YUM CHINA HOLDINGS, INC. SHANGHAI, July 5, 2017 /PRNewswire/ -- Yum China Holdings, Inc. (the "Company" or "Yum China") (NYSE: YUMC) today reported unaudited results for the second quarter ended May 31, 2017.
Second Quarter Highlights
-- Total system sales grew 7%, including growth of 8% at KFC and 7% at
Pizza Hut(1), excluding foreign currency translation ("F/X").
-- Same-store sales grew 3%, including growth of 4% at KFC, flat at Pizza
Hut.
-- Opened 90 new restaurants during the quarter.
-- Total restaurant margin increased 2.7 percentage points to 15.3%,
primarily due to the impact of retail tax structure reform and also
driven by same-store sales leverage, partially offset by wage inflation
and commodity inflation.
-- Operating profit increased 64%, and 73% excluding F/X, primarily due to
the impact of retail tax structure reform and also driven by same-store
sales leverage. F/X negatively impacted reported operating profit by $8
million.
-- Net income increased 39% to $107 million.
-- Adjusted EBITDA increased 15% to $259 million.
-- Basic EPS increased 33% to $0.28 and diluted EPS increased 29% to $0.27.
1 Beginning with the quarter
ended May 31, 2017, Pizza
Hut Casual Dining and Pizza
Hut Home Service were
combined and reported
together as the Pizza Hut
reportable segment. Segment
financial information for
prior periods has been re-
cast to align with this
change in segments.
Key Results
Second Quarter Year to Date
-------------- ------------
% Change % Change
System Same-Store Net New Operating System Same-Store Net New Operating
Sales Sales Units Profit Sales Sales Units Profit
----- ----- ----- ------ ----- ----- ----- ------
Yum China 7 3 6 64 6 2 6 34
KFC 8 4 5 41 6 3 5 20
Pizza Hut 7 - 9 157 8 1 9 95
--------- --- --- --- --- --- --- --- ---
Second Quarter Year to Date
-------------- ------------
(in US$ million,
except % Change % Change
2016
for per share
data and 2017 Ex F/X 2017 2016
percentages)
Reported Reported Ex F/X
-------- -------- ------
$87
Operating Profit $143 64 73 $397 $296 34 41
$77
Net Income $107 39 46 $282 $222 27 34
$226
Adjusted EBITDA $259 15 21 $579 $505 14 21
Basic EPS $0.28 $0.21 33 39 $0.73 $0.61 20 25
Diluted EPS $0.27 $0.21 29 35 $0.71 $0.61 16 23
----------- ----- ----- --- --- ----- ----- --- ---
Note: All comparisons are versus
the same period a year ago.
Consistent with prior years, Yum
China's fiscal second quarter
includes March, April and May
results. Percentages may not
recompute due to rounding.
System sales and same-store sales
percentages exclude the impact of
F/X. Adjusted EBITDA is a non-
GAAP financial measure. See
Reconciliation of Reported Results
to Non-GAAP Measures included in
the accompanying tables of this
release for further details.
CEO Comments
"I am pleased with our overall performance during the quarter, with same-store sales up 3% and system sales up 7%, on the back of continued strength at KFC. Operating profit, restaurant margin and net income all showed robust improvement." said Micky Pant, CEO.
"We are committed to building one of the world's leading restaurant companies, and are executing against a plan that we have developed towards this goal. We are making progress in the key themes we are investing in - loyalty programs, digital and delivery capabilities, and continued upgrade of restaurant assets and optimization of store formats. We are pleased to report some encouraging results: loyalty members for KFC and Pizza Hut have surpassed 100 million in total, and mobile payment exceeded 40% of our company sales in the second quarter. Over 4,900 of our restaurants offered delivery service. Delivery sales accounted for 13% of company sales in the second quarter.
We also completed the acquisition of an 80% stake, on a fully diluted basis, in Daojia, an online aggregator platform with two brands focusing on higher-end delivery market segment, for a cash consideration of $36.7 million to the selling shareholders and a capital contribution of $25 million to Daojia. We see this acquisition as complementary to our existing delivery business, and it provides valuable operational and technological expertise."
New-Unit Development and Asset Upgrade
-- Opened 90 new restaurants during the second quarter, and 223 year to
date.
