Yum China Holdings, Inc. - FORM 8-K - EX-99.1

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8-K - 8-K - Yum China Holdings, Inc.	yumc-8k_20180418.htm

Exhibit 99.1

Yum China Holdings, Inc.

Recast Consolidated and Combined Statements of Income

(in US$ millions, except for per share data)

(unaudited)

	2017															2016
	Quarter Ended March 31			Quarter Ended June 30			Quarter Ended September 30			Quarter Ended December 31			Year Ended December 31			Year Ended December 31

Revenues
Company sales	$	1,738		$	1,664		$	1,924		$	1,667		$	6,993		$	6,622
Franchise fees and rental income		36			33			38			34			141			129
Revenues from transactions with franchisees and unconsolidated affiliates		147			141			160			151			599			299
Other revenues		5			3			8			20			36			25
Total revenues		1,926			1,841			2,130			1,872			7,769			7,075
Costs and Expenses, Net
Company restaurants
Food and paper		486			483			560			505			2,034			1,921
Payroll and employee benefits		368			366			403			406			1,543			1,432
Occupancy and other operating expenses		530			539			614			562			2,245			2,259
Company restaurant expenses		1,384			1,388			1,577			1,473			5,822			5,612
General and administrative expenses		98			118			123			156			495			429
Franchise expenses		18			17			19			17			71			72
Expenses for transactions with franchisees and unconsolidated affiliates		147			137			159			149			592			295
Other operating costs		3			3			8			14			28			15
Closures and impairment expenses, net		—			18			2			27			47			78
Refranchising gain, net		(1	)		—			(1	)		(3	)		(5	)		(11	)
Other income, net		(19	)		(11	)		(21	)		(8	)		(59	)		(49	)
Total costs and expenses, net		1,630			1,670			1,866			1,825			6,991			6,441
Operating Profit		296			171			264			47			778			634
Interest income, net		4			4			8			9			25			11
Changes in fair value of financial instruments		—			—			—			—			—			21
Income Before Income Taxes		300			175			272			56			803			666
Income tax provision		(90	)		(43	)		(87	)		(159	)		(379	)		(156	)
Net income (loss) – including noncontrolling interests		210			132			185			(103	)		424			510
Net income – noncontrolling interests		6			7			9			4			26			12
Net Income (Loss) – Yum China Holdings, Inc.		204			125			176			(107	)		398			498
Weighted-average common shares outstanding: (in millions)
Basic		388			387			386			386			387			368
Diluted		395			399			398			386			398			369
Basic Earnings (Loss) Per Common Share		0.53			0.32			0.46			(0.28	)		1.03			1.35
Diluted Earnings (Loss) Per Common Share		0.52			0.31			0.44			(0.28	)		1.00			1.35

Yum China Holdings, Inc.

Recast Consolidated Balance Sheets

(in US$ millions)

(unaudited)

	12/31/2017			12/31/2016
ASSETS
Current Assets
Cash and cash equivalents	$	1,059		$	885
Short-term investments		205			79
Accounts receivable, net		81			74
Inventories, net		297			268
Prepaid expenses and other current assets		160			120
Total Current Assets		1,802			1,426
Property, plant and equipment, net		1,691			1,647
Goodwill		108			79
Intangible assets, net		101			88
Investments in unconsolidated affiliates		95			77
Other assets		385			267
Deferred income taxes		105			166
Total Assets	$	4,287		$	3,750
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY
Current Liabilities
Accounts payable and other current liabilities	$	979		$	971
Income taxes payable		39			33
Total Current Liabilities		1,018			1,004
Capital lease obligations		28			28
Other liabilities and deferred credits		394			285
Total Liabilities		1,440			1,317
Redeemable Noncontrolling Interest		5			—
Equity
Common stock, $0.01 par value; 1,000 million shares authorized; 389 million shares and 383 million shares issued at December 31, 2017 and 2016, respectively; 385 million shares and 383 million shares outstanding at December 31, 2017 and 2016, respectively		4			4
Treasury stock		(148	)		(20	)
Additional paid-in capital		2,375			2,345
Retained earnings		397			38
Accumulated other comprehensive income		137			—
Total Equity – Yum China Holdings, Inc.		2,765			2,367
Noncontrolling interests		77			66
Total Equity		2,842			2,433
Total Liabilities, Redeemable Noncontrolling Interest and Equity	$	4,287		$	3,750

Yum China Holdings, Inc.

