Fourth Quarter System Sales Up 21%, Operating Profit Up 170% and Core Operating Profit Grew 324% (1)
Full Year System Sales Up 21%, Operating Profit Up 76% to $1.1 Billion and Core Operating Profit Grew 79%
Record 2023 Results - Total Revenues of $11 Billion, Adjusted Operating Profit of $1.1 Billion and 1,697 Net New Stores Opened
14,644 Stores in Over 2,000 Cities
SHANGHAI, Feb. 7, 2024 /PRNewswire/ -- Yum China Holdings, Inc. (the "Company" or "Yum China") (NYSE: YUMC and HKEX: 9987) today reported unaudited results for the fourth quarter and year ended December 31, 2023.
Fourth Quarter Highlights
Full Year Highlights
(1) Core Operating Profit is defined as Operating Profit adjusted for Special Items, further excluding items affecting comparability and the impact of F/X. The Company uses Core Operating Profit for the purposes of evaluating the performance of its core operations. Please refer to "Reconciliation of Reported GAAP Results to Non-GAAP Measures" included in the accompanying tables of this release for further details. |
(2) Net new unit contribution refers to sales contribution from net new stores. |
(3) Digital sales refer to sales at company-owned stores where orderings were placed digitally. |
Increasing Dividends and Stepping Up Share Repurchases
Key Financial Results
Fourth Quarter |
Full Year |
|||||||||||||||||||||||||||||||
%/ppts Change |
%/ppts Change |
|||||||||||||||||||||||||||||||
2023 |
2022 |
Reported |
Ex F/X |
2023 |
2022 |
Reported |
Ex F/X |
|||||||||||||||||||||||||
System Sales Growth (4) (%) |
21 |
(4) |
NM |
NM |
21 |
(5) |
NM |
NM |
||||||||||||||||||||||||
Same-Store Sales Growth (4) (%) |
4 |
(4) |
NM |
NM |
7 |
(7) |
NM |
NM |
||||||||||||||||||||||||
Operating Profit ($mn) |
110 |
41 |
+170 |
+175 |
1,106 |
629 |
+76 |
+86 |
||||||||||||||||||||||||
Adjusted Operating Profit (5) ($mn) |
116 |
40 |
+193 |
+199 |
1,121 |
633 |
+77 |
+87 |
||||||||||||||||||||||||
Core Operating Profit (5) (6) ($mn) |
111 |
29 |
NM |
+324 |
1,121 |
627 |
NM |
+79 |
||||||||||||||||||||||||
Net Income ($mn) |
97 |
53 |
+81 |
+84 |
827 |
442 |
+87 |
+97 |
||||||||||||||||||||||||
Adjusted Net Income (5) ($mn) |
103 |
52 |
+96 |
+100 |
842 |
446 |
+89 |
+99 |
||||||||||||||||||||||||
Diluted Earnings |
0.23 |
0.13 |
+77 |
+85 |
1.97 |
1.04 |
+89 |
+100 |
||||||||||||||||||||||||
Adjusted Diluted Earnings |
0.25 |
0.13 |
+92 |
+92 |
2.00 |
1.05 |
+90 |
+101 |
(4) System sales and same-store sales percentages exclude the impact of F/X. Effective January 1, 2018, temporary store closures are normalized in the same-store sales calculation by excluding the period during which stores are temporarily closed. |
(5) See "Reconciliation of Reported GAAP Results to Non-GAAP Measures" included in the accompanying tables of this release for further details. |
(6) Current period amounts are derived by translating results at average exchange rates of the prior year period. |
Note: All comparisons are versus the same period a year ago. |
Percentages may not recompute due to rounding. |
NM refers to not meaningful. |
CEO Comments
Joey Wat, CEO of Yum China, commented, "2023 was a pivotal year for Yum China. Not only did we demonstrate strong resilience during the pandemic, but we also seized opportunities that arose from China's reopening. In 2023, our system sales grew by 21%, surpassing the industry's growth rate, and we set new records for both revenue and profits. Our return to shareholders through cash dividends and share repurchases in 2023 was the highest since spinoff. Looking ahead, we remain very positive about the vast growth opportunities in China. Currently serving just one-third of China's population, our ambitious goal is to extend our reach to half of the population by 2026. Over half of our new stores are located in lower-tier cities, strategically positioned to capture the demand from long-term consumption upgrades there. We are also expanding our addressable market and capturing incremental sales across city tiers with innovative products, engaging campaigns and a wider range of price points. Leveraging our distinctive strengths, including brands deeply ingrained in China, remarkable agility and robust operational execution, we are well-positioned to achieve our growth targets for 2024-2026 and deliver excellent returns to our shareholders through increased cash dividends and stepped-up share buybacks."
KFC
Fourth Quarter |
Full Year |
|||||||||||||||||||||||||||||
%/ppts Change |
%/ppts Change |
|||||||||||||||||||||||||||||
2023 |
2022 |
Reported |
Ex F/X |
2023 |
2022 |
Reported |
Ex F/X |
|||||||||||||||||||||||
Restaurants |
10,296 |
9,094 |
+13 |
NM |
10,296 |
9,094 |
+13 |
NM |
||||||||||||||||||||||
System Sales Growth (%) |
20 |
(1) |
NM |
NM |
20 |
(4) |
NM |
NM |
||||||||||||||||||||||
Same-Store Sales Growth (%) |
3 |
(3) |
NM |
NM |
7 |
(7) |
NM |
NM |
||||||||||||||||||||||
Total Revenues ($mn) |
1,872 |
1,591 |
+18 |
+19 |
8,240 |
7,219 |
+14 |
+20 |
||||||||||||||||||||||
Operating Profit ($mn) |
167 |
117 |
+43 |
+45 |
1,202 |
787 |
+53 |
+60 |
||||||||||||||||||||||
Core Operating Profit ($mn) |
164 |
115 |
NM |
+43 |
1,211 |
806 |
NM |
+50 |
||||||||||||||||||||||
Restaurant Margin (%) |
12.0 |
12.7 |
(0.7) |
(0.7) |
17.7 |
15.7 |
+2.0 |
+2.0 |
Pizza Hut
Fourth Quarter |
Full Year |
|||||||||||||||||||||||||||||
%/ppts Change |
%/ppts Change |
|||||||||||||||||||||||||||||
2023 |
2022 |
Reported |
Ex F/X |
2023 |
2022 |
Reported |
Ex F/X |
|||||||||||||||||||||||
Restaurants |
3,312 |
2,903 |
+14 |
NM |
3,312 |
2,903 |
+14 |
NM |
||||||||||||||||||||||
System Sales Growth (%) |
24 |
(6) |
NM |
NM |
20 |
(3) |
NM |
NM |
||||||||||||||||||||||
Same-Store Sales Growth (%) |
6 |
(8) |
NM |
NM |
6 |
(6) |
NM |
NM |
||||||||||||||||||||||
Total Revenues ($mn) |
496 |
404 |
+23 |
+24 |
2,246 |
1,960 |
+15 |
+21 |
||||||||||||||||||||||
Operating Profit ($mn) |
5 |
(20) |
NM |
NM |
142 |
70 |
+102 |
+117 |
||||||||||||||||||||||
Core Operating Profit ($mn) |
4 |
(27) |
NM |
NM |
143 |
48 |
NM |
+198 |
||||||||||||||||||||||
Restaurant Margin (%) |
7.3 |
1.9 |
+5.4 |
+5.4 |
11.8 |
9.2 |
+2.6 |
+2.6 |
Outlook
In 2024, Yum China plans to
From 2024 to 2026, Yum China targets to
Other Updates
Note on Non-GAAP Measures
Reported GAAP results include items that are excluded from non-GAAP measures. See "Reconciliation of Reported GAAP Results to Non-GAAP Measures" and "Segment Results" within this release for non-GAAP reconciliation details.
Conference Call
Yum China's management will hold an earnings conference call at 7:00 p.m. U.S. Eastern Time on Tuesday, February 6, 2024 (8:00 a.m. Beijing/Hong Kong Time on Wednesday, February 7, 2024).