-- Remodeled 197 restaurants during the second quarter, and 229 year to
date, led by KFC.
New Units Restaurant Count
--------- ----------------
Second As of Second Quarter End
Quarter Year to Date
------- ------------
2017 2016
---- ----
Yum China 90 223 7,685 7,246
KFC 62 134 5,301 5,039
Pizza Hut 25 64 2,122 1,949
Little Sheep, East Dawning and Taco Bell 3 25 262 258
---------------------------------------- --- --- --- ---
Total Restaurant Count
Restaurant Count
----------------
As of Second Quarter End
2017 2016
---- ----
Restaurants 7,685 7,246
Company-owned 6,103 5,800
Unconsolidated Affiliates 854 811
Franchisees 728 635
----------- --- ---
Restaurant Margin
-- For the second quarter, restaurant margin for Yum China increased 2.7
percentage points to 15.3%. Year to date, restaurant margin for Yum
China increased 3.1 percentage points to 18.7%. Margin expansion was
primarily due to the impact of retail tax structure reform and also
driven by same-store sales leverage, partially offset by wage inflation
and commodity inflation.
Second Quarter Year to Date
-------------- ------------
2017 2016 % ppts 2017 2016 % ppts
change change
------ ------
Yum China 15.3% 12.6% 2.7 18.7% 15.6% 3.1
KFC 16.0% 13.8% 2.2 19.4% 17.2% 2.2
Pizza Hut 13.9% 10.4% 3.5 17.5% 12.4% 5.1
--------- ---- ---- --- ---- ---- ---
Digital and Delivery
-- Driven by our digital initiatives, we continued to strengthen our
loyalty membership programs. By the end of the second quarter, total
members in our loyalty programs surpassed 100 million, including 83
million members for KFC and 26 million for Pizza Hut.
-- Mobile payments exceeded 40% of company sales in the second quarter of
2017. Over $900 million in company sales were settled by cashless
payment methods during the quarter.
-- Over 4,900 restaurants across China offered delivery services as of the
end of the second quarter. Delivery contributed about 13% of company
sales in the second quarter.
Completed Acquisition of Daojia
-- During the second quarter, Yum China completed the acquisition of a
controlling interest in the holding company of DAOJIA.com.cn ("Daojia"),
an established online food delivery service provider. Founded in 2010,
Daojia targets higher-end orders in four Tier 1 cities. Daojia also
operates Sherpa's, a leading premium food delivery platform specializing
in English speaking services.
-- Yum China agreed to pay cash consideration of $36.7 million to the
sellers and made a concurrent capital contribution of $25.0 million to
Daojia. As of the completion of the acquisition, Yum China held 90% of
Daojia's outstanding shares of common stock, or 80% of its equity
interests on a fully-diluted basis. Mr. Hank Sun, founder of Daojia,
will continue to lead the business.
-- The acquisition marks another step in executing Yum China's strategy to
accelerate growth by building know-how and expertise in delivery. Daojia
is complementary to Yum China's existing delivery business, and it
provides valuable operational and technological expertise.
Share Repurchase Update
-- Year to date ended May 31, 2017, we repurchased approximately 1 million
shares for $39 million at an average price of $36.27 per share.
Conference Call
Yum China Holdings, Inc. will host a conference call to review the Company's financial performance and strategies at 8:00 p.m. U.S. Eastern Time on Wednesday, July 5, 2017 (8:00 a.m. Beijing/Hong Kong Time on Thursday, July 6, 2017). A copy of the presentation will be available on the Yum China Holdings, Inc. website, http://ir.yumchina.com.
U.S.: +1-845-675-0437
Hong Kong: +852-3018-6771
Mainland China: 400-6208-038 or
800-8190-121
International: +65-6713-5090
Passcode: Yum China
A live webcast of the call may also be accessed at http://edge.media-server.com/m/p/kdojo9ry.
