SHANGHAI, Feb. 4, 2021 /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, 2020.
Impact of COVID-19 Outbreak and Mitigation Efforts
Fourth quarter operations improved sequentially from the third quarter. The Company's primary focus continues to be safety, efficiency and sales recovery. To counter the pandemic impact, we ran strong value and digital campaigns to drive traffic. Delivery and takeaway remained popular, while dine-in recovered sequentially. Proactive cost structure realignment, productivity improvements and one-off cost savings helped us achieve year-over-year expansion of restaurant margins and operating profit. However, the pace of recovery was uneven and non-linear, impacted by regional resurgences of COVID-19 in Qingdao, Xinjiang, Beijing, Dalian and elsewhere. October sales benefited from the National Day long holiday, but November and December sales were pressured by the regional outbreaks. Traffic at transportation hubs remained significantly below the prior year due to reduced travel.
The impact of regional resurgences has continued into the first quarter of 2021. In January, there were clusters of outbreaks, mostly in northern and northeastern China, resulting in tighter public health measures across China. There are now measures restricting travel and large gatherings, and recommendations against dining out. Several cities have been put on city-wide quarantine, including Shijiazhuang which has an 11-million population and is the capital city of Hebei province.
The Company anticipates significant headwinds in the first quarter. Our transportation and tourist locations, representing high single digits of sales mix, will likely be more significantly impacted. In the first few days of the Chinese New Year travel season, which started in late January, the number of travelers declined over 70% year-over-year. The important Chinese New Year holiday season will be subdued, with sales impacted by substantially less travel, smaller gatherings and generally reduced social activities. Our teams are closely monitoring this fluid situation and adjusting marketing programs and operations accordingly. Please also note that in 2020, COVID-related lockdowns started in late January, so they only impacted the last two months of that quarter. January 2020 sales were strong leading into Chinese New Year.
Fourth Quarter Highlights
Full Year Highlights
There was no material F/X impact on the full year results, and therefore growth rates are based on reported currency, unless otherwise noted.
Key Financial Results
Fourth Quarter 2020 |
Full Year 2020 |
||||||||||||||||
% Change |
% Change |
||||||||||||||||
System |
Same- |
Net New |
Operating |
System |
Same-Store |
Net New |
Operating |
||||||||||
Yum China |
+5 |
(4) |
+14 |
+90 |
(5) |
(9) |
+14 |
+7 |
|||||||||
KFC |
+3 |
(4) |
+10 |
+26 |
(5) |
(8) |
+10 |
(16) |
|||||||||
Pizza Hut |
(3) |
(5) |
+3 |
NM |
(15) |
(14) |
+3 |
(45) |
Fourth Quarter |
Full Year |
||||||||||||||||||||
(in US$ million, except |
% Change |
% Change |
|||||||||||||||||||
per share data and percentages) |
2020 |
2019 |
Reported |
Ex F/X |
2020 |
2019 |
Reported |
Ex F/X |
|||||||||||||
Operating Profit |
$ |
180 |
$ |
94 |
+90 |
+78 |
$ |
961 |
$ |
901 |
+7 |
+7 |
|||||||||
Adjusted Operating Profit(1) |
$ |
182 |
$ |
105 |
+72 |
+61 |
$ |
732 |
$ |
912 |
(20) |
(20) |
|||||||||
Net Income |
$ |
151 |
$ |
90 |
+68 |
+59 |
$ |
784 |
$ |
713 |
+10 |
+10 |
|||||||||
Adjusted Net Income(1) |
$ |
153 |
$ |
98 |
+56 |
+48 |
$ |
615 |
$ |
729 |
(16) |
(15) |
|||||||||
Basic Earnings Per Common Share |
$ |
0.36 |
$ |
0.24 |
+50 |
+42 |
$ |
2.01 |
$ |
1.89 |
+6 |
+7 |
|||||||||
Adjusted Basic Earnings Per |
|||||||||||||||||||||
Common Share(1) |
$ |
0.37 |
$ |
0.26 |
+42 |
+35 |
$ |
1.58 |
$ |
1.93 |
(18) |
(18) |
|||||||||
Diluted Earnings Per Common Share |
$ |
0.35 |
$ |
0.23 |
+52 |
+43 |
$ |
1.95 |
$ |
1.84 |
+6 |
+7 |
|||||||||
Adjusted Diluted Earnings Per |
|||||||||||||||||||||
Common Share(1) |
$ |
0.35 |
$ |
0.25 |
+40 |
+36 |
$ |
1.53 |
$ |
1.88 |
(19) |
(18) |
|||||||||
(1) See "Reconciliation of Reported GAAP Results to non-GAAP Adjusted Measures" included in the accompanying tables of this release for further details. |
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Note: All comparisons are versus the same period a year ago. |
|||||||||||||||||||||
NM refers to changes over 100%, from negative to positive amounts or from zero to an amount. |
|||||||||||||||||||||
Percentages may not recompute due to rounding. |
|||||||||||||||||||||
System sales and same-store sales percentages exclude the impact of F/X. Effective January 1, 2018, temporary store closures are normalized in the same-store sales calculation by |
CEO and CFO Comments
Joey Wat, CEO of Yum China, commented, "2020 was an unprecedented year that tested our people, systems and capabilities. I would like to express my heartfelt appreciation to our employees and business partners. Through their dedication, creativity, and tireless efforts, we overcame numerous challenges and demonstrated our ability to succeed in the face of adversity. Fourth quarter results marked a strong finish to 2020, with same-store sales recovering sequentially and double-digit operating profit growth. Our foremost priority remains the safety of our employees and customers. The COVID-19 pandemic reinforced our determination to look after our employees and strive to be a responsible corporate citizen, an effort that is recognized by our industry."