A live webcast of the call may be accessed at https://edge.media-server.com/mmc/p/rav3hcwk.
To join by phone, please register in advance of the conference through the link provided below. Upon registering, you will be provided with participant dial-in numbers, a passcode and a unique access PIN.
Pre-registration link: https://s1.c-conf.com/diamondpass/10035579-wp1ljg.html
A replay of the conference call will be available one hour after the call ends until Wednesday, February 14, 2024 and may be accessed by phone using the following numbers:
U.S.: |
1 855 883 1031 |
Mainland China: |
400 1209 216 |
Hong Kong: |
800 930 639 |
U.K.: |
0800 031 4295 |
Replay PIN: |
10035579 |
Additionally, this earnings release, the accompanying slides, as well as the live and archived webcast of this conference call will be available at Yum China's Investor Relations website at http://ir.yumchina.com.
For important news and information regarding Yum China, including our filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange, visit Yum China's Investor Relations website at http://ir.yumchina.com. Yum China uses this website as a primary channel for disclosing key information to its investors, some of which may contain material and previously non-public information.
Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including under "2024 Outlook." We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the fact that they do not relate strictly to historical or current facts and by the use of forward-looking words such as "expect," "expectation," "believe," "anticipate," "may," "could," "intend," "belief," "plan," "estimate," "target," "predict," "project," "likely," "will," "continue," "should," "forecast," "outlook," "commit" or similar terminology. These statements are based on current estimates and assumptions made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable under the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. Forward-looking statements include, without limitation, statements regarding the future strategies, growth, business plans, investments, store openings, capital expenditures, dividend and share repurchase plans, CAGR for system sales, operating profit and EPS, earnings, performance and returns of Yum China, anticipated effects of population and macroeconomic trends, pace of recovery of Yum China's business, the anticipated effects of our innovation, digital and delivery capabilities and investments on growth and beliefs regarding the long-term drivers of Yum China's business. Forward-looking statements are not guarantees of performance and are inherently subject to known and unknown risks and uncertainties that are difficult to predict and could cause our actual results or events to differ materially from those indicated by those statements. We cannot assure you that any of our expectations, estimates or assumptions will be achieved. The forward-looking statements included in this press release are only made as of the date of this press release, and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law. Numerous factors could cause our actual results or events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: whether we are able to achieve development goals at the times and in the amounts currently anticipated, if at all, the success of our marketing campaigns and product innovation, our ability to maintain food safety and quality control systems, changes in public health conditions, including the COVID-19 pandemic, our ability to control costs and expenses, including tax costs, as well as changes in political, economic and regulatory conditions in China, and those set forth under the caption "Risk Factors" in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q). In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial could affect the accuracy of any such forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. You should consult our filings with the Securities and Exchange Commission (including the information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q) for additional detail about factors that could affect our financial and other results.
About Yum China Holdings, Inc.
Yum China is the largest restaurant company in China with a mission to make every life taste beautiful. The Company has over 400,000 employees and operates over 14,000 restaurants under six brands across 2,000 cities in China. KFC and Pizza Hut are the leading brands in the quick-service and casual dining restaurant spaces in China, respectively. Taco Bell offers innovative Mexican-inspired food. Yum China has also partnered with Lavazza to develop the Lavazza coffee concept in China. Little Sheep and Huang Ji Huang specialize in Chinese cuisine. Yum China has a world-class, digitalized supply chain which includes an extensive network of logistics centers nationwide and an in-house supply chain management system. Its strong digital capabilities and loyalty program enable the Company to reach customers faster and serve them better. Yum China is a Fortune 500 company with the vision to be the world's most innovative pioneer in the restaurant industry. For more information, please visit http://ir.yumchina.com.
Investor Relations Contact: |
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Tel: +86 21 2407 7556 / +852 2267 5801
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Media Contact: |
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Tel: +86 21 2407 7510 |
Yum China Holdings, Inc. |
||||||||||||||||||||||||||
Condensed Consolidated Statements of Income |
||||||||||||||||||||||||||
(in US$ million, except per share data) |
||||||||||||||||||||||||||
(unaudited) |
||||||||||||||||||||||||||
Quarter Ended |
% Change |
Year Ended |
% Change |
|||||||||||||||||||||||
12/31/2023 |
12/31/2022 |
B/(W) |
12/31/2023 |
12/31/2022 |
B/(W) |
|||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||
Company sales |
$ |
2,343 |
$ |
1,975 |
19 |
$ |
10,391 |
$ |
9,110 |
14 |
||||||||||||||||
Franchise fees and income |
20 |
16 |
24 |
89 |
81 |
11 |
||||||||||||||||||||
Revenues from transactions with franchisees |
90 |
68 |
32 |
372 |
287 |
30 |
||||||||||||||||||||
Other revenues |
40 |
29 |
37 |
126 |
91 |
39 |
||||||||||||||||||||
Total revenues |
2,493 |
2,088 |
19 |
10,978 |
9,569 |
15 |
||||||||||||||||||||
Costs and Expenses, Net |
||||||||||||||||||||||||||
Company restaurants |
||||||||||||||||||||||||||
Food and paper |
758 |
630 |
(20) |
3,224 |
2,836 |
(14) |
||||||||||||||||||||
Payroll and employee benefits |
678 |
570 |
(19) |
2,725 |
2,389 |
(14) |
||||||||||||||||||||
Occupancy and other operating expenses |
654 |
570 |
(15) |
2,752 |
2,604 |
(6) |
||||||||||||||||||||
Company restaurant expenses |
2,090 |
1,770 |
(18) |
8,701 |
7,829 |
(11) |
||||||||||||||||||||
General and administrative expenses |
153 |
145 |
(5) |
638 |
594 |
(7) |
||||||||||||||||||||
Franchise expenses |
8 |
7 |
(9) |
36 |
34 |
(2) |
||||||||||||||||||||
Expenses for transactions with franchisees |
86 |
67 |
(28) |
356 |
279 |
(28) |
||||||||||||||||||||
Other operating costs and expenses |
35 |
25 |
(38) |
112 |
78 |
(43) |
||||||||||||||||||||
Closures and impairment expenses, net |
12 |
12 |
5 |
29 |
32 |
11 |
||||||||||||||||||||
Other (income) expenses, net |
(1) |
21 |
NM |
— |
94 |
100 |
||||||||||||||||||||
Total costs and expenses, net |
2,383 |
2,047 |
(16) |
9,872 |
8,940 |
(10) |
||||||||||||||||||||
Operating Profit |
110 |
41 |
170 |
1,106 |
629 |
76 |
||||||||||||||||||||
Interest income, net |
45 |
33 |
33 |
169 |
84 |
101 |
||||||||||||||||||||
Investment (loss) gain |
(17) |
6 |
NM |
(49) |
(26) |
(91) |
||||||||||||||||||||
Income Before Income Taxes and |
138 |
80 |
71 |
1,226 |
687 |
78 |
||||||||||||||||||||
Income tax provision |
(33) |
(24) |
(39) |
(329) |
(207) |
(59) |
||||||||||||||||||||
Equity in net earnings (losses) from |
2 |
2 |
9 |
4 |
(2) |
NM |
||||||||||||||||||||
Net income – including noncontrolling interests |
107 |
58 |
81 |
901 |
478 |
88 |
||||||||||||||||||||
Net income – noncontrolling interests |
10 |
5 |
(86) |
74 |
36 |
(106) |
||||||||||||||||||||
Net Income – Yum China Holdings, Inc. |
$ |
97 |
$ |
53 |
81 |
$ |
827 |
$ |
442 |
87 |
||||||||||||||||
Effective tax rate |
24.2 |
% |
29.9 |
% |
5.7 |
ppts. |
26.9 |
% |
30.1 |
% |
3.2 |
ppts. |
||||||||||||||
Basic Earnings Per Common Share |
$ |
0.23 |
$ |
0.13 |
$ |
1.99 |
$ |
1.05 |
||||||||||||||||||
Weighted-average shares outstanding |
411 |
419 |
416 |
421 |
||||||||||||||||||||||
Diluted Earnings Per Common Share |
$ |
0.23 |
$ |
0.13 |
$ |
1.97 |
$ |
1.04 |
||||||||||||||||||
Weighted-average shares outstanding |
415 |
423 |
420 |
425 |
||||||||||||||||||||||
Company sales |
100.0 |
% |
100.0 |
% |
100.0 |
% |
100.0 |
% |
||||||||||||||||||
Food and paper |
32.4 |
31.9 |
(0.5) |
ppts. |
31.0 |
31.1 |
0.1 |
ppts. |
||||||||||||||||||
Payroll and employee benefits |
29.0 |
28.8 |
(0.2) |
ppts. |
26.2 |
26.2 |
— |
ppts. |
||||||||||||||||||
Occupancy and other operating expenses |
27.9 |
28.9 |
1.0 |
ppts. |
26.5 |
28.6 |
2.1 |
ppts. |
||||||||||||||||||
Restaurant margin |
10.7 |
% |
10.4 |
% |
0.3 |
ppts. |
16.3 |
% |
14.1 |
% |
2.2 |
ppts. |
||||||||||||||
Operating margin |
4.7 |
% |
2.1 |
% |
2.6 |
ppts. |
10.6 |
% |
6.9 |
% |
3.7 |
ppts. |
Percentages may not recompute due to rounding. NM refers to not meaningful.
