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Yum China Reports Fourth Quarter Results, Increases Dividend by 23% and Steps Up 2024 Share Repurchases to $1.25 billion

2024/2/7 5:46:42

Fourth Quarter System Sales Up 21%, Operating Profit Up 170% and Core Operating Profit Grew 324% (1)
Full Year System Sales Up 21%, Operating Profit Up 76% to $1.1 Billion and Core Operating Profit Grew 79%
Record 2023 Results - Total Revenues of $11 Billion, Adjusted Operating Profit of $1.1 Billion and 1,697 Net New Stores Opened
14,644 Stores in Over 2,000 Cities

SHANGHAI, Feb. 7, 2024 /PRNewswire/ -- Yum China Holdings, Inc. (the "Company" or "Yum China") (NYSE: YUMC and HKEX: 9987) today reported unaudited results for the fourth quarter and year ended December 31, 2023.

 Fourth Quarter Highlights

  • Total system sales grew 21% year over year excluding foreign currency translation ("F/X"). Growth was mainly attributable to 12% net new unit contribution(2), 4% same-store sales growth and lapping temporary closures from the pandemic in the prior year.
  • Opened 542 net new stores in the fourth quarter. Total stores reached 14,644 as of December 31, 2023. KFC reached 10,296 stores and Pizza Hut reached 3,312 stores.
  • Total revenues increased 19% to $2.49 billion, or 21% excluding F/X.
  • Operating profit grew 170% to $110 million. Core operating profit grew 324%.
  • Restaurant margin expanded to 10.7%. Excluding items affecting comparability at the restaurant level – the impact from temporary relief and VAT deduction benefits in both years, restaurant margin expanded 170 basis points.
  • Diluted EPS increased 77% to $0.23. Excluding Special Items as well as unfavorable impacts of $0.01 from F/X and $0.04 from the mark-to-market investment in Meituan, the increase was 164%.
  • Foreign currency translation unfavorably impacted total revenues by $36 million, operating profit by $2 million and diluted EPS by $0.01.

Full Year Highlights

  • Total system sales grew 21% excluding F/X. Growth was mainly attributable to 9% net new unit contribution, 7% same-store sales growth and lapping temporary closures from the pandemic in the prior year.
  • Store count increased 13%, or 1,697 net new stores, exceeding the full-year net new store target.
  • Total revenues were up 15% to $10.98 billion, or 21% excluding F/X.
  • Operating profit grew 76% to $1.1 billion. Core operating profit grew 79%.
  • Restaurant margin expanded to 16.3%. Excluding items affecting comparability at the restaurant level, restaurant margin expanded 270 basis points.
  • Diluted EPS increased 89% to $1.97. Excluding Special Items as well as unfavorable impacts of $0.11 from F/X and $0.04 from the mark-to-market investment in Meituan, the increase was 101%.
  • Foreign currency translation unfavorably impacted total revenues by $589 million, operating profit by $61 million and diluted EPS by $0.11.
  • Shareholder returns through share repurchases and cash dividends increased 25% to $833 million.
  • Digital sales(3) exceeded $9.2 billion, with digital ordering accounted for approximately 89% of total company sales.
  • Total membership of KFC and Pizza Hut exceeded 470 million, up 14% versus the prior year. Member sales accounted for approximately 65% of KFC and Pizza Hut's system sales in the aggregate.

(1) Core Operating Profit is defined as Operating Profit adjusted for Special Items, further excluding items affecting comparability and the impact of F/X. The Company uses Core Operating Profit for the purposes of evaluating the performance of its core operations. Please refer to "Reconciliation of Reported GAAP Results to Non-GAAP Measures" included in the accompanying tables of this release for further details.

(2) Net new unit contribution refers to sales contribution from net new stores.

(3) Digital sales refer to sales at company-owned stores where orderings were placed digitally.

Increasing Dividends and Stepping Up Share Repurchases

  • Yum China returned approximately $390 million to shareholders in the fourth quarter and $833 million for the full year through share repurchases and cash dividends. This stands as the highest full year return thus far in the Company's history.
  • During the fourth quarter, the Company stepped up share repurchases, totaling 7.5 million shares of common stock for $336 million. In 2023 the Company repurchased 12.4 million shares, equivalent to about 3% of its total outstanding shares. As of December 31, 2023, approximately $1.5 billion remained available for future share repurchases under the current authorization program.
  • The Company plans to significantly accelerate the return of value to its shareholders in 2024:
    - The board declared a 23% increase in cash dividend to $0.16 per share on Yum China's common stock, payable on March 26, 2024 to shareholders of record as of the close of business on March 5, 2024.
    - The Company plans to repurchase $1.25 billion of its common stock in 2024, through open market transactions in the U.S. and Hong Kong. This includes two primary components: (i) an aggregate repurchase amount of $750 million in 2024 under the Rule 10b5-1 of the United States Securities Exchange Act of 1934 (the "Exchange Act") in the U.S. and a similar program in Hong Kong; and (ii) an aggregate repurchase amount of $500 million in the first quarter of 2024 under the Rule 10b-18 of the Exchange Act in the U.S. and through similar transactions in Hong Kong.

Key Financial Results


Fourth Quarter




Full Year









%/ppts Change










%/ppts Change



2023



2022



Reported



Ex F/X




2023



2022



Reported



Ex F/X


System Sales Growth (4) (%)


21




(4)



NM



NM





21




(5)



NM



NM


Same-Store Sales Growth (4) (%)


4




(4)



NM



NM





7




(7)



NM



NM


Operating Profit ($mn)


110




41




+170




+175





1,106




629




+76




+86


Adjusted Operating Profit (5) ($mn)


116




40




+193




+199





1,121




633




+77




+87


Core Operating Profit (5) (6) ($mn)


111




29



NM




+324





1,121




627



NM




+79


Net Income ($mn)


97




53




+81




+84





827




442




+87




+97


Adjusted Net Income (5) ($mn)


103




52




+96




+100





842




446




+89




+99


Diluted Earnings
  Per Common Share ($)


0.23




0.13




+77




+85





1.97




1.04




+89




+100


Adjusted Diluted Earnings
  Per Common Share (5) ($)


0.25




0.13




+92




+92





2.00




1.05




+90




+101


(4) System sales and same-store sales percentages exclude the impact of F/X. Effective January 1, 2018, temporary store closures are normalized in the same-store sales calculation by excluding the period during which stores are temporarily closed.

(5) See "Reconciliation of Reported GAAP Results to Non-GAAP Measures" included in the accompanying tables of this release for further details.

