Yum China Reports Second Quarter Results

Yum China Holdings, Inc.

Segment Results

(in US$ million)

(unaudited)

Quarter Ended 6/30/2024

KFC

Pizza Hut

All Other

Segments

Corporate

and

Unallocated⁽¹⁾

Elimination

Total

Company sales

$         1,983

$            530

$                     15

$                     —

$                  —

$         2,528

Franchise fees and income

16

2

4

—

—

22

Revenues from transactions with franchisees⁽²⁾

12

1

16

67

—

96

Other revenues

3

7

144

16

(137)

33

Total revenues

$         2,014

$            540

$                   179

$                     83

$              (137)

$         2,679

Company restaurant expenses

1,663

460

14

—

—

2,137

General and administrative expenses

60

27

10

36

—

133

Franchise expenses

8

1

—

—

—

9

Expenses for transactions with franchisees⁽²⁾

11

1

14

66

—

92

Other operating costs and expenses

2

6

142

16

(137)

29

Closures and impairment expenses, net

6

5

2

—

—

13

Total costs and expenses, net

1,750

500

182

118

(137)

2,413

Operating Profit (Loss)

$            264

$              40

$                     (3)

$                   (35)

$                  —

$            266

Reconciliation of GAAP Operating Profit to Restaurant Profit

Quarter Ended 6/30/2024

KFC

Pizza Hut

All Other

Segments

Corporate

and

Unallocated⁽¹⁾

Elimination

Total

GAAP Operating Profit (Loss)

$            264

$              40

$                     (3)

$                   (35)

$                  —

$            266

Less:

   Franchise fees and income

16

2

4

—

—

22

   Revenues from transactions with franchisees⁽²⁾

12

1

16

67

—

96

   Other revenues

3

7

144

16

(137)

33

Add:

   General and administrative expenses

60

27

10

36

—

133

   Franchise expenses

8

1

—

—

—

9

   Expenses for transactions with franchisees⁽²⁾

11

1

14

66

—

92

   Other operating costs and expenses

2

6

142

16

(137)

29

   Closures and impairment expenses, net

6

5

2

—

—

13

Restaurant profit

$            320

$              70

$                       1

$                     —

$                  —

$            391

Company sales

1,983

530

15

—

—

2,528

Restaurant margin %

16.2 %

13.2 %

5.9 %

N/A

N/A

15.5 %

Reconciliation of GAAP Operating Profit to Core Operating Profit

Quarter Ended 6/30/2024

KFC

Pizza Hut

All Other

Segments

Corporate

and

Unallocated⁽¹⁾

Elimination

Total

GAAP Operating Profit (Loss)

$            264

$              40

$                     (3)

$                   (35)

$                  —

$            266

Special Items, Operating Profit 

—

—

—

—

—

—

Adjusted Operating Profit (Loss)

$            264

$              40

$                     (3)

$                   (35)

$                  —

$            266

F/X impact

9

1

—

(1)

—

9

Core Operating Profit (Loss)

$            273

$              41

$                     (3)

$                   (36)

$                  —

$            275

Quarter Ended 6/30/2023

KFC

Pizza Hut

All Other

Segments

Corporate

and

Unallocated⁽¹⁾

Elimination

Total

Company sales

$         1,954

$            546

$                     17

$                     —

$                  —

$         2,517

Franchise fees and income

15

2

4

—

—

21

Revenues from transactions with franchisees⁽²⁾

11

1

17

60

—

89

Other revenues

4

5

144

10

(136)

27

Total revenues

$         1,984

$            554

$                   182

$                     70

$              (136)

$         2,654

Company restaurant expenses

1,616

479

18

—

—

2,113

General and administrative expenses

67

30

10

46

—

153

Franchise expenses

7

1

1

—

—

9

Expenses for transactions with franchisees⁽²⁾

9

1

15

59

—

84

Other operating costs and expenses

4

4

142

10

(136)

24

Closures and impairment expenses, net

8

4

2

—

—

14

Total costs and expenses, net

1,711

519

188

115

(136)

2,397

Operating Profit (Loss)

$            273

$              35

$                     (6)

$                   (45)

$                  —

$            257

Reconciliation of GAAP Operating Profit to Restaurant Profit

Quarter Ended 6/30/2023

KFC

Pizza Hut

All Other

Segments

Corporate

and

Unallocated⁽¹⁾

Elimination

Total

GAAP Operating Profit (Loss)