Yum China Holdings, Inc. |
||||||||||||||||||||||||||
KFC Operating Results |
||||||||||||||||||||||||||
(in US$ million) |
||||||||||||||||||||||||||
(unaudited) |
||||||||||||||||||||||||||
Quarter Ended |
% Change |
Year Ended |
% Change |
|||||||||||||||||||||||
12/31/2023 |
12/31/2022 |
B/(W) |
12/31/2023 |
12/31/2022 |
B/(W) |
|||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||
Company sales |
$ |
1,842 |
$ |
1,566 |
18 |
$ |
8,116 |
$ |
7,120 |
14 |
||||||||||||||||
Franchise fees and income |
14 |
12 |
14 |
62 |
56 |
10 |
||||||||||||||||||||
Revenues from transactions with franchisees |
12 |
9 |
35 |
45 |
33 |
37 |
||||||||||||||||||||
Other revenues |
4 |
4 |
(15) |
17 |
10 |
60 |
||||||||||||||||||||
Total revenues |
1,872 |
1,591 |
18 |
8,240 |
7,219 |
14 |
||||||||||||||||||||
Costs and Expenses, Net |
||||||||||||||||||||||||||
Company restaurants |
||||||||||||||||||||||||||
Food and paper |
598 |
496 |
(21) |
2,512 |
2,208 |
(14) |
||||||||||||||||||||
Payroll and employee benefits |
519 |
434 |
(20) |
2,057 |
1,797 |
(14) |
||||||||||||||||||||
Occupancy and other operating expenses |
504 |
437 |
(15) |
2,107 |
1,994 |
(6) |
||||||||||||||||||||
Company restaurant expenses |
1,621 |
1,367 |
(19) |
6,676 |
5,999 |
(11) |
||||||||||||||||||||
General and administrative expenses |
60 |
63 |
5 |
263 |
254 |
(4) |
||||||||||||||||||||
Franchise expenses |
7 |
6 |
(8) |
31 |
29 |
(2) |
||||||||||||||||||||
Expenses for transactions with franchisees |
10 |
8 |
(32) |
39 |
30 |
(33) |
||||||||||||||||||||
Other operating costs and expenses |
4 |
3 |
(1) |
15 |
7 |
(91) |
||||||||||||||||||||
Closures and impairment expenses, net |
3 |
5 |
47 |
12 |
16 |
28 |
||||||||||||||||||||
Other expenses, net |
— |
22 |
99 |
2 |
97 |
98 |
||||||||||||||||||||
Total costs and expenses, net |
1,705 |
1,474 |
(16) |
7,038 |
6,432 |
(9) |
||||||||||||||||||||
Operating Profit |
$ |
167 |
$ |
117 |
43 |
$ |
1,202 |
$ |
787 |
53 |
||||||||||||||||
Company sales |
100.0 |
% |
100.0 |
% |
100.0 |
% |
100.0 |
% |
||||||||||||||||||
Food and paper |
32.5 |
31.7 |
(0.8) |
ppts. |
31.0 |
31.0 |
— |
ppts. |
||||||||||||||||||
Payroll and employee benefits |
28.2 |
27.7 |
(0.5) |
ppts. |
25.3 |
25.2 |
(0.1) |
ppts. |
||||||||||||||||||
Occupancy and other operating expenses |
27.3 |
27.9 |
0.6 |
ppts. |
26.0 |
28.1 |
2.1 |
ppts. |
||||||||||||||||||
Restaurant margin |
12.0 |
% |
12.7 |
% |
(0.7) |
ppts. |
17.7 |
% |
15.7 |
% |
2.0 |
ppts. |
||||||||||||||
Operating margin |
9.1 |
% |
7.4 |
% |
1.7 |
ppts. |
14.8 |
% |
11.0 |
% |
3.8 |
ppts. |
Percentages may not recompute due to rounding.
Yum China Holdings, Inc. |
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Pizza Hut Operating Results |
||||||||||||||||||||||||||
(in US$ million) |
||||||||||||||||||||||||||
(unaudited) |
||||||||||||||||||||||||||
Quarter Ended |
% Change |
Year Ended |
% Change |
|||||||||||||||||||||||
12/31/2023 |
12/31/2022 |
B/(W) |
12/31/2023 |
12/31/2022 |
B/(W) |
|||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||
Company sales |
$ |
486 |
$ |
398 |
22 |
$ |
2,214 |
$ |
1,939 |
14 |
||||||||||||||||
Franchise fees and income |
1 |
1 |
25 |
7 |
7 |
9 |
||||||||||||||||||||
Revenues from transactions with franchisees |
1 |
1 |
9 |
4 |
4 |
11 |
||||||||||||||||||||
Other revenues |
8 |
4 |
90 |
21 |
10 |
114 |
||||||||||||||||||||
Total revenues |
496 |
404 |
23 |
2,246 |
1,960 |
15 |
||||||||||||||||||||
Costs and Expenses, Net |
||||||||||||||||||||||||||
Company restaurants |
||||||||||||||||||||||||||
Food and paper |
155 |
131 |
(18) |
692 |
612 |
(13) |
||||||||||||||||||||
Payroll and employee benefits |
153 |
135 |
(14) |
649 |
572 |
(14) |
||||||||||||||||||||
Occupancy and other operating expenses |
141 |
125 |
(13) |
610 |
577 |
(6) |
||||||||||||||||||||
Company restaurant expenses |
449 |
391 |
(15) |
1,951 |
1,761 |
(11) |
||||||||||||||||||||
General and administrative expenses |
29 |
26 |
(11) |
118 |
110 |
(7) |
||||||||||||||||||||
Franchise expenses |
1 |
1 |
(13) |
4 |
4 |
(8) |
||||||||||||||||||||
Expenses for transactions with franchisees |
1 |
— |
(11) |
4 |
3 |
(11) |
||||||||||||||||||||
Other operating costs and expenses |
8 |
3 |
(117) |
19 |
8 |
(124) |
||||||||||||||||||||
Closures and impairment expenses, net |
3 |
3 |
1 |
8 |
4 |
(135) |
||||||||||||||||||||
Total costs and expenses, net |
491 |
424 |
(16) |
2,104 |
1,890 |
(11) |
||||||||||||||||||||
Operating Profit |
$ |
5 |
$ |
(20) |
NM |
$ |
142 |
$ |
70 |
102 |
||||||||||||||||
Company sales |
100.0 |
% |
100.0 |
% |
100.0 |
% |
100.0 |
% |
||||||||||||||||||
Food and paper |
32.0 |
32.9 |
0.9 |
ppts. |
31.3 |
31.5 |
0.2 |
ppts. |
||||||||||||||||||
Payroll and employee benefits |
31.7 |
33.9 |
2.2 |
ppts. |
29.3 |
29.5 |
0.2 |
ppts. |
||||||||||||||||||
Occupancy and other operating expenses |
29.0 |
31.3 |
2.3 |
ppts. |
27.6 |
29.8 |
2.2 |
ppts. |
||||||||||||||||||
Restaurant margin |
7.3 |
% |
1.9 |
% |
5.4 |
ppts. |
11.8 |
% |
9.2 |
% |
2.6 |
ppts. |
||||||||||||||
Operating margin |
1.1 |
% |
(5.0) |
% |
6.1 |
ppts. |
6.4 |
% |
3.6 |
% |
2.8 |
ppts. |
Percentages may not recompute due to rounding. NM refers to not meaningful.