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

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

Percentages may not recompute due to rounding.

NM refers to not meaningful.

CEO Comments 

Joey Wat, CEO of Yum China, commented, "2023 was a pivotal year for Yum China. Not only did we demonstrate strong resilience during the pandemic, but we also seized opportunities that arose from China's reopening. In 2023, our system sales grew by 21%, surpassing the industry's growth rate, and we set new records for both revenue and profits. Our return to shareholders through cash dividends and share repurchases in 2023 was the highest since spinoff. Looking ahead, we remain very positive about the vast growth opportunities in China. Currently serving just one-third of China's population, our ambitious goal is to extend our reach to half of the population by 2026. Over half of our new stores are located in lower-tier cities, strategically positioned to capture the demand from long-term consumption upgrades there. We are also expanding our addressable market and capturing incremental sales across city tiers with innovative products, engaging campaigns and a wider range of price points. Leveraging our distinctive strengths, including brands deeply ingrained in China, remarkable agility and robust operational execution, we are well-positioned to achieve our growth targets for 2024-2026 and deliver excellent returns to our shareholders through increased cash dividends and stepped-up share buybacks."

KFC


Fourth Quarter


Full Year









%/ppts Change








%/ppts Change



2023



2022



Reported



Ex F/X


2023



2022



Reported



Ex F/X


Restaurants


10,296




9,094




+13



NM



10,296




9,094




+13



NM


System Sales Growth (%)


20




(1)



NM



NM



20




(4)



NM



NM


Same-Store Sales Growth (%)


3




(3)



NM



NM



7




(7)



NM



NM


Total Revenues ($mn)


1,872




1,591




+18




+19



8,240




7,219




+14




+20


Operating Profit ($mn)


167




117




+43




+45



1,202




787




+53




+60


Core Operating Profit ($mn)


164




115



NM




+43



1,211




806



NM




+50


Restaurant Margin (%)


12.0




12.7




(0.7)




(0.7)



17.7




15.7




+2.0




+2.0


  • System sales for KFC grew 20% for the quarter and the year, primarily driven by net new unit contribution of 12% and 9%, respectively, 3% increase in same-store sales for the quarter and 7% increase for the year, as well as lapping temporary closures in the prior year.
  • KFC opened a record 1,202 net new stores in 2023 and reached 10,296 stores at year-end 2023.
  • Operating profit of $1.2 billion reached a record level with increases of 43% for the quarter and 53% for the year.
  • Restaurant margin was 12.0% for the quarter. Excluding items affecting comparability at the restaurant level, restaurant margin expanded 60 basis points, primarily due to sales leveraging, which was partially offset by higher promotion costs and wage inflation. Full-year restaurant margin was 17.7%. Excluding items affecting comparability at the restaurant level, restaurant margin expanded 240 basis points, primarily driven by sales leveraging and favorable commodity prices, partially offset by higher promotion costs and wage inflation.
  • Delivery contributed approximately 38% of KFC's Company sales for the quarter and 36% for the year. Off-premise contributed approximately 66% for the full year 2023, compared to 69% in 2022. Dine-in significantly rebounded in 2023 compared to the pandemic-impacted prior year.

Pizza Hut


Fourth Quarter


Full Year









%/ppts Change








%/ppts Change



2023



2022



Reported



Ex F/X


2023



2022



Reported



Ex F/X


Restaurants


3,312




2,903




+14



NM



3,312




2,903




+14



NM


System Sales Growth (%)


24




(6)



NM



NM



20




(3)



NM



NM


Same-Store Sales Growth (%)


6




(8)



NM



NM



6




(6)



NM



NM


Total Revenues ($mn)


496




404




+23




+24



2,246




1,960




+15




+21


Operating Profit ($mn)


5




(20)



NM



NM



142




70




+102




+117


Core Operating Profit ($mn)


4




(27)



NM



NM



143




48



NM




+198


Restaurant Margin (%)


7.3




1.9




+5.4




+5.4



11.8




9.2




+2.6




+2.6


  • System sales for Pizza Hut grew 24% for the quarter and 20% for the year, primarily driven by net new unit contribution of 12% for the quarter and 10% for the year, a 6% increase in same-store sales and lapping temporary closures in the prior year.
  • Pizza Hut accelerated new store openings in 2023 with a record 409 net new stores. Total stores reached 3,312 at year-end 2023.
  • Operating profit increased to $5 million for the quarter, compared with an operating loss of $20 million in the prior year period. For the year, operating profit was $142 million, representing 102% growth.
  • Restaurant margin for the quarter was 7.3%. Excluding items affecting comparability at the restaurant level, restaurant margin expanded 680 basis points, primarily driven by sales leveraging, labor productivity gain, and lower rider cost. For the full year, restaurant margin was 11.8%. Excluding items affecting comparability at the restaurant level, restaurant margin expanded 330 basis points from the prior year, primarily driven by sales leveraging and favorable commodity prices, which was partially offset by wage inflation and higher promotion costs.
  • Delivery contributed approximately 40% of Pizza Hut's Company sales for the quarter and 37% for the year. Off-premise contributed approximately 46% for the year, compared to 52% in 2022, significantly above pre-pandemic 2019 level of 30%.

Outlook

In 2024, Yum China plans to

  • Open approximately 1,500 to 1,700 net new stores.
  • Make capital expenditures in the range of approximately $700 million to $850 million.

 From 2024 to 2026, Yum China targets to

  • Reach a total store count of 20,000 by 2026.
  • Achieve a high-single-to-double-digit CAGR for system sales and operating profit, and a double-digit CAGR for EPS, using 2023 as the base year excluding F/X.
  • Return a minimum of $3 billion to shareholders through quarterly dividends and share repurchases.

Other Updates

  • Yum China was ranked number one globally for the Restaurant & Leisure Facilities Industry in the S&P Global 2023 Corporate Sustainability Assessment, reflecting its unwavering commitment to environmental, social, and governance. 2023 marked the fourth consecutive year that Yum China was selected as a member of both the Dow Jones Sustainability Indices: World Index and Emerging Market Index.
  • Yum China was once again named by Top Employers Institute as a Top Employer in China for the sixth consecutive year. Yum China was first in the restaurant industry. This latest recognition underscores the Company's continued dedication to providing an exceptional working environment and experience for its people.
  • Yum China has been named to the Fortune World's Most Admired Companies list for 2024, ranked #5 in the food service industry.

Note on Non-GAAP Measures

Reported GAAP results include items that are excluded from non-GAAP measures. See "Reconciliation of Reported GAAP Results to Non-GAAP Measures" and "Segment Results" within this release for non-GAAP reconciliation details.

