Income (6) ($mn)

 

212

 

 

 

199

 

 

 

+7

 

 

 

+10

 

 

 

 

499

 

 

 

491

 

 

 

+2

 

 

 

+6

 

Diluted Earnings
  Per Common Share ($)

 

0.55

 

 

 

0.47

 

 

 

+17

 

 

 

+19

 

 

 

 

1.26

 

 

 

1.15

 

 

 

+10

 

 

 

+14

 

Adjusted Diluted Earnings
  Per Common Share (6) ($)

 

0.55

 

 

 

0.47

 

 

 

+17

 

 

 

+19

 

 

 

 

1.26

 

 

 

1.16

 

 

 

+9

 

 

 

+13

 

5 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.

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

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

8 Core OP margin refers to core operating profit as a percentage of total revenues excluding F/X.

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

Percentages may not recompute due to rounding.

NM refers to not meaningful.

 

KFC

 

 

Second Quarter

 

Year to Date Ended 6/30

 

 

 

 

 

 

 

 

%/ppts Change

 

 

 

 

 

 

 

%/ppts Change

 

 

2024

 

 

2023

 

 

Reported

 

 

Ex F/X

 

2024

 

 

2023

 

 

Reported

 

 

Ex F/X

 

Restaurants

 

10,931

 

 

 

9,562

 

 

 

+14

 

 

NM

 

 

10,931

 

 

 

9,562

 

 

 

+14

 

 

NM

 

System Sales Growth (%)

 

5

 

 

 

32

 

 

NM

 

 

NM

 

 

6

 

 

 

24

 

 

NM

 

 

NM

 

Same-Store Sales Growth (%)

 

(3

)

 

 

15

 

 

NM

 

 

NM

 

 

(3

)

 

 

11

 

 

NM

 

 

NM

 

Total Revenues ($mn)

 

2,014

 

 

 

1,984

 

 

 

+2

 

 

 

+5

 

 

4,244

 

 

 

4,182

 

 

 

+2

 

 

 

+6

 

Operating Profit ($mn)

 

264

 

 

 

273

 

 

 

(3

)

 

 

—

 

 

636

 

 

 

693

 

 

 

(8

)

 

 

(4

)

Core Operating Profit ($mn)

 

273

 

 

 

263

 

 

NM

 

 

 

+4

 

 

665

 

 

 

659

 

 

NM

 

 

 

+1

 

Restaurant Margin (%)

 

16.2

 

 

 

17.3

 

 

 

(1.1

)

 

 

(1.1

)

 

17.8

 

 

 

19.9

 

 

 

(2.1

)

 

 

(2.1

)
•
System sales for KFC grew 5% YoY for the quarter, on top of high base last year, primarily driven by net new unit contribution of 8%.
•
KFC opened 328 net new stores during the quarter. 74 net new stores, or 23%, were opened by franchisees. Total store count reached 10,931 as of June 30, 2024.
•
Operating profit was $264 million. Core operating profit was $273 million for the quarter, up 4% YoY.
•
Restaurant margin was 16.2% for the quarter. Excluding items affecting comparability, restaurant margin decreased by 60 basis points against a strong comparison in the second quarter of 2023, primarily due to increased value-for-money offerings to drive traffic and wage inflation, partially offset by favorable commodity prices and improved operational efficiency.
•
Delivery sales grew 12% YoY, contributing approximately 38% of KFC’s Company sales for the quarter. Off-premises dining accounted for approximately 67% of KFC's Company sales.

2

 

Pizza Hut

 

Second Quarter

 

Year to Date Ended 6/30

 

 

 

 

 

 

 

 

%/ppts Change

 

 

 

 

 

 

 

%/ppts Change

 

 

2024

 

 

2023

 

 

Reported

 

 

Ex F/X

 

2024

 

 

2023

 

 

Reported

 

 

Ex F/X

 

Restaurants

 

3,504

 

 

 

3,072

 

 

 

+14

 

 

NM

 

 

3,504

 

 

 

3,072

 

 

 

+14

 

 

NM

 

System Sales Growth (%)

 

1

 

 

 

30

 

 

NM

 

 

NM

 

 

3

 

 

 

23

 

 

NM

 

 

NM

 

Same-Store Sales Growth (%)

 

(8

)

 

 

13

 

 

NM

 

 

NM

 

 

(7

)

 

 

10

 

 

NM

 

 

NM

 

Total Revenues ($mn)

 

540

 

 

 

554

 

 

 

(2

)

 

 

+1

 

 

1,135

 

 

 

1,151

 

 

 

(1

)

 

 

+3

 

Operating Profit ($mn)

 

40

 

 

 

35

 

 

 

+13

 

 

 

+18

 

 

87

 

 

 

90

 

 

 

(4

)

 

 

+1

 

Core Operating Profit ($mn)

 

41

 

 

 

34

 

 

NM

 

 

 

+23

 

 

91

 

 

 

86

 

 

NM

 

 

 

+8

 

Restaurant Margin (%)

 

13.2

 

 

 

12.4

 

 

 

+0.8

 

 

 

+0.8

 

 

12.8

 

 

 

13.3

 

 

 

(0.5

)

 

 

(0.5

)
•
System sales for Pizza Hut grew 1% YoY for the quarter, on top of high base last year, primarily driven by net new unit contribution of 8%.
•
Pizza Hut opened 79 net new stores during the quarter. Total store count reached 3,504 as of June 30, 2024.
•
Operating profit grew 13% YoY to $40 million, a record level for the second quarter. Core operating profit was $41 million, up 23% YoY.
•
Restaurant margin was 13.2% for the quarter. Excluding items affecting comparability, restaurant margin was up 110 basis points YoY. Higher operational efficiency offset the impact of increased value-for-money offerings and wage inflation, resulting in an increased margin.
•
Delivery sales grew 6%, contributing approximately 38% of Pizza Hut’s Company sales for the quarter. Off-premises dining accounted for approximately 48% of Pizza Hut's Company sales.

Returns to Shareholders

•
Yum China repurchased 5.1 million shares of common stock for $187 million in the quarter. As of June 30, 2024, $666 million remained available for future share repurchases under the current authorization program.
•
Yum China's board of directors declared a cash dividend of $0.16 per share on Yum China’s common stock, payable on September 17, 2024 to shareholders of record as of the close of business on August 27, 2024.
•
In the first half of 2024, the Company returned a record $994 million to shareholders, including buying back 21.7 million shares of common stock, which is equivalent to over 5% of its outstanding shares as of December 31, 2023.

 

Outlook

The Company’s targets for the 2024 fiscal year remain unchanged from the prior period's disclosures.