Yum China Holdings, Inc. |
||||||||
Condensed Consolidated Balance Sheets |
||||||||
(in US$ million) |
||||||||
12/31/2023 |
12/31/2022 |
|||||||
(Unaudited) |
||||||||
ASSETS |
||||||||
Current Assets |
||||||||
Cash and cash equivalents |
$ |
1,128 |
$ |
1,130 |
||||
Short-term investments |
1,472 |
2,022 |
||||||
Accounts receivable, net |
68 |
64 |
||||||
Inventories, net |
424 |
417 |
||||||
Prepaid expenses and other current assets |
339 |
307 |
||||||
Total Current Assets |
3,431 |
3,940 |
||||||
Property, plant and equipment, net |
2,310 |
2,118 |
||||||
Operating lease right-of-use assets |
2,217 |
2,219 |
||||||
Goodwill |
1,932 |
1,988 |
||||||
Intangible assets, net |
150 |
159 |
||||||
Long-term bank deposits and notes |
1,265 |
680 |
||||||
Equity investments |
332 |
361 |
||||||
Deferred income tax assets |
129 |
113 |
||||||
Other assets |
265 |
248 |
||||||
Total Assets |
12,031 |
11,826 |
||||||
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY |
||||||||
Current Liabilities |
||||||||
Accounts payable and other current liabilities |
2,164 |
2,096 |
||||||
Short-term borrowings |
168 |
2 |
||||||
Income taxes payable |
90 |
68 |
||||||
Total Current Liabilities |
2,422 |
2,166 |
||||||
Non-current operating lease liabilities |
1,899 |
1,906 |
||||||
Non-current finance lease liabilities |
44 |
42 |
||||||
Deferred income tax liabilities |
390 |
390 |
||||||
Other liabilities |
157 |
162 |
||||||
Total Liabilities |
4,912 |
4,666 |
||||||
Redeemable Noncontrolling Interest |
13 |
12 |
||||||
Equity |
||||||||
Common stock, $0.01 par value; 1,000 million shares authorized; |
4 |
4 |
||||||
Additional paid-in capital |
4,320 |
4,390 |
||||||
Retained earnings |
2,310 |
2,191 |
||||||
Accumulated other comprehensive loss |
(229) |
(103) |
||||||
Total Yum China Holdings, Inc. Stockholders' Equity |
6,405 |
6,482 |
||||||
Noncontrolling interests |
701 |
666 |
||||||
Total Equity |
7,106 |
7,148 |
||||||
Total Liabilities, Redeemable Noncontrolling Interest and Equity |
$ |
12,031 |
$ |
11,826 |
||||
Yum China Holdings, Inc. |
||||||||||
Condensed Consolidated Statements of Cash Flows |
||||||||||
(in US$ million) |
||||||||||
(unaudited) |
||||||||||
Year Ended |
||||||||||
12/31/2023 |
12/31/2022 |
|||||||||
Cash Flows – Operating Activities |
||||||||||
Net income – including noncontrolling interests |
$ |
901 |
$ |
478 |
||||||
Depreciation and amortization |
453 |
602 |
||||||||
Non-cash operating lease cost |
404 |
435 |
||||||||
Closures and impairment expenses |
29 |
32 |
||||||||
Investment loss |
49 |
26 |
||||||||
Equity in net (earnings) losses from equity method investments |
(4) |
2 |
||||||||
Distributions of income received from equity method investments |
11 |
7 |
||||||||
Deferred income taxes |
(10) |
(20) |
||||||||
Share-based compensation expense |
64 |
42 |
||||||||
Changes in accounts receivable |
(6) |
(1) |
||||||||
Changes in inventories |
(19) |
(19) |
||||||||
Changes in prepaid expenses, other current assets and VAT assets |
(35) |
207 |
||||||||
Changes in accounts payable and other current liabilities |
84 |
16 |
||||||||
Changes in income taxes payable |
25 |
25 |
||||||||
Changes in non-current operating lease liabilities |
(407) |
(396) |
||||||||
Other, net |
(66) |
(23) |
||||||||
Net Cash Provided by Operating Activities |
1,473 |
1,413 |
||||||||
Cash Flows – Investing Activities |
||||||||||
Capital spending |
(710) |
(679) |
||||||||
Purchases of short-term investments, long-term bank deposits and notes |
(3,517) |
(5,189) |
||||||||
Maturities of short-term investments, long-term bank deposits and notes |
3,499 |
5,365 |
||||||||
Acquisition of business, net of cash acquired |
— |
(23) |
||||||||
Acquisition of equity investment |
(20) |
— |
||||||||
Other, net |
5 |
4 |
||||||||
Net Cash Used in Investing Activities |
(743) |
(522) |
||||||||
Cash Flows – Financing Activities |
||||||||||
Proceeds from short-term borrowings |
264 |
2 |
||||||||
Payment of short-term borrowings |
(100) |
— |
||||||||
Repurchase of shares of common stock |
(613) |
(466) |
||||||||
Cash dividends paid on common stock |
(216) |
(202) |
||||||||
Dividends paid to noncontrolling interests |
(77) |
(72) |
||||||||
Acquisitions of noncontrolling interests |
— |
(113) |
||||||||
Contributions from noncontrolling interests |
35 |
18 |
||||||||
Payment of acquisition related holdback |
(3) |
(7) |
||||||||
Other, net |
(6) |
(4) |
||||||||
Net Cash Used in Financing Activities |
(716) |
(844) |
||||||||
Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash |
(16) |
(53) |
||||||||
Net Decrease in Cash, Cash Equivalents and Restricted Cash |
(2) |
(6) |
||||||||
Cash, Cash Equivalents, and Restricted Cash - Beginning of Year |
1,130 |
1,136 |
||||||||
Cash, Cash Equivalents, and Restricted Cash - End of Year |
$ |
1,128 |
$ |
1,130 |
In this press release:
Unit Count by Brand
KFC
12/31/2022 |
New Builds |
Closures |
Acquired |
Refranchised |
12/31/2023 |
|||||||||||||||||||
Company-owned |
8,214 |
1,246 |
(222) |
2 |
(3) |
9,237 |
||||||||||||||||||
Franchisees |
880 |
193 |
(15) |
(2) |
3 |
1,059 |
||||||||||||||||||
Total |
9,094 |
1,439 |
(237) |
— |
— |
10,296 |
Pizza Hut
12/31/2022 |
New Builds |
Closures |
Refranchised |
12/31/2023 |
||||||||||||||||
Company-owned |
2,760 |
515 |
(118) |
(2) |
3,155 |
|||||||||||||||
Franchisees |
143 |
16 |
(4) |
2 |
157 |
|||||||||||||||
Total |
2,903 |
531 |
(122) |
— |
3,312 |
Others
12/31/2022 |
New Builds |
Closures |
12/31/2023 |
|||||||||||||
Company-owned |
187 |
93 |
(24) |
256 |
||||||||||||
Franchisees |
763 |
142 |
(125) |
780 |
||||||||||||
Total |
950 |
235 |
(149) |
1,036 |
Reconciliation of Reported GAAP Results to Non-GAAP Measures
(in millions, except per share data)
(unaudited)
In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") in this press release, the Company provides the following non-GAAP measures:
These non-GAAP measures are not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of these non-GAAP measures provides additional information to investors to facilitate the comparison of past and present results, excluding those items that the Company does not believe are indicative of our core operations.