Conference Call

Yum China's management will hold an earnings conference call at 7:00 p.m. U.S. Eastern Time on Tuesday, February 6, 2024 (8:00 a.m. Beijing/Hong Kong Time on Wednesday, February 7, 2024).

A live webcast of the call may be accessed at https://edge.media-server.com/mmc/p/rav3hcwk.

To join by phone, please register in advance of the conference through the link provided below. Upon registering, you will be provided with participant dial-in numbers, a passcode and a unique access PIN.

Pre-registration link: https://s1.c-conf.com/diamondpass/10035579-wp1ljg.html

A replay of the conference call will be available one hour after the call ends until Wednesday, February 14, 2024 and may be accessed by phone using the following numbers:

U.S.:

1 855 883 1031

Mainland China:

400 1209 216

Hong Kong:

800 930 639

U.K.:

0800 031 4295



Replay PIN:

10035579

Additionally, this earnings release, the accompanying slides, as well as the live and archived webcast of this conference call will be available at Yum China's Investor Relations website at http://ir.yumchina.com

For important news and information regarding Yum China, including our filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange, visit Yum China's Investor Relations website at http://ir.yumchina.com. Yum China uses this website as a primary channel for disclosing key information to its investors, some of which may contain material and previously non-public information.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including under "2024 Outlook." We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the fact that they do not relate strictly to historical or current facts and by the use of forward-looking words such as "expect," "expectation," "believe," "anticipate," "may," "could," "intend," "belief," "plan," "estimate," "target," "predict," "project," "likely," "will," "continue," "should," "forecast," "outlook," "commit" or similar terminology. These statements are based on current estimates and assumptions made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable under the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. Forward-looking statements include, without limitation, statements regarding the future strategies, growth, business plans, investments, store openings, capital expenditures, dividend and share repurchase plans, CAGR for system sales, operating profit and EPS, earnings, performance and returns of Yum China, anticipated effects of population and macroeconomic trends, pace of recovery of Yum China's business, the anticipated effects of our innovation, digital and delivery capabilities and investments on growth and beliefs regarding the long-term drivers of Yum China's business. Forward-looking statements are not guarantees of performance and are inherently subject to known and unknown risks and uncertainties that are difficult to predict and could cause our actual results or events to differ materially from those indicated by those statements. We cannot assure you that any of our expectations, estimates or assumptions will be achieved. The forward-looking statements included in this press release are only made as of the date of this press release, and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law. Numerous factors could cause our actual results or events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: whether we are able to achieve development goals at the times and in the amounts currently anticipated, if at all, the success of our marketing campaigns and product innovation, our ability to maintain food safety and quality control systems, changes in public health conditions, including the COVID-19 pandemic, our ability to control costs and expenses, including tax costs, as well as changes in political, economic and regulatory conditions in China, and those set forth under the caption "Risk Factors" in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q). In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial could affect the accuracy of any such forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. You should consult our filings with the Securities and Exchange Commission (including the information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q) for additional detail about factors that could affect our financial and other results.

About Yum China Holdings, Inc.

Yum China is the largest restaurant company in China with a mission to make every life taste beautiful. The Company has over 400,000 employees and operates over 14,000 restaurants under six brands across 2,000 cities in China. KFC and Pizza Hut are the leading brands in the quick-service and casual dining restaurant spaces in China, respectively. Taco Bell offers innovative Mexican-inspired food. Yum China has also partnered with Lavazza to develop the Lavazza coffee concept in China. Little Sheep and Huang Ji Huang specialize in Chinese cuisine. Yum China has a world-class, digitalized supply chain which includes an extensive network of logistics centers nationwide and an in-house supply chain management system. Its strong digital capabilities and loyalty program enable the Company to reach customers faster and serve them better. Yum China is a Fortune 500 company with the vision to be the world's most innovative pioneer in the restaurant industry. For more information, please visit http://ir.yumchina.com

Investor Relations Contact:



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 Ended



% Change



12/31/2023



12/31/2022



B/(W)


12/31/2023



12/31/2022



B/(W)

Revenues





















Company sales


$

2,343



$

1,975




19




$

10,391



$

9,110




14



Franchise fees and income



20




16




24





89




81




11



Revenues from transactions with franchisees



90




68




32





372




287




30



Other revenues



40




29




37





126




91




39



Total revenues



2,493




2,088




19





10,978




9,569




15



Costs and Expenses, Net





















Company restaurants





















Food and paper



758




630




(20)





3,224




2,836




(14)



Payroll and employee benefits



678




570




(19)





2,725




2,389




(14)



Occupancy and other operating expenses



654




570




(15)





2,752




2,604




(6)



Company restaurant expenses



2,090




1,770




(18)





8,701




7,829




(11)



General and administrative expenses



153




145




(5)





638




594




(7)



Franchise expenses



8




7




(9)





36




34




(2)



Expenses for transactions with franchisees



86




67




(28)





356




279




(28)



Other operating costs and expenses



35




25




(38)





112




78




(43)



Closures and impairment expenses, net



12




12




5





29




32




11



Other (income) expenses, net



(1)




21



NM








94




100



Total costs and expenses, net



2,383




2,047




(16)





9,872




8,940




(10)



Operating Profit



110




41




170





1,106




629




76



Interest income, net



45




33




33





169




84




101



Investment (loss) gain



(17)




6



NM





(49)




(26)




(91)



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



138




80




71





1,226




687




78



Income tax provision



(33)




(24)




(39)





(329)




(207)




(59)



Equity in net earnings (losses) from
   equity method investments



2




2




9





4




(2)



NM



Net income – including noncontrolling interests



107




58




81





901




478




88



Net income – noncontrolling interests



10




5




(86)





74




36




(106)



Net Income – Yum China Holdings, Inc.


$

97



$

53




81




$

827



$

442




87



Effective tax rate



24.2

%



29.9

%



5.7


ppts.



26.9

%



30.1

%



3.2


ppts.






















Basic Earnings Per Common Share


$

0.23



$

0.13







$

1.99



$

1.05






Weighted-average shares outstanding
    (in millions)



411




419








416




421



























Diluted Earnings Per Common Share


$

0.23



$

0.13







$

1.97



$

1.04






Weighted-average shares outstanding
    (in millions)



415




423








420




425



























Company sales



100.0

%



100.0

%







100.0

%



100.0

%





Food and paper



32.4




31.9




(0.5)


ppts.



31.0




31.1




0.1


ppts.

Payroll and employee benefits



29.0




28.8




(0.2)


ppts.