•
Open approximately 1,500 to 1,700 net new stores.
•
Make capital expenditures in the range of approximately $700 million to $850 million.
•
Return a Company record-setting $1.5 billion to shareholders through quarterly cash dividends and share repurchases.

 

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 8:00 p.m. U.S. Eastern Time on Monday, August 5, 2024 (8:00 a.m. Beijing/Hong Kong Time on Tuesday, August 6, 2024).

A live webcast of the call may be accessed at https://edge.media-server.com/mmc/p/qibtjiz2.

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/10039799-9htky1.html

A replay of the conference call will be available one hour after the call ends until Tuesday, August 13, 2024 and may be accessed by phone at the following numbers:

3

 

 

U.S.:

1 855 883 1031

Mainland China:

400 1209 216

Hong Kong:

800 930 639

U.K.:

0800 031 4295

 

 

Replay PIN:

10039799

 

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 “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, 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 approximately 400,000 employees and operates over 15,000 restaurants under six brands across more than 2,100 cities in China. KFC and Pizza Hut are the leading brands in the quick-service and casual dining restaurant spaces in China, respectively. In addition, Yum China has partnered with Lavazza to develop the Lavazza coffee concept in China. Little Sheep and Huang Ji Huang specialize in Chinese cuisine. Taco Bell offers innovative Mexican-inspired food. 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.

 

Contacts

 

4

 

Investor Relations Contact:

 

 

Tel: +86 21 2407 7556

IR@YumChina.com

 

 

 

Media Contact:

 

 

Tel: +86 21 2407 8288 / +852 2267 5807

Media@YumChina.com

 

5

 

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

 

 

6/30/2024

 

 

6/30/2023

 

 

B/(W)

 

6/30/2024

 

 

6/30/2023

 

 

B/(W)

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company sales

 

$

2,528

 

 

$

2,517

 

 

 

—

 

 

 

$

5,322

 

 

$

5,289

 

 

 

1

 

 

Franchise fees and income

 

 

22

 

 

 

21

 

 

 

—

 

 

 

 

47

 

 

 

46

 

 

 

1

 

 

Revenues from transactions with franchisees

 

 

96

 

 

 

89

 

 

 

8

 

 

 

 

203

 

 

 

182

 

 

 

11

 

 

Other revenues

 

 

33

 

 

 

27

 

 

 

20

 

 

 

 

65

 

 

 

54

 

 

 

19

 

 

Total revenues

 

 

2,679

 

 

 

2,654

 

 

 

1

 

 

 

 

5,637

 

 

 

5,571

 

 

 

1

 

 

Costs and Expenses, Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company restaurants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Food and paper

 

 

797

 

 

 

773

 

 

 

(3

)

 

 

 

1,693

 

 

 

1,608

 

 

 

(5

)

 

Payroll and employee benefits

 

 

666

 

 

 

665

 

 

 

—

 

 

 

 

1,374

 

 

 

1,348

 

 

 

(2

)

 

Occupancy and other operating expenses

 

 

674

 

 

 

675

 

 

 

—

 

 

 

 

1,371

 

 

 

1,366

 

 

 

—

 

 

Company restaurant expenses

 

 

2,137

 

 

 

2,113

 

 

 

(1

)

 

 

 

4,438

 

 

 

4,322

 

 

 

(3

)

 

General and administrative expenses

 

 

133

 

 

 

153

 

 

 

13

 

 

 

 

273

 

 

 

316

 

 

 

14

 

 

Franchise expenses

 

 

9

 

 

 

9

 

 

 

(6

)

 

 

 

19

 

 

 

19

 

 

 

(3

)

 

Expenses for transactions with franchisees

 

 

92

 

 

 

84

 

 

 

(8

)

 

 

 

196

 

 

 

175

 

 

 

(11

)

 

Other operating costs and expenses

 

 

29

 

 

 

24

 

 

 

(22

)

 

 

 

58

 

 

 

48

 

 

 

(21

)

 

Closures and impairment expenses, net

 

 

13

 

 

 

14

 

 

 

13

 

 

 

 

14

 

 

 

17

 

 

 

18

 

 

Other (income) expenses, net

 

 

—

 

 

 

—

 

 

NM

 

 

 

 

(1

)

 

 

1

 

 

NM

 

 

Total costs and expenses, net

 

 

2,413

 

 

 

2,397

 

 

 

(1

)

 

 

 

4,997

 

 

 

4,898

 

 

 

(2

)

 

Operating Profit

 

 

266

 

 

 

257

 

 

 

4

 

 

 

 

640

 

 

 

673

 

 

 

(5

)

 

Interest income, net

 

 

31

 

 

 

40

 

 

 

(21

)

 

 

 

69

 

 

 

78

 

 

 

(11

)

 

Investment gain (loss)

 

 

8

 

 

 

(11

)

 

NM

 

 

 

 

16

 

 

 

(28

)

 

NM

 

 

Income Before Income Taxes and
  Equity in Net Earnings (Losses) from
  Equity Method Investments

 

 

305

 

 

 

286

 

 

 

7

 

 

 

 

725

 

 

 

723

 

 

 

—

 

 

Income tax provision

 

 

(77

)

 

 

(71

)

 

 

(9

)

 

 

 

(190

)

 

 

(196

)

 

 

3

 

 

Equity in net earnings (losses) from
   equity method investments

 

 

—

 

 

 

(1

)

 

 

47

 

 

 

 

—

 

 

 

—

 

 

 

8

 

 

Net income – including noncontrolling interests

 

 

228

 

 

 

214

 

 

 

7

 

 

 

 

535

 

 

 

527

 

 

 

2

 

 

Net income – noncontrolling interests

 

 

16

 

 

 

17

 

 

 

5

 

 

 

 

36

 

 

 

41

 

 

 

12

 

 

Net Income – Yum China Holdings, Inc.

 

$

212

 

 

$

197

 

 

 

8

 

 

 

$

499

 

 

$

486

 

 

 

3

 

 

Effective tax rate

 

 

25.2

%

 

 

24.7

%

 

 

(0.5

)

ppts.

 

 

26.2

%

 

 

27.0

%

 

 

0.8

 

ppts.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Common Share

 

$

0.55

 

 

$

0.47

 

 

 

 

 

 

$

1.27

 

 

$

1.16

 

 

 

 

 

Weighted-average shares outstanding
    (in millions)

 

 

389

 

 

 

418

 

 

 

 

 

 

 

395

 

 

 

418

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Common Share

 

$

0.55

 

 

$

0.47

 

 

 

 

 

 

$

1.26

 

 

$

1.15

 

 

 

 

 

Weighted-average shares outstanding
    (in millions)

 

 

391

 

 

 

422

 

 

 

 

 

 

 

397

 

 

 

423

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company sales

 

 

100.0

%

 

 

100.0

%

 

 

 

 

 

 

100.0

%

 

 

100.0

%

 

 

 

 

Food and paper

 

 

31.5

 

 

 

30.7

 

 

 

(0.8

)

ppts.