With respect to non-GAAP measures adjusted for Special Items, the Company excludes impact from Special Items for the purpose of evaluating performance internally and uses them as factors in determining compensation for certain employees. Special Items are not included in any of our segment results.
Adjusted EBITDA is defined as net income including noncontrolling interests adjusted for equity in net earnings (losses) from equity method investments, income tax, interest income, net, investment gain or loss, depreciation and amortization, store impairment charges, and Special Items. Store impairment charges included as an adjustment item in Adjusted EBITDA primarily resulted from our semi-annual impairment evaluation of long-lived assets of individual restaurants, and additional impairment evaluation whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. If these restaurant-level assets were not impaired, depreciation of the assets would have been recorded and included in EBITDA. Therefore, store impairment charges were a non-cash item similar to depreciation and amortization of our long-lived assets of restaurants. The Company believes that investors and analyst may find it useful in measuring operating performance without regard to such non-cash items.
Restaurant Profit is defined as Company sales less expenses incurred directly by our Company-owned restaurants in generating Company sales, including cost of food and paper, restaurant-level payroll and employee benefits, rent, depreciation and amortization of restaurant-level assets, advertising expenses, and other operating expenses. Restaurant margin is defined as Restaurant profit divided by Company sales. We also use Restaurant profit and Restaurant margin for the purposes of internally evaluating the performance of our Company-owned restaurants and we believe they provide useful information to investors as to the profitability of our Company-owned restaurants.
Core Operating Profit is defined as Operating Profit adjusted for Special Items, and further excluding Items Affecting Comparability and the impact of F/X. We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Items such as charges, gains and accounting changes which are viewed by management as significantly impacting the current period or the comparable period, due to changes in policy or other external factors, or non-cash items pertaining to underlying activities that are different from or unrelated to our core operations, are generally considered "Items Affecting Comparability." Examples of Items Affecting Comparability include, but are not limited to: temporary relief from landlords and government agencies, VAT deductions due to tax policy changes, and amortization of reacquired franchise rights recognized upon acquisitions. We believe presenting Core Operating Profit provides additional information to further enhance comparability of our operating results, and we use this measure for the purposes of evaluating the performance of our core operations.
The following tables set forth the reconciliation of the most directly comparable GAAP financial measures to the non-GAAP financial measures. The reconciliation of GAAP Operating Profit to Restaurant Profit and Core Operating Profit by segment is presented in Segment Results within this release.
Quarter Ended |
Year Ended |
|||||||||||||||
12/31/2023 |
12/31/2022 |
12/31/2023 |
12/31/2022 |
|||||||||||||
Non-GAAP Reconciliations |
||||||||||||||||
Reconciliation of Operating Profit to Adjusted Operating Profit |
||||||||||||||||
Operating Profit |
$ |
110 |
$ |
41 |
$ |
1,106 |
$ |
629 |
||||||||
Special Items, Operating Profit |
(6) |
1 |
(15) |
(4) |
||||||||||||
Adjusted Operating Profit |
$ |
116 |
$ |
40 |
$ |
1,121 |
$ |
633 |
||||||||
Reconciliation of Net Income to Adjusted Net Income |
||||||||||||||||
Net Income – Yum China Holdings, Inc. |
$ |
97 |
$ |
53 |
$ |
827 |
$ |
442 |
||||||||
Special Items, Net Income –Yum China Holdings, Inc. |
(6) |
1 |
(15) |
(4) |
||||||||||||
Adjusted Net Income – Yum China Holdings, Inc. |
$ |
103 |
$ |
52 |
$ |
842 |
$ |
446 |
||||||||
Reconciliation of EPS to Adjusted EPS |
||||||||||||||||
Basic Earnings Per Common Share |
$ |
0.23 |
$ |
0.13 |
$ |
1.99 |
$ |
1.05 |
||||||||
Special Items, Basic Earnings Per Common Share |
(0.02) |
— |
(0.03) |
(0.01) |
||||||||||||
Adjusted Basic Earnings Per Common Share |
$ |
0.25 |
$ |
0.13 |
$ |
2.02 |
$ |
1.06 |
||||||||
Diluted Earnings Per Common Share |
$ |
0.23 |
$ |
0.13 |
$ |
1.97 |
$ |
1.04 |
||||||||
Special Items, Diluted Earnings Per Common Share |
(0.02) |
— |
(0.03) |
(0.01) |
||||||||||||
Adjusted Diluted Earnings Per Common Share |
$ |
0.25 |
$ |
0.13 |
$ |
2.00 |
$ |
1.05 |
||||||||
Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate |
||||||||||||||||
Effective tax rate |
24.2 |
% |
29.9 |
% |
26.9 |
% |
30.1 |
% |
||||||||
Impact on effective tax rate as a result of Special Items |
1.0 |
% |
(0.4) |
% |
0.4 |
% |
0.2 |
% |
||||||||
Adjusted effective tax rate |
23.2 |
% |
30.3 |
% |
26.5 |
% |
29.9 |
% |
Net income, along with the reconciliation to Adjusted EBITDA, is presented below:
Quarter Ended |
Year Ended |
|||||||||||||||
12/31/2023 |
12/31/2022 |
12/31/2023 |
12/31/2022 |
|||||||||||||
Reconciliation of Net Income to Adjusted EBITDA |
||||||||||||||||
Net Income – Yum China Holdings, Inc. |
$ |
97 |
$ |
53 |
$ |
827 |
$ |
442 |
||||||||
Net income – noncontrolling interests |
10 |
5 |
74 |
36 |
||||||||||||
Equity in net (earnings) losses from equity method investments |
(2) |
(2) |
(4) |
2 |
||||||||||||
Income tax provision |
33 |
24 |
329 |
207 |
||||||||||||
Interest income, net |
(45) |
(33) |
(169) |
(84) |
||||||||||||
Investment loss (gain) |
17 |
(6) |
49 |
26 |
||||||||||||
Operating Profit |
110 |
41 |
1,106 |
629 |
||||||||||||
Special Items, Operating Profit |
6 |
(1) |
15 |
4 |
||||||||||||
Adjusted Operating Profit |
116 |
40 |
1,121 |
633 |
||||||||||||
Depreciation and amortization |
114 |
135 |
453 |
602 |
||||||||||||
Store impairment charges |
13 |
14 |
37 |
51 |
||||||||||||
Adjusted EBITDA |
$ |
243 |
$ |
189 |
$ |
1,611 |
$ |
1,286 |
Details of Special Items are presented below:
Quarter Ended |
Year Ended |
|||||||||||||||
12/31/2023 |
12/31/2022 |
12/31/2023 |
12/31/2022 |
|||||||||||||
Share-based compensation expense for Partner PSU Awards(1) |
$ |
(6) |
$ |
1 |
$ |
(15) |
$ |
(4) |
||||||||
Special Items, Operating Profit |
(6) |
1 |
(15) |
(4) |
||||||||||||
Tax effect on Special Items(2) |
— |
— |
— |
— |
||||||||||||
Special Items, net income – including noncontrolling interests |
(6) |
1 |
(15) |
(4) |
||||||||||||
Special Items, net income – noncontrolling interests |
— |
— |
— |
— |
||||||||||||
Special Items, Net Income –Yum China Holdings, Inc. |
$ |
(6) |
$ |
1 |
$ |
(15) |
$ |
(4) |
||||||||
Weighted-average Diluted Shares Outstanding (in millions) |
415 |
423 |
420 |
425 |
||||||||||||
Special Items, Diluted Earnings Per Common Share |
$ |
(0.02) |
$ |
— |
$ |
(0.03) |
$ |
(0.01) |
(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.