26.2




26.2





ppts.

Occupancy and other operating expenses



27.9




28.9




1.0


ppts.



26.5




28.6




2.1


ppts.

Restaurant margin



10.7

%



10.4

%



0.3


ppts.



16.3

%



14.1

%



2.2


ppts.

Operating margin



4.7

%



2.1

%



2.6


ppts.



10.6

%



6.9

%



3.7


ppts.

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

 

 

Yum China Holdings, Inc.

KFC Operating Results

(in US$ million)

(unaudited)




Quarter Ended



% Change


Year Ended



% Change



12/31/2023



12/31/2022



B/(W)


12/31/2023



12/31/2022



B/(W)

Revenues





















Company sales


$

1,842



$

1,566




18




$

8,116



$

7,120




14



Franchise fees and income



14




12




14





62




56




10



Revenues from transactions with franchisees



12




9




35





45




33




37



Other revenues



4




4




(15)





17




10




60



Total revenues



1,872




1,591




18





8,240




7,219




14



Costs and Expenses, Net





















Company restaurants





















Food and paper



598




496




(21)





2,512




2,208




(14)



Payroll and employee benefits



519




434




(20)





2,057




1,797




(14)



Occupancy and other operating expenses



504




437




(15)





2,107




1,994




(6)



Company restaurant expenses



1,621




1,367




(19)





6,676




5,999




(11)



General and administrative expenses



60




63




5





263




254




(4)



Franchise expenses



7




6




(8)





31




29




(2)



Expenses for transactions with franchisees



10




8




(32)





39




30




(33)



Other operating costs and expenses



4




3




(1)





15




7




(91)



Closures and impairment expenses, net



3




5




47





12




16




28



Other expenses, net






22




99





2




97




98



Total costs and expenses, net



1,705




1,474




(16)





7,038




6,432




(9)



Operating Profit


$

167



$

117




43




$

1,202



$

787




53



Company sales



100.0

%



100.0

%







100.0

%



100.0

%





Food and paper



32.5




31.7




(0.8)


ppts.



31.0




31.0





ppts.

Payroll and employee benefits



28.2




27.7




(0.5)


ppts.



25.3




25.2




(0.1)


ppts.

Occupancy and other operating expenses



27.3




27.9




0.6


ppts.



26.0




28.1




2.1


ppts.

Restaurant margin



12.0

%



12.7

%



(0.7)


ppts.



17.7

%



15.7

%



2.0


ppts.

Operating margin



9.1

%



7.4

%



1.7


ppts.



14.8

%



11.0

%



3.8


ppts.

Percentages may not recompute due to rounding.

 

 

Yum China Holdings, Inc.

Pizza Hut Operating Results

(in US$ million)

(unaudited)




Quarter Ended



% Change


Year Ended



% Change



12/31/2023



12/31/2022



B/(W)


12/31/2023



12/31/2022



B/(W)

Revenues





















Company sales


$

486



$

398




22




$

2,214



$

1,939




14



Franchise fees and income



1




1




25





7




7




9



Revenues from transactions with franchisees



1




1




9





4




4




11



Other revenues



8




4




90





21




10




114



Total revenues



496




404




23





2,246




1,960




15



Costs and Expenses, Net





















Company restaurants





















Food and paper



155




131




(18)





692




612




(13)



Payroll and employee benefits



153




135




(14)





649




572




(14)



Occupancy and other operating expenses



141




125




(13)





610




577




(6)



Company restaurant expenses



449




391




(15)





1,951




1,761




(11)



General and administrative expenses



29




26




(11)





118




110




(7)



Franchise expenses



1




1




(13)





4




4




(8)



Expenses for transactions with franchisees



1







(11)





4




3




(11)



Other operating costs and expenses



8




3




(117)





19




8




(124)



Closures and impairment expenses, net



3




3




1





8




4




(135)



Total costs and expenses, net



491




424




(16)





2,104




1,890




(11)



Operating Profit


$

5



$

(20)



NM




$

142



$

70




102



Company sales



100.0

%



100.0

%







100.0

%



100.0

%





Food and paper



32.0




32.9




0.9


ppts.



31.3




31.5




0.2


ppts.

Payroll and employee benefits



31.7




33.9




2.2


ppts.



29.3




29.5




0.2


ppts.

Occupancy and other operating expenses



29.0




31.3




2.3


ppts.



27.6




29.8




2.2


ppts.

Restaurant margin



7.3

%



1.9

%



5.4


ppts.



11.8

%



9.2

%



2.6


ppts.

Operating margin



1.1

%



(5.0)

%



6.1


ppts.



6.4

%



3.6

%



2.8


ppts.

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

 

 

Yum China Holdings, Inc.

Condensed Consolidated Balance Sheets

(in US$ million)




12/31/2023



12/31/2022




(Unaudited)





ASSETS







Current Assets







Cash and cash equivalents


$

1,128



$

1,130


Short-term investments



1,472




2,022


Accounts receivable, net



68




64


Inventories, net



424




417


Prepaid expenses and other current assets



339




307


Total Current Assets



3,431




3,940


Property, plant and equipment, net



2,310




2,118


Operating lease right-of-use assets



2,217




2,219


Goodwill



1,932




1,988


Intangible assets, net



150




159


Long-term bank deposits and notes



1,265




680


Equity investments



332




361


Deferred income tax assets



129




113


Other assets



265




248


Total Assets



12,031




11,826









LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY







Current Liabilities







Accounts payable and other current liabilities



2,164




2,096


Short-term borrowings



168




2


Income taxes payable



90




68


Total Current Liabilities



2,422




2,166


Non-current operating lease liabilities



1,899




1,906


Non-current finance lease liabilities



44




42


Deferred income tax liabilities



390




390


Other liabilities



157




162


Total Liabilities



4,912




4,666









Redeemable Noncontrolling Interest



13




12









Equity







Common stock,  $0.01 par value; 1,000 million shares authorized;
       407 million shares and 419 million shares issued and outstanding
       at December 31, 2023 and 2022, respectively.