 

 

31.8

 

 

 

30.4

 

 

 

(1.4

)

ppts.

Payroll and employee benefits

 

 

26.3

 

 

 

26.4

 

 

 

0.1

 

ppts.

 

 

25.8

 

 

 

25.5

 

 

 

(0.3

)

ppts.

Occupancy and other operating expenses

 

 

26.7

 

 

 

26.8

 

 

 

0.1

 

ppts.

 

 

25.8

 

 

 

25.8

 

 

 

—

 

ppts.

Restaurant margin

 

 

15.5

%

 

 

16.1

%

 

 

(0.6

)

ppts.

 

 

16.6

%

 

 

18.3

%

 

 

(1.7

)

ppts.

 

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

 

6

 

Yum China Holdings, Inc.

KFC Operating Results

(in US$ million)

(unaudited)

 

 

 

Quarter Ended

 

 

% Change

 

Year to Date Ended

 

 

% Change

 

 

6/30/2024

 

 

6/30/2023

 

 

B/(W)

 

6/30/2024

 

 

6/30/2023

 

 

B/(W)

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company sales

 

$

1,983

 

 

$

1,954

 

 

 

1

 

 

 

$

4,176

 

 

$

4,120

 

 

 

1

 

 

Franchise fees and income

 

 

16

 

 

 

15

 

 

 

7

 

 

 

 

34

 

 

 

32

 

 

 

7

 

 

Revenues from transactions with franchisees

 

 

12

 

 

 

11

 

 

 

22

 

 

 

 

26

 

 

 

21

 

 

 

26

 

 

Other revenues

 

 

3

 

 

 

4

 

 

 

(21

)

 

 

 

8

 

 

 

9

 

 

 

(14

)

 

Total revenues

 

 

2,014

 

 

 

1,984

 

 

 

2

 

 

 

 

4,244

 

 

 

4,182

 

 

 

2

 

 

Costs and Expenses, Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company restaurants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Food and paper

 

 

626

 

 

 

602

 

 

 

(4

)

 

 

 

1,320

 

 

 

1,248

 

 

 

(6

)

 

Payroll and employee benefits

 

 

513

 

 

 

498

 

 

 

(3

)

 

 

 

1,055

 

 

 

1,010

 

 

 

(4

)

 

Occupancy and other operating expenses

 

 

524

 

 

 

516

 

 

 

(1

)

 

 

 

1,059

 

 

 

1,043

 

 

 

(2

)

 

Company restaurant expenses

 

 

1,663

 

 

 

1,616

 

 

 

(3

)

 

 

 

3,434

 

 

 

3,301

 

 

 

(4

)

 

General and administrative expenses

 

 

60

 

 

 

67

 

 

 

10

 

 

 

 

121

 

 

 

135

 

 

 

10

 

 

Franchise expenses

 

 

8

 

 

 

7

 

 

 

(5

)

 

 

 

17

 

 

 

16

 

 

 

(3

)

 

Expenses for transactions with franchisees

 

 

11

 

 

 

9

 

 

 

(18

)

 

 

 

23

 

 

 

18

 

 

 

(22

)

 

Other operating costs and expenses

 

 

2

 

 

 

4

 

 

 

32

 

 

 

 

6

 

 

 

8

 

 

 

18

 

 

Closures and impairment expenses, net

 

 

6

 

 

 

8

 

 

 

14

 

 

 

 

7

 

 

 

9

 

 

 

14

 

 

Other expenses, net

 

 

—

 

 

 

—

 

 

 

5

 

 

 

 

—

 

 

 

2

 

 

 

89

 

 

Total costs and expenses, net

 

 

1,750

 

 

 

1,711

 

 

 

(2

)

 

 

 

3,608

 

 

 

3,489

 

 

 

(3

)

 

Operating Profit

 

$

264

 

 

$

273

 

 

 

(3

)

 

 

$

636

 

 

$

693

 

 

 

(8

)

 

Company sales

 

 

100.0

%

 

 

100.0

%

 

 

 

 

 

 

100.0

%

 

 

100.0

%

 

 

 

 

Food and paper

 

 

31.6

 

 

 

30.8

 

 

 

(0.8

)

ppts.

 

 

31.6

 

 

 

30.3

 

 

 

(1.3

)

ppts.

Payroll and employee benefits

 

 

25.9

 

 

 

25.5

 

 

 

(0.4

)

ppts.

 

 

25.3

 

 

 

24.5

 

 

 

(0.8

)

ppts.

Occupancy and other operating expenses

 

 

26.3

 

 

 

26.4

 

 

 

0.1

 

ppts.

 

 

25.3

 

 

 

25.3

 

 

 

—

 

ppts.

Restaurant margin

 

 

16.2

%

 

 

17.3

%

 

 

(1.1

)

ppts.

 

 

17.8

%

 

 

19.9

%

 

 

(2.1

)

ppts.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentages may not recompute due to rounding.

7

 

Yum China Holdings, Inc.

Pizza Hut Operating Results

(in US$ million)

(unaudited)

 

 

 

Quarter Ended

 

 

% Change

 

Year to Date Ended

 

 

% Change

 

 

6/30/2024

 

 

6/30/2023

 

 

B/(W)

 

6/30/2024

 

 

6/30/2023

 

 

B/(W)

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company sales

 

$

530

 

 

$

546

 

 

 

(3

)

 

 

$

1,117

 

 

$

1,137

 

 

 

(2

)

 

Franchise fees and income

 

 

2

 

 

 

2

 

 

 

4

 

 

 

 

4

 

 

 

4

 

 

 

2

 

 

Revenues from transactions with franchisees

 

 

1

 

 

 

1

 

 

 

6

 

 

 

 

2

 

 

 

2

 

 

 

(1

)

 

Other revenues

 

 

7

 

 

 

5

 

 

 

36

 

 

 

 

12

 

 

 

8

 

 

 

55

 

 

Total revenues

 

 

540

 

 

 

554

 

 

 

(2

)

 

 

 

1,135

 

 

 

1,151

 

 

 

(1

)

 

Costs and Expenses, Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company restaurants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Food and paper

 

 

167

 

 

 

166

 

 

 

(1

)

 

 

 

365

 

 

 

350

 

 

 

(4

)

 

Payroll and employee benefits

 

 

150

 

 

 

162

 

 

 

8

 

 

 

 

312

 

 

 

329

 

 

 

5

 

 