A replay of the conference call may be accessed by phone at the following numbers two hours after the call ends until 9:00 a.m. U.S. Eastern Time on Thursday, July 13, 2017 (9:00 p.m. Beijing/Hong Kong Time on Thursday, July 13, 2017):
U.S.: +1-855-452-5696
International: +61-2-8199-0299
Passcode: 26482181
The webcast and the playback can be accessed via the internet by visiting the Yum China Holdings, Inc. website, http://ir.yumchina.com
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. 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," "likely," "will," "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 business plans and earnings and performance of Yum China, anticipated effects of population and macroeconomic trends, the capital structure of Yum China, and statements regarding the anticipated synergies from the acquisition 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 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 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, our ability to control costs and expenses, including tax costs, changes in political, economic and regulatory conditions in China, the fact that the integration of Daojia may require significant time, attention and resources, potentially diverting attention from the conduct of our core businesses, as well as the fact that the expected synergies from the acquisition may not be realized. 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 "Forward-Looking Statements" in our Annual Report on Form 10-K) 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, which opened its first restaurant in China at the end of 2016. Yum China also owns the Little Sheep and East Dawning concepts outright. Yum China is well positioned for growth thanks to its strong competitive position, integration of its brands into Chinese popular culture and consumers' daily lives, expanding geographic footprint in China and existing operational expertise. It has a strong capital position, no external debt and expects to continue growing its system sales and profit by adding new restaurants and through growing same-store sales. Yum China had more than 7,600 restaurants and more than 420,000 employees in over 1,100 cities at the end of May 2017. A new generation of younger consumers who are digitally sophisticated and brand driven are fueling growth in consumption in China. The ongoing growth of the middle class and urban population in China is expected to create the world's largest market for restaurant brands, with Yum China poised to be the market leader.
Analysts are invited to contact:
Christie Ju, Vice President
- Finance, Investor
Relations, at +86 21 2407
8090
Elaine Lai, Director -
Finance, Investor
Relations, at +86 21 2407
8278
Members of the media are invited to
contact:
Forest Liu, Director,
Public Affairs, at +86 21
2407 7505
Yum China Holdings, Inc.
Condensed Consolidated and Combined Summary of Results
(amounts in US$ million, except for number of shares and per share amounts)
(unaudited)
Quarter ended % Change Year to date ended % Change
------------- ------------------
5/31/2017 5/31/2016 B/(W) 5/31/2017 5/31/2016 B/(W)
--------- --------- --------- ---------
Revenues
Company sales $1,563 $1,558 - $2,820 $2,836 (1)
Franchise fees and income 31 30 6 58 55 6
--- --- --- ---
Total revenues 1,594 1,588 - 2,878 2,891 -
----- ----- ----- -----
Costs and Expenses, Net
Company restaurants
Food and paper 453 462 2 798 847 6
Payroll and employee benefits 358 342 (5) 615 587 (5)
Occupancy and other operating expenses 513 558 8 879 960 8
--- --- --- ---
Company restaurant expenses 1,324 1,362 3 2,292 2,394 4
General and administrative expenses 107 104 (4) 174 170 (2)
Franchise expenses 15 17 12 28 31 11
Closures and impairment expenses, net 17 31 47 17 31 47
Refranchising gain, net (1) (1) (73) (2) (4) (67)
Other income, net (11) (12) (1) (28) (27) 7
--- --- --- ---
Total costs and expenses, net 1,451 1,501 3 2,481 2,595 4
----- ----- ----- -----
Operating Profit 143 87 64 397 296 34
Interest income, net 5 2 66 7 4 59
Income Before Income Taxes 148 89 64 404 300 34
Income tax provision (35) (16) NM (111) (78) (40)
--- --- ---- ---
Net income - including noncontrolling interests 113 73 55 293 222 32
Net income (loss) - noncontrolling interests 6 (4) NM 11 - NM
--- --- --- ---
Net Income - Yum China Holdings, Inc. $107 $77 39 $282 $222 27
==== === ==== ====
Effective tax rate 22.9% 18.6% (4.3) ppts. 27.4% 26.2% (1.2) ppts.
==== ==== ==== ====
Basic Earnings Per Common Share $0.28 $0.21 33 $0.73 $0.61 20
===== ===== ===== =====
Weighted average shares outstanding 387,901,955 363,758,219 NM 387,754,681 363,758,219 NM
=========== =========== =========== ===========
Diluted Earnings Per Common Share $0.27 $0.21 29 $0.71 $0.61 16
===== ===== ===== =====
Weighted average shares outstanding 397,326,233 363,758,219 NM 396,679,703 363,758,219 NM
=========== =========== =========== ===========
Company sales 100.0% 100.0% 100.0% 100.0%
Food and paper 29.0 29.6 0.6 ppts. 28.3 29.9 1.6 ppts.