4




4


Additional paid-in capital



4,320




4,390


Retained earnings



2,310




2,191


Accumulated other comprehensive loss



(229)




(103)


Total Yum China Holdings, Inc. Stockholders' Equity



6,405




6,482


Noncontrolling interests



701




666


Total Equity



7,106




7,148


Total Liabilities, Redeemable Noncontrolling Interest and Equity


$

12,031



$

11,826









 

 

Yum China Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(in US$ million)

(unaudited)




Year Ended



12/31/2023


12/31/2022

 Cash Flows – Operating Activities









 Net income – including noncontrolling interests


$

901




$

478



 Depreciation and amortization



453





602



 Non-cash operating lease cost



404





435



 Closures and impairment expenses



29





32



 Investment loss



49





26



 Equity in net (earnings) losses from equity method investments



(4)





2



 Distributions of income received from equity method investments



11





7



 Deferred income taxes



(10)





(20)



 Share-based compensation expense



64





42



 Changes in accounts receivable



(6)





(1)



 Changes in inventories



(19)





(19)



 Changes in prepaid expenses, other current assets and VAT assets



(35)





207



 Changes in accounts payable and other current liabilities



84





16



 Changes in income taxes payable



25





25



 Changes in non-current operating lease liabilities



(407)





(396)



 Other, net



(66)





(23)



 Net Cash Provided by Operating Activities



1,473





1,413



 Cash Flows – Investing Activities









 Capital spending



(710)





(679)



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



(3,517)





(5,189)



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



3,499





5,365



 Acquisition of business, net of cash acquired







(23)



 Acquisition of equity investment



(20)







 Other, net



5





4



 Net Cash Used in Investing Activities



(743)





(522)



 Cash Flows – Financing Activities









 Proceeds from short-term borrowings



264





2



 Payment of short-term borrowings



(100)







 Repurchase of shares of common stock



(613)





(466)



 Cash dividends paid on common stock



(216)





(202)



 Dividends paid to noncontrolling interests



(77)





(72)



 Acquisitions of noncontrolling interests







(113)



 Contributions from noncontrolling interests



35





18



 Payment of acquisition related holdback



(3)





(7)



 Other, net



(6)





(4)



 Net Cash Used in Financing Activities



(716)





(844)



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



(16)





(53)



 Net Decrease in Cash, Cash Equivalents and Restricted Cash



(2)





(6)



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



1,130





1,136



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


$

1,128




$

1,130



In this press release:

  • Certain performance metrics and non-GAAP measures are presented excluding the impact of foreign currency translation ("F/X"). These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the F/X impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.
  • System sales growth reflects the results of all restaurants regardless of ownership, including Company-owned and franchise restaurants that operate our restaurant concepts, except for non-Company-owned restaurants for which we do not receive a sales-based royalty. Sales of franchise restaurants typically generate ongoing franchise fees for the Company at an average rate of approximately 6% of system sales. Franchise restaurant sales are not included in Company sales in the Condensed Consolidated Statements of Income; however, the franchise fees are included in the Company's revenues. We believe system sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates all of our revenue drivers, Company and franchise same-store sales as well as net unit growth.
  • Effective January 1, 2018, the Company revised its definition of same-store sales growth to represent the estimated percentage change in sales of food of all restaurants in the Company system that have been open prior to the first day of our prior fiscal year, excluding the period during which stores are temporarily closed. We refer to these as our "base" stores. Previously, same-store sales growth represented the estimated percentage change in sales of all restaurants in the Company system that have been open for one year or more, including stores temporarily closed, and the base stores changed on a rolling basis from month to month. This revision was made to align with how management measures performance internally and focuses on trends of a more stable base of stores.
  • Certain comparative items in the Condensed Consolidated Financial Statements have been reclassified to conform to the current period's presentation to facilitate comparison.

Unit Count by Brand

KFC



12/31/2022



New Builds



Closures



Acquired



Refranchised



12/31/2023


Company-owned



8,214




1,246




(222)




2




(3)




9,237


Franchisees



880




193




(15)




(2)




3




1,059


Total



9,094




1,439




(237)










10,296


Pizza Hut



12/31/2022



New Builds



Closures



Refranchised



12/31/2023


Company-owned



2,760




515




(118)




(2)




3,155


Franchisees



143




16




(4)




2




157


Total



2,903




531




(122)







3,312


Others



12/31/2022



New Builds



Closures



12/31/2023


Company-owned



187




93




(24)




256


Franchisees



763




142




(125)




780


Total



950




235




(149)




1,036


 

Reconciliation of Reported GAAP Results to Non-GAAP Measures
(in millions, except per share data)
(unaudited)

In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") in this press release, the Company provides the following non-GAAP measures:

  • Measures adjusted for Special Items, which include Adjusted Operating Profit, Adjusted Net Income, Adjusted Earnings Per Common Share ("EPS"), Adjusted Effective Tax Rate and Adjusted EBITDA;
  • Company Restaurant Profit ("Restaurant profit") and Restaurant margin;
  • Core Operating Profit that excludes Special Items, and further adjusted for Items Affecting Comparability and the impact of F/X;

These non-GAAP measures are not intended to replace the presentation of our financial results in accordance with GAAP.  Rather, the Company believes that the presentation of these non-GAAP measures provides additional information to investors to facilitate the comparison of past and present results, excluding those items that the Company does not believe are indicative of our core operations.

With respect to non-GAAP measures adjusted for Special Items, the Company excludes impact from Special Items for the purpose of evaluating performance internally and uses them as factors in determining compensation for certain employees. Special Items are not included in any of our segment results.

Adjusted EBITDA is defined as net income including noncontrolling interests adjusted for equity in net earnings (losses) from equity method investments, income tax, interest income, net, investment gain or loss, depreciation and amortization, store impairment charges, and Special Items. Store impairment charges included as an adjustment item in Adjusted EBITDA primarily resulted from our semi-annual impairment evaluation of long-lived assets of individual restaurants, and additional impairment evaluation whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. If these restaurant-level assets were not impaired, depreciation of the assets would have been recorded and included in EBITDA. Therefore, store impairment charges were a non-cash item similar to depreciation and amortization of our long-lived assets of restaurants. The Company believes that investors and analyst may find it useful in measuring operating performance without regard to such non-cash items.

Restaurant Profit is defined as Company sales less expenses incurred directly by our Company-owned restaurants in generating Company sales, including cost of food and paper, restaurant-level payroll and employee benefits, rent, depreciation and amortization of restaurant-level assets, advertising expenses, and other operating expenses. Restaurant margin is defined as Restaurant profit divided by Company sales. We also use Restaurant profit and Restaurant margin for the purposes of internally evaluating the performance of our Company-owned restaurants and we believe they provide useful information to investors as to the profitability of our Company-owned restaurants.