Occupancy and other operating expenses

 

 

143

 

 

 

151

 

 

 

5

 

 

 

 

297

 

 

 

307

 

 

 

3

 

 

Company restaurant expenses

 

 

460

 

 

 

479

 

 

 

4

 

 

 

 

974

 

 

 

986

 

 

 

1

 

 

General and administrative expenses

 

 

27

 

 

 

30

 

 

 

9

 

 

 

 

54

 

 

 

59

 

 

 

8

 

 

Franchise expenses

 

 

1

 

 

 

1

 

 

 

(5

)

 

 

 

2

 

 

 

2

 

 

 

(1

)

 

Expenses for transactions with franchisees

 

 

1

 

 

 

1

 

 

 

4

 

 

 

 

2

 

 

 

2

 

 

 

7

 

 

Other operating costs and expenses

 

 

6

 

 

 

4

 

 

 

(46

)

 

 

 

11

 

 

 

7

 

 

 

(68

)

 

Closures and impairment expenses, net

 

 

5

 

 

 

4

 

 

 

(6

)

 

 

 

5

 

 

 

5

 

 

 

1

 

 

Total costs and expenses, net

 

 

500

 

 

 

519

 

 

 

4

 

 

 

 

1,048

 

 

 

1,061

 

 

 

1

 

 

Operating Profit

 

$

40

 

 

$

35

 

 

 

13

 

 

 

$

87

 

 

$

90

 

 

 

(4

)

 

Company sales

 

 

100.0

%

 

 

100.0

%

 

 

 

 

 

 

100.0

%

 

 

100.0

%

 

 

 

 

Food and paper

 

 

31.6

 

 

 

30.3

 

 

 

(1.3

)

ppts.

 

 

32.7

 

 

 

30.8

 

 

 

(1.9

)

ppts.

Payroll and employee benefits

 

 

28.3

 

 

 

29.7

 

 

 

1.4

 

ppts.

 

 

27.9

 

 

 

28.9

 

 

 

1.0

 

ppts.

Occupancy and other operating expenses

 

 

26.9

 

 

 

27.6

 

 

 

0.7

 

ppts.

 

 

26.6

 

 

 

27.0

 

 

 

0.4

 

ppts.

Restaurant margin

 

 

13.2

%

 

 

12.4

%

 

 

0.8

 

ppts.

 

 

12.8

%

 

 

13.3

%

 

 

(0.5

)

ppts.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentages may not recompute due to rounding.

 

 

8

 

Yum China Holdings, Inc.

Condensed Consolidated Balance Sheets

(in US$ million)

 

 

 

 

6/30/2024

 

 

12/31/2023

 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,043

 

 

$

1,128

 

Short-term investments

 

 

1,434

 

 

 

1,472

 

Accounts receivable, net

 

 

74

 

 

 

68

 

Inventories, net

 

 

362

 

 

 

424

 

Prepaid expenses and other current assets

 

 

368

 

 

 

339

 

Total Current Assets

 

 

3,281

 

 

 

3,431

 

Property, plant and equipment, net

 

 

2,314

 

 

 

2,310

 

Operating lease right-of-use assets

 

 

2,151

 

 

 

2,217

 

Goodwill

 

 

1,888

 

 

 

1,932

 

Intangible assets, net

 

 

146

 

 

 

150

 

Long-term bank deposits and notes

 

 

1,051

 

 

 

1,265

 

Equity investments

 

 

343

 

 

 

332

 

Deferred income tax assets

 

 

132

 

 

 

129

 

Other assets

 

 

262

 

 

 

265

 

Total Assets

 

 

11,568

 

 

 

12,031

 

 

 

 

 

 

 

 

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable and other current liabilities

 

 

2,149

 

 

 

2,164

 

Short-term borrowings

 

 

416

 

 

 

168

 

Income taxes payable

 

 

113

 

 

 

90

 

Total Current Liabilities

 

 

2,678

 

 

 

2,422

 

Non-current operating lease liabilities

 

 

1,827

 

 

 

1,899

 

Non-current finance lease liabilities

 

 

46

 

 

 

44

 

Deferred income tax liabilities

 

 

386

 

 

 

390

 

Other liabilities

 

 

149

 

 

 

157

 

Total Liabilities

 

 

5,086

 

 

 

4,912

 

 

 

 

 

 

 

 

Redeemable Noncontrolling Interest

 

 

13

 

 

 

13

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Common stock, $0.01 par value; 1,000 million shares authorized; 387 million shares
      and 407 million shares issued at June 30, 2024 and December 31, 2023, respectively;
      386 million shares and 407 million shares outstanding at June 30, 2024 and
      December 31, 2023, respectively.

 

 

4

 

 

 

4

 

Treasury stock

 

 

(17

)

 

 

—

 

Additional paid-in capital

 

 

4,103

 

 

 

4,320

 

Retained earnings

 

 

2,048

 

 

 

2,310

 

Accumulated other comprehensive loss

 

 

(326

)

 

 

(229

)

Total Yum China Holdings, Inc. Stockholders' Equity

 

 

5,812

 

 

 

6,405

 

Noncontrolling interests

 

 

657

 

 

 

701

 

Total Equity

 

 

6,469

 

 

 

7,106

 

Total Liabilities, Redeemable Noncontrolling Interest and Equity

 

$

11,568

 

 

$

12,031

 

 

 

 

 

 

 

 

 

 

9

 

Yum China Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(in US$ million)

(unaudited)

 

 

Year to Date Ended

 

 

6/30/2024

 

6/30/2023

 Cash Flows – Operating Activities

 

 

 

 

 

 

 

 

 Net income – including noncontrolling interests

 

$

535

 

 

 

$

527

 

 

 Depreciation and amortization

 

 

235

 

 

 

 

228

 

 Non-cash operating lease cost

 

 

203

 

 

 

 

202

 

 

 Closures and impairment expenses

 

 

14

 

 

 

 

17

 

 

 Investment (gain) loss

 

 

(16

)

 

 

 

28

 

 

 Equity in net (earnings) losses from equity method investments

 

 

—

 

 

 

 

—

 

 

 Distributions of income received from equity method investments

 

 

7

 

 

 

 

8

 

 

 Deferred income taxes

 

 

(2

)

 

 

 

13

 

 

 Share-based compensation expense

 

 

23

 

 

 

 

29

 

 

 Changes in accounts receivable

 

 

(5

)

 

 

 

2

 

 

 Changes in inventories

 

 

52

 

 

 

 

1

 

 

 Changes in prepaid expenses, other current assets and value-added tax assets

 

 

(28

)

 

 

 

19

 

 

 Changes in accounts payable and other current liabilities

 

 

27

 

 

 

 

