Total Revenues grew 9%. System
Sales grew 1% in constant currency
Opened a
record of 524 new stores
Reported $178 million Operating Profit despite Delta
variant outbreak, demonstrating resiliency and agility
SHANGHAI, Oct. 27, 2021 /PRNewswire/ -- Yum China Holdings,
Inc. (the "Company" or "Yum China")
(NYSE: YUMC and HKEX: 9987) today reported unaudited results for
the third quarter ended September 30,
2021.
Impact of COVID-19 Outbreak and Mitigation
Efforts
As we described in the business update released on September 14, 2021, third quarter results were
significantly impacted by the Delta variant outbreak that started
in late July. This regional outbreak was the most widely spread
wave since the first quarter of 2020. Several major cities were
locked down, including Nanjing and
Yangzhou, which are key cities for us in eastern China.
Zhengzhou and Wuhan, the capital cities of Henan and Hubei provinces, respectively, were also
significantly affected. In mid-September, there were also smaller
regional outbreaks in Fujian and
Heilongjiang provinces, in
southeastern and northeastern China, respectively. Strict public
health measures were implemented across the country, including the
closure of many tourist locations. These actions led to fewer
social activities, substantially lower travel volume, and cancelled
holiday trips. According to government statistics, the restaurant
industry in China was considerably
impacted in August with a revenue decline of approximately 10%
compared to August 2019. Despite a
mild recovery, the restaurant industry's revenue growth of
approximately 2% in September compared to 2019 was the slowest
since March 2021.
Going into the fourth quarter, strict public health measures
remain in effect nationwide. The effects of COVID-19 persist, such
as fewer social activities, cautious consumer spending and subdued
travel volume. According to government statistics, for the
seven-day National Day holiday that started on October 1, the number of travelers was down 2%
compared to the same period last year and down 30% versus the
corresponding period in 2019. Related travel spending was down 5%
compared to 2020 and 40% compared to 2019. With latest regional
outbreaks resurging across 12 provinces and rigorous preventative
health measures in force across the country, we continue to expect
same-store sales recovery to take time. Same-store sales are
gradually recovering but remain below the prior year and pre-COVID
2019 levels, since overall dine-in volume as well as traffic at
transportation hubs are still significantly impacted. We are
focused on driving sales by leveraging our member base and digital
channels, launching great food for both dine-in and home
consumption and enhancing our hybrid delivery model.
Third Quarter Highlights
- Total revenues increased 9% year over year to
$2.55 billion from $2.35 billion (a 2% increase excluding foreign
currency translation ("F/X")).
- Total system sales increased 1% year over year, with
increases of 1% at both KFC and Pizza Hut, excluding F/X.
- Same-store sales decreased 7 % year over year, with
decreases of 8% at KFC and 5% at Pizza Hut, excluding F/X.
- Opened 524 new stores during the quarter.
- Total store count reached 11,415 as of September 30, 2021, an increase of 1,265 stores
over the past year.
- Restaurant margin was 12.2%, compared with 18.6% in the
prior year period, primarily due to sales deleveraging.
- Operating Profit decreased 68% year over year to
$178 million from $556 million (a 70% decrease excluding F/X),
primarily due to sales deleveraging and lapping the non-cash gain
of $239 million from the
re-measurement of our previously held equity interest in Suzhou KFC
in the third quarter 2020.
- Adjusted Operating Profit decreased 48% year over year
to $168 million from $320 million (a 52% decrease excluding F/X).
- Effective tax rate was 28.3%.
- Net Income decreased 76% to $104 million from $439
million in the prior year period, primarily due to the
decrease in Operating Profit and loss from our mark-to-market
investment in Meituan.
- Adjusted Net Income decreased 63% to $96 million from $263
million in the prior year period (a 45% decrease excluding
the net loss of $32 million in the
third quarter of 2021 and the net gain of $29 million in the third quarter of 2020,
respectively, from our mark-to-market equity investment in Meituan;
a 50% decrease if further excluding F/X).
- Diluted EPS decreased 78% to $0.24 from $1.10 in
the prior year period.
- Adjusted Diluted EPS decreased 67% to $0.22 from $0.66 in
the prior year period (a 50% decrease excluding the net loss in the
third quarter of 2021 and the net gain in the third quarter of
2020, respectively, from our mark-to-market investment; a 53%
decrease if further excluding F/X).
- Results include the consolidation of Huang Ji Huang since April 2020, and Suzhou KFC since August 2020.
Key Financial
Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
2021
|
|
|
Year to Date Ended
9/30/2021
|
|
|
%
Change
|
|
|
%
Change
|
|
|
System
Sales
|
|
Same-
Store Sales
|
|
Net New
Units
|
|
Operating
Profit
|
|
|
System
Sales
|
|
Same-
Store Sales
|
|
Net New
Units
|
|
Operating
Profit
|
|
Yum China
|
+1
|
|
(7)
|
|
+12
|
|
(68)
|
|
|
+15
|
|
+2
|
|
+12
|
|
(4)
|
|
KFC
|
+1
|
|
(8)
|
|
+14
|
|
(31)
|
|
|
+12
|
|
-
|
|
+14
|
|
+27
|
|
Pizza Hut
|
+1
|
|
(5)
|
|
+10
|
|
(69)
|
|
|
+20
|
|
+11
|
|
+10
|
|
+141
|
|
|
|
Third
Quarter
|
|
|
|
Year to Date Ended
9/30
|
|
(in US$ million,
except
|
|
|
|
|
|
|
%
Change
|
|
|
|
|
|
|
|
|
%
Change
|
|
per share data and
percentages)
|
|
2021
|
|
|
2020
|
|
Reported
|
|
Ex F/X
|
|
|
|
2021
|
|
|
2020
|
|
Reported
|
|
Ex F/X
|
|
Operating
Profit
|
$
|
178
|
|
$
|
556
|
|
(68)
|
|
(70)
|
|
|
$
|
753
|
|
$
|
781
|
|
(4)
|
|
(11)
|
|
Adjusted Operating
Profit(1)
|
$
|
168
|
|
$
|
320
|
|
(48)
|
|
(52)
|
|
|
$
|
750
|
|
$
|
550
|
|
+36
|
|
+26
|
|
Net Income
|
$
|
104
|
|
$
|
439
|
|
(76)
|
|
(79)
|
|
|
$
|
515
|
|
$
|
633
|
|
(19)
|
|
(26)
|
|
Adjusted Net
Income(1)
|
$
|
96
|
|
$
|
263
|
|
(63)
|
|
(67)
|
|
|
$
|
514
|
|
$
|
462
|
|
+11
|
|
+2
|
|
Basic Earnings Per
Common Share
|
$
|
0.25
|
|
$
|
1.13
|
|
(78)
|
|
(81)
|
|
|
$
|
1.23
|
|
$
|
1.67
|
|
(26)
|
|
(33)
|
|
Adjusted Basic
Earnings Per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Share(1)
|
$
|
0.23
|
|
$
|
0.68
|
|
(66)
|
|
(71)
|
|
|
$
|
1.22
|
|
$
|
1.21
|
|
+1
|
|
(7)
|
|
Diluted Earnings Per
Common Share
|
$
|
0.24
|
|
$
|
1.10
|
|
(78)
|
|
(81)
|
|
|
$
|
1.19
|
|
$
|
1.62
|
|
(27)
|
|
(33)
|
|
Adjusted Diluted
Earnings Per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Share(1)
|
$
|
0.22
|
|
$
|
0.66
|
|
(67)
|
|
(70)
|
|
|
$
|
1.18
|
|
$
|
1.18
|
|
-
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) See
"Reconciliation of Reported GAAP Results to non-GAAP Adjusted
Measures" included in the accompanying tables of this release for
further details.