Core Operating Profit is defined as Operating Profit adjusted for Special Items, and further excluding Items Affecting Comparability and the impact of F/X. We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Items such as charges, gains and accounting changes which are viewed by management as significantly impacting the current period or the comparable period, due to changes in policy or other external factors, or non-cash items pertaining to underlying activities that are different from or unrelated to our core operations, are generally considered "Items Affecting Comparability." Examples of Items Affecting Comparability include, but are not limited to: temporary relief from landlords and government agencies, VAT deductions due to tax policy changes, and amortization of reacquired franchise rights recognized upon acquisitions. We believe presenting Core Operating Profit provides additional information to further enhance comparability of our operating results, and we use this measure for the purposes of evaluating the performance of our core operations.

The following tables set forth the reconciliation of the most directly comparable GAAP financial measures to the non-GAAP financial measures. The reconciliation of GAAP Operating Profit to Restaurant Profit and Core Operating Profit by segment is presented in Segment Results within this release.



Quarter Ended



Year Ended




12/31/2023



12/31/2022



12/31/2023



12/31/2022















Non-GAAP Reconciliations


























Reconciliation of Operating Profit to Adjusted Operating Profit













Operating Profit


$

110



$

41



$

1,106



$

629


Special Items, Operating Profit



(6)




1




(15)




(4)


Adjusted Operating Profit


$

116



$

40



$

1,121



$

633


Reconciliation of Net Income to Adjusted Net Income













Net Income – Yum China Holdings, Inc.


$

97



$

53



$

827



$

442


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



(6)




1




(15)




(4)


Adjusted Net Income – Yum China Holdings, Inc.


$

103



$

52



$

842



$

446


Reconciliation of EPS to Adjusted EPS













Basic Earnings Per Common Share


$

0.23



$

0.13



$

1.99



$

1.05


Special Items, Basic Earnings Per Common Share



(0.02)







(0.03)




(0.01)


Adjusted Basic Earnings Per Common Share


$

0.25



$

0.13



$

2.02



$

1.06


Diluted Earnings Per Common Share


$

0.23



$

0.13



$

1.97



$

1.04


Special Items, Diluted Earnings Per Common Share



(0.02)







(0.03)




(0.01)


Adjusted Diluted Earnings Per Common Share


$

0.25



$

0.13



$

2.00



$

1.05


Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate













Effective tax rate



24.2

%



29.9

%



26.9

%



30.1

%

Impact on effective tax rate as a result of Special Items



1.0

%



(0.4)

%



0.4

%



0.2

%

Adjusted effective tax rate



23.2

%



30.3

%



26.5

%



29.9

%

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



Quarter Ended



Year Ended




12/31/2023



12/31/2022



12/31/2023



12/31/2022


Reconciliation of Net Income to Adjusted EBITDA













Net Income – Yum China Holdings, Inc.


$

97



$

53



$

827



$

442


Net income – noncontrolling interests



10




5




74




36


Equity in net (earnings) losses from equity method investments



(2)




(2)




(4)




2


Income tax provision



33




24




329




207


Interest income, net



(45)




(33)




(169)




(84)


Investment loss (gain)



17




(6)




49




26


Operating Profit



110




41




1,106




629


Special Items, Operating Profit



6




(1)




15




4


Adjusted Operating Profit



116




40




1,121




633


Depreciation and amortization



114




135




453




602


Store impairment charges



13




14




37




51


Adjusted EBITDA


$

243



$

189



$

1,611



$

1,286


Details of Special Items are presented below:



Quarter Ended



Year Ended




12/31/2023



12/31/2022



12/31/2023



12/31/2022















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


$

(6)



$

1



$

(15)



$

(4)


Special Items, Operating Profit



(6)




1




(15)




(4)


Tax effect on Special Items(2)













Special Items, net income – including noncontrolling interests



(6)




1




(15)




(4)


Special Items, net income – noncontrolling interests













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


$

(6)



$

1



$

(15)



$

(4)


Weighted-average Diluted Shares Outstanding (in millions)



415




423




420




425


Special Items, Diluted Earnings Per Common Share


$

(0.02)



$



$

(0.03)



$

(0.01)


(1)  In February 2020, the Company granted Partner PSU Awards to select employees who were deemed critical to the Company's execution of its strategic operating plan. These PSU awards will only vest if threshold performance goals are achieved over a four-year performance period, with the payout ranging from 0% to 200% of the target number of shares subject to the PSU awards. Partner PSU Awards were granted to address increased competition for executive talent, motivate transformational performance and encourage management retention. Given the unique nature of these grants, the Compensation Committee does not intend to grant similar, special grants to the same employees during the performance period. The impact from these special awards is excluded from metrics that management uses to assess the Company's performance.

(2)  The tax expense was determined based upon the nature, as well as the jurisdiction, of each Special Item at the applicable tax rate.

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


Quarter ended




% Change


Year ended



% Change



12/31/2023



12/31/2022



B/(W)


12/31/2023



12/31/2022



B/(W)


Reconciliation of Operating Profit to Core Operating Profit





















Operating profit

$

110



$

41




170




$

1,106



$

629




76




Special Items, Operating Profit


6




(1)








15




4







Adjusted Operating Profit

$

116



$

40




193




$

1,121



$

633




77




Items Affecting Comparability





















Temporary relief from landlords(1)


(1)




(12)








(11)




(39)







Temporary relief from government agencies(2)


(3)




(14)








(7)




(48)







VAT deductions(3)


(2)




(8)








(44)




(16)







Amortization of reacquired franchise rights(4)





23








2




97







F/X impact


1











60










Core Operating Profit

$

111



$

29




324




$

1,121



$

627




79




 

(1)  In relation to the effects of the COVID-19 pandemic, the Company was granted lease concessions from landlords. The lease concessions were primarily in the form of rent reduction over the period of time when the Company's restaurant business was adversely impacted. Such concessions were primarily recognized as a reduction of Occupancy and other operating expenses within Company restaurant expenses included in the Condensed Consolidated Statement of Income in the period the concession was granted.

(2)  In relation to the effects of the COVID-19 pandemic, the government issued a policy in 2020 on reducing enterprise social security contribution, and the Company recorded one-time relief of $11 million and $33 million, respectively, for the fourth quarter and year ended December 31, 2022. In addition, this also includes government subsidies for employee benefits and providing training to employees, with higher amounts received during 2022 impacted by the COVID-19 pandemic. The temporary relief was primarily recognized as a reduction to Payroll and employee benefits within Company restaurant expenses included in the Condensed Consolidated Statement of Income.