Wat continued, "Looking into 2021, we will continue to manage the impact of the pandemic. We will swiftly adjust our operations according to market conditions and drive traffic with compelling offers for both dine-in and off-premise occasions. Our industry-leading digital capabilities enable us to stay agile in this ever-evolving situation. We remain committed to growth and intend to open approximately 1,000 new stores in the year ahead. Our confidence in the long-term potential of China is unshaken. We are focused on growing our store footprint and developing our emerging brands. We will also step up investment in digitization and infrastructure to create an even stronger foundation to accelerate expansion. I am confident that with the strength of our team together with our resilient business model, culture of innovation and execution capabilities, we will overcome these short-term challenges and achieve attractive long-term growth."
Andy Yeung, CFO of Yum China, added, "Fourth quarter operations improved sequentially, although the recovery was uneven and non-linear, impacted by regional outbreaks. We improved our margins in the quarter with solid productivity gains, temporary relief and one-off savings. Recent surges in COVID-19 outbreaks resulted in the government tightening measures nationwide, including city-wide quarantine in several cities, advice against travel during the Chinese New Year holiday period and large gatherings. These measures resulted in a very challenging condition. Traffic is significantly lower in transportation and tourist locations. Accordingly, we will continue to adjust our operations and leverage our digital and delivery resources to capture dine-in and off-premise demand. We also plan to step up our value campaigns and tailor offers according to city tiers and trade zones. Despite these challenges, we will continue to invest for the long term, focusing on building our capabilities, making our business model more resilient, and driving long-term growth. Our healthy balance sheet and strong cash position enable us to handle potential contingencies, while laying the foundation for us to capture market opportunities and achieve sustainable growth in the long run."
Dividends
Digital and Delivery
KFC and Pizza Hut Total |
Fourth Quarter |
Full Year |
||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||
Member count (as of period-end) |
300 million+ |
240 million+ |
300 million+ |
240 million+ |
||||||||
Member sales as % of system sales |
~59% |
~56% |
~60% |
~52% |
||||||||
Delivery as % of Company sales |
~29% |
~22% |
~30% |
~20% |
||||||||
Digital orders as % of Company sales |
~83% |
~61% |
~80% |
~55% |
New-Unit Development and Asset Upgrade
New Units |
Restaurant Count |
|||||||||
Fourth Quarter |
Full Year |
As of Year-End |
||||||||
2020 |
2020 |
2020 |
2019 |
|||||||
Yum China |
505 |
1,165 |
10,506 |
9,200 |
||||||
KFC |
306 |
840 |
7,166 |
6,534 |
||||||
Pizza Hut |
96 |
152 |
2,355 |
2,281 |
||||||
Others(2) |
103 |
173 |
985 |
385 |
||||||
(2) Others include Taco Bell, Little Sheep, Huang Ji Huang, East Dawning, COFFii & JOY and Lavazza. |
Restaurant Margin
Fourth Quarter |
Full Year |
|||||||||||||
2020 |
2019 |
ppts change |
2020 |
2019 |
ppts change |
|||||||||
Yum China |
15.1% |
12.4% |
+2.7 |
14.9% |
16.0% |
(1.1) |
||||||||
KFC |
16.8% |
14.5% |
+2.3 |
16.3% |
17.8% |
(1.5) |
||||||||
Pizza Hut |
10.4% |
6.7% |
+3.7 |
10.5% |
11.1% |
(0.6) |
2021 Outlook
The Company provides the following fiscal year 2021 targets:
Other Company Updates
Note on Non-GAAP Adjusted Measures
Reported GAAP results include Special Items, which are excluded from non-GAAP adjusted measures. Special Items are not allocated to any segment and therefore only impact reported GAAP results of Yum China. See "Reconciliation of Reported GAAP Results to Non-GAAP Adjusted Measures" within this release.
Conference Call
Yum China's management will hold an earnings conference call at 7:00 p.m. U.S. Eastern Time on Wednesday, February 3, 2021 (8:00 a.m. Beijing/Hong Kong Time on Thursday, February 4, 2021).
Operator-assisted conference calls are not available at the moment. Please register in advance of the conference through the link provided below. Upon registering, you will be provided with participant dial-in numbers, a passcode and a unique registrant ID.
Pre-registration Link: http://apac.directeventreg.com/registration/event/2064799
Conference ID: 2064799
A live webcast of the call may also be accessed at https://edge.media-server.com/mmc/p/mmubh6w3.
A replay of the conference call will be available two hours after the call ends until 8:00 a.m. U.S. Eastern Time on Thursday, February 11, 2021 (9:00 p.m. Beijing/Hong Kong Time on Thursday, February 11, 2021) and may be accessed by phone at the following numbers:
U.S.: 1 855 452 5696
Mainland China: 400 602 2065 or 800 870 0206
Hong Kong: +852 3051 2780
U.K.: 0808 234 0072
International: +61 2 8199 0299
Replay access code: 2064799
Additionally, this earnings release, the accompanying slides, a live webcast and an archived webcast of this conference call will be available at Yum China's Investor Relations website at http://ir.yumchina.com.
For important news and information regarding Yum China, including our filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange, visit Yum China's Investor Relations website at http://ir.yumchina.com. Yum China uses this website as a primary channel for disclosing key information to its investors, some of which may contain material and previously non-public information.
Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including under "2021 Outlook." We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the fact that they do not relate strictly to historical or current facts and by the use of forward-looking words such as "expect," "expectation," "believe," "anticipate," "may," "could," "intend," "belief," "plan," "estimate," "target," "predict," "project," "likely," "will," "continue," "should," "forecast," "outlook" or similar terminology. These statements are based on current estimates and assumptions made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable under the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. Forward-looking statements include, without limitation, statements regarding the future strategies, business plans, investment, dividend and share repurchase plans, earnings, performance and returns of Yum China, anticipated effects of population and macroeconomic trends, the expected impact of the COVID-19 outbreak, the anticipated effects of our innovation, digital and delivery capabilities on growth and beliefs regarding the long-term drivers of Yum China's business. Forward-looking statements are not guarantees of performance and are inherently subject to known and unknown risks and uncertainties that are difficult to predict and could cause our actual results or events to differ materially from those indicated by those statements. We cannot assure you that any of our expectations, estimates or assumptions will be achieved. The forward-looking statements included in this press release are only made as of the date of this press release, and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law. Numerous factors could cause our actual results or events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: whether we are able to achieve development goals at the times and in the amounts currently anticipated, if at all, the success of our marketing campaigns and product innovation, our ability to maintain food safety and quality control systems, changes in public health conditions, including the COVID-19 outbreak, our ability to control costs and expenses, including tax costs, as well as changes in political, economic and regulatory conditions in China. In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial could affect the accuracy of any such forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. You should consult our filings with the Securities and Exchange Commission (including the information set forth under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q) for additional detail about factors that could affect our financial and other results.
About Yum China Holdings, Inc.
Yum China Holdings, Inc. is a licensee of Yum! Brands in mainland China. It has exclusive rights in mainland China to KFC, China's leading quick-service restaurant brand, Pizza Hut, the leading casual dining restaurant brand in China, and Taco Bell, a California-based restaurant chain serving innovative Mexican-inspired food. Yum China also owns the Little Sheep, Huang Ji Huang, East Dawning and COFFii & JOY concepts outright. In addition, Yum China has partnered with Lavazza to explore and develop the Lavazza coffee shop concept in China. The Company had 10,506 restaurants in over 1,500 cities at the end of December 2020. Yum China ranked # 361 on the Fortune 500 list for 2020. Yum China has been named the Industry Leader for the Restaurant & Leisure Facilities Industry in the 2020 Dow Jones Sustainability Indices. In 2021, Yum China was named to the Bloomberg Gender-Equality Index and was certified as a Top Employer 2021 in China by the Top Employers Institute, both for the third consecutive year. For more information, please visit http://ir.yumchina.com.
Investor Relations Contact: |
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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. |
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Condensed Consolidated Statements of Income |
||||||||||||||
(in US$ million, except per share data) |
||||||||||||||
(unaudited) |
||||||||||||||
Quarter Ended |
% Change |
Year Ended |
% Change |
|||||||||||
12/31/2020 |
12/31/2019 |
B/(W) |
12/31/2020 |
12/31/2019 |
B/(W) |
|||||||||
Revenues |
||||||||||||||
Company sales |
$ 2,038 |
$ 1,813 |
12 |
$ 7,396 |
$ 7,925 |
(7) |
||||||||
Franchise fees and income |
36 |
35 |
4 |
148 |
148 |
— |
||||||||
Revenues from transactions with |
159 |
158 |
— |
647 |
654 |
(1) |
||||||||
Other revenues |
26 |
23 |
11 |
72 |
49 |
45 |
||||||||
Total revenues |
2,259 |
2,029 |
11 |
8,263 |
8,776 |
(6) |
||||||||
Costs and Expenses, Net |
||||||||||||||
Company restaurants |
||||||||||||||
Food and paper |
631 |
583 |
(8) |
2,342 |
2,479 |
6 |
||||||||
Payroll and employee benefits |
494 |
436 |
(13) |
1,730 |
1,807 |
4 |
||||||||
Occupancy and other operating expenses |
605 |
569 |
(6) |
2,226 |
2,373 |
6 |
||||||||
Company restaurant expenses |
1,730 |
1,588 |
(9) |
6,298 |
6,659 |
5 |
||||||||
General and administrative expenses |
140 |
147 |
4 |
479 |
487 |
2 |
||||||||
Franchise expenses |
15 |
16 |
7 |
65 |
71 |
8 |
||||||||
Expenses for transactions with |
153 |
157 |
3 |
633 |
645 |
2 |
||||||||
Other operating costs and expenses |
19 |
17 |
(13) |
57 |
37 |
(53) |
||||||||
Closures and impairment expenses, net |
25 |
22 |
(10) |
55 |
36 |
(51) |
||||||||
Other income, net |
(3) |
(12) |
(73) |
(285) |
(60) |