Operating Profit, along with the reconciliation to Core Operating Profit, is presented below:
Quarter ended |
|
Year ended |
% Change |
|||||||||||||||||||||||
12/31/2023 |
12/31/2022 |
B/(W) |
12/31/2023 |
12/31/2022 |
B/(W) |
|||||||||||||||||||||
Reconciliation of Operating Profit to Core Operating Profit |
||||||||||||||||||||||||||
Operating profit |
$ |
110 |
$ |
41 |
170 |
$ |
1,106 |
$ |
629 |
76 |
||||||||||||||||
Special Items, Operating Profit |
6 |
(1) |
15 |
4 |
||||||||||||||||||||||
Adjusted Operating Profit |
$ |
116 |
$ |
40 |
193 |
$ |
1,121 |
$ |
633 |
77 |
||||||||||||||||
Items Affecting Comparability |
||||||||||||||||||||||||||
Temporary relief from landlords(1) |
(1) |
(12) |
(11) |
(39) |
||||||||||||||||||||||
Temporary relief from government agencies(2) |
(3) |
(14) |
(7) |
(48) |
||||||||||||||||||||||
VAT deductions(3) |
(2) |
(8) |
(44) |
(16) |
||||||||||||||||||||||
Amortization of reacquired franchise rights(4) |
— |
23 |
2 |
97 |
||||||||||||||||||||||
F/X impact |
1 |
— |
60 |
— |
||||||||||||||||||||||
Core Operating Profit |
$ |
111 |
$ |
29 |
324 |
$ |
1,121 |
$ |
627 |
79 |
(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 government issued a policy in 2020 on reducing enterprise social security contribution, and the Company recorded one-time relief of $11 million and $33 million, respectively, for the fourth quarter and year ended December 31, 2022. In addition, this also includes government subsidies for employee benefits and providing training to employees, with higher amounts received during 2022 impacted by the COVID-19 pandemic. 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. Based on the information currently available to the Company, such preferential policy is not expected to be extended.
(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 $61 million of the purchase price were allocated to intangible assets related to reacquired franchise rights, respectively, which were amortized over the remaining franchise contract period of 1 year, 2.4 years and 5 years, respectively. The reacquired franchise rights were fully amortized as of March 31, 2023. The amortization was recorded in Other (Income) Expenses, net included in the Condensed Consolidated Statements of Income.
Yum China Holdings, Inc. |
||||||||||||||||||||||||
Segment Results |
||||||||||||||||||||||||
(in US$ million) |
||||||||||||||||||||||||
(unaudited) |
||||||||||||||||||||||||
Quarter Ended 12/31/2023 |
||||||||||||||||||||||||
KFC |
Pizza Hut |
All Other |
Corporate |
Elimination |
Total |
|||||||||||||||||||
Company sales |
$ |
1,842 |
$ |
486 |
$ |
15 |
$ |
— |
$ |
— |
$ |
2,343 |
||||||||||||
Franchise fees and income |
14 |
1 |
5 |
— |
— |
20 |
||||||||||||||||||
Revenues from transactions with franchisees(2) |
12 |
1 |
18 |
59 |
— |
90 |
||||||||||||||||||
Other revenues |
4 |
8 |
156 |
12 |
(140) |
40 |
||||||||||||||||||
Total revenues |
$ |
1,872 |
$ |
496 |
$ |
194 |
$ |
71 |
$ |
(140) |
$ |
2,493 |
||||||||||||
Company restaurant expenses |
1,621 |
449 |
20 |
— |
— |
2,090 |
||||||||||||||||||
General and administrative expenses |
60 |
29 |
11 |
53 |
— |
153 |
||||||||||||||||||
Franchise expenses |
7 |
1 |
— |
— |
— |
8 |
||||||||||||||||||
Expenses for transactions with franchisees(2) |
10 |
1 |
17 |
58 |
— |
86 |
||||||||||||||||||
Other operating costs and expenses |
4 |
8 |
151 |
12 |
(140) |
35 |
||||||||||||||||||
Closures and impairment expenses, net |
3 |
3 |
6 |
— |
— |
12 |
||||||||||||||||||
Other expenses (income), net |
— |
— |
— |
(1) |
— |
(1) |
||||||||||||||||||
Total costs and expenses, net |
1,705 |
491 |
205 |
122 |
(140) |
2,383 |
||||||||||||||||||
Operating Profit (Loss) |
$ |
167 |
$ |
5 |
$ |
(11) |
$ |
(51) |
$ |
— |
$ |
110 |
Reconciliation of GAAP Operating Profit to Restaurant Profit
Quarter Ended 12/31/2023 |
||||||||||||||||||||||||
KFC |
Pizza Hut |
All Other |
Corporate |
Elimination |
Total |
|||||||||||||||||||
GAAP Operating Profit (Loss) |
$ |
167 |
$ |
5 |
$ |
(11) |
$ |
(51) |
$ |
— |
$ |
110 |
||||||||||||
Less: |
||||||||||||||||||||||||
Franchise fees and income |
14 |
1 |
5 |
— |
— |
20 |
||||||||||||||||||
Revenues from transactions with franchisees(2) |
12 |
1 |
18 |
59 |
— |
90 |
||||||||||||||||||
Other revenues |
4 |
8 |
156 |
12 |
(140) |
40 |
||||||||||||||||||
Add: |
||||||||||||||||||||||||
General and administrative expenses |
60 |
29 |
11 |
53 |
— |
153 |
||||||||||||||||||
Franchise expenses |
7 |
1 |
— |
— |
— |
8 |
||||||||||||||||||
Expenses for transactions with franchisees(2) |
10 |
1 |
17 |
58 |
— |
86 |
||||||||||||||||||
Other operating costs and expenses |
4 |
8 |
151 |
12 |
(140) |
35 |
||||||||||||||||||
Closures and impairment expenses, net |
3 |
3 |
6 |
— |
— |
12 |
||||||||||||||||||
Other expenses (income), net |
— |
— |
— |
(1) |
— |
(1) |
||||||||||||||||||
Restaurant profit (loss) |
$ |
221 |
$ |
37 |
$ |
(5) |
$ |
— |
$ |
— |
$ |
253 |
||||||||||||
Company sales |
1,842 |
486 |
15 |
— |
— |
2,343 |
||||||||||||||||||
Restaurant margin % |
12.0 |
% |
7.3 |
% |
(35.9) |
% |
N/A |
N/A |
10.7 |
% |
Reconciliation of GAAP Operating Profit to Core Operating Profit
Quarter Ended 12/31/2023 |
||||||||||||||||||||||||
KFC |
Pizza Hut |
All Other |
Corporate |
Elimination |
Total |
|||||||||||||||||||
GAAP Operating Profit (Loss) |
$ |
167 |
$ |
5 |
$ |
(11) |
$ |
(51) |
$ |
— |
$ |
110 |
||||||||||||
Special Items, Operating Profit |
— |
— |
— |
6 |
— |
6 |
||||||||||||||||||
Adjusted Operating Profit |
$ |
167 |
$ |
5 |
$ |
(11) |
$ |
(45) |
$ |
— |
$ |
116 |
||||||||||||
Items Affecting Comparability |
||||||||||||||||||||||||
Temporary relief from landlords |
(1) |
— |
— |
— |
— |
(1) |
||||||||||||||||||
Temporary relief from government agencies |
(2) |
(1) |
— |