Payroll and employee benefits 22.9 21.9 (1.0) ppts. 21.8 20.7 (1.1) ppts.
Occupancy and other operating expenses 32.8 35.9 3.1 ppts. 31.2 33.8 2.6 ppts.
---- ---- ---- ----
Restaurant margin 15.3% 12.6% 2.7 ppts. 18.7% 15.6% 3.1 ppts.
==== ==== ==== ====
Operating margin 9.1% 5.6% 3.5 ppts. 14.1% 10.5% 3.6 ppts.
=== === ==== ====
Percentages may not recompute due to rounding.
Yum China Holdings, Inc.
KFC Operating Results
(amounts in US$ million)
(unaudited)
Quarter ended % Change Year to date ended % Change
------------- ------------------
5/31/2017 5/31/2016 B/(W) 5/31/2017 5/31/2016 B/(W)
---------- ---------- ----- ----------- ---------- -----
Revenues
Company sales $1,087 $1,078 1 $1,957 $1,975 (1)
Franchise fees and income 29 29 4 55 53 4
--- --- --- ---
Total revenues 1,116 1,107 1 2,012 2,028 (1)
----- ----- ----- -----
Costs and Expenses, Net
Company restaurants
Food and paper 330 330 - 581 605 4
Payroll and employee benefits 236 223 (5) 403 382 (6)
Occupancy and other operating expenses 347 377 8 594 649 9
--- --- --- ---
Company restaurant expenses 913 930 2 1,578 1,636 4
General and administrative expenses 39 38 (3) 64 62 (5)
Franchise expenses 14 17 13 27 31 12
Closures and impairment expenses, net 8 21 65 9 21 61
Other income, net (12) (8) 36 (27) (22) 21
--- --- --- ---
Total costs and expenses, net 962 998 4 1,651 1,728 4
--- --- ----- -----
Operating Profit $154 $109 41 $361 $300 20
==== ==== ==== ====
Company sales 100.0% 100.0% 100.0% 100.0%
Food and paper 30.3 30.5 0.2 ppts. 29.7 30.6 0.9 ppts.
Payroll and employee benefits 21.7 20.7 (1.0) ppts. 20.6 19.3 (1.3) ppts.
Occupancy and other operating expenses 32.0 35.0 3.0 ppts. 30.3 32.9 2.6 ppts.
---- ---- ---- ----
Restaurant margin 16.0% 13.8% 2.2 ppts. 19.4% 17.2% 2.2 ppts.
==== ==== ==== ====
Operating margin 14.1% 10.1% 4.0 ppts. 18.4% 15.2% 3.2 ppts.
==== ==== ==== ====
Percentages may not recompute due to rounding.
Yum China Holdings, Inc.
Pizza Hut Operating Results
(amounts in US$ million)
(unaudited)
Quarter ended % Change Year to date ended % Change
------------- ------------------
5/31/2017 5/31/2016 B/(W) 5/31/2017 5/31/2016 B/(W)
--------- --------- ----- --------- --------- -----
Revenues
Company sales $467 $465 1 $846 $832 2
Franchise fees and income 1 1 23 1 1 27
--- --- --- ---
Total revenues 468 466 1 847 833 2
--- --- --- ---
Costs and Expenses, Net
Company restaurants
Food and paper 120 127 6 212 232 9
Payroll and employee benefits 119 115 (5) 207 197 (5)
Occupancy and other operating expenses 163 175 7 279 301 7
--- --- --- ---
Company restaurant expenses 402 417 3 698 730 4
General and administrative expenses 26 26 2 43 43 2
Franchise expenses 1 - (21) 1 - (13)
Closures and impairment expenses, net 9 11 21 8 10 21
Total costs and expenses, net 438 454 4 750 783 4
--- --- --- ---
Operating Profit $30 $12 157 $97 $50 95
=== === === ===
Company sales 100.0% 100.0% 100.0% 100.0%
Food and paper 25.8 27.5 1.7 ppts. 25.1 28.0 2.9 ppts.
Payroll and employee benefits 25.6 24.4 (1.2) ppts. 24.5 23.6 (0.9) ppts.
Occupancy and other operating expenses 34.7 37.7 3.0 ppts. 32.9 36.0 3.1 ppts.