NM |
||||||||
Total costs and expenses, net |
2,079 |
1,935 |
(7) |
7,302 |
7,875 |
7 |
||||||||
Operating Profit |
180 |
94 |
90 |
961 |
901 |
7 |
||||||||
Interest income, net |
15 |
10 |
60 |
43 |
39 |
11 |
||||||||
Investment gain |
29 |
24 |
19 |
104 |
63 |
65 |
||||||||
Income Before Income Taxes |
224 |
128 |
74 |
1,108 |
1,003 |
10 |
||||||||
Income tax provision |
(63) |
(34) |
(82) |
(295) |
(260) |
(13) |
||||||||
Net income – including noncontrolling interests |
161 |
94 |
72 |
813 |
743 |
9 |
||||||||
Net income – noncontrolling interests |
10 |
4 |
NM |
29 |
30 |
3 |
||||||||
Net Income – Yum China Holdings, Inc. |
$ 151 |
$ 90 |
68 |
$ 784 |
$ 713 |
10 |
||||||||
Effective tax rate |
28.0% |
26.8% |
(1.2) |
ppts. |
26.6% |
25.9% |
(0.7) |
ppts. |
||||||
Basic Earnings Per Common Share |
$ 0.36 |
$ 0.24 |
$ 2.01 |
$ 1.89 |
||||||||||
Weighted-average shares outstanding |
420 |
376 |
390 |
377 |
||||||||||
Diluted Earnings Per Common Share |
$ 0.35 |
$ 0.23 |
$ 1.95 |
$ 1.84 |
||||||||||
Weighted-average shares outstanding |
433 |
387 |
402 |
388 |
||||||||||
Cash Dividends Declared Per Common Share |
$ 0.12 |
$ 0.12 |
$ 0.24 |
$ 0.48 |
||||||||||
Company sales |
100.0% |
100.0% |
100.0% |
100.0% |
||||||||||
Food and paper |
31.0 |
32.2 |
1.2 |
ppts. |
31.7 |
31.3 |
(0.4) |
ppts. |
||||||
Payroll and employee benefits |
24.2 |
24.0 |
(0.2) |
ppts. |
23.4 |
22.8 |
(0.6) |
ppts. |
||||||
Occupancy and other operating expenses |
29.7 |
31.4 |
1.7 |
ppts. |
30.0 |
29.9 |
(0.1) |
ppts. |
||||||
Restaurant margin |
15.1% |
12.4% |
2.7 |
ppts. |
14.9% |
16.0% |
(1.1) |
ppts. |
||||||
Operating margin |
8.8% |
5.2% |
3.6 |
ppts. |
13.0% |
11.4% |
1.6 |
ppts. |
||||||
Percentages may not recompute due to rounding. |
Yum China Holdings, Inc. |
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KFC Operating Results |
||||||||||||||
(in US$ million) |
||||||||||||||
(unaudited) |
||||||||||||||
Quarter Ended |
% Change |
Year Ended |
% Change |
|||||||||||
12/31/2020 |
12/31/2019 |
B/(W) |
12/31/2020 |
12/31/2019 |
B/(W) |
|||||||||
Revenues |
||||||||||||||
Company sales |
$ 1,556 |
$ 1,344 |
16 |
$ 5,633 |
$ 5,839 |
(4) |
||||||||
Franchise fees and income |
28 |
32 |
(12) |
125 |
136 |
(8) |
||||||||
Revenues from transactions with |
14 |
16 |
(10) |
61 |
64 |
(4) |
||||||||
Other revenues |
1 |
— |
NM |
2 |
1 |
52 |
||||||||
Total revenues |
1,599 |
1,392 |
15 |
5,821 |
6,040 |
(4) |
||||||||
Costs and Expenses, Net |
||||||||||||||
Company restaurants |
||||||||||||||
Food and paper |
486 |
432 |
(12) |
1,801 |
1,835 |
2 |
||||||||
Payroll and employee benefits |
359 |
303 |
(18) |
1,247 |
1,245 |
— |
||||||||
Occupancy and other operating expenses |
450 |
412 |
(9) |
1,665 |
1,717 |
3 |
||||||||
Company restaurant expenses |
1,295 |
1,147 |
(13) |
4,713 |
4,797 |
2 |
||||||||
General and administrative expenses |
62 |
59 |
(6) |
200 |
207 |
3 |
||||||||
Franchise expenses |
14 |
16 |
11 |
62 |
69 |
10 |
||||||||
Expenses for transactions with |
14 |
16 |
11 |
61 |
64 |
4 |
||||||||
Other operating costs and expenses |
1 |
1 |
NM |
1 |
1 |
(81) |
||||||||
Closures and impairment expenses, net |
13 |
2 |
NM |
25 |
9 |
NM |
||||||||
Other income, net |
(3) |
(10) |
(74) |
(42) |
(56) |
(25) |
||||||||
Total costs and expenses, net |
1,396 |
1,231 |
(14) |
5,020 |
5,091 |
1 |
||||||||
Operating Profit |
$ 203 |
$ 161 |
26 |
$ 801 |
$ 949 |
(16) |
||||||||
Company sales |
100.0% |
100.0% |
100.0% |
100.0% |
||||||||||
Food and paper |
31.2 |
32.2 |
1.0 |
ppts. |
32.0 |
31.4 |
(0.6) |
ppts. |
||||||
Payroll and employee benefits |
23.1 |
22.6 |
(0.5) |
ppts. |
22.1 |
21.3 |
(0.8) |
ppts. |
||||||
Occupancy and other operating expenses |
28.9 |
30.7 |
1.8 |
ppts. |
29.6 |
29.5 |
(0.1) |
ppts. |
||||||
Restaurant margin |
16.8% |
14.5% |
2.3 |
ppts. |
16.3% |
17.8% |
(1.5) |
ppts. |
||||||
Operating margin |
13.0% |
12.0% |
1.0 |
ppts. |
14.2% |
16.2% |
(2.0) |
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 |
|||||||||||
12/31/2020 |
12/31/2019 |
B/(W) |
12/31/2020 |
12/31/2019 |
B/(W) |
|||||||||
Revenues |
||||||||||||||
Company sales |
$ 469 |
$ 457 |
3 |
$ 1,721 |
$ 2,045 |
(16) |
||||||||
Franchise fees and income |
1 |
1 |
25 |
5 |
4 |
18 |
||||||||
Revenues from transactions with |
1 |
1 |
7 |
4 |
4 |
4 |
||||||||
Other revenues |
— |
— |
(6) |
— |
1 |
(30) |
||||||||
Total revenues |
471 |
459 |
3 |
1,730 |
2,054 |
(16) |
||||||||
Costs and Expenses, Net |
||||||||||||||
Company restaurants |
||||||||||||||
Food and paper |
141 |
149 |
4 |
529 |
633 |
16 |
||||||||
Payroll and employee benefits |
132 |
129 |
(2) |
471 |
549 |
14 |
||||||||
Occupancy and other operating expenses |
147 |
149 |
2 |
540 |
636 |
15 |
||||||||
Company restaurant expenses |
420 |
427 |
1 |
1,540 |
1,818 |
15 |
||||||||
General and administrative expenses |
25 |
25 |
(1) |
96 |
101 |
5 |
||||||||
Franchise expenses |
1 |
— |
(36) |
3 |
2 |
(14) |
||||||||
Expenses for transactions with |
1 |
1 |
(11) |
4 |
4 |
(12) |
||||||||
Other operating costs and expenses |
— |
— |
8 |
— |
1 |
33 |
||||||||
Closures and impairment expenses, net |
10 |
9 |
(20) |
25 |
14 |
(83) |
||||||||
Total costs and expenses, net |
457 |
462 |
1 |
1,668 |
1,940 |
14 |
||||||||
Operating Profit (Loss) |
$ 14 |
$ (3) |
NM |
$ 62 |
$ 114 |
(45) |
||||||||
Company sales |
100.0% |
100.0% |
100.0% |
100.0% |
||||||||||
Food and paper |
30.3 |
32.4 |
2.1 |
ppts. |
30.8 |
30.9 |
0.1 |