Recast Annual Segment Operating Results

(in US$ millions)

(unaudited)

	Year Ended 12/31/2017
	KFC			Pizza Hut		All Other Segments			Corporate & Unallocated⁽¹⁾			Total
Total revenues		5,066			2,093		106			504			7,769
Company restaurant expenses		3,986			1,798		38			—			5,822
General and administrative expenses		176			108		26			185			495
Franchise expenses		69			2		—			—			71
Expenses for transactions with franchisees and unconsolidated affiliates		70			1		21			500			592
Other operating costs		—			—		28			—			28
Closures and impairment expenses, net		20			27		—			—			47
Refranchising gain, net		—			—		—			(5	)		(5	)
Other (income) expenses, net		(57	)		—		2			(4	)		(59	)
Total costs and expenses, net		4,264			1,936		115			676			6,991
Operating Profit (Loss)		802			157		(9	)		(172	)		778

	Year Ended 12/31/2016
	KFC			Pizza Hut		All Other Segments			Corporate & Unallocated⁽¹⁾			Total
Total revenues		4,757			1,996		100			222			7,075
Company restaurant expenses		3,829			1,727		57			(1	)		5,612
General and administrative expenses		162			99		15			153			429
Franchise expenses		69			3		—			—			72
Expenses for transactions with franchisees and unconsolidated affiliates		61			1		14			219			295
Other operating costs		—			—		15			—			15
Closures and impairment expenses, net		41			17		3			17			78
Refranchising gain, net		—			—		—			(11	)		(11	)
Other (income) expenses, net		(46	)		—		1			(4	)		(49	)
Total costs and expenses, net		4,116			1,847		105			373			6,441
Operating Profit (Loss)		641			149		(5	)		(151	)		634

⁽¹⁾	Amount includes revenues and expenses associated with transactions with franchisees and unconsolidated affiliates such as inventory procurement and other services provided to franchisees and unconsolidated affiliates.

Yum China Holdings, Inc.

Recast Quarterly Segment Operating Results

(in US$ millions)

(unaudited)

	Quarter Ended 3/31/2017
	KFC			Pizza Hut			All Other Segments			Corporate & Unallocated⁽¹⁾			Total
Total revenues		1,250			528			23			125			1,926
Company restaurant expenses		950			423			11			—			1,384
General and administrative expenses		39			25			3			31			98
Franchise expenses		17			1			—			—			18
Expenses for transactions with franchisees and unconsolidated affiliates		17			—			5			125			147
Other operating costs		—			—			3			—			3
Closures and impairment expenses (income), net		1			(1	)		—			—			—
Refranchising gain, net		—			—			—			(1	)		(1	)
Other income, net		(19	)		—			—			—			(19	)
Total costs and expenses, net		1,005			448			22			155			1,630
Operating Profit (Loss)		245			80			1			(30	)		296

	Quarter Ended 6/30/2017
	KFC			Pizza Hut			All Other Segments			Corporate & Unallocated⁽¹⁾			Total
Total revenues		1,206			498			16			121			1,841
Company restaurant expenses		956			423			9			—			1,388
General and administrative expenses		38			26			4			50			118
Franchise expenses		17			—			—			—			17
Expenses for transactions with franchisees and unconsolidated affiliates		15			1			3			118			137
Other operating costs		—			—			3			—			3
Closures and impairment expenses, net		9			9			—			—			18
Other income, net		(11	)		—			—			—			(11	)
Total costs and expenses, net		1,024			459			19			168			1,670
Operating Profit (Loss)		182			39			(3	)		(47	)		171

⁽¹⁾	Amount includes revenues and expenses associated with transactions with franchisees and unconsolidated affiliates such as inventory procurement and other services provided to franchisees and unconsolidated affiliates.

Yum China Holdings, Inc.

Recast Quarterly Segment Operating Results

(in US$ millions)

(unaudited)

	Quarter Ended 9/30/2017
	KFC			Pizza Hut			All Other Segments			Corporate & Unallocated⁽¹⁾			Total
Total revenues		1,402			569			23			136			2,130
Company restaurant expenses		1,082			487			8			—			1,577
General and administrative expenses		44			27			9			43			123
Franchise expenses		19			—			—			—			19
Expenses for transactions with franchisees and unconsolidated affiliates		19			—			4			136			159
Other operating costs		—			—			8			—			8
Closures and impairment expenses, net		—			1			1			—			2
Refranchising gain, net		—			—			—			(1	)		(1	)
Other income, net		(18	)		—			—			(3	)		(21	)
Total costs and expenses, net		1,146			515			30			175			1,866
Operating Profit (Loss)		256			54			(7	)		(39	)		264

	Quarter Ended 12/31/2017
	KFC			Pizza Hut			All Other Segments			Corporate & Unallocated⁽¹⁾			Total
Total revenues		1,208			498			44			122			1,872
Company restaurant expenses		998			465			10			—			1,473
General and administrative expenses		55			30			10			61			156
Franchise expenses		16			1			—			—			17
Expenses for transactions with franchisees and unconsolidated affiliates		19			—			9			121			149
Other operating costs		—			—			14			—			14
Closures and impairment expenses (income), net		10			18			(1	)		—			27
Refranchising gain, net		—			—			—			(3	)		(3	)
Other (income) expenses, net		(9	)		—			2			(1	)		(8	)
Total costs and expenses, net		1,089			514			44			178			1,825
Operating Profit (Loss)		119			(16	)		—			(56	)		47

⁽¹⁾	Amount includes revenues and expenses associated with transactions with franchisees and unconsolidated affiliates such as inventory procurement and other services provided to franchisees and unconsolidated affiliates.