---- ---- ---- ----
Restaurant margin 13.9% 10.4% 3.5 ppts. 17.5% 12.4% 5.1 ppts.
==== ==== ==== ====
Operating margin 6.6% 2.6% 4.0 ppts. 11.6% 6.0% 5.5 ppts.
=== === ==== ===
Percentages may not recompute due to rounding.
Yum China Holdings, Inc.
Condensed Consolidated Balance Sheets
(amounts in US$ million, except for number of shares)
5/31/2017 12/31/2016
--------- ----------
ASSETS (Unaudited)
Current Assets
Cash and cash equivalents $892 $885
Short-term investments 310 79
Accounts receivable, net 74 74
Inventories, net 266 268
Prepaid expenses and other current assets 150 120
--- ---
Total Current Assets 1,692 1,426
Property, plant and equipment, net 1,617 1,647
Goodwill 103 79
Intangible assets, net 105 88
Investments in unconsolidated affiliates 51 71
Other assets 287 254
Deferred income taxes 166 162
--- ---
Total Assets 4,021 3,727
===== =====
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY
Current Liabilities
Accounts payable and other current liabilities 966 971
Income taxes payable 36 33
--- ---
Total Current Liabilities 1,002 1,004
Capital lease obligations 27 28
Other liabilities and deferred credits 260 252
--- ---
Total Liabilities 1,289 1,284
----- -----
Redeemable Noncontrolling Interest 5 -
Equity
Common stock, $0.01 par value; 1,000,000,000 shares authorized; 4 4
386,617,759.42 shares and 383,344,835.42 shares issued at May 31, 2017
and December 31, 2016, respectively; 384,760,471 shares and 383,344,835.42 shares
outstanding at May 31, 2017 and December 31, 2016, respectively
Treasury stock (59) (20)
Additional paid-in capital 2,367 2,352
Retained earnings 322 40
Accumulated other comprehensive income 35 1
--- ---
Total Equity - Yum China Holdings, Inc. 2,669 2,377
Noncontrolling interests 58 66
--- ---
Total Equity 2,727 2,443
----- -----
Total Liabilities, Redeemable Noncontrolling Interest and Equity $4,021 $3,727
====== ======
Yum China Holdings, Inc.
Condensed Consolidated and Combined Statements of Cash Flows
(amounts in US$ million)
(unaudited)
Year to date ended
------------------
5/31/2017 5/31/2016
--------- ---------
Cash Flows -Operating
Activities
Net income -including
noncontrolling interests $293 $222
Depreciation and amortization 160 171
Closures and impairment
expenses 17 31
Refranchising gain (2) (4)
Deferred income taxes (1) (29)
Equity income from investments
in unconsolidated affiliates (30) (26)
Distributions of income
received from unconsolidated
affiliates 26 13
Share-based compensation
expense 10 5
Changes in accounts receivable 3 (8)
Changes in inventories 7 (30)
Changes in prepaid expenses and
other current assets 5 -
Changes in accounts payable and
other current liabilities 7 35
Changes in income taxes payable 3 25
Other, net (25) 18
--- ---
Net Cash Provided by Operating
Activities 473 423
--- ---
Cash Flows -Investing
Activities
Capital spending (177) (172)
Purchase of short-term
investments (229) (54)
Proceeds from refranchising of
restaurants 3 13
Acquisition of business, net of
cash acquired (25) -
Other, net (4) (1)
--- ---
Net Cash Used in Investing
Activities (432) (214)
---- ----
Cash Flows -Financing
Activities
Net transfers to Parent - (118)
Payment of capital lease
obligations (1) (1)
Repurchase of shares of common
stock (30) -
Employee stock option proceeds 4 -
Other, net (16) -
--- ---
Net Cash Used in Financing
Activities (43) (119)
--- ----
Effect of Exchange Rates on
Cash and Cash Equivalents 9 (7)
--- ---
Net Increase in Cash and Cash
Equivalents 7 83
Cash and Cash Equivalents -
Beginning of Period 885 425
--- ---
Cash and Cash Equivalents - End
of Period $892 $508
==== ====
Reconciliation of Reported Results to Non-GAAP Measures
(amounts in US$ million)
(unaudited)
In this press release:
-- The Company provides certain percentage changes excluding the impact of
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 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 a rate of
approximately 6% of system sales. Franchise and unconsolidated affiliate
restaurant sales are not included in Company sales on the Condensed
Consolidated and Combined 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.