|
Note: All
comparisons are versus the same period a year
ago.
|
Percentages may not
recompute due to rounding.
|
System sales and
same-store sales percentages exclude the impact of F/X. Effective
January 1, 2018, temporary store closures are normalized in the
same-store sales calculation by
excluding the period during which stores are temporarily
closed.
|
CEO and CFO Comments
Joey Wat, CEO of Yum China, commented, "The third quarter was
challenging as the regional outbreaks heavily impacted the
restaurant industry. I am grateful for our teams who worked nimbly
and tirelessly to navigate these adverse conditions. We quickly
adjusted operations, strengthened value promotions and product
innovation to drive off-premise demand. Our digital channels
enabled us to more quickly reach members with targeted promotions.
We sustained system sales growth in the third quarter, with new
unit openings more than offsetting same-store sales declines.
Despite the near-term challenges, we continue to execute on the
strategies we outlined in our September investor day to
fortify resiliency and accelerate growth. With record openings
of 524 new stores during the quarter and after a review of our
current pipeline, we now expect to open over 1,700 gross new stores
in 2021. We deepened our partnership with Lavazza to accelerate the
growth of its footprint in China,
aiming to open 1,000 stores by 2025. We are also excited to become
a strategic investor in Hangzhou Catering Service Group,
which is an important shareholder of the Hangzhou KFC joint
venture and was instrumental in making Hangzhou one of our largest markets, to
accelerate growth across our brands in Zhejiang province."
Andy Yeung, CFO of Yum China, added, "Our third quarter results are
in line with expectations that we indicated in the September
business update. We took immediate action to manage costs and
leverage technology to drive productivity. Looking ahead, we expect
the near-term environment to be challenging. We expect that
COVID-19, especially the Delta variant outbreaks, will continue to
affect consumer behavior and impact our same-store sales recovery.
Keep in mind that fourth quarter is the seasonally lowest quarter
for sales and profit margins, so small changes in sales and
operations will considerably impact profitability. We expect
restaurant margins in the fourth quarter and near-term to be
pressured by the significant headwinds in (1) sales deleveraging
impact, (2) rising commodity prices, and (3) wage inflation.
Against this backdrop, we plan to continue to manage costs and stay
agile. We will also continue to invest with discipline in store
network expansion, supply chain, and digitalization for sustainable
growth."
Dividends and Share Repurchases
- The Board of Directors declared a cash dividend of $0.12 per share on Yum
China's common stock, payable as of the close of business on
December 16, 2021 to shareholders of
record as of the close of business on November 24, 2021.
- During the third quarter, we repurchased approximately 0.57
million shares of Yum China common
stock for $33.6 million at an average
price of $58.56 per share. As of
September 30, 2021, approximately
$658 million remained available for
future share repurchases under the current authorization.
Digital and Delivery
- The KFC and Pizza Hut loyalty programs exceeded 350 million
members combined as of quarter-end. Member sales accounted for
approximately 60% of system sales in the third quarter of
2021.
- Delivery contributed approximately 34% of KFC and Pizza Hut's
Company sales in the third quarter of 2021, an increase of
approximately six percentage points from the prior year period as
consumers remain cautious about dine-in.
- Digital orders, including delivery, mobile orders and kiosk
orders, accounted for approximately 87% of KFC and Pizza Hut's
Company sales in the third quarter of 2021.
KFC and Pizza Hut
Total
|
|
Third
Quarter
|
|
|
Year to Date Ended
9/30
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Member
count (as of period-end)
|
|
350
million+
|
|
|
285
million+
|
|
|
350
million+
|
|
|
285
million+
|
|
Member
sales as % of system sales
|
|
~60%
|
|
|
~60%
|
|
|
~61%
|
|
|
~60%
|
|
Delivery
as % of Company sales
|
|
~34%
|
|
|
~28%
|
|
|
~32%
|
|
|
~30%
|
|
Digital
orders as % of Company sales
|
|
~87%
|
|
|
~78%
|
|
|
~86%
|
|
|
~78%
|
|
New-Unit Development and Asset Upgrade
- Yum China opened 524 new stores
in the third quarter of 2021, mainly driven by development of the
KFC and Pizza Hut brands.
- The Company remodeled 211 stores in the third quarter of
2021.
|
|
New
Units
|
|
|
Restaurant
Count
|
|
|
|
Third
Quarter
|
|
Year to
Date
|
|
|
As of September
30
|
|
|
|
2021
|
|
Ended
9/30/2021
|
|
|
2021
|
|
2020
|
|
Yum China
|
|
524
|
|
1,243
|
|
|
11,415
|
|
10,150
|
|
KFC
|
|
362
|
|
895
|
|
|
7,908
|
|
6,925
|
|
Pizza
Hut
|
|
103
|
|
211
|
|
|
2,503
|
|
2,277
|
|
Others(2)
|
|
59
|
|
137
|
|
|
1,004
|
|
948
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Others
include Taco Bell, Little Sheep, Huang Ji Huang, East Dawning,
COFFii & JOY and Lavazza.
|
Restaurant Margin
- Restaurant margin was 12.2% in the third quarter of 2021,
compared with 18.6% in the prior year period, primarily
attributable to sales deleveraging, stepped-up promotions, wage
inflation, increased rider cost associated with rising delivery
volume, and lower temporary relief provided by landlords and
government agencies. The benefit of favorable commodity prices in
the third quarter of 2021 was partially offset by higher cost
associated with the phase-out of certain plastic packaging and
other packaging upgrades.
|
Third
Quarter
|
|
|
Year to Date Ended
9/30
|
|
|
|
2021
|
|
2020
|
|
ppts
change
|
|
|
2021
|
|
2020
|
|
ppts
change
|
|
Yum China
|
|
12.2%
|
|
18.6%
|
|
(6.4)
|
|
|
15.6%
|
|
14.7%
|
|
+0.9
|
|
KFC
|
|
13.6%
|
|
19.4%
|
|
(5.8)
|
|
|
16.8%
|
|
16.2%
|
|
+0.6
|
|
Pizza
Hut
|
|
8.2%
|
|
16.7%
|
|
(8.5)
|
|
|
12.2%
|
|
10.6%
|
|
+1.6
|
|
2021 Outlook
- We are increasing gross new stores target to over 1,700,
compared to the previous target of 1,300, primarily due to the
acceleration of KFC and Pizza Hut store expansion.
- We maintain the capital expenditures target of approximately
$700-800 million, benefiting from our
ongoing efforts to reduce capital expenditures per new store.