Yum China Holdings, Inc.

Recast Annual System and Same-Store Sales Growth

(unaudited)

System sales growth includes the results of all restaurants regardless of ownership, including company-owned, unconsolidated affiliate and franchise restaurants that operate our concepts, except for non-company-owned restaurants for which we do not receive a sales-based royalty. Sales of unconsolidated affiliate and franchise restaurants typically generate ongoing franchise fees for the Company at a rate of approximately 6% of system sales. Sales of unconsolidated affiliate and franchise restaurants are not included in the Company sales in the Consolidated and Combined Statements of Income (Loss); 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 represents 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.

	Year Ended 12/31/2017
	KFC			Pizza Hut			All Other Segments			Total
System Sales Growth (Decline)		7	%		5	%		(31	)%		6	%
System Sales Growth (Decline), excluding F/X⁽²⁾		9	%		7	%		(29	)%		8	%
Same-Store Sales Growth (Decline)		5	%		1	%		(6	)%		4	%

	Year Ended 12/31/2016
	KFC			Pizza Hut			All Other Segments			Total
System Sales Growth (Decline)		—	%		(2	)%		(41	)%		(1	)%
System Sales Growth (Decline), excluding F/X⁽²⁾		6	%		4	%		(37	)%		5	%
Same-Store Sales Growth (Decline)		3	%		(7	)%		(3	)%		—	%

⁽²⁾

The Company provides system sales growth (decline), excluding the impact of foreign currency translation (“F/X”). These amounts are derived by translating current year results at prior year average exchange rates. The Company believes the elimination of the F/X impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.

Yum China Holdings, Inc.

Recast Quarterly System and Same-Store Sales Growth

(unaudited)

	Quarter Ended 3/31/2017
	KFC			Pizza Hut			All Other Segments			Total
System Sales (Decline) Growth		(2	)%		3	%		(42	)%		(1	)%
System Sales Growth (Decline), excluding F/X⁽²⁾		3	%		9	%		(38	)%		4	%
Same-Store Sales Growth (Decline)		1	%		3	%		(1	)%		1	%

	Quarter Ended 6/30/2017
	KFC			Pizza Hut			All Other Segments			Total
System Sales Growth (Decline)		3	%		1	%		(35	)%		2	%
System Sales Growth (Decline), excluding F/X⁽²⁾		8	%		6	%		(32	)%		7	%
Same-Store Sales Growth (Decline)		4	%		—	%		(2	)%		3	%

	Quarter Ended 9/30/2017
	KFC			Pizza Hut			All Other Segments			Total
System Sales Growth (Decline)		14	%		7	%		(34	)%		12	%
System Sales Growth (Decline), excluding F/X⁽²⁾		14	%		7	%		(33	)%		12	%
Same-Store Sales Growth (Decline)		10	%		1	%		(5	)%		8	%

	Quarter Ended 12/31/2017
	KFC			Pizza Hut			All Other Segments			Total
System Sales (Decline) Growth		14	%		10	%		(4	)%		13	%
System Sales Growth (Decline), excluding F/X⁽²⁾		11	%		6	%		(6	)%		9	%
Same-Store Sales Decline		6	%		1	%		(3	)%		5	%

⁽²⁾

Yum China Holdings, Inc.

Recast Restaurant Count and New Unit Activity

(unaudited)

KFC
	Company-owned		Unconsolidated affiliates			Franchise			Total
As of 12/31/2016		3,913		836			475			5,224

Net Unit Change
Q1 2017		46		12			(5	)		53
Q2 2017		32		15			—			47
Q3 2017		50		17			2			69
Q4 2017		71		11			13			95

As of 12/31/2017		4,112		891			485			5,488


Pizza Hut
			Company-owned			Franchise			Total
As of 12/31/2016				2,057			24			2,081

Net Unit Change
Q1 2017				21			3			24
Q2 2017				16			1			17
Q3 2017				34			1			35
Q4 2017				38			—			38

As of 12/31/2017				2,166			29			2,195


All Other Segments
			Company-owned			Franchise			Total
As of 12/31/2016				38			219			257

Net Unit Change
Q1 2017				(1	)		15			14
Q2 2017				(9	)		(4	)		(13	)
Q3 2017				—			5			5
Q4 2017				1			36			37

As of 12/31/2017				29			271			300

Yum China Holdings, Inc. - FORM 8-K - EX-99.1 - April 18, 2018

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Yum China Holdings, Inc. Reports