54

 

 

 Changes in income taxes payable

 

 

25

 

 

 

 

25

 

 

 Changes in non-current operating lease liabilities

 

 

(206

)

 

 

 

(193

)

 

 Other, net

 

 

(21

)

 

 

 

(36

)

 

 Net Cash Provided by Operating Activities

 

 

843

 

 

 

 

924

 

 

 Cash Flows – Investing Activities

 

 

 

 

 

 

 

 

 Capital spending

 

 

(358

)

 

 

 

(332

)

 

 Purchases of short-term investments, long-term bank deposits and notes

 

 

(1,479

)

 

 

 

(2,172

)

 

 Maturities of short-term investments, long-term bank deposits and notes

 

 

1,702

 

 

 

 

1,904

 

 

 Other, net

 

 

3

 

 

 

 

2

 

 

 Net Cash Used in Investing Activities

 

 

(132

)

 

 

 

(598

)

 

 Cash Flows – Financing Activities

 

 

 

 

 

 

 

 

 Proceeds from short-term borrowings

 

 

307

 

 

 

 

—

 

 

 Repayment of short-term borrowings

 

 

(52

)

 

 

 

—

 

 

 Repurchase of shares of common stock

 

 

(869

)

 

 

 

(122

)

 

 Cash dividends paid on common stock

 

 

(126

)

 

 

 

(108

)

 

 Dividends paid to noncontrolling interests

 

 

(28

)

 

 

 

(28

)

 

 Contributions from noncontrolling interests

 

 

—

 

 

 

 

35

 

 

 Payment of acquisition related holdback

 

 

—

 

 

 

 

(3

)

 

 Other, net

 

 

(17

)

 

 

 

(4

)

 

 Net Cash Used in Financing Activities

 

 

(785

)

 

 

 

(230

)

 

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

 

 

(11

)

 

 

 

(37

)

 

 Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash

 

 

(85

)

 

 

 

59

 

 

 Cash, Cash Equivalents, and Restricted Cash - Beginning of Period

 

 

1,128

 

 

 

 

1,130

 

 

 Cash, Cash Equivalents, and Restricted Cash - End of Period

 

$

1,043

 

 

 

$

1,189

 

 

 

10

 

 

 

 

In this press release:

•
Certain performance metrics and non-GAAP measures are presented 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 and franchise 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 restaurants typically generate ongoing franchise fees for the Company at an average rate of approximately 6% of system sales. Franchise 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.

11

 

Unit Count by Brand

 

KFC

 

 

 

12/31/2023

 

 

New Builds

 

 

Closures

 

 

Acquired

 

 

6/30/2024

 

Company-owned

 

 

9,237

 

 

 

614

 

 

 

(112

)

 

 

1

 

 

 

9,740

 

Franchisees

 

 

1,059

 

 

 

144

 

 

 

(11

)

 

 

(1

)

 

 

1,191

 

Total

 

 

10,296

 

 

 

758

 

 

 

(123

)

 

 

—

 

 

 

10,931

 

 

Pizza Hut

 

 

 

12/31/2023

 

 

New Builds

 

 

Closures

 

 

6/30/2024

 

Company-owned

 

 

3,155

 

 

 

246

 

 

 

(60

)

 

 

3,341

 

Franchisees

 

 

157

 

 

 

10

 

 

 

(4

)

 

 

163

 

Total

 

 

3,312

 

 

 

256

 

 

 

(64

)

 

 

3,504

 

 

Others

 

 

 

12/31/2023

 

 

New Builds

 

 

Closures

 

 

6/30/2024

 

Company-owned

 

 

256

 

 

 

10

 

 

 

(69

)

 

 

197

 

Franchisees

 

 

780

 

 

 

51

 

 

 

(40

)

 

 

791

 

Total

 

 

1,036

 

 

 

61

 

 

 

(109

)

 

 

988

 

 

12

 

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:

•
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;
•
Company Restaurant Profit ("Restaurant profit") and Restaurant margin;
•
Core Operating Profit and Core OP margin, which exclude Special Items, and further adjusted for Items Affecting Comparability and the impact of F/X;

 

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 analysts 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. Company restaurant margin percentage 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 purposes of evaluating the performance of our core operations. Core OP margin is defined as Core Operating Profit divided by Total revenues, excluding the impact of F/X.

13

 

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 to Date Ended

 

 

 

6/30/2024

 

 

6/30/2023

 

 

6/30/2024

 

 

6/30/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Reconciliations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Operating Profit to Adjusted Operating Profit

 

 

 

 

 

 

 

 

 

 

 

 

Operating Profit

 

$

266

 

 

$

257

 

 

$

640

 

 

$

673

 

Special Items, Operating Profit

 

 

—

 

 

 

(2

)

 

 

—

 

 

 

(5

)

Adjusted Operating Profit

 

$

266

 

 

$

259

 

 

$

640

 

 

$

678

 

Reconciliation of Net Income to Adjusted Net Income

 

 

 

 

 

 

 

 

 

 

 

 

Net Income – Yum China Holdings, Inc.

 

$

212

 

 

$

197

 

 

$

499

 

 

$

486

 

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

 

 

—

 

 

 

(2

)

 

 

—

 

 

 

(5

)

Adjusted Net Income – Yum China Holdings, Inc.

 

$

212

 

 

$

199

 

 

$

499

 

 

$

491

 

Reconciliation of EPS to Adjusted EPS

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Common Share

 

$

0.55

 

 

$

0.47

 

 

$

1.27

 

 

$

1.16

 

Special Items, Basic Earnings Per Common Share

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(0.01

)

Adjusted Basic Earnings Per Common Share

 

$

0.55

 

 

$

0.47

 

 

$

1.27

 

 

$

1.17

 

Diluted Earnings Per Common Share

 

$

0.55

 

 

$

0.47

 

 

$

1.26

 

 

$

1.15

 

Special Items, Diluted Earnings Per Common Share

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(0.01

)

Adjusted Diluted Earnings Per Common Share

 

$

0.55

 

 

$

0.47

 

 

$

1.26

 

 

$

1.16

 

Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate

 

 

 

 

 

 

 

 

 

 

 

 

Effective tax rate

 

 

25.2

%

 

 

24.7

%

 

 

26.2

%

 

 

27.0

%

Impact on effective tax rate as a result of Special Items

 

 

—

%

 

 

0.1

%

 

 

—

%

 

 

0.1

%

Adjusted effective tax rate

 

 

25.2

%

 

 

24.6

%

 

 

26.2

%

 

 

26.9

%

 

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

 

 

Quarter Ended

 

 

Year to Date Ended

 

 

 

6/30/2024

 

 

6/30/2023

 

 

6/30/2024

 

 

6/30/2023

 

Reconciliation of Net Income to Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

Net Income – Yum China Holdings, Inc.