ppts. |
||||||
Payroll and employee benefits |
28.0 |
28.2 |
0.2 |
ppts. |
27.3 |
26.8 |
(0.5) |
ppts. |
||||||
Occupancy and other operating expenses |
31.3 |
32.7 |
1.4 |
ppts. |
31.4 |
31.2 |
(0.2) |
ppts. |
||||||
Restaurant margin |
10.4% |
6.7% |
3.7 |
ppts. |
10.5% |
11.1% |
(0.6) |
ppts. |
||||||
Operating margin |
2.9% |
(0.6)% |
3.5 |
ppts. |
3.6% |
5.6% |
(2.0) |
ppts. |
||||||
Percentages may not recompute due to rounding. |
Yum China Holdings, Inc. |
||||
Condensed Consolidated Balance Sheets |
||||
(in US$ million) |
||||
12/31/2020 |
12/31/2019 |
|||
(Unaudited) |
||||
ASSETS |
||||
Current Assets |
||||
Cash and cash equivalents |
$ 1,158 |
$ 1,046 |
||
Short-term investments |
3,105 |
611 |
||
Accounts receivable, net |
99 |
88 |
||
Inventories, net |
398 |
380 |
||
Prepaid expenses and other current assets |
176 |
134 |
||
Total Current Assets |
4,936 |
2,259 |
||
Property, plant and equipment, net |
1,765 |
1,594 |
||
Operating lease right-of-use assets |
2,164 |
1,985 |
||
Goodwill |
832 |
254 |
||
Intangible assets, net |
246 |
94 |
||
Deferred income taxes |
98 |
95 |
||
Investments in unconsolidated affiliates |
85 |
89 |
||
Other assets |
749 |
580 |
||
Total Assets |
10,875 |
6,950 |
||
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST |
||||
Current Liabilities |
||||
Accounts payable and other current liabilities |
1,995 |
1,691 |
||
Income taxes payable |
72 |
45 |
||
Total Current Liabilities |
2,067 |
1,736 |
||
Non-current operating lease liabilities |
1,915 |
1,803 |
||
Non-current finance lease obligations |
28 |
26 |
||
Other liabilities |
394 |
210 |
||
Total Liabilities |
4,404 |
3,775 |
||
Redeemable Noncontrolling Interest |
12 |
— |
||
Equity |
||||
Common stock, $0.01 par value; 1,000 million shares authorized; 440 million shares and |
4 |
4 |
||
Treasury stock |
(728) |
(721) |
||
Additional paid-in capital |
4,658 |
2,427 |
||
Retained earnings |
2,105 |
1,416 |
||
Accumulated other comprehensive income (loss) |
167 |
(49) |
||
Total Yum China Holdings, Inc. Stockholders' Equity |
6,206 |
3,077 |
||
Noncontrolling interests |
253 |
98 |
||
Total Equity |
6,459 |
3,175 |
||
Total Liabilities, Redeemable Noncontrolling Interest and Equity |
$ 10,875 |
$ 6,950 |
Yum China Holdings, Inc. |
||||||
Condensed Consolidated Statements of Cash Flows |
||||||
(in US$ million) |
||||||
(unaudited) |
||||||
Year Ended |
||||||
12/31/2020 |
12/31/2019 |
|||||
Cash Flows – Operating Activities |
||||||
Net income – including noncontrolling interests |
$ 813 |
$ 743 |
||||
Depreciation and amortization |
450 |
428 |
||||
Non-cash operating lease cost |
368 |
339 |
||||
Closures and impairment expenses |
55 |
36 |
||||
Gain from re-measurement of equity interest upon acquisition |
(239) |
— |
||||
Investment gain |
(104) |
(63) |
||||
Equity income from investments in unconsolidated affiliates |
(62) |
(69) |
||||
Distributions of income received from unconsolidated affiliates |
55 |
73 |
||||
Deferred income taxes |
111 |
16 |
||||
Share-based compensation expense |
36 |
26 |
||||
Changes in accounts receivable |
(15) |
(9) |
||||
Changes in inventories |
17 |
(77) |
||||
Changes in prepaid expenses and other current assets |
(15) |
(3) |
||||
Changes in accounts payable and other current liabilities |
65 |
171 |
||||
Changes in income taxes payable |
17 |
(8) |
||||
Changes in non-current operating lease liabilities |
(394) |
(381) |
||||
Other, net |
(44) |
(37) |
||||
Net Cash Provided by Operating Activities |
1,114 |
1,185 |
||||
Cash Flows – Investing Activities |
||||||
Capital spending |
(419) |
(435) |
||||
Purchases of short-term investments |
(4,499) |
(1,024) |
||||
Purchase of long-term time deposits |
(57) |
— |
||||
Maturities of short-term investments |
2,061 |
534 |
||||
Contribution to unconsolidated affiliates |
(17) |
— |
||||
Acquisition of business, net of cash acquired |
(288) |
— |
||||
Disposal of equity securities |
54 |
— |
||||
Other, net |
56 |
15 |
||||
Net Cash Used in Investing Activities |
(3,109) |
(910) |
||||
Cash Flows – Financing Activities |
||||||
Common stock issuance proceeds, net of issuance costs |
2,195 |
— |
||||
Repurchase of shares of common stock |
(8) |
(265) |
||||
Cash dividends paid on common stock |
(95) |
(181) |
||||
Dividends paid to noncontrolling interests |
(33) |
(32) |
||||
Other, net |
(1) |
(2) |
||||
Net Cash Provided by (Used in) Financing Activities |
2,058 |
(480) |
||||
Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash |
40 |
(6) |
||||
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash |
103 |
(211) |
||||
Cash, Cash Equivalents, and Restricted Cash - Beginning of Year |
1,055 |
1,266 |
||||
Cash, Cash Equivalents, and Restricted Cash - End of Year |
$ 1,158 |
$ 1,055 |
In this press release:
Reconciliation of Reported GAAP Results to Non-GAAP Adjusted Measures
(in millions, except per share data)
(unaudited)
In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") in this press release, the Company provides non-GAAP measures adjusted for Special Items, which include Adjusted Operating Profit, Adjusted Net Income, Adjusted EPS, Adjusted Effective Tax Rate and Adjusted EBITDA, which we define as net income including noncontrolling interests adjusted for income tax, interest income, net, investment gain or loss, certain non-cash expenses, consisting of depreciation and amortization as well as store impairment charges, and Special Items.