$            273

$              35

$                     (6)

$                   (45)

$                  —

$            257

Less:

   Franchise fees and income

15

2

4

—

—

21

   Revenues from transactions with franchisees⁽²⁾

11

1

17

60

—

89

   Other revenues

4

5

144

10

(136)

27

Add:

   General and administrative expenses

67

30

10

46

—

153

    Franchise expenses

7

1

1

—

—

9

    Expenses for transactions with franchisees⁽²⁾

9

1

15

59

—

84

    Other operating costs and expenses

4

4

142

10

(136)

24

    Closures and impairment expenses, net

8

4

2

—

—

14

Restaurant profit (loss)

$            338

$              67

$                     (1)

$                     —

$                  —

$            404

Company sales

1,954

546

17

—

—

2,517

Restaurant margin %

17.3 %

12.4 %

(9.6) %

N/A

N/A

16.1 %

Reconciliation of GAAP Operating Profit to Core Operating Profit

Quarter Ended 6/30/2023

KFC

Pizza Hut

All Other

Segments

Corporate

and

Unallocated⁽¹⁾

Elimination

Total

GAAP Operating Profit (Loss)

$            273

$              35

$                     (6)

$                   (45)

$                  —

$            257

Special Items, Operating Profit 

—

—

—

2

—

2

Adjusted Operating Profit (Loss)

$            273

$              35

$                     (6)

$                   (43)

$                  —

$            259

Items Affecting Comparability

   Temporary relief from landlords

(2)

—

—

—

—

(2)

   Temporary relief from government agencies

(1)

—

—

—

—

(1)

   VAT deductions

(7)

(1)

(1)

—

—

(9)

F/X impact

—

—

—

—

—

—

Core Operating Profit (Loss)

$            263

$              34

$                     (7)

$                   (43)

$                  —

$            247

Year to Date Ended 6/30/2024

KFC

Pizza Hut

All Other

Segments

Corporate

and

Unallocated⁽¹⁾

Elimination

Total

Company sales

$         4,176

$         1,117

$                     29

$                     —

$                  —

$         5,322

Franchise fees and income

34

4

9

—

—

47

Revenues from transactions with franchisees⁽²⁾

26

2

36

139

—

203

Other revenues

8

12

308

31

(294)

65

Total revenues

$         4,244

$         1,135

$                   382

$                   170

$              (294)

$         5,637

Company restaurant expenses

3,434

974

31

—

(1)

4,438

General and administrative expenses

121

54

20

78

—

273

Franchise expenses

17

2

—

—

—

19

Expenses for transactions with franchisees⁽²⁾

23

2

33

138

—

196

Other operating costs and expenses

6

11

304

30

(293)

58

Closures and impairment expenses, net

7

5

2

—

—

14

Other expenses (income), net

—

—

—

(1)

—

(1)

Total costs and expenses, net

3,608

1,048

390

245

(294)

4,997

Operating Profit (Loss)

$            636

$              87

$                     (8)

$                   (75)

$                  —

$            640

Reconciliation of GAAP Operating Profit to Restaurant Profit

Year to Date Ended 6/30/2024

KFC

Pizza Hut

All Other

Segments

Corporate

and

Unallocated⁽¹⁾

Elimination

Total

GAAP Operating Profit (Loss)

$            636

$              87

$                     (8)

$                   (75)

$                  —

$            640

Less:

   Franchise fees and income

34

4

9

—

—

47

   Revenues from transactions with franchisees⁽²⁾

26

2

36

139

—

203

   Other revenues

8

12

308

31

(294)

65

Add:

   General and administrative expenses

121

54

20

78

—

273

   Franchise expenses

17

2

—

—

—

19

   Expenses for transactions with franchisees⁽²⁾

23

2

33

138

—

196

   Other operating costs and expenses

6

11

304

30

(293)

58

   Closures and impairment expenses, net

7

5

2

—

—

14

   Other expenses (income), net

—

—

—

(1)

—

(1)

Restaurant profit (loss)

$            742

$            143

$                     (2)

$                     —

$                    1

$            884

Company sales

4,176

1,117

29

—

—

5,322

Restaurant margin %

17.8 %

12.8 %

(11.1) %

N/A

N/A

16.6 %

Reconciliation of GAAP Operating