— |
— |
(3) |
||||||||||||||||||
VAT deductions |
(2) |
— |
— |
— |
— |
(2) |
||||||||||||||||||
Amortization of reacquired franchise rights |
— |
— |
— |
— |
— |
— |
||||||||||||||||||
F/X impact |
2 |
— |
— |
(1) |
— |
1 |
||||||||||||||||||
Core Operating Profit (Loss) |
$ |
164 |
$ |
4 |
$ |
(11) |
$ |
(46) |
$ |
— |
$ |
111 |
Quarter Ended 12/31/2022 |
||||||||||||||||||||||||
KFC |
Pizza Hut |
All Other |
Corporate |
Elimination |
Total |
|||||||||||||||||||
Company sales |
$ |
1,566 |
$ |
398 |
$ |
11 |
$ |
— |
$ |
— |
$ |
1,975 |
||||||||||||
Franchise fees and income |
12 |
1 |
3 |
— |
— |
16 |
||||||||||||||||||
Revenues from transactions with franchisees(2) |
9 |
1 |
10 |
48 |
— |
68 |
||||||||||||||||||
Other revenues |
4 |
4 |
156 |
11 |
(146) |
29 |
||||||||||||||||||
Total revenues |
$ |
1,591 |
$ |
404 |
$ |
180 |
$ |
59 |
$ |
(146) |
$ |
2,088 |
||||||||||||
Company restaurant expenses |
1,367 |
391 |
15 |
— |
(3) |
1,770 |
||||||||||||||||||
General and administrative expenses |
63 |
26 |
10 |
46 |
— |
145 |
||||||||||||||||||
Franchise expenses |
6 |
1 |
— |
— |
— |
7 |
||||||||||||||||||
Expenses for transactions with franchisees(2) |
8 |
— |
11 |
48 |
— |
67 |
||||||||||||||||||
Other operating costs and expenses |
3 |
3 |
151 |
11 |
(143) |
25 |
||||||||||||||||||
Closures and impairment expenses, net |
5 |
3 |
4 |
— |
— |
12 |
||||||||||||||||||
Other expenses (income), net |
22 |
— |
— |
(1) |
— |
21 |
||||||||||||||||||
Total costs and expenses, net |
1,474 |
424 |
191 |
104 |
(146) |
2,047 |
||||||||||||||||||
Operating Profit (Loss) |
$ |
117 |
$ |
(20) |
$ |
(11) |
$ |
(45) |
$ |
— |
$ |
41 |
Reconciliation of GAAP Operating Profit to Restaurant Profit
Quarter Ended 12/31/2022 |
||||||||||||||||||||||||
KFC |
Pizza Hut |
All Other |
Corporate |
Elimination |
Total |
|||||||||||||||||||
GAAP Operating Profit (Loss) |
$ |
117 |
$ |
(20) |
$ |
(11) |
$ |
(45) |
$ |
— |
$ |
41 |
||||||||||||
Less: |
||||||||||||||||||||||||
Franchise fees and income |
12 |
1 |
3 |
— |
— |
16 |
||||||||||||||||||
Revenues from transactions with franchisees(2) |
9 |
1 |
10 |
48 |
— |
68 |
||||||||||||||||||
Other revenues |
4 |
4 |
156 |
11 |
(146) |
29 |
||||||||||||||||||
Add: |
||||||||||||||||||||||||
General and administrative expenses |
63 |
26 |
10 |
46 |
— |
145 |
||||||||||||||||||
Franchise expenses |
6 |
1 |
— |
— |
— |
7 |
||||||||||||||||||
Expenses for transactions with franchisees(2) |
8 |
— |
11 |
48 |
— |
67 |
||||||||||||||||||
Other operating costs and expenses |
3 |
3 |
151 |
11 |
(143) |
25 |
||||||||||||||||||
Closures and impairment expenses, net |
5 |
3 |
4 |
— |
— |
12 |
||||||||||||||||||
Other expenses (income), net |
22 |
— |
— |
(1) |
— |
21 |
||||||||||||||||||
Restaurant profit (loss) |
$ |
199 |
$ |
7 |
$ |
(4) |
$ |
— |
$ |
3 |
$ |
205 |
||||||||||||
Company sales |
1,566 |
398 |
11 |
— |
— |
1,975 |
||||||||||||||||||
Restaurant margin % |
12.7 |
% |
1.9 |
% |
(42.6) |
% |
N/A |
N/A |
10.4 |
% |
Reconciliation of GAAP Operating Profit to Core Operating Profit
Quarter Ended 12/31/2022 |
||||||||||||||||||||||||
KFC |
Pizza Hut |
All Other |
Corporate |
Elimination |
Total |
|||||||||||||||||||
GAAP Operating Profit (Loss) |
$ |
117 |
$ |
(20) |
$ |
(11) |
$ |
(45) |
$ |
— |
$ |
41 |
||||||||||||
Special Items, Operating Profit |
— |
— |
— |
(1) |
— |
(1) |
||||||||||||||||||
Adjusted Operating Profit |
$ |
117 |
$ |
(20) |
$ |
(11) |
$ |
(46) |
$ |
— |
$ |
40 |
||||||||||||
Items Affecting Comparability |
||||||||||||||||||||||||
Temporary relief from landlords |
(10) |
(2) |
— |
— |
— |
(12) |
||||||||||||||||||
Temporary relief from government agencies |
(10) |
(4) |
— |
— |
— |
(14) |
||||||||||||||||||
VAT deductions |
(5) |
(1) |
(2) |
— |
— |
(8) |
||||||||||||||||||
Amortization of reacquired franchise rights |
23 |
— |
— |
— |
— |
23 |
||||||||||||||||||
F/X impact |
— |
— |
— |
— |
— |
— |
||||||||||||||||||
Core Operating Profit (Loss) |
$ |
115 |
$ |
(27) |
$ |
(13) |
$ |
(46) |
$ |
— |
$ |
29 |
Year Ended 12/31/2023 |
||||||||||||||||||||||||
KFC |
Pizza Hut |
All Other |
Corporate |
Elimination |
Total |
|||||||||||||||||||
Company sales |
$ |
8,116 |
$ |
2,214 |
$ |
61 |
$ |
— |
$ |
— |
$ |
10,391 |
||||||||||||
Franchise fees and income |
62 |
7 |
20 |
— |
— |
89 |
||||||||||||||||||
Revenues from transactions with franchisees(2) |
45 |
4 |
74 |
249 |
— |
372 |
||||||||||||||||||
Other revenues |
17 |
21 |
624 |
44 |
(580) |
126 |
||||||||||||||||||
Total revenues |
$ |
8,240 |
$ |
2,246 |
$ |
779 |
$ |
293 |
$ |
(580) |
$ |
10,978 |
||||||||||||
Company restaurant expenses |
6,676 |
1,951 |
76 |
— |
(2) |
8,701 |
||||||||||||||||||
General and administrative expenses |
263 |
118 |
43 |
214 |
— |
638 |
||||||||||||||||||
Franchise expenses |
31 |
4 |
1 |
— |
— |
36 |
||||||||||||||||||
Expenses for transactions with franchisees(2) |
39 |
4 |
67 |
246 |
— |
356 |
||||||||||||||||||
Other operating costs and expenses |
15 |
19 |
614 |
42 |
(578) |
112 |
||||||||||||||||||
Closures and impairment expenses, net |
12 |
8 |
9 |
— |
— |
29 |
||||||||||||||||||
Other expenses (income), net |
2 |
— |
— |
(2) |
— |
— |
||||||||||||||||||
Total costs and expenses, net |
7,038 |
2,104 |
810 |
500 |
(580) |
9,872 |
||||||||||||||||||
Operating Profit (Loss) |
$ |
1,202 |
$ |
142 |
$ |
(31) |
$ |
(207) |
$ |
— |
$ |
1,106 |
Reconciliation of GAAP Operating Profit to Restaurant Profit
Year Ended 12/31/2023 |
||||||||||||||||||||||||
KFC |
Pizza Hut |
All Other |
Corporate |
Elimination |
Total |
|||||||||||||||||||
GAAP Operating Profit (Loss) |
$ |
1,202 |
$ |
142 |
$ |
(31) |
$ |
(207) |
$ |
— |
$ |
1,106 |
||||||||||||
Less: |
||||||||||||||||||||||||
Franchise fees and income |
62 |
7 |
20 |
— |
— |
89 |
||||||||||||||||||