Other Updates
- In September 2021, the Company
entered into a definitive agreement to acquire a 28% equity
interest in Hangzhou Catering Service Group ("Hangzhou Catering")
for total cash consideration of approximately $250 million. Hangzhou Catering holds a 45%
equity interest in the Hangzhou KFC joint venture ("Hangzhou KFC"),
of which the Company currently holds a 47% equity interest. We
expect to complete the acquisition in the fourth quarter of 2021,
subject to the satisfaction of customary closing conditions and
regulatory approvals. Upon closing, the Company will control and
consolidate Hangzhou KFC, which operates over 700 KFC stores in and
around Hangzhou, with an
approximately 60% equity interest, directly and indirectly. In
addition to its holding in Hangzhou KFC, Hangzhou Catering operates
approximately 60 Chinese dining restaurants under four time-honored
brands (Zhi Wei Guan, Hangzhou
Restaurant, Kui Yuan Guan and Tian Xiang
Lou) and a high-growth food processing business. With this
acquisition, Yum China expects to
deepen the partnership with Hangzhou Catering and its key
shareholder, which has a large commercial real estate portfolio in
the region, in the areas of product innovations, retail product
collaborations and accelerating store expansion across our brands
in Zhejiang province.
- In September 2021, Yum China and Luigi
Lavazza S.p.A. ("Lavazza") entered into agreements for the
previously formed joint venture and announced plans to accelerate
the expansion of Lavazza stores in China, aiming to open 1,000 stores by 2025.
Together, an initial funding of $200
million will be injected into the joint venture for its
future growth. The joint venture is also expected to be Lavazza's
exclusive distributor in mainland China to introduce more products
from Lavazza's global portfolio. Upon execution of these agreements
in September, Yum China consolidates
the joint venture results with its 65% equity interest.
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 8:00 p.m. U.S. Eastern Time on
Wednesday, October 27, 2021 (8:00
a.m. Beijing/Hong Kong Time
on Thursday, October 28, 2021).
A live webcast of the call may be accessed at
https://edge.media-server.com/mmc/p/5tbn4t8f.
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
registrant ID.
Pre-registration
Link:
http://apac.directeventreg.com/registration/event/5193096
Conference
ID: 5193096
A replay of the conference call will be available two hours
after the call ends until 9:00 a.m. U.S. Eastern Time on
Thursday, November 4, 2021 (9:00
p.m. Beijing/Hong Kong Time
on Thursday, November 4, 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:
5193096
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, growth, business plans, investment, dividend and
share repurchase plans, earnings, performance and returns of
Yum China, anticipated effects of
population and macroeconomic trends, the expected impact of the
COVID-19 pandemic, the anticipated closing of the Hangzhou Catering
investment, 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 and regional outbreaks
caused by existing or new COVID-19 variants, 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 11,415 restaurants
in over 1,600 cities at the end of September 2021. Yum
China ranked # 363 on the Fortune 500 list and was named to
TIME100 Most Influential Companies list in 2021. 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:
|
|
|
Tel: +86 21 2407 7556
/ +852 2267 5801
IR@YumChina.com
|
|
|
|
Media
Contact:
|
|
|
Tel: +86 21 2407
7510
Media@YumChina.com
|
Yum China
Holdings, Inc.
|
Condensed
Consolidated Statements of Income
|
(in US$ million,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
%
Change
|
|
Year to Date
Ended
|
|
%
Change
|
|
|
9/30/2021
|
|
9/30/2020
|
|
B/(W)
|
|
9/30/2021
|
|
9/30/2020
|
|
B/(W)
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
sales
|
|
$
2,310
|
|
$
2,118
|
|
9
|
|
|
$
6,874
|
|
$
5,358
|
|
28
|
|
Franchise fees and
income
|
|
40
|
|
40
|
|
—
|
|
|
120
|
|
112
|
|
7
|
|
Revenues from
transactions with
franchisees and unconsolidated affiliates
|
|
184
|
|
170
|
|
8
|
|
|
519
|
|
488
|
|
7
|
|
Other
revenues
|
|
20
|
|
20
|
|
2
|
|
|
49
|
|
46
|
|
7
|
|
Total
revenues
|
|
2,554
|
|
2,348
|
|
9
|
|
|
7,562
|
|
6,004
|
|
26
|
|
Costs and
Expenses, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
restaurants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food and
paper
|
|
743
|
|
660
|
|
(13)
|
|
|
2,133
|
|
1,711
|
|
(25)
|
|
Payroll and employee
benefits
|
|
591
|
|
458
|
|
(29)
|
|
|
1,675
|
|
1,236
|
|
(35)
|
|
Occupancy and other
operating expenses
|
|
694
|
|
606
|
|
(15)
|
|
|
1,995
|
|
1,621
|
|
(23)
|
|
Company restaurant
expenses
|
|
2,028
|
|
1,724
|
|
(18)
|
|
|
5,803
|
|
4,568
|
|
(27)
|
|
General and
administrative expenses
|
|
142
|
|
127
|
|
(13)
|
|
|
408
|
|
339
|
|
(21)
|
|
Franchise
expenses
|
|
17
|
|
17
|
|
(1)
|
|
|
50
|
|
50
|
|
2
|
|
Expenses for
transactions with
franchisees and unconsolidated affiliates
|
|
180
|
|
164
|
|
(9)
|
|
|
509
|
|
480
|
|
(6)
|
|
Other operating costs
and expenses
|
|
17
|
|
15
|
|
(16)
|
|
|
41
|
|
38
|
|
(9)
|
|
Closures and
impairment expenses, net
|
|
2
|
|
1
|
|
(62)
|
|
|
13
|
|
30
|
|
57
|
|
Other income,
net
|
|
(10)
|
|
(256)
|
|
(96)
|
|
|
(15)
|
|
(282)
|
|
(95)
|
|
Total costs and
expenses, net
|
|
2,376
|
|
1,792
|
|
(33)
|
|
|
6,809
|
|
5,223
|
|
(30)
|
|
Operating
Profit
|
|
178
|
|
556
|
|
(68)
|
|
|
753
|
|
781
|
|
(4)
|
|
Interest income,
net
|
|
16
|
|
11
|
|
58
|
|
|
47
|
|
28
|
|
69
|
|
Investment (loss)
gain
|
|
(39)
|
|
38
|
|
NM
|
|
|
(43)
|
|
75
|
|
NM
|
|
Income Before
Income Taxes
|
|
155
|
|
605
|
|
(74)
|
|
|
757
|
|
884
|
|
(14)
|
|
Income tax
provision
|
|
(44)
|
|
(155)
|
|
72
|
|
|
(210)
|
|
(232)
|
|
10
|
|
Net income –
including noncontrolling interests
|
|
111
|
|
450
|
|
(75)
|
|
|
547
|
|
652
|
|
(16)
|
|
Net income –
noncontrolling interests
|
|
7
|
|
11
|
|
31
|
|
|
32
|
|
19
|
|
(73)
|
|
Net Income – Yum
China Holdings, Inc.
|
|
$
104
|
|
$
439
|
|
(76)
|
|
|
$
515
|
|
$
633
|
|
(19)
|
|
Effective tax
rate
|
|
28.3%
|
|
25.6%
|
|
(2.7)
|
ppts.