The following table set forth the reconciliation of the most directly comparable GAAP financial measures to the non-GAAP adjusted financial measures.
Quarter Ended |
Year Ended |
|||||||
12/31/2020 |
12/31/2019 |
12/31/2020 |
12/31/2019 |
|||||
Non-GAAP Reconciliations |
||||||||
Reconciliation of Operating Profit to Adjusted Operating Profit |
||||||||
Operating Profit |
$ 180 |
$ 94 |
$ 961 |
$ 901 |
||||
Special Items, Operating Profit |
(2) |
(11) |
229 |
(11) |
||||
Adjusted Operating Profit |
$ 182 |
$ 105 |
$ 732 |
$ 912 |
||||
Reconciliation of Net Income to Adjusted Net Income |
||||||||
Net Income – Yum China Holdings, Inc. |
$ 151 |
$ 90 |
$ 784 |
$ 713 |
||||
Special Items, Net Income –Yum China Holdings, Inc. |
(2) |
(8) |
169 |
(16) |
||||
Adjusted Net Income – Yum China Holdings, Inc. |
$ 153 |
$ 98 |
$ 615 |
$ 729 |
||||
Reconciliation of EPS to Adjusted EPS |
||||||||
Basic Earnings Per Common Share |
$ 0.36 |
$ 0.24 |
$ 2.01 |
$ 1.89 |
||||
Special Items, Basic Earnings Per Common Share |
(0.01) |
(0.02) |
0.43 |
(0.04) |
||||
Adjusted Basic Earnings Per Common Share |
$ 0.37 |
$ 0.26 |
$ 1.58 |
$ 1.93 |
||||
Diluted Earnings Per Common Share |
$ 0.35 |
$ 0.23 |
$ 1.95 |
$ 1.84 |
||||
Special Items, Diluted Earnings Per Common Share |
— |
(0.02) |
0.42 |
(0.04) |
||||
Adjusted Diluted Earnings Per Common Share |
$ 0.35 |
$ 0.25 |
$ 1.53 |
$ 1.88 |
||||
Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate |
||||||||
Effective tax rate |
28.0% |
26.8% |
26.6% |
25.9% |
||||
Impact on effective tax rate as a result of Special Items |
0.3% |
1.7% |
(0.2)% |
1.0% |
||||
Adjusted effective tax rate |
27.7% |
25.1% |
26.8% |
24.9% |
Net income, along with the reconciliation to Adjusted EBITDA, is presented below:
Quarter Ended |
Year Ended |
|||||||
12/31/2020 |
12/31/2019 |
12/31/2020 |
12/31/2019 |
|||||
Reconciliation of Net Income to Adjusted EBITDA |
||||||||
Net Income – Yum China Holdings, Inc. |
$ 151 |
$ 90 |
$ 784 |
$ 713 |
||||
Net income – noncontrolling interests |
10 |
4 |
29 |
30 |
||||
Income tax provision |
63 |
34 |
295 |
260 |
||||
Interest income, net |
(15) |
(10) |
(43) |
(39) |
||||
Investment gain |
(29) |
(24) |
(104) |
(63) |
||||
Operating Profit |
180 |
94 |
961 |
901 |
||||
Special Items, Operating Profit |
2 |
11 |
(229) |
11 |
||||
Adjusted Operating Profit |
182 |
105 |
732 |
912 |
||||
Depreciation and amortization |
123 |
106 |
450 |
428 |
||||
Store impairment charges |
27 |
11 |
66 |
38 |
||||
Adjusted EBITDA |
$ 332 |
$ 222 |
$ 1,248 |
$ 1,378 |
Details of Special Items are presented below:
Quarter Ended |
Year Ended |
|||||||
12/31/2020 |
12/31/2019 |
12/31/2020 |
12/31/2019 |
|||||
Gain from re-measurement of equity interest upon acquisition(1) |
$ - |
$ - |
$ 239 |
$ - |
||||
Share-based compensation expense for Partner PSU awards(2) |
(2) |
- |
(7) |
- |
||||
Derecognition of indemnification assets related to Daojia(3) |
- |
- |
(3) |
- |
||||
Daojia impairment(4) |
- |
(11) |
- |
(11) |
||||
Special Items, Operating Profit |
(2) |
(11) |
229 |
(11) |
||||
Tax effect on Special Items(5) |
- |
1 |
(60) |
1 |
||||
Impact from the Tax Act(6) |
- |
- |
- |
(8) |
||||
Special Items, net income – including noncontrolling interests |
(2) |
(10) |
169 |
(18) |
||||
Special Items, net income – noncontrolling interests |
- |
(2) |
- |
(2) |
||||
Special Items, Net Income –Yum China Holdings, Inc. |
$ (2) |
$ (8) |
$ 169 |
$ (16) |
||||
Weighted-average Diluted Shares Outstanding (in millions) |
433 |
387 |
402 |
388 |
||||
Special Items, Diluted Earnings Per Common Share |
$ - |
$ (0.02) |
$ 0.42 |
$ (0.04) |
(1) As a result of the acquisition of Suzhou KFC in the third quarter of 2020, the Company recognized a gain of $239 million from the re-measurement of our previously held 47% equity interest at fair value, which was not allocated to any segment for performance reporting purposes.