Revenues from transactions with franchisees(2) |
45 |
4 |
74 |
249 |
— |
372 |
||||||||||||||||||
Other revenues |
17 |
21 |
624 |
44 |
(580) |
126 |
||||||||||||||||||
Add: |
||||||||||||||||||||||||
General and administrative expenses |
263 |
118 |
43 |
214 |
— |
638 |
||||||||||||||||||
Franchise expenses |
31 |
4 |
1 |
— |
— |
36 |
||||||||||||||||||
Expenses for transactions with franchisees(2) |
39 |
4 |
67 |
246 |
— |
356 |
||||||||||||||||||
Other operating costs and expenses |
15 |
19 |
614 |
42 |
(578) |
112 |
||||||||||||||||||
Closures and impairment expenses, net |
12 |
8 |
9 |
— |
— |
29 |
||||||||||||||||||
Other expenses (income), net |
2 |
— |
— |
(2) |
— |
— |
||||||||||||||||||
Restaurant profit (loss) |
$ |
1,440 |
$ |
263 |
$ |
(15) |
$ |
— |
$ |
2 |
$ |
1,690 |
||||||||||||
Company sales |
8,116 |
2,214 |
61 |
— |
— |
10,391 |
||||||||||||||||||
Restaurant margin % |
17.7 |
% |
11.8 |
% |
(25.1) |
% |
N/A |
N/A |
16.3 |
% |
Reconciliation of GAAP Operating Profit to Core Operating Profit
Year Ended 12/31/2023 |
||||||||||||||||||||||||
KFC |
Pizza Hut |
All Other |
Corporate |
Elimination |
Total |
|||||||||||||||||||
GAAP Operating Profit (Loss) |
$ |
1,202 |
$ |
142 |
$ |
(31) |
$ |
(207) |
$ |
— |
$ |
1,106 |
||||||||||||
Special Items, Operating Profit |
— |
— |
— |
15 |
— |
15 |
||||||||||||||||||
Adjusted Operating Profit |
$ |
1,202 |
$ |
142 |
$ |
(31) |
$ |
(192) |
$ |
— |
$ |
1,121 |
||||||||||||
Items Affecting Comparability |
||||||||||||||||||||||||
Temporary relief from landlords |
(9) |
(2) |
— |
— |
— |
(11) |
||||||||||||||||||
Temporary relief from government agencies |
(5) |
(2) |
— |
— |
— |
(7) |
||||||||||||||||||
VAT deductions |
(36) |
(6) |
(2) |
— |
— |
(44) |
||||||||||||||||||
Amortization of reacquired franchise rights |
2 |
— |
— |
— |
— |
2 |
||||||||||||||||||
F/X impact |
57 |
11 |
(2) |
(6) |
— |
60 |
||||||||||||||||||
Core Operating Profit (Loss) |
$ |
1,211 |
$ |
143 |
$ |
(35) |
$ |
(198) |
$ |
— |
$ |
1,121 |
Year Ended 12/31/2022 |
||||||||||||||||||||||||
KFC |
Pizza Hut |
All Other |
Corporate |
Elimination |
Total |
|||||||||||||||||||
Company sales |
$ |
7,120 |
$ |
1,939 |
$ |
51 |
$ |
— |
$ |
— |
$ |
9,110 |
||||||||||||
Franchise fees and income |
56 |
7 |
18 |
— |
— |
81 |
||||||||||||||||||
Revenues from transactions with franchisees(2) |
33 |
4 |
39 |
211 |
— |
287 |
||||||||||||||||||
Other revenues |
10 |
10 |
563 |
42 |
(534) |
91 |
||||||||||||||||||
Total revenues |
$ |
7,219 |
$ |
1,960 |
$ |
671 |
$ |
253 |
$ |
(534) |
$ |
9,569 |
||||||||||||
Company restaurant expenses |
5,999 |
1,761 |
70 |
— |
(1) |
7,829 |
||||||||||||||||||
General and administrative expenses |
254 |
110 |
46 |
184 |
— |
594 |
||||||||||||||||||
Franchise expenses |
29 |
4 |
1 |
— |
— |
34 |
||||||||||||||||||
Expenses for transactions with franchisees(2) |
30 |
3 |
35 |
211 |
— |
279 |
||||||||||||||||||
Other operating costs and expenses |
7 |
8 |
557 |
39 |
(533) |
78 |
||||||||||||||||||
Closures and impairment expenses, net |
16 |
4 |
12 |
— |
— |
32 |
||||||||||||||||||
Other expenses (income), net |
97 |
— |
— |
(3) |
— |
94 |
||||||||||||||||||
Total costs and expenses, net |
6,432 |
1,890 |
721 |
431 |
(534) |
8,940 |
||||||||||||||||||
Operating Profit (Loss) |
$ |
787 |
$ |
70 |
$ |
(50) |
$ |
(178) |
$ |
— |
$ |
629 |
Reconciliation of GAAP Operating Profit to Restaurant Profit
Year Ended 12/31/2022 |
||||||||||||||||||||||||
KFC |
Pizza Hut |
All Other |
Corporate |
Elimination |
Total |
|||||||||||||||||||
GAAP Operating Profit (Loss) |
$ |
787 |
$ |
70 |
$ |
(50) |
$ |
(178) |
$ |
— |
$ |
629 |
||||||||||||
Less: |
||||||||||||||||||||||||
Franchise fees and income |
56 |
7 |
18 |
— |
— |
81 |
||||||||||||||||||
Revenues from transactions with franchisees(2) |
33 |
4 |
39 |
211 |
— |
287 |
||||||||||||||||||
Other revenues |
10 |
10 |
563 |
42 |
(534) |
91 |
||||||||||||||||||
Add: |
||||||||||||||||||||||||
General and administrative expenses |
254 |
110 |
46 |
184 |
— |
594 |
||||||||||||||||||
Franchise expenses |
29 |
4 |
1 |
— |
— |
34 |
||||||||||||||||||
Expenses for transactions with franchisees(2) |
30 |
3 |
35 |
211 |
— |
279 |
||||||||||||||||||
Other operating costs and expenses |
7 |
8 |
557 |
39 |
(533) |
78 |
||||||||||||||||||
Closures and impairment expenses, net |
16 |
4 |
12 |
— |
— |
32 |
||||||||||||||||||
Other expenses (income), net |
97 |
— |
— |
(3) |
— |
94 |
||||||||||||||||||
Restaurant profit (loss) |
$ |
1,121 |
$ |
178 |
$ |
(19) |
$ |
— |
$ |
1 |
$ |
1,281 |
||||||||||||
Company sales |
7,120 |
1,939 |
51 |
— |
— |
9,110 |
||||||||||||||||||
Restaurant margin % |
15.7 |
% |
9.2 |
% |
(37.6) |
% |
N/A |
N/A |
14.1 |
% |
Reconciliation of GAAP Operating Profit to Core Operating Profit
Year Ended 12/31/2022 |
||||||||||||||||||||||||
KFC |
Pizza Hut |
All Other |
Corporate |
Elimination |
Total |
|||||||||||||||||||
GAAP Operating Profit (Loss) |
$ |
787 |
$ |
70 |
$ |
(50) |
$ |
(178) |
$ |
— |
$ |
629 |
||||||||||||
Special Items, Operating Profit |
— |
— |
— |
4 |
— |
4 |
||||||||||||||||||
Adjusted Operating Profit |
$ |
787 |
$ |
70 |
$ |
(50) |
$ |
(174) |
$ |
— |
$ |
633 |
||||||||||||
Items Affecting Comparability |
||||||||||||||||||||||||
Temporary relief from landlords |
(32) |
(6) |
(1) |
— |
— |
(39) |
||||||||||||||||||
Temporary relief from government agencies |
(34) |
(14) |
— |
— |
— |
(48) |
||||||||||||||||||
VAT deductions |
(12) |
(2) |
(2) |
— |
— |
(16) |
||||||||||||||||||
Amortization of reacquired franchise rights |
97 |
— |
— |
— |
— |
97 |
||||||||||||||||||
F/X impact |
— |
— |
— |
— |
— |
— |
||||||||||||||||||
Core Operating Profit (Loss) |
$ |
806 |
$ |
48 |
$ |
(53) |
$ |
(174) |
$ |
— |
$ |
627 |
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.