|
|
27.7%
|
|
26.3%
|
|
(1.4)
|
ppts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Common Share
|
|
$
0.25
|
|
$
1.13
|
|
|
|
|
$
1.23
|
|
$
1.67
|
|
|
|
Weighted-average
shares outstanding
(in millions)
|
|
422
|
|
387
|
|
|
|
|
421
|
|
380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings
Per Common Share
|
|
$
0.24
|
|
$
1.10
|
|
|
|
|
$
1.19
|
|
$
1.62
|
|
|
|
Weighted-average
shares outstanding
(in millions)
|
|
435
|
|
400
|
|
|
|
|
435
|
|
391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Dividends
Declared Per Common Share
|
|
$
0.12
|
|
$
-
|
|
|
|
|
$
0.36
|
|
$
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
sales
|
|
100.0%
|
|
100.0%
|
|
|
|
|
100.0%
|
|
100.0%
|
|
|
|
Food and
paper
|
|
32.2
|
|
31.2
|
|
(1.0)
|
ppts.
|
|
31.0
|
|
31.9
|
|
0.9
|
ppts.
|
Payroll and employee
benefits
|
|
25.6
|
|
21.6
|
|
(4.0)
|
ppts.
|
|
24.4
|
|
23.1
|
|
(1.3)
|
ppts.
|
Occupancy and other
operating expenses
|
|
30.0
|
|
28.6
|
|
(1.4)
|
ppts.
|
|
29.0
|
|
30.3
|
|
1.3
|
ppts.
|
Restaurant
margin
|
|
12.2%
|
|
18.6%
|
|
(6.4)
|
ppts.
|
|
15.6%
|
|
14.7%
|
|
0.9
|
ppts.
|
Operating
margin
|
|
7.7%
|
|
26.2%
|
|
(18.5)
|
ppts.
|
|
11.0%
|
|
14.6%
|
|
(3.6)
|
ppts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentages may not
recompute due to rounding. NM refers to not meaningful.
|
Yum China
Holdings, Inc.
|
KFC Operating
Results
|
(in US$
million)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
%
Change
|
|
Year to Date
Ended
|
|
%
Change
|
|
|
9/30/2021
|
|
9/30/2020
|
|
B/(W)
|
|
9/30/2021
|
|
9/30/2020
|
|
B/(W)
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
sales
|
|
$
1,750
|
|
$
1,597
|
|
10
|
|
|
$
5,220
|
|
$
4,077
|
|
28
|
|
Franchise fees and
income
|
|
32
|
|
32
|
|
—
|
|
|
95
|
|
97
|
|
(2)
|
|
Revenues from
transactions with
franchisees and unconsolidated affiliates
|
|
17
|
|
16
|
|
1
|
|
|
46
|
|
47
|
|
(3)
|
|
Other
revenues
|
|
2
|
|
1
|
|
NM
|
|
|
6
|
|
1
|
|
NM
|
|
Total
revenues
|
|
1,801
|
|
1,646
|
|
9
|
|
|
5,367
|
|
4,222
|
|
27
|
|
Costs and
Expenses, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
restaurants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food and
paper
|
|
567
|
|
504
|
|
(12)
|
|
|
1,629
|
|
1,315
|
|
(24)
|
|
Payroll and employee
benefits
|
|
425
|
|
330
|
|
(29)
|
|
|
1,214
|
|
888
|
|
(37)
|
|
Occupancy and other
operating expenses
|
|
520
|
|
453
|
|
(15)
|
|
|
1,500
|
|
1,215
|
|
(23)
|
|
Company restaurant
expenses
|
|
1,512
|
|
1,287
|
|
(17)
|
|
|
4,343
|
|
3,418
|
|
(27)
|
|
General and
administrative expenses
|
|
62
|
|
50
|
|
(25)
|
|
|
175
|
|
138
|
|
(27)
|
|
Franchise
expenses
|
|
16
|
|
16
|
|
2
|
|
|
47
|
|
48
|
|
2
|
|
Expenses for
transactions with
franchisees and unconsolidated affiliates
|
|
16
|
|
16
|
|
1
|
|
|
45
|
|
47
|
|
5
|
|
Other operating costs
and expenses
|
|
2
|
|
—
|
|
NM
|
|
|
3
|
|
—
|
|
NM
|
|
Closures and
impairment expenses, net
|
|
1
|
|
1
|
|
NM
|
|
|
7
|
|
12
|
|
33
|
|
Other income,
net
|
|
(4)
|
|
(10)
|
|
(65)
|
|
|
(16)
|
|
(39)
|
|
(60)
|
|
Total costs and
expenses, net
|
|
1,605
|
|
1,360
|
|
(18)
|
|
|
4,604
|
|
3,624
|
|
(27)
|
|
Operating
Profit
|
|
$
196
|
|
$
286
|
|
(31)
|
|
|
$
763
|
|
$
598
|
|
27
|
|
Company
sales
|
|
100.0%
|
|
100.0%
|
|
|
|
|
100.0%
|
|
100.0%
|
|
|
|
Food and
paper
|
|
32.4
|
|
31.6
|
|
(0.8)
|
ppts.
|
|
31.2
|
|
32.3
|
|
1.1
|
ppts.
|
Payroll and employee
benefits
|
|
24.3
|
|
20.7
|
|
(3.6)
|
ppts.
|
|
23.3
|
|
21.8
|
|
(1.5)
|
ppts.
|
Occupancy and other
operating expenses
|
|
29.7
|
|
28.3
|
|
(1.4)
|
ppts.
|
|
28.7
|
|
29.7
|
|
1.0
|
ppts.
|
Restaurant
margin
|
|
13.6%
|
|
19.4%
|
|
(5.8)
|
ppts.
|
|
16.8%
|
|
16.2%
|
|
0.6
|
ppts.
|
Operating
margin
|
|
11.2%
|
|
17.9%
|
|
(6.7)
|
ppts.
|
|
14.6%
|
|
14.7%
|
|
(0.1)
|
ppts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentages may not
recompute due to rounding. NM refers to not meaningful.
|
Yum China
Holdings, Inc.