 

$

212

 

 

$

197

 

 

$

499

 

 

$

486

 

Net income – noncontrolling interests

 

 

16

 

 

 

17

 

 

 

36

 

 

 

41

 

Equity in net (earnings) losses from equity method investments

 

 

—

 

 

 

1

 

 

 

—

 

 

 

—

 

Income tax provision

 

 

77

 

 

 

71

 

 

 

190

 

 

 

196

 

Interest income, net

 

 

(31

)

 

 

(40

)

 

 

(69

)

 

 

(78

)

Investment (gain) loss

 

 

(8

)

 

 

11

 

 

 

(16

)

 

 

28

 

Operating Profit

 

 

266

 

 

 

257

 

 

 

640

 

 

 

673

 

Special Items, Operating Profit

 

 

—

 

 

 

2

 

 

 

—

 

 

 

5

 

Adjusted Operating Profit

 

 

266

 

 

 

259

 

 

 

640

 

 

 

678

 

Depreciation and amortization

 

 

118

 

 

 

112

 

 

 

235

 

 

 

228

 

Store impairment charges

 

 

15

 

 

 

17

 

 

 

19

 

 

 

21

 

Adjusted EBITDA

 

$

399

 

 

$

388

 

 

$

894

 

 

$

927

 

 

Details of Special Items are presented below:

 

 

 

Quarter Ended

 

 

Year to Date Ended

 

 

 

6/30/2024

 

 

6/30/2023

 

 

6/30/2024

 

 

6/30/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense for Partner PSU Awards(1)

 

$

—

 

 

$

(2

)

 

$

—

 

 

$

(5

)

Special Items, Operating Profit

 

 

—

 

 

 

(2

)

 

 

—

 

 

 

(5

)

Tax effect on Special Items(2)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Special Items, net income – including noncontrolling interests

 

 

—

 

 

 

(2

)

 

 

—

 

 

 

(5

)

Special Items, net income – noncontrolling interests

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

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

 

$

—

 

 

$

(2

)

 

$

—

 

 

$

(5

)

Weighted-average Diluted Shares Outstanding (in millions)

 

 

391

 

 

 

422

 

 

 

397

 

 

 

423

 

Special Items, Diluted Earnings Per Common Share

 

$

—

 

 

$

—

 

 

$

—

 

 

$

(0.01

)

 

14

 

 

(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. These awards vested as of December 31, 2023 with a payout in the first quarter of 2024. 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.

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

 

 

Quarter ended

 

 

% Change

 

Year to Date Ended

 

 

% Change

 

6/30/2024

 

 

6/30/2023

 

 

B/(W)

 

6/30/2024

 

 

6/30/2023

 

 

B/(W)

Reconciliation of Operating Profit to Core Operating Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit

$

266

 

 

$

257

 

 

 

4

 

 

 

$

640

 

 

$

673

 

 

 

(5

)

 

Special Items, Operating Profit

 

—

 

 

 

2

 

 

 

 

 

 

 

—

 

 

 

5

 

 

 

 

 

Adjusted Operating Profit

$

266

 

 

$

259

 

 

 

3

 

 

 

$

640

 

 

$

678

 

 

 

(6

)

 

Items Affecting Comparability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Temporary relief from landlords(1)

 

—

 

 

 

(2

)

 

 

 

 

 

 

—

 

 

 

(10

)

 

 

 

 

Temporary relief from government agencies(2)

 

—

 

 

 

(1

)

 

 

 

 

 

 

—

 

 

 

(3

)

 

 

 

 

VAT deductions(3)

 

—

 

 

 

(9

)

 

 

 

 

 

 

—

 

 

 

(28

)

 

 

 

 

Amortization of reacquired franchise rights(4)

 

—

 

 

 

—

 

 

 

 

 

 

 

—

 

 

 

2

 

 

 

 

 

F/X impact

 

9

 

 

 

—

 

 

 

 

 

 

 

31

 

 

 

—

 

 

 

 

 

Core Operating Profit

$

275

 

 

$

247

 

 

 

12

 

 

 

$

671

 

 

$

639

 

 

 

5

 

 

Total revenues

 

2,679

 

 

 

2,654

 

 

 

1

 

 

 

 

5,637

 

 

 

5,571

 

 

 

1

 

 

F/X impact

 

85

 

 

 

—

 

 

 

 

 

 

 

239

 

 

 

—

 

 

 

 

 

Total revenues, excluding the impact of F/X

$

2,764

 

 

$

2,654

 

 

 

4

 

 

 

$

5,876

 

 

$

5,571

 

 

 

5

 

 

Core OP margin

 

10.0

%

 

 

9.3

%

 

 

0.7

 

ppts.

 

 

11.4

%

 

 

11.5

%

 

 

(0.1

)

ppts.

 

(1)
In relation to the effects of the COVID-19 pandemic, the Company was granted lease concessions from landlords. The lease concessions were primarily in the form of rent reduction over the period of time when the Company’s restaurant business was adversely impacted. Such concessions were primarily recognized as a reduction of Occupancy and other operating expenses within Company restaurant expenses included in the Condensed Consolidated Statement of Income in the period the concession was granted.
(2)
In relation to the effects of the COVID-19 pandemic, the Company received government subsidies for employee benefits and providing training to employees. The temporary relief was primarily recognized as a reduction to Payroll and employee benefits within Company restaurant expenses included in the Condensed Consolidated Statement of Income.
(3)
Pursuant to the tax policy issued by relevant government authorities, general VAT taxpayers in certain industries that meet certain criteria are allowed to claim an additional 10% or 15% input VAT, which will be used to offset their VAT payables. This VAT policy was further extended to December 31, 2023 but the additional deduction was reduced to 5% or 10% respectively. VAT deductions were primarily recorded as a reduction to Food and paper and Occupancy and other operating expenses within Company restaurant expenses included in the Condensed Consolidated Statements of Income. Such preferential policy was not extended in 2024.
(4)
As a result of the acquisition of our previously unconsolidated joint ventures of Hangzhou KFC, Suzhou KFC and Wuxi KFC, $66 million, $61 million and $61 million of the purchase price were allocated to intangible assets related to reacquired franchise rights, respectively, which were amortized over the remaining franchise contract period of 1 year, 2.4 years and 5 years, respectively. The reacquired franchise rights were fully amortized as of March 31, 2023. The amortization was recorded in Other (Income) Expenses, net included in the Condensed Consolidated Statements of Income.

15

 

Yum China Holdings, Inc.