-- Same-store sales growth is the estimated percentage change in sales of
all restaurants that have been open and in the Company system one year
or more.
-- 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.
In addition to the results provided in accordance with US Generally Accepted Accounting Principles ("GAAP") in this press release, the Company provides non-GAAP measures which present Operating Profit before Special Items, Diluted Earnings Per Common Share before Special Items, Effective tax rate before Special Items and Adjusted EBITDA, which we define as net income including noncontrolling interests adjusted for income tax, interest income, depreciation, amortization and other items, including store impairment charges. Special Items consist of provision for losses associated with the sale of the aircraft and impact of the redemption of the Little Sheep noncontrolling interest which are described in (a), (b) and (c) in the accompanying notes. 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. 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 we do not believe are indicative of our ongoing operations due to their nature. These non-GAAP measures should not be considered in isolation or as a substitute for GAAP financial results, but should be read in conjunction with the unaudited Condensed Consolidated and Combined Summary of Results and other information presented herein. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures follows.
Quarter ended Year to date ended
------------- ------------------
Detail of Special Items 5/31/2017 5/31/2016 5/31/2017 5/31/2016
----------------------- --------- --------- --------- ---------
Provision for loss associated with sale of aircraft(a) $ - $(1) $ - $(1)
--- --- --- --- --- ---
Special Items Expense - Operating Profit - (1) - (1)
Special Items Expense, net of tax of nil - (1) - (1)
- including noncontrolling interests
Special Items Expense, net of tax of nil - (8) - (8)
- noncontrolling interests(b)
Special Items Income, net of tax of nil $ - $7 $ - $7
- Yum China Holdings, Inc.
Weighted average diluted shares outstanding 397,326,233 363,758,219 396,679,703 363,758,219
Special Items Diluted Earnings Per Common Share $ - $0.02 $ - $0.02
Reconciliation of Reported Operating Profit to
Operating Profit Before Special Items
Reported Operating Profit $143 $87 $397 $296
Special Items Expense - Operating Profit - (1) - (1)
--- --- --- ---
Operating Profit before Special Items $143 $88 $397 $297
==== === ==== ====
Reconciliation of Reported EPS to EPS Before
Special Items
Reported Diluted Earnings Per Common Share $0.27 $0.21 $0.71 $0.61
Special Items Diluted Earnings Per Common Share - 0.02 - 0.02
--- ---- --- ----
Diluted Earnings Per Common Share before Special Items $0.27 $0.19 $0.71 $0.59
===== ===== ===== =====
Reconciliation of Reported Effective Tax Rate to
Effective Tax Rate Before Special Items
Reported effective tax rate 22.9% 18.6% 27.4% 26.2%
Effective tax rate before Special Items(c) 22.9% 18.6% 27.4% 26.2%
==== ==== ==== ====
(a) During the quarter ended May 31, 2016, we recognized a loss of $1 million associated with the sale of the aircraft.
(b) During the quarter ended May 31, 2016, the Little Sheep founding shareholders sold their remaining 7% Little Sheep ownership interest to the Company pursuant to their redemption rights. The difference between the purchase price of less than $1 million, which was determined using a non-fair value based formula pursuant to the agreement governing the redemption rights, and the carrying
value of their redeemable noncontrolling interests was recorded as an $8 million loss attributable to noncontrolling interests.
(c) Impact on effective tax rate as a result of Special Items was nil.
Reconciliation of Net Income to Adjusted EBITDA
(amounts in US$ million)
(unaudited)
Net income, along with the reconciliation to Adjusted EBITDA, is presented below.
Quarter ended Year to date ended
------------- ------------------
5/31/2017 5/31/2016 5/31/2017 5/31/2016
--------- --------- --------- ---------
Reconciliation of Net Income to Adjusted EBITDA
-----------------------------------------------
Net income (loss) - noncontrolling interests $6 $(4) $11 $ -
Net Income - Yum China Holdings, Inc. 107 77 282 222
Income tax provision 35 16 111 78
Interest income, net (5) (2) (7) (4)
Operating Profit 143 87 397 296
Depreciation and amortization 96 103 160 171
Store impairment charges 20 35 22 37
Special Items Expense - Operating Profit - 1 - 1
--- --- --- ---
Adjusted EBITDA $259 $226 $579 $505
==== ==== ==== ====
Yum China Holdings, Inc.