|
Pizza Hut
Operating Results
|
(in US$
million)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
%
Change
|
|
Year to Date
Ended
|
|
%
Change
|
|
|
9/30/2021
|
|
9/30/2020
|
|
B/(W)
|
|
9/30/2021
|
|
9/30/2020
|
|
B/(W)
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
sales
|
|
$
546
|
|
$
508
|
|
7
|
|
|
$
1,617
|
|
$
1,252
|
|
29
|
|
Franchise fees and
income
|
|
2
|
|
2
|
|
20
|
|
|
6
|
|
4
|
|
41
|
|
Revenues from
transactions with
franchisees and unconsolidated affiliates
|
|
2
|
|
1
|
|
55
|
|
|
5
|
|
3
|
|
72
|
|
Other
revenues
|
|
1
|
|
—
|
|
NM
|
|
|
2
|
|
—
|
|
NM
|
|
Total
revenues
|
|
551
|
|
511
|
|
8
|
|
|
1,630
|
|
1,259
|
|
29
|
|
Costs and
Expenses, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
restaurants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food and
paper
|
|
173
|
|
152
|
|
(13)
|
|
|
493
|
|
388
|
|
(27)
|
|
Payroll and employee
benefits
|
|
161
|
|
124
|
|
(29)
|
|
|
450
|
|
339
|
|
(32)
|
|
Occupancy and other
operating expenses
|
|
168
|
|
148
|
|
(14)
|
|
|
478
|
|
393
|
|
(22)
|
|
Company restaurant
expenses
|
|
502
|
|
424
|
|
(18)
|
|
|
1,421
|
|
1,120
|
|
(27)
|
|
General and
administrative expenses
|
|
27
|
|
24
|
|
(14)
|
|
|
80
|
|
71
|
|
(13)
|
|
Franchise
expenses
|
|
1
|
|
1
|
|
(29)
|
|
|
3
|
|
2
|
|
(33)
|
|
Expenses for
transactions with
franchisees and unconsolidated affiliates
|
|
2
|
|
1
|
|
(46)
|
|
|
5
|
|
3
|
|
(63)
|
|
Other operating costs
and expenses
|
|
1
|
|
—
|
|
NM
|
|
|
1
|
|
—
|
|
(12)
|
|
Closures and
impairment expenses, net
|
|
—
|
|
—
|
|
NM
|
|
|
3
|
|
15
|
|
81
|
|
Total costs and
expenses, net
|
|
533
|
|
450
|
|
(18)
|
|
|
1,513
|
|
1,211
|
|
(25)
|
|
Operating
Profit
|
|
$
18
|
|
$
61
|
|
(69)
|
|
|
$
117
|
|
$
48
|
|
141
|
|
Company
sales
|
|
100.0%
|
|
100.0%
|
|
|
|
|
100.0%
|
|
100.0%
|
|
|
|
Food and
paper
|
|
31.5
|
|
29.8
|
|
(1.7)
|
ppts.
|
|
30.5
|
|
31.0
|
|
0.5
|
ppts.
|
Payroll and employee
benefits
|
|
29.5
|
|
24.6
|
|
(4.9)
|
ppts.
|
|
27.8
|
|
27.1
|
|
(0.7)
|
ppts.
|
Occupancy and other
operating expenses
|
|
30.8
|
|
28.9
|
|
(1.9)
|
ppts.
|
|
29.5
|
|
31.3
|
|
1.8
|
ppts.
|
Restaurant
margin
|
|
8.2%
|
|
16.7%
|
|
(8.5)
|
ppts.
|
|
12.2%
|
|
10.6%
|
|
1.6
|
ppts.
|
Operating
margin
|
|
3.5%
|
|
12.0%
|
|
(8.5)
|
ppts.
|
|
7.2%
|
|
3.9%
|
|
3.3
|
ppts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentages may not
recompute due to rounding. NM refers to not meaningful.
|
Yum China
Holdings, Inc.
|
Condensed
Consolidated Balance Sheets
|
(in US$
million)
|
|
|
|
|
|
|
|
9/30/2021
|
|
12/31/2020
|
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
1,278
|
|
$
1,158
|
Short-term
investments
|
|
3,099
|
|
3,105
|
Accounts receivable,
net
|
|
97
|
|
99
|
Inventories,
net
|
|
390
|
|
398
|
Prepaid expenses and
other current assets
|
|
218
|
|
176
|
Total Current
Assets
|
|
5,082
|
|
4,936
|
Property, plant and
equipment, net
|
|
1,910
|
|
1,765
|
Operating lease
right-of-use assets
|
|
2,287
|
|
2,164
|
Goodwill
|
|
858
|
|
832
|
Intangible assets,
net
|
|
218
|
|
246
|
Deferred income tax
assets
|
|
68
|
|
98
|
Investments in
unconsolidated affiliates
|
|
309
|
|
85
|
Other
assets
|
|
774
|
|
749
|
Total
Assets
|
|
11,506
|
|
10,875
|
|
|
|
|
|
LIABILITIES,
REDEEMABLE NONCONTROLLING INTEREST AND EQUITY
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Accounts payable and
other current liabilities
|
|
2,126
|
|
1,995
|
Income taxes
payable
|
|
68
|
|
72
|
Total Current
Liabilities
|
|
2,194
|
|
2,067
|
Non-current operating
lease liabilities
|
|
2,014
|
|
1,915
|
Non-current finance
lease obligations
|
|
34
|
|
28
|
Deferred income tax
liabilities
|
|
217
|
|
227
|
Other
liabilities
|
|
170
|
|
167
|
Total
Liabilities
|
|
4,629
|
|
4,404
|
|
|
|
|
|
Redeemable
Noncontrolling Interest
|
|
12
|
|
12
|
|
|
|
|
|
Equity
|
|
|
|
|
Common stock,
$0.01 par value; 1,000 million shares authorized; 444 million
shares and
440 million shares issued at September 30, 2021
and December 31, 2020, respectively; 424
million shares and 420 million shares
outstanding at September 30, 2021 and December 31,
2020, respectively
|
|
4
|
|
4
|
Treasury
stock
|
|
(762)
|
|
(728)
|
Additional paid-in
capital
|
|
4,685
|
|
4,658
|
Retained
earnings
|
|
2,468
|
|
2,105
|
Accumulated other
comprehensive income
|
|
213
|
|
167
|
Total Yum China
Holdings, Inc. Stockholders' Equity
|
|
6,608
|
|
6,206
|
Noncontrolling
interests
|
|
257
|
|
253
|
Total
Equity
|
|
6,865
|
|
6,459
|
Total Liabilities,
Redeemable Noncontrolling Interest and Equity
|
|
$
11,506
|
|
$
10,875
|
Yum China
Holdings, Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(in US$
million)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
Year to Date
Ended
|
|
|
9/30/2021
|
|
9/30/2020
|
Cash Flows –
Operating Activities
|
|
|
|
|
|
|
Net income –
including noncontrolling interests
|
|
|
$
547
|
|
|
$
652
|
Depreciation and
amortization
|
|
|
380
|
|
|
327
|
Non-cash operating
lease cost
|
|
|
310
|
|
|
270
|
Closures and
impairment expenses
|
|
|
13
|
|
|
30
|
Gain from
re-measurement of previously held equity interest
|
|
|
(10)
|
|
|
(239)
|
Investment loss
(gain)
|
|
|
43
|
|
|
(75)
|
Equity income from
investments in unconsolidated affiliates
|
|
|
(38)
|
|
|
(51)
|
Distributions of
income received from unconsolidated affiliates
|
|
|
21
|
|
|
25
|
Deferred income
taxes
|
|
|
17
|
|
|
73
|
Share-based
compensation expense
|
|
|
32
|
|
|
27
|
Changes in accounts
receivable
|
|
|
2
|
|
|
(19)
|
Changes in
inventories
|
|
|
13
|
|
|
52
|
Changes in prepaid
expenses and other current assets
|
|
|
—
|
|
|
31
|
Changes in accounts
payable and other current liabilities
|
|
|
82
|
|
|
56
|
Changes in income
taxes payable
|
|
|
(5)
|
|
|
62
|
Changes in
non-current operating lease liabilities
|
|
|
(309)
|
|
|
(292)
|
Other, net
|
|
|
(24)
|
|
|
(30)
|
Net Cash Provided
by Operating Activities
|
|
|
1,074
|
|
|
899
|
Cash Flows –
Investing Activities
|
|
|
|
|
|
|
Capital
spending
|
|
|
(482)
|
|
|
(284)
|
Purchases of
short-term investments
|
|
|
(4,524)
|
|
|
(2,859)
|
Purchases of
long-term time deposits
|
|
|
(25)
|
|
|
(57)
|
Maturities of
short-term investments
|
|
|
4,544
|
|
|
1,066
|
Contribution to
unconsolidated affiliates
|
|
|
—
|
|
|
(17)
|
Acquisition of
business, net of cash acquired
|
|
|
—
|
|
|
(288)
|
Investment in equity
securities
|
|
|
(261)
|
|
|
—
|
Disposal of equity
securities
|
|
|
—
|
|
|
54
|
Other, net
|
|
|
5
|
|
|
52
|
Net Cash Used in
Investing Activities
|
|
|
(743)
|
|
|
(2,333)
|
Cash Flows –
Financing Activities
|
|
|
|
|
|
|
Common stock issuance
proceeds, net of issuance costs
|
|
|
—
|
|
|
2,203
|
Repurchase of shares
of common stock
|
|
|
(32)
|
|
|
(8)
|
Cash dividends paid
on common stock
|
|
|
(152)
|
|
|
(45)
|
Dividends paid to
noncontrolling interests
|
|
|
(22)
|
|
|
(7)
|
Payment of
acquisition related holdback
|
|
|
(8)
|
|
|
—
|
Other, net
|
|
|
(6)
|
|
|
1
|
Net Cash (Used in)
Provided by Financing Activities
|
|
|
(220)
|
|
|
2,144
|
Effect of Exchange
Rates on Cash, Cash Equivalents and Restricted Cash
|
|
|
9
|
|
|
17
|
Net Increase in
Cash, Cash Equivalents and Restricted Cash
|
|
|
120
|
|
|
727
|
Cash, Cash
Equivalents, and Restricted Cash - Beginning of
Period
|
|
|
1,158
|
|
|
1,055
|
Cash, Cash
Equivalents, and Restricted Cash - End of Period
|
|
|
$
1,278
|
|
|
$
1,782
|
In this press release:
- The Company provides certain percentage changes excluding the
impact of foreign currency translation ("F/X"). These amounts are
derived by translating current year results at prior year average
exchange rates. We believe the elimination of the F/X impact
provides better year-to-year comparability without the distortion
of foreign currency fluctuations.