Segment Results

(in US$ million)

(unaudited)

 

 

 

Quarter Ended 6/30/2024

 

 

 

KFC

 

 

Pizza Hut

 

 

All Other Segments

 

 

Corporate
and
Unallocated(1)

 

 

Elimination

 

 

Total

 

Company sales

 

$

1,983

 

 

$

530

 

 

$

15

 

 

$

—

 

 

$

—

 

 

$

2,528

 

Franchise fees and income

 

 

16

 

 

 

2

 

 

 

4

 

 

 

—

 

 

 

—

 

 

 

22

 

Revenues from transactions with franchisees(2)

 

 

12

 

 

 

1

 

 

 

16

 

 

 

67

 

 

 

—

 

 

 

96

 

Other revenues

 

 

3

 

 

 

7

 

 

 

144

 

 

 

16

 

 

 

(137

)

 

 

33

 

Total revenues

 

$

2,014

 

 

$

540

 

 

$

179

 

 

$

83

 

 

$

(137

)

 

$

2,679

 

Company restaurant expenses

 

 

1,663

 

 

 

460

 

 

 

14

 

 

 

—

 

 

 

—

 

 

 

2,137

 

General and administrative expenses

 

 

60

 

 

 

27

 

 

 

10

 

 

 

36

 

 

 

—

 

 

 

133

 

Franchise expenses

 

 

8

 

 

 

1

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

9

 

Expenses for transactions with franchisees(2)

 

 

11

 

 

 

1

 

 

 

14

 

 

 

66

 

 

 

—

 

 

 

92

 

Other operating costs and expenses

 

 

2

 

 

 

6

 

 

 

142

 

 

 

16

 

 

 

(137

)

 

 

29

 

Closures and impairment expenses, net

 

 

6

 

 

 

5

 

 

 

2

 

 

 

—

 

 

 

—

 

 

 

13

 

Total costs and expenses, net

 

 

1,750

 

 

 

500

 

 

 

182

 

 

 

118

 

 

 

(137

)

 

 

2,413

 

Operating Profit (Loss)

 

$

264

 

 

$

40

 

 

$

(3

)

 

$

(35

)

 

$

—

 

 

$

266

 

 

Reconciliation of GAAP Operating Profit to Restaurant Profit

 

 

 

Quarter Ended 6/30/2024

 

 

 

KFC

 

 

Pizza Hut

 

 

All Other Segments

 

 

Corporate
and
Unallocated(1)

 

 

Elimination

 

 

Total

 

GAAP Operating Profit (Loss)

 

$

264

 

 

$

40

 

 

$

(3

)

 

$

(35

)

 

$

—

 

 

$

266

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Franchise fees and income

 

 

16

 

 

 

2

 

 

 

4

 

 

 

—

 

 

 

—

 

 

 

22

 

Revenues from transactions with franchisees(2)

 

 

12

 

 

 

1

 

 

 

16

 

 

 

67

 

 

 

—

 

 

 

96

 

Other revenues

 

 

3

 

 

 

7

 

 

 

144

 

 

 

16

 

 

 

(137

)

 

 

33

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

60

 

 

 

27

 

 

 

10

 

 

 

36

 

 

 

—

 

 

 

133

 

Franchise expenses

 

 

8

 

 

 

1

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

9

 

Expenses for transactions with franchisees(2)

 

 

11

 

 

 

1

 

 

 

14

 

 

 

66

 

 

 

—

 

 

 

92

 

Other operating costs and expenses

 

 

2

 

 

 

6

 

 

 

142

 

 

 

16

 

 

 

(137

)

 

 

29

 

Closures and impairment expenses, net

 

 

6

 

 

 

5

 

 

 

2

 

 

 

—

 

 

 

—

 

 

 

13

 

Restaurant profit

 

$

320

 

 

$

70

 

 

$

1

 

 

$

—

 

 

$

—

 

 

$

391

 

Company sales

 

 

1,983

 

 

 

530

 

 

 

15

 

 

 

—

 

 

 

—

 

 

 

2,528

 

Restaurant margin %

 

 

16.2

%

 

 

13.2

%

 

 

5.9

%

 

N/A

 

 

N/A

 

 

 

15.5

%

 

Reconciliation of GAAP Operating Profit to Core Operating Profit

 

 

 

Quarter Ended 6/30/2024

 

 

 

KFC

 

 

Pizza Hut

 

 

All Other Segments

 

 

Corporate
and
Unallocated(1)

 

 

Elimination

 

 

Total

 

GAAP Operating Profit (Loss)

 

$

264

 

 

$

40

 

 

$

(3

)

 

$

(35

)

 

$

—

 

 

$

266

 

Special Items, Operating Profit

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Adjusted Operating Profit (Loss)

 

$

264

 

 

$

40

 

 

$

(3

)

 

$

(35

)

 

$

—

 

 

$

266

 

F/X impact

 

 

9

 

 

 

1

 

 

 

—

 

 

 

(1

)

 

 

—

 

 

 

9

 

Core Operating Profit (Loss)

 

$

273

 

 

$

41

 

 

$

(3

)

 

$

(36

)

 

$

—

 

 

$

275

 

 

 

16

 

 

 

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(1)

 

 

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(2)

 

 

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(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

 

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

%

 

Reconciliation of GAAP Operating Profit to Core Operating Profit

 

 

 

Quarter Ended 6/30/2023

 

 

 

KFC

 

 

Pizza Hut

 

 

All Other Segments

 

 

Corporate
and
Unallocated(1)

 

 

Elimination

 

 

Total

 

GAAP Operating Profit (Loss)

 

$

273

 

 

$

35

 

 

$

(6

)

 

$

(45

)

 

$

—

 

 

$

257

 

Special Items, Operating Profit

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2

 

 

 

—

 

 

 

2

 

Adjusted Operating Profit (Loss)

 

$

273

 

 

$

35

 

 

$

(6

)

 

$

(43

)

 

$

—

 

 

$

259

 

Items Affecting Comparability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Temporary relief from landlords

 

 

(2

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(2

)

Temporary relief from government agencies

 

 

(1

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1

)

VAT deductions

 

 

(7

)

 

 

(1

)

 

 

(1

)

 

 

—

 

 

 

—

 

 

 

(9

)

F/X impact

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Core Operating Profit (Loss)

 

$

263

 

 

$

34

 

 

$

(7

)

 

$

(43

)

 

$

—

 

 

$

247

 

 

 

17

 

 

 

Year to Date Ended 6/30/2024

 

 

 

KFC

 

 

Pizza Hut

 

 

All Other Segments

 

 

Corporate
and
Unallocated(1)

 

 

Elimination

 

 

Total

 

Company sales

 

$

4,176

 

 

$

1,117

 

 

$

29

 