(3)  Pursuant to the tax policy issued by relevant government authorities, general VAT taxpayers in certain industries that meet certain criteria are allowed to claim an additional 10% or 15% input VAT, which will be used to offset their VAT payables. This VAT policy was further extended to December 31, 2023 but the additional deduction was reduced to 5% or 10% respectively. VAT deductions were primarily recorded as a reduction to Food and paper and Occupancy and other operating expenses within Company restaurant expenses included in the Condensed Consolidated Statements of Income. Based on the information currently available to the Company, such preferential policy is not expected to be extended.

(4)  As a result of the acquisition of our previously unconsolidated joint ventures of Hangzhou KFC, Suzhou KFC and Wuxi KFC, $66 million, $61 million and $61 million of the purchase price were allocated to intangible assets related to reacquired franchise rights, respectively, which were amortized over the remaining franchise contract period of 1 year, 2.4 years and 5 years, respectively. The reacquired franchise rights were fully amortized as of March 31, 2023. The amortization was recorded in Other (Income) Expenses, net included in the Condensed Consolidated Statements of Income.

Yum China Holdings, Inc.

Segment Results

(in US$ million)

(unaudited)




Quarter Ended 12/31/2023




KFC



Pizza Hut



All Other
Segments



Corporate
and
Unallocated(1)



Elimination



Total


Company sales


$

1,842



$

486



$

15



$



$



$

2,343


Franchise fees and income



14




1




5










20


Revenues from transactions with franchisees(2)



12




1




18




59







90


Other revenues



4




8




156




12




(140)




40


Total revenues


$

1,872



$

496



$

194



$

71



$

(140)



$

2,493


Company restaurant expenses



1,621




449




20










2,090


General and administrative expenses



60




29




11




53







153


Franchise expenses



7




1













8


Expenses for transactions with franchisees(2)



10




1




17




58







86


Other operating costs and expenses



4




8




151




12




(140)




35


Closures and impairment expenses, net



3




3




6










12


Other expenses (income), net












(1)







(1)


Total costs and expenses, net



1,705




491




205




122




(140)




2,383


Operating Profit (Loss)


$

167



$

5



$

(11)



$

(51)



$



$

110


 

Reconciliation of GAAP Operating Profit to Restaurant Profit



Quarter Ended 12/31/2023




KFC



Pizza Hut



All Other
Segments



Corporate
and
Unallocated(1)



Elimination



Total


GAAP Operating Profit (Loss)


$

167



$

5



$

(11)



$

(51)



$



$

110


Less:



















Franchise fees and income



14




1




5










20


Revenues from transactions with franchisees(2)



12




1




18




59







90


Other revenues



4




8




156




12




(140)




40


Add:



















General and administrative expenses



60




29




11




53







153


Franchise expenses



7




1













8


Expenses for transactions with franchisees(2)



10




1




17




58







86


Other operating costs and expenses



4




8




151




12




(140)




35


Closures and impairment expenses, net



3




3




6










12


Other expenses (income), net












(1)







(1)


Restaurant profit (loss)


$

221



$

37



$

(5)



$



$



$

253


Company sales



1,842




486




15










2,343


Restaurant margin %



12.0

%



7.3

%



(35.9)

%


N/A



N/A




10.7

%

 

Reconciliation of GAAP Operating Profit to Core Operating Profit



Quarter Ended 12/31/2023




KFC



Pizza Hut



All Other
Segments



Corporate
and
Unallocated(1)



Elimination



Total


GAAP Operating Profit (Loss)


$

167



$

5



$

(11)



$

(51)



$



$

110


Special Items, Operating Profit












6







6


Adjusted Operating Profit


$

167



$

5



$

(11)



$

(45)



$



$

116


Items Affecting Comparability



















Temporary relief from landlords



(1)
















(1)


Temporary relief from government agencies



(2)




(1)













(3)


VAT deductions



(2)
















(2)


Amortization of reacquired franchise rights



















F/X impact



2










(1)







1


Core Operating Profit (Loss)


$

164



$

4



$

(11)



$

(46)



$



$

111


 



Quarter Ended 12/31/2022




KFC



Pizza Hut



All Other
Segments



Corporate
and
Unallocated(1)



Elimination



Total


Company sales


$

1,566



$

398



$

11



$



$



$

1,975


Franchise fees and income



12




1




3










16


Revenues from transactions with franchisees(2)



9




1




10




48







68


Other revenues



4




4




156




11




(146)




29


Total revenues


$

1,591



$

404



$

180



$

59



$

(146)



$

2,088


Company restaurant expenses



1,367




391




15







(3)




1,770


General and administrative expenses



63




26




10




46







145


Franchise expenses



6




1













7


Expenses for transactions with franchisees(2)



8







11




48







67


Other operating costs and expenses



3




3




151




11




(143)




25


Closures and impairment expenses, net



5




3




4










12


Other expenses (income), net



22










(1)







21


Total costs and expenses, net



1,474




424




191




104




(146)




2,047


Operating Profit (Loss)


$

117



$

(20)



$

(11)



$

(45)



$



$

41


 

Reconciliation of GAAP Operating Profit to Restaurant Profit



Quarter Ended 12/31/2022




KFC



Pizza Hut



All Other
Segments



Corporate
and
Unallocated(1)



Elimination



Total


GAAP Operating Profit (Loss)


$

117



$

(20)



$

(11)



$

(45)



$



$

41


Less:



















Franchise fees and income



12




1




3










16


Revenues from transactions with franchisees(2)



9




1




10




48







68


Other revenues



4




4




156




11




(146)




29


Add:



















General and administrative expenses



63




26




10




46







145


Franchise expenses



6




1













7


Expenses for transactions with franchisees(2)



8







11




48







67


Other operating costs and expenses



3




3




151




11




(143)




25


Closures and impairment expenses, net



5




3




4










12


Other expenses (income), net



22










(1)







21


Restaurant profit (loss)


$

199



$

7



$

(4)



$



$

3



$

205


Company sales



1,566




398




11










1,975


Restaurant margin %



12.7

%



1.9

%



(42.6)

%


N/A



N/A




10.4

%

 

Reconciliation of GAAP Operating Profit to Core Operating Profit



Quarter Ended 12/31/2022




KFC



Pizza Hut



All Other
Segments



Corporate
and
Unallocated(1)



Elimination



Total


GAAP Operating Profit (Loss)


$

117



$

(20)



$

(11)



$

(45)



$



$

41


Special Items, Operating Profit












(1)







(1)


Adjusted Operating Profit


$

117



$

(20)



$

(11)



$

(46)



$



$

40


Items Affecting Comparability



















Temporary relief from landlords



(10)




(2)













(12)


Temporary relief from government agencies



(10)




(4)













(14)


VAT deductions



(5)




(1)




(2)










(8)