- System sales growth reflects the results of all restaurants
regardless of ownership, including Company-owned, franchise and
unconsolidated affiliate restaurants that operate our restaurant
concepts, except for non-Company-owned restaurants for which we do
not receive a sales-based royalty. Sales of franchise and
unconsolidated affiliate restaurants typically generate ongoing
franchise fees for the Company at an average rate of approximately
6% of system sales. Franchise and unconsolidated affiliate
restaurant sales are not included in Company sales in the Condensed
Consolidated Statements of Income; however, the franchise fees are
included in the Company's revenues. We believe system sales growth
is useful to investors as a significant indicator of the overall
strength of our business as it incorporates all of our revenue
drivers, Company and franchise same-store sales as well as net unit
growth.
- Effective January 1, 2018, the
Company revised its definition of same-store sales growth to
represent the estimated percentage change in sales of food of all
restaurants in the Company system that have been open prior to the
first day of our prior fiscal year, excluding the period during
which stores are temporarily closed. We refer to these as our
"base" stores. Previously, same-store sales growth represented the
estimated percentage change in sales of all restaurants in the
Company system that have been open for one year or more, including
stores temporarily closed, and the base stores changed on a rolling
basis from month to month. This revision was made to align with how
management measures performance internally and focuses on trends of
a more stable base of stores.
- Company sales represent revenues from Company-owned
restaurants. Company Restaurant profit ("Restaurant profit") is
defined as Company sales less expenses incurred directly by our
Company-owned restaurants in generating Company sales. Company
restaurant margin percentage is defined as Restaurant profit
divided by Company sales.
Reconciliation of Reported GAAP Results to
Non-GAAP Adjusted Measures
(in millions, except per share
data)
(unaudited)
In addition to the results provided in accordance with U.S.
Generally Accepted Accounting Principles ("GAAP") in this press
release, the Company provides non-GAAP measures adjusted for
Special Items, which include Adjusted Operating Profit, Adjusted
Net Income, Adjusted Earnings Per Common Share ("EPS"), Adjusted
Effective Tax Rate and Adjusted EBITDA, which we define as net
income including noncontrolling interests adjusted for 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 to Date
Ended
|
|
|
9/30/2021
|
|
9/30/2020
|
|
9/30/2021
|
|
9/30/2020
|
Non-GAAP
Reconciliations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Operating Profit to Adjusted Operating Profit
|
|
|
|
|
|
|
|
|
Operating
Profit
|
|
$
178
|
|
$
556
|
|
$
753
|
|
$
781
|
Special Items,
Operating Profit
|
|
10
|
|
236
|
|
3
|
|
231
|
Adjusted Operating
Profit
|
|
$
168
|
|
$
320
|
|
$
750
|
|
$
550
|
Reconciliation of
Net Income to Adjusted Net Income
|
|
|
|
|
|
|
|
|
Net Income – Yum
China Holdings, Inc.
|
|
$
104
|
|
$
439
|
|
$
515
|
|
$
633
|
Special Items, Net
Income –Yum China Holdings, Inc.
|
|
8
|
|
176
|
|
1
|
|
171
|
Adjusted Net Income –
Yum China Holdings, Inc.
|
|
$
96
|
|
$
263
|
|
$
514
|
|
$
462
|
Reconciliation of
EPS to Adjusted EPS
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Common Share
|
|
$
0.25
|
|
$
1.13
|
|
$
1.23
|
|
$
1.67
|
Special Items, Basic
Earnings Per Common Share
|
|
0.02
|
|
0.45
|
|
0.01
|
|
0.46
|
Adjusted Basic
Earnings Per Common Share
|
|
$
0.23
|
|
$
0.68
|
|
$
1.22
|
|
$
1.21
|
Diluted Earnings Per
Common Share
|
|
$
0.24
|
|
$
1.10
|
|
$
1.19
|
|
$
1.62
|
Special Items,
Diluted Earnings Per Common Share
|
|
0.02
|
|
0.44
|
|
0.01
|
|
0.44
|
Adjusted Diluted
Earnings Per Common Share
|
|
$
0.22
|
|
$
0.66
|
|
$
1.18
|
|
$
1.18
|
Reconciliation of
Effective Tax Rate to Adjusted Effective Tax Rate
|
|
|
|
|
|
|
|
|
Effective tax
rate
|
|
28.3%
|
|
25.6%
|
|
27.7%
|
|
26.3%
|
Impact on effective
tax rate as a result of Special Items
|
|
(0.5)%
|
|
(0.1)%
|
|
0.1%
|
|
(0.1)%
|
Adjusted effective
tax rate
|
|
28.8%
|
|
25.7%
|
|
27.6%
|
|
26.4%
|
Net income, along with the reconciliation to Adjusted EBITDA, is
presented below:
|
|
Quarter
Ended
|
|
Year to Date
Ended
|
|
|
9/30/2021
|
|
9/30/2020
|
|
9/30/2021
|
|
9/30/2020
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Net Income to Adjusted EBITDA
|
|
|
|
|
|
|
|
|
Net Income – Yum
China Holdings, Inc.