 

$

—

 

 

$

—

 

 

$

5,322

 

Franchise fees and income

 

 

34

 

 

 

4

 

 

 

9

 

 

 

—

 

 

 

—

 

 

 

47

 

Revenues from transactions with franchisees(2)

 

 

26

 

 

 

2

 

 

 

36

 

 

 

139

 

 

 

—

 

 

 

203

 

Other revenues

 

 

8

 

 

 

12

 

 

 

308

 

 

 

31

 

 

 

(294

)

 

 

65

 

Total revenues

 

$

4,244

 

 

$

1,135

 

 

$

382

 

 

$

170

 

 

$

(294

)

 

$

5,637

 

Company restaurant expenses

 

 

3,434

 

 

 

974

 

 

 

31

 

 

 

—

 

 

 

(1

)

 

 

4,438

 

General and administrative expenses

 

 

121

 

 

 

54

 

 

 

20

 

 

 

78

 

 

 

—

 

 

 

273

 

Franchise expenses

 

 

17

 

 

 

2

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

19

 

Expenses for transactions with franchisees(2)

 

 

23

 

 

 

2

 

 

 

33

 

 

 

138

 

 

 

—

 

 

 

196

 

Other operating costs and expenses

 

 

6

 

 

 

11

 

 

 

304

 

 

 

30

 

 

 

(293

)

 

 

58

 

Closures and impairment expenses, net

 

 

7

 

 

 

5

 

 

 

2

 

 

 

—

 

 

 

—

 

 

 

14

 

Other expenses (income), net

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1

)

 

 

—

 

 

 

(1

)

Total costs and expenses, net

 

 

3,608

 

 

 

1,048

 

 

 

390

 

 

 

245

 

 

 

(294

)

 

 

4,997

 

Operating Profit (Loss)

 

$

636

 

 

$

87

 

 

$

(8

)

 

$

(75

)

 

$

—

 

 

$

640

 

 

Reconciliation of GAAP Operating Profit to Restaurant Profit

 

 

 

Year to Date Ended 6/30/2024

 

 

 

KFC

 

 

Pizza Hut

 

 

All Other Segments

 

 

Corporate
and
Unallocated(1)

 

 

Elimination

 

 

Total

 

GAAP Operating Profit (Loss)

 

$

636

 

 

$

87

 

 

$

(8

)

 

$

(75

)

 

$

—

 

 

$

640

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Franchise fees and income

 

 

34

 

 

 

4

 

 

 

9

 

 

 

—

 

 

 

—

 

 

 

47

 

Revenues from transactions with franchisees(2)

 

 

26

 

 

 

2

 

 

 

36

 

 

 

139

 

 

 

—

 

 

 

203

 

Other revenues

 

 

8

 

 

 

12

 

 

 

308

 

 

 

31

 

 

 

(294

)

 

 

65

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

121

 

 

 

54

 

 

 

20

 

 

 

78

 

 

 

—

 

 

 

273

 

Franchise expenses

 

 

17

 

 

 

2

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

19

 

Expenses for transactions with franchisees(2)

 

 

23

 

 

 

2

 

 

 

33

 

 

 

138

 

 

 

—

 

 

 

196

 

Other operating costs and expenses

 

 

6

 

 

 

11

 

 

 

304

 

 

 

30

 

 

 

(293

)

 

 

58

 

Closures and impairment expenses, net

 

 

7

 

 

 

5

 

 

 

2

 

 

 

—

 

 

 

—

 

 

 

14

 

Other expenses (income), net

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1

)

 

 

—

 

 

 

(1

)

Restaurant profit (loss)

 

$

742

 

 

$

143

 

 

$

(2

)

 

$

—

 

 

$

1

 

 

$

884

 

Company sales

 

 

4,176

 

 

 

1,117

 

 

 

29

 

 

 

—

 

 

 

—

 

 

 

5,322

 

Restaurant margin %

 

 

17.8

%

 

 

12.8

%

 

 

(11.1

)%

 

N/A

 

 

N/A

 

 

 

16.6

%

 

Reconciliation of GAAP Operating Profit to Core Operating Profit

 

 

 

Year to Date Ended 6/30/2024

 

 

 

KFC

 

 

Pizza Hut

 

 

All Other Segments

 

 

Corporate
and
Unallocated(1)

 

 

Elimination

 

 

Total

 

GAAP Operating Profit (Loss)

 

$

636

 

 

$

87

 

 

$

(8

)

 

$

(75

)

 

$

—

 

 

$

640

 

Special Items, Operating Profit

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Adjusted Operating Profit (Loss)

 

$

636

 

 

$

87

 

 

$

(8

)

 

$

(75

)

 

$

—

 

 

$

640

 

F/X impact

 

 

29

 

 

 

4

 

 

 

—

 

 

 

(2

)

 

 

—

 

 

 

31

 

Core Operating Profit (Loss)

 

$

665

 

 

$

91

 

 

$

(8

)

 

$

(77

)

 

$

—

 

 

$

671

 

 

 

18

 

 

 

 

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(1)

 

 

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(2)

 

 

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(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

 

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

%

 

Reconciliation of GAAP Operating Profit to Core Operating Profit

 

 

 

Year to Date Ended 6/30/2023

 

 

 

KFC

 

 

Pizza Hut

 

 

All Other Segments

 

 

Corporate
and
Unallocated(1)

 

 

Elimination

 

 

Total

 

GAAP Operating Profit (Loss)

 

$

693

 

 

$

90

 

 

$

(13

)

 

$

(97

)

 

$

—

 

 

$

673

 

Special Items, Operating Profit

 

 

—

 

 

 

—

 

 

 

—

 

 

 

5

 

 

 

—

 

 

 

5

 

Adjusted Operating Profit (Loss)

 

$

693

 

 

$

90

 

 

$

(13

)

 

$

(92

)

 

$

—

 

 

$

678

 

Items Affecting Comparability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Temporary relief from landlords

 

 

(9

)

 

 

(1

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(10

)

Temporary relief from government agencies

 

 

(3

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3

)

VAT deductions

 

 

(24

)

 

 

(3

)

 

 

(1

)

 

 

—

 

 

 

—

 

 

 

(28

)

Amortization of reacquired franchise rights

 

 

2

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2

 

F/X impact

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Core Operating Profit (Loss)

 

$

659

 

 

$

86

 

 

$

(14

)

 

$

(92

)

 

$

—

 

 

$

639

 

 

19

 

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

 

(1)
Amounts have not been allocated to any segment for purpose of making operating decision or assessing financial performance as the transactions are deemed corporate revenues and expenses in nature.
(2)
Primarily includes revenues and associated expenses of transactions with franchisees 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.

20