(2) 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 during the performance period. The impact from these special awards is excluded from metrics that management uses to assess the Company's performance. The Company recognized share-based compensation cost of $2 million and $7 million associated with the Partner PSU Awards for the quarter and year ended December 31, 2020, respectively.
(3) In the quarter ended June 30, 2020, the Company derecognized a $3 million indemnification asset previously recorded for the Daojia acquisition as the indemnification right expired pursuant to the purchase agreement. The amount was included in Other income, net, but was not allocated to any segment for performance reporting purposes.
(4) During the year ended December 31, 2019, we recorded an impairment charge of $11 million on intangible assets and goodwill attributable to the Daojia business. It was included in Closures and impairment expenses in our Condensed Consolidated Statement of Income, but was not allocated to any segment for performance reporting purposes. We recorded a tax benefit of $1 million associated with the impairment, and allocated $2 million of the after-tax impairment charge to noncontrolling interests.
(5) The tax expense was determined based upon the nature, as well as the jurisdiction, of each Special Item at the applicable tax rate.
(6) We completed the evaluation of the impact on our transition tax computation based on the final regulations that were released by the U.S. Treasury Department and the U.S. Internal Revenue Service and became effective in the first quarter of 2019, and recorded an additional tax expense of $8 million for the transition tax accordingly.
The Company excludes impact from Special Items for the purpose of evaluating performance internally. Special Items are not included in any of our segment results. In addition, the Company provides Adjusted EBITDA because we believe that investors and analysts may find it useful in measuring operating performance without regard to items such as income tax, interest income, net, investment gain or loss, depreciation and amortization, store impairment charges, and Special Items. Store impairment charges included as an adjustment item in Adjusted EBITDA primarily resulted from our semi-annual impairment evaluation of long-lived assets of individual restaurants, and additional impairment evaluation whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. If these restaurant-level assets were not impaired, depreciation of the assets would have been recorded and included in EBITDA. Therefore, store impairment charges were a non-cash item similar to depreciation and amortization of our long-lived assets of restaurants. The Company believes that investors and analyst may find it useful in measuring operating performance without regard to such non-cash item.
These adjusted measures are not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of these adjusted measures provides additional information to investors to facilitate the comparison of past and present results, excluding those items that the Company does not believe are indicative of our ongoing operations due to their nature.
Unit Count by Brand |
||||||||||||||
KFC |
||||||||||||||
12/31/2019 |
New Builds |
Closures |
Refranchised |
Acquired |
Others(1) |
12/31/2020 |
||||||||
Company-owned |
5,083 |
651 |
(171) |
(9) |
2 |
316 |
5,872 |
|||||||
Unconsolidated affiliates |
896 |
119 |
(22) |
— |
— |
(316) |
677 |
|||||||
Franchisees |
555 |
70 |
(15) |
9 |
(2) |
— |
617 |
|||||||
Total |
6,534 |
840 |
(208) |
— |
— |
— |
7,166 |
|||||||
Pizza Hut |
||||||||||||||
12/31/2019 |
New Builds |
Closures |
Refranchised |
12/31/2020 |
||||||||||
Company-owned |
2,178 |
141 |
(77) |
(12) |
2,230 |
|||||||||
Franchisees |
103 |
11 |
(1) |
12 |
125 |
|||||||||
Total |
2,281 |
152 |
(78) |
— |
2,355 |
|||||||||
Others |
||||||||||||||
12/31/2019 |
New Builds |
Closures |
Acquired(2) |
Others |
12/31/2020 |
|||||||||
Company-owned |
94 |
13 |
(22) |
3 |
— |
88 |
||||||||
Unconsolidated affiliates |
— |
3 |
— |
— |
1 |
4 |
||||||||
Franchisees |
291 |
156 |
(177) |
623 |
— |
893 |
||||||||
Other |
— |
1 |
— |
— |
(1) |
— |
||||||||
Total |
385 |
173 |
(199) |
626 |
— |
985 |
||||||||
(1) As a result of the acquisition of Suzhou KFC on August 3, 2020, the restaurant units of Suzhou KFC have been transferred from |
||||||||||||||
(2) On April 8, 2020, the Company completed the acquisition of Huang Ji Huang. |
Yum China Holdings, Inc. |
||||||||||||
Segment Results |
||||||||||||
(in US$ million) |
||||||||||||
(unaudited) |
||||||||||||
Quarter Ended 12/31/2020 |
KFC |
Pizza Hut |
All Other |
Corporate |
Elimination |
Total |
||||||
Company sales |
$ 1,556 |
$ 469 |