|
|
$
104
|
|
$
439
|
|
$
515
|
|
$
633
|
Net income –
noncontrolling interests
|
|
7
|
|
11
|
|
32
|
|
19
|
Income tax
provision
|
|
44
|
|
155
|
|
210
|
|
232
|
Interest income,
net
|
|
(16)
|
|
(11)
|
|
(47)
|
|
(28)
|
Investment loss
(gain)
|
|
39
|
|
(38)
|
|
43
|
|
(75)
|
Operating
Profit
|
|
178
|
|
556
|
|
753
|
|
781
|
Special Items,
Operating Profit
|
|
(10)
|
|
(236)
|
|
(3)
|
|
(231)
|
Adjusted Operating
Profit
|
|
168
|
|
320
|
|
750
|
|
550
|
Depreciation and
amortization
|
|
128
|
|
113
|
|
380
|
|
327
|
Store impairment
charges
|
|
4
|
|
3
|
|
23
|
|
39
|
Adjusted
EBITDA
|
|
$
300
|
|
$
436
|
|
$
1,153
|
|
$
916
|
Details of Special Items are presented below:
|
|
Quarter
Ended
|
|
Year to Date
Ended
|
|
|
9/30/2021
|
|
9/30/2020
|
|
9/30/2021
|
|
9/30/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains from
re-measurement of previously held equity
interest(1)
|
|
$
10
|
|
$
239
|
|
$
10
|
|
$
239
|
Share-based
compensation expense for Partner PSU
awards(2)
|
|
—
|
|
(3)
|
|
(7)
|
|
(5)
|
Derecognition of
indemnification assets related to Daojia(3)
|
|
—
|
|
—
|
|
—
|
|
(3)
|
Special Items,
Operating Profit
|
|
10
|
|
236
|
|
3
|
|
231
|
Tax effect on Special
Items(4)
|
|
(2)
|
|
(60)
|
|
(2)
|
|
(60)
|
Special Items, net
income – including noncontrolling interests
|
|
8
|
|
176
|
|
1
|
|
171
|
Special Items, net
income – noncontrolling interests
|
|
—
|
|
—
|
|
—
|
|
—
|
Special Items, Net
Income –Yum China Holdings, Inc.
|
|
$
8
|
|
$
176
|
|
$
1
|
|
$
171
|
Weighted-average
Diluted Shares Outstanding (in millions)
|
|
435
|
|
400
|
|
435
|
|
391
|
Special Items,
Diluted Earnings Per Common Share
|
|
$
0.02
|
|
$
0.44
|
|
$
0.01
|
|
$
0.44
|
(1)
In the quarters ended September 30, 2021 and 2020, as a result of
the consolidation of the Lavazza joint venture and Suzhou KFC,
the
Company recognized a gain of $10 million and $239 million,
respectively, from the re-measurement of our previously held
equity interest at fair value. The re-measurement gains were 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 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. The Company recognized share-
based compensation cost of nil and $7 million associated with the
Partner PSU Awards for the quarter and year to date ended
September 30, 2021, respectively, and $3 million and $5 million for
the quarter and year to date ended September 30, 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)
The tax expense was determined based upon the nature, as well as
the jurisdiction, of each Special Item at the applicable tax
rate.
|
The Company excludes impact from Special Items for the purpose
of evaluating performance internally. Special Items are not
included in any of our segment results. In addition, the Company
provides Adjusted EBITDA because we believe that investors and
analysts may find it useful in measuring operating performance
without regard to items such as 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
|
|
|
12/31/2020
|
|
New Builds
|
|
Closures
|
|
Refranchised
|
|
Acquired
|
|
9/30/2021
|
|
|
|
|
Company-owned
|
|
5,872
|
|
706
|
|
(130)
|
|
(2)
|
|
4
|
|
6,450
|
|
|
|
|
Unconsolidated
affiliates
|
|
677
|
|
93
|
|
(8)
|
|
—
|
|
—
|
|
762
|
|
|
|
|
Franchisees
|
|
617
|
|
96
|
|
(15)
|
|
2
|
|
(4)
|
|
696
|
|
|
|
|
Total
|
|
7,166
|
|
895
|
|
(153)
|
|
—
|
|
—
|
|
7,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pizza
Hut
|
|
|
12/31/2020
|
|
New Builds
|
|
Closures
|
|
9/30/2021
|
|
|
|
|
|
|
|
|
Company-owned
|
|
2,230
|
|
199
|
|
(60)
|
|
2,369
|
|
|
|
|
|
|
|
|
Franchisees
|
|
125
|
|
12
|
|
(3)
|
|
134
|
|
|
|
|
|
|
|
|
Total
|
|
2,355
|
|
211
|
|
(63)
|
|
2,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others
|
|
|
12/31/2020
|
|
New Builds
|
|
Closures
|
|
Other(1)
|
|
9/30/2021
|
|
|
|
|
|
|
Company-owned
|
|
88
|
|
20
|
|
(11)
|
|
22
|
|
119
|
|
|
|
|
|
|
Unconsolidated
affiliates
|
|
4
|
|
18
|
|
—
|
|
(22)
|
|
—
|
|
|
|
|
|
|
Franchisees
|
|
893
|
|
99
|
|
(107)
|
|
—
|
|
885
|
|
|
|
|
|
|
Total
|
|
985
|
|
137
|
|
(118)
|
|
—
|
|
1,004
|
|
|
|
|
|
|
(1) As a result of the consolidation of the Lavazza joint
venture in September 2021, the
restaurant units of Lavazza were transferred from unconsolidated
affiliates to Company-owned.
Yum China
Holdings, Inc.