Amortization of reacquired franchise rights



23
















23


F/X impact



















Core Operating Profit (Loss)


$

115



$

(27)



$

(13)



$

(46)



$



$

29


 



Year Ended 12/31/2023




KFC



Pizza Hut



All Other
Segments



Corporate
and
Unallocated(1)



Elimination



Total


Company sales


$

8,116



$

2,214



$

61



$



$



$

10,391


Franchise fees and income



62




7




20










89


Revenues from transactions with franchisees(2)



45




4




74




249







372


Other revenues



17




21




624




44




(580)




126


Total revenues


$

8,240



$

2,246



$

779



$

293



$

(580)



$

10,978


Company restaurant expenses



6,676




1,951




76







(2)




8,701


General and administrative expenses



263




118




43




214







638


Franchise expenses



31




4




1










36


Expenses for transactions with franchisees(2)



39




4




67




246







356


Other operating costs and expenses



15




19




614




42




(578)




112


Closures and impairment expenses, net



12




8




9










29


Other expenses (income), net



2










(2)








Total costs and expenses, net



7,038




2,104




810




500




(580)




9,872


Operating Profit (Loss)


$

1,202



$

142



$

(31)



$

(207)



$



$

1,106


 

Reconciliation of GAAP Operating Profit to Restaurant Profit



Year Ended 12/31/2023




KFC



Pizza Hut



All Other
Segments



Corporate
and
Unallocated(1)



Elimination



Total


GAAP Operating Profit (Loss)


$

1,202



$

142



$

(31)



$

(207)



$



$

1,106


Less:



















Franchise fees and income



62




7




20










89


Revenues from transactions with franchisees(2)



45




4




74




249







372


Other revenues



17




21




624




44




(580)




126


Add:



















General and administrative expenses



263




118




43




214







638


Franchise expenses



31




4




1










36


Expenses for transactions with franchisees(2)



39




4




67




246







356


Other operating costs and expenses



15




19




614




42




(578)




112


Closures and impairment expenses, net



12




8




9










29


Other expenses (income), net



2










(2)








Restaurant profit (loss)


$

1,440



$

263



$

(15)



$



$

2



$

1,690


Company sales



8,116




2,214




61










10,391


Restaurant margin %



17.7

%



11.8

%



(25.1)

%


N/A



N/A




16.3

%

 

Reconciliation of GAAP Operating Profit to Core Operating Profit



Year Ended 12/31/2023




KFC



Pizza Hut



All Other
Segments



Corporate
and
Unallocated(1)



Elimination



Total


GAAP Operating Profit (Loss)


$

1,202



$

142



$

(31)



$

(207)



$



$

1,106


Special Items, Operating Profit












15







15


Adjusted Operating Profit


$

1,202



$

142



$

(31)



$

(192)



$



$

1,121


Items Affecting Comparability



















Temporary relief from landlords



(9)




(2)













(11)


Temporary relief from government agencies



(5)




(2)













(7)


VAT deductions



(36)




(6)




(2)










(44)


Amortization of reacquired franchise rights



2
















2


F/X impact



57




11




(2)




(6)







60


Core Operating Profit (Loss)


$

1,211



$

143



$

(35)



$

(198)



$



$

1,121


 



Year Ended 12/31/2022




KFC



Pizza Hut



All Other
Segments



Corporate
and
Unallocated(1)



Elimination



Total


Company sales


$

7,120



$

1,939



$

51



$



$



$

9,110


Franchise fees and income



56




7




18










81


Revenues from transactions with franchisees(2)



33




4




39




211







287


Other revenues



10




10




563




42




(534)




91


Total revenues


$

7,219



$

1,960



$

671



$

253



$

(534)



$

9,569


Company restaurant expenses



5,999




1,761




70







(1)




7,829


General and administrative expenses



254




110




46




184







594


Franchise expenses



29




4




1










34


Expenses for transactions with franchisees(2)



30




3




35




211







279


Other operating costs and expenses



7




8




557




39




(533)




78


Closures and impairment expenses, net



16




4




12










32


Other expenses (income), net



97










(3)







94


Total costs and expenses, net



6,432




1,890




721




431




(534)




8,940


Operating Profit (Loss)


$

787



$

70



$

(50)



$

(178)



$



$

629


 

Reconciliation of GAAP Operating Profit to Restaurant Profit



Year Ended 12/31/2022




KFC



Pizza Hut



All Other
Segments



Corporate
and
Unallocated(1)



Elimination



Total


GAAP Operating Profit (Loss)


$

787



$

70



$

(50)



$

(178)



$



$

629


Less:



















Franchise fees and income



56




7




18










81


Revenues from transactions with franchisees(2)



33




4




39




211







287


Other revenues



10




10




563




42




(534)




91


Add:



















General and administrative expenses



254




110




46




184







594


Franchise expenses



29




4




1










34


Expenses for transactions with franchisees(2)



30




3




35




211







279


Other operating costs and expenses



7




8




557




39




(533)




78


Closures and impairment expenses, net



16




4




12










32


Other expenses (income), net



97










(3)







94


Restaurant profit (loss)


$

1,121



$

178



$

(19)



$



$

1



$

1,281


Company sales



7,120




1,939




51










9,110


Restaurant margin %



15.7

%



9.2

%



(37.6)

%


N/A



N/A




14.1

%

 

Reconciliation of GAAP Operating Profit to Core Operating Profit



Year Ended 12/31/2022




KFC



Pizza Hut



All Other
Segments



Corporate
and
Unallocated(1)



Elimination



Total


GAAP Operating Profit (Loss)


$

787



$

70



$

(50)



$

(178)



$



$

629


Special Items, Operating Profit












4







4


Adjusted Operating Profit


$

787



$

70



$

(50)



$

(174)



$



$

633


Items Affecting Comparability



















Temporary relief from landlords



(32)




(6)




(1)










(39)


Temporary relief from government agencies



(34)




(14)













(48)


VAT deductions



(12)




(2)




(2)










(16)


Amortization of reacquired franchise rights



97
















97


F/X impact



















Core Operating Profit (Loss)


$

806



$

48



$

(53)



$

(174)



$



$

627


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

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

(2)  Primarily includes revenues and associated expenses of transactions with franchisees derived from the Company's central procurement model whereby the Company centrally purchases substantially all food and paper products from suppliers and then sells and delivers to KFC and Pizza Hut restaurants, including franchisees.

 

The Westin Pazhou Guangzhou

Area C, the Canton Fair Complex, No. 681 Middle Fengpu Road,Haizhu District,Guangzhou,Guangdong