Segment Results
(amounts in US$ million)
(unaudited)
Quarter Ended 5/31/2017 KFC Pizza Hut Others Corporate Total
--- --------- ------ -----
and
Unallocated
-----------
Total revenues $1,116 $468 $10 $ - $1,594
------ ---- --- --- --- ------
Company restaurant expenses 913 402 9 - 1,324
General and administrative expenses 39 26 2 40 107
Franchise expenses 14 1 - - 15
Closures and impairment expenses, net 8 9 - - 17
Refranchising gain, net - - - (1) (1)
Other income, net (12) - 1 - (11)
--- --- --- --- ---
962 438 12 39 1,451
--- --- --- --- -----
Operating Profit (Loss) $154 $30 $(2) $(39) $143
==== === === ==== ====
Quarter Ended 5/31/2016 KFC Pizza Hut Others Corporate Total
--- --------- ------ -----
and
Unallocated
-----------
Total revenues $1,107 $466 $15 $ - $1,588
------ ---- --- --- --- ------
Company restaurant expenses 930 417 15 - 1,362
General and administrative expenses 38 26 3 37 104
Franchise expenses 17 - - - 17
Closures and impairment expenses, net 21 11 (1) - 31
Refranchising gain, net - - - (1) (1)
Other income, net (8) - - (4) (12)
--- --- --- --- ---
998 454 17 32 1,501
--- --- --- --- -----
Operating Profit (Loss) $109 $12 $(2) $(32) $87
==== === === ==== ===
The above tables reconcile segment information with our Condensed Consolidated and Combined Summary of Results.
Corporate and unallocated expenses comprise items that are not allocated to segments for performance reporting purposes.
The Corporate and Unallocated column in the above tables includes, among other amounts, all amounts that we have deemed Special Items.
See Reconciliation of Reported Results to Non-GAAP Measures.
Yum China Holdings, Inc.
Segment Results
(amounts in US$ million)
(unaudited)
Year to date ended 5/31/2017 KFC Pizza Hut Others Corporate Total
--- --------- ------ -----
and
Unallocated
-----------
Total revenues $2,012 $847 $19 $ - $2,878
------ ---- --- --- --- ------
Company restaurant expenses 1,578 698 16 - 2,292
General and administrative expenses 64 43 4 63 174
Franchise expenses 27 1 - - 28
Closures and impairment expenses, net 9 8 - - 17
Refranchising gain, net - - - (2) (2)
Other income, net (27) - (1) - (28)
--- --- --- --- ---
1,651 750 19 61 2,481
----- --- --- --- -----
Operating Profit (Loss) $361 $97 $ - $(61) $397
---- --- --- --- ---- ----
Year to date ended 5/31/2016 KFC Pizza Hut Others Corporate Total
--- --------- ------ -----
and
Unallocated
-----------
Total revenues $2,028 $833 $30 $ - $2,891
------ ---- --- --- --- ------
Company restaurant expenses 1,636 730 28 - 2,394
General and administrative expenses 62 43 4 61 170
Franchise expenses 31 - - - 31
Closures and impairment expenses, net 21 10 - - 31
Refranchising gain, net - - - (4) (4)
Other income, net (22) - (1) (4) (27)
--- --- --- --- ---
1,728 783 31 53 2,595
----- --- --- --- -----
Operating Profit (Loss) $300 $50 $(1) $(53) $296
==== === === ==== ====
The above tables reconcile segment information with our Condensed Consolidated and Combined Summary of Results.
Corporate and unallocated expenses comprise items that are not allocated to segments for performance reporting purposes.
The Corporate and Unallocated column in the above tables includes, among other amounts, all amounts that we have deemed Special Items.
See Reconciliation of Reported Results to Non-GAAP Measures.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/yum-china-reports-q2-same-store-sales-growth-of-3-and-operating-profit-growth-of-64-loyalty-members-surpassed-100-million-mobile-payment-exceeded-40-of-total-company-sales-300483327.html
SOURCE Yum China Holdings, Inc