|
Segment
Results
|
(in US$
million)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
9/30/2021
|
|
KFC
|
|
Pizza Hut
|
|
All Other
Segments
|
|
Corporate
and
Unallocated(1)
|
|
Elimination
|
|
Total
|
Company
sales
|
|
$
1,750
|
|
$
546
|
|
$
14
|
|
$
—
|
|
$
—
|
|
$
2,310
|
Franchise fees and
income
|
|
32
|
|
2
|
|
6
|
|
—
|
|
—
|
|
40
|
Revenues from
transactions with
franchisees and unconsolidated
affiliates(2)
|
|
17
|
|
2
|
|
26
|
|
139
|
|
—
|
|
184
|
Other
revenues
|
|
2
|
|
1
|
|
88
|
|
7
|
|
(78)
|
|
20
|
Total
revenues
|
|
$
1,801
|
|
$
551
|
|
$
134
|
|
$
146
|
|
$
(78)
|
|
$
2,554
|
Company restaurant
expenses
|
|
1,512
|
|
502
|
|
14
|
|
—
|
|
—
|
|
2,028
|
General and
administrative expenses
|
|
62
|
|
27
|
|
11
|
|
42
|
|
—
|
|
142
|
Franchise
expenses
|
|
16
|
|
1
|
|
—
|
|
—
|
|
—
|
|
17
|
Expenses for
transactions with
franchisees and unconsolidated
affiliates(2)
|
|
16
|
|
2
|
|
24
|
|
138
|
|
—
|
|
180
|
Other operating costs
and expenses
|
|
2
|
|
1
|
|
87
|
|
5
|
|
(78)
|
|
17
|
Closures and
impairment expenses, net
|
|
1
|
|
—
|
|
1
|
|
—
|
|
—
|
|
2
|
Other (income)
expenses, net
|
|
(4)
|
|
—
|
|
3
|
|
(9)
|
|
—
|
|
(10)
|
Total costs and
expenses, net
|
|
1,605
|
|
533
|
|
140
|
|
176
|
|
(78)
|
|
2,376
|
Operating Profit
(Loss)
|
|
$
196
|
|
$
18
|
|
$
(6)
|
|
$
(30)
|
|
$
—
|
|
$
178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
9/30/2020
|
|
KFC
|
|
Pizza Hut
|
|
All Other
Segments
|
|
Corporate
and
Unallocated(1)
|
|
Elimination
|
|
Total
|
Company
sales
|
|
$
1,597
|
|
$
508
|
|
$
13
|
|
$
—
|
|
$
—
|
|
$
2,118
|
Franchise fees and
income
|
|
32
|
|
2
|
|
6
|
|
—
|
|
—
|
|
40
|
Revenues from
transactions with
franchisees and unconsolidated
affiliates(2)
|
|
16
|
|
1
|
|
18
|
|
135
|
|
—
|
|
170
|
Other
revenues
|
|
1
|
|
—
|
|
36
|
|
2
|
|
(19)
|
|
20
|
Total
revenues
|
|
$
1,646
|
|
$
511
|
|
$
73
|
|
$
137
|
|
$
(19)
|
|
$
2,348
|
Company restaurant
expenses
|
|
1,287
|
|
424
|
|
13
|
|
—
|
|
—
|
|
1,724
|
General and
administrative expenses
|
|
50
|
|
24
|
|
11
|
|
42
|
|
—
|
|
127
|
Franchise
expenses
|
|
16
|
|
1
|
|
—
|
|
—
|
|
—
|
|
17
|
Expenses for
transactions with
franchisees and unconsolidated
affiliates(2)
|
|
16
|
|
1
|
|
13
|
|
134
|
|
—
|
|
164
|
Other operating costs
and expenses
|
|
—
|
|
—
|
|
33
|
|
1
|
|
(19)
|
|
15
|
Closures and
impairment expenses, net
|
|
1
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
Other (income)
expenses, net
|
|
(10)
|
|
—
|
|
1
|
|
(247)
|
|
—
|
|
(256)
|
Total costs and
expenses, net
|
|
1,360
|
|
450
|
|
71
|
|
(70)
|
|
(19)
|
|
1,792
|
Operating
Profit
|
|
$
286
|
|
$
61
|
|
$
2
|
|
$
207
|
|
$
—
|
|
$
556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to Date Ended
9/30/2021
|
|
KFC
|
|
Pizza Hut
|
|
All Other
Segments
|
|
Corporate
and
Unallocated(1)
|
|
Elimination
|
|
Total
|
Company
sales
|
|
$
5,220
|
|
$
1,617
|
|
$
37
|
|
$
—
|
|
$
—
|
|
$
6,874
|
Franchise fees and
income
|
|
95
|
|
6
|
|
19
|
|
—
|
|
—
|
|
120
|
Revenues from
transactions with
franchisees and unconsolidated
affiliates(2)
|
|
46
|
|
5
|
|
75
|
|
393
|
|
—
|
|
519
|
Other
revenues
|
|
6
|
|
2
|
|
187
|
|
11
|
|
(157)
|
|
49
|
Total
revenues
|
|
$
5,367
|
|
$
1,630
|
|
$
318
|
|
$
404
|
|
$
(157)
|
|
$
7,562
|
Company restaurant
expenses
|
|
4,343
|
|
1,421
|
|
40
|
|
—
|
|
(1)
|
|
5,803
|
General and
administrative expenses
|
|
175
|
|
80
|
|
30
|
|
123
|
|
—
|
|
408
|
Franchise
expenses
|
|
47
|
|
3
|
|
—
|
|
—
|
|
—
|
|
50
|
Expenses for
transactions with
franchisees and unconsolidated
affiliates(2)
|
|
45
|
|
5
|
|
69
|
|
390
|
|
—
|
|
509
|
Other operating costs
and expenses
|
|
3
|
|
1
|
|
183
|
|
10
|
|
(156)
|
|
41
|
Closures and
impairment expenses, net
|
|
7
|
|
3
|
|
3
|
|
—
|
|
—
|
|
13
|
Other (income)
expenses, net
|
|
(16)
|
|
—
|
|
8
|
|
(7)
|
|
—
|
|
(15)
|
Total costs and
expenses, net
|
|
4,604
|
|
1,513
|
|
333
|
|
516
|
|
(157)
|
|
6,809
|
Operating Profit
(Loss)
|
|
$
763
|
|
$
117
|
|
$
(15)
|
|
$
(112)
|
|
$
—
|
|
$
753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to Date Ended
9/30/2020
|
|
KFC
|
|
Pizza Hut
|
|
All Other
Segments
|
|
Corporate
and
Unallocated(1)
|
|
Elimination
|
|
Total
|
Company
sales
|
|
$
4,077
|
|
$
1,252
|
|
$
29
|
|
$
—
|
|
$
—
|
|
$
5,358
|
Franchise fees and
income
|
|
97
|
|
4
|
|
11
|
|
—
|
|
—
|
|
112
|
Revenues from
transactions with
franchisees and unconsolidated
affiliates(2)
|
|
47
|
|
3
|
|
34
|
|
404
|
|
—
|
|
488
|
Other
revenues
|
|
1
|
|
—
|
|
77
|
|
4
|
|
(36)
|
|
46
|
Total
revenues
|
|
$
4,222
|
|
$
1,259
|
|
$
151
|
|
$
408
|
|
$
(36)
|
|
$
6,004
|
Company restaurant
expenses
|
|
3,418
|
|
1,120
|
|
32
|
|
—
|
|
(2)
|
|
4,568
|
General and
administrative expenses
|
|
138
|
|
71
|
|
30
|
|
100
|
|
—
|
|
339
|
Franchise
expenses
|
|
48
|
|
2
|
|
—
|
|
—
|
|
—
|
|
50
|
Expenses for
transactions with
franchisees and unconsolidated
affiliates(2)
|
|
47
|
|
3
|
|
26
|
|
404
|
|
—
|
|
480
|
Other operating costs
and expenses
|
|
—
|
|
—
|
|
69
|
|
3
|
|
(34)
|
|
38
|
Closures and
impairment expenses, net
|
|
12
|
|
15
|
|
3
|
|
—
|
|
—
|
|
30
|
Other (income)
expenses, net
|
|
(39)
|
|
—
|
|
1
|
|
(244)
|
|
—
|
|
(282)
|
Total costs and
expenses, net
|
|
3,624
|
|
1,211
|
|
161
|
|
263
|
|
(36)
|
|
5,223
|
Operating Profit
(Loss)
|
|
$
598
|
|
$
48
|
|
$
(10)
|
|
$
145
|
|
$
—
|
|
$
781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
included revenues and associated expenses of transactions with
franchisees and unconsolidated affiliates 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 and unconsolidated
affiliates.
|
View original
content:https://www.prnewswire.com/news-releases/yum-china-reports-third-quarter-2021-results-301409870.html
SOURCE Yum China Holdings, Inc.