$ 13 |
$ — |
$ — |
$ 2,038 |
||||||
Franchise fees and income |
28 |
1 |
7 |
— |
— |
36 |
||||||
Revenues from transactions with |
14 |
1 |
18 |
126 |
— |
159 |
||||||
Other revenues |
1 |
— |
31 |
16 |
(22) |
26 |
||||||
Total revenues |
$ 1,599 |
$ 471 |
$ 69 |
$ 142 |
$ (22) |
$ 2,259 |
||||||
Company restaurant expenses |
1,295 |
420 |
13 |
— |
2 |
1,730 |
||||||
General and administrative expenses |
62 |
25 |
9 |
44 |
— |
140 |
||||||
Franchise expenses |
14 |
1 |
— |
— |
— |
15 |
||||||
Expenses for transactions with |
14 |
1 |
14 |
124 |
— |
153 |
||||||
Other operating costs and expenses |
1 |
— |
27 |
15 |
(24) |
19 |
||||||
Closures and impairment expenses, net |
13 |
10 |
2 |
— |
— |
25 |
||||||
Other (income) expenses, net |
(3) |
— |
1 |
(1) |
— |
(3) |
||||||
Total costs and expenses, net |
1,396 |
457 |
66 |
182 |
(22) |
2,079 |
||||||
Operating Profit (Loss) |
$ 203 |
$ 14 |
$ 3 |
$ (40) |
$ — |
$ 180 |
||||||
Quarter Ended 12/31/2019 |
KFC |
Pizza Hut |
All Other |
Corporate |
Elimination |
Total |
||||||
Company sales |
$ 1,344 |
$ 457 |
$ 12 |
$ — |
$ — |
$ 1,813 |
||||||
Franchise fees and income |
32 |
1 |
2 |
— |
— |
35 |
||||||
Revenues from transactions with |
16 |
1 |
8 |
133 |
— |
158 |
||||||
Other revenues |
— |
— |
32 |
1 |
(10) |
23 |
||||||
Total revenues |
$ 1,392 |
$ 459 |
$ 54 |
$ 134 |
$ (10) |
$ 2,029 |
||||||
Company restaurant expenses |
1,147 |
427 |
13 |
— |
1 |
1,588 |
||||||
General and administrative expenses |
59 |
25 |
10 |
53 |
— |
147 |
||||||
Franchise expenses |
16 |
— |
— |
— |
— |
16 |
||||||
Expenses for transactions with |
16 |
1 |
7 |
133 |
— |
157 |
||||||
Other operating costs and expenses |
1 |
— |
26 |
1 |
(11) |
17 |
||||||
Closures and impairment expenses, net |
2 |
9 |
— |
11 |
— |
22 |
||||||
Other income, net |
(10) |
— |
— |
(2) |
— |
(12) |
||||||
Total costs and expenses, net |
1,231 |
462 |
56 |
196 |
(10) |
1,935 |
||||||
Operating Profit (Loss) |
$ 161 |
$ (3) |
$ (2) |
$ (62) |
$ — |
$ 94 |
||||||
0 |
||||||||||||
Year Ended 12/31/2020 |
KFC |
Pizza Hut |
All Other |
Corporate |
Elimination |
Total |
||||||
Company sales |
$ 5,633 |
$ 1,721 |
$ 42 |
$ — |
$ — |
$ 7,396 |
||||||
Franchise fees and income |
125 |
5 |
18 |
— |
— |
148 |
||||||
Revenues from transactions with |
61 |
4 |
49 |
533 |
— |
647 |
||||||
Other revenues |
2 |
— |
96 |
32 |
(58) |
72 |
||||||
Total revenues |
$ 5,821 |
$ 1,730 |
$ 205 |
$ 565 |
$ (58) |
$ 8,263 |
||||||
Company restaurant expenses |
4,713 |
1,540 |
45 |
— |
— |
6,298 |
||||||
General and administrative expenses |
200 |
96 |
39 |
144 |
— |
479 |
||||||
Franchise expenses |
62 |
3 |
— |
— |
— |
65 |
||||||
Expenses for transactions with |
61 |
4 |
37 |
531 |
— |
633 |
||||||
Other operating costs and expenses |
1 |
— |
84 |
30 |
(58) |
57 |
||||||
Closures and impairment expenses, net |
25 |
25 |
5 |
— |
— |
55 |
||||||
Other (income) expenses, net(3) |
(42) |
— |
2 |
(245) |
— |
(285) |
||||||
Total costs and expenses, net |
5,020 |
1,668 |
212 |
460 |
(58) |
7,302 |
||||||
Operating Profit (Loss) |
$ 801 |
$ 62 |
$ (7) |
$ 105 |
$ — |
$ 961 |
||||||
Year Ended 12/31/2019 |
KFC |
Pizza Hut |
All Other |
Corporate |
Elimination |
Total |
||||||
Company sales |
$ 5,839 |
$ 2,045 |
$ 41 |
$ — |
$ — |
$ 7,925 |
||||||
Franchise fees and income |
136 |
4 |
8 |
— |
— |
148 |
||||||
Revenues from transactions with |
64 |
4 |
28 |
558 |
— |
654 |
||||||
Other revenues |
1 |
1 |
81 |
4 |
(38) |
49 |
||||||
Total revenues |
$ 6,040 |
$ 2,054 |
$ 158 |
$ 562 |
$ (38) |
$ 8,776 |
||||||
Company restaurant expenses |
4,797 |
1,818 |
44 |
— |
— |
6,659 |
||||||
General and administrative expenses |
207 |
101 |
34 |
145 |
— |
487 |
||||||
Franchise expenses |
69 |
2 |
— |
— |
— |
71 |
||||||
Expenses for transactions with |
64 |
4 |
23 |
554 |
— |
645 |
||||||
Other operating costs and expenses |
1 |
1 |
69 |
4 |
(38) |
37 |
||||||
Closures and impairment expenses, net |
9 |
14 |
2 |
11 |
— |
36 |
||||||
Other income, net |
(56) |
— |
— |
(4) |
— |
(60) |
||||||
Total costs and expenses, net |
5,091 |
1,940 |
172 |
710 |
(38) |
7,875 |
||||||
Operating Profit (Loss) |
$ 949 |
$ 114 |
$ (14) |
$ (148) |
$ — |
$ 901 |
||||||
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 |
||||||||||||
(2) Primarily included revenues and associated expenses of transactions with franchisees and unconsolidated affiliates derived from the Company's central procurement model |
||||||||||||
(3) As a result of the acquisition of Suzhou KFC in the third quarter of 2020, the Company recognized a gain of $239 million from the re-measurement of our previously held 47% equity |
View original content:http://www.prnewswire.com/news-releases/yum-china-reports-fourth-quarter-and-full-year-2020-results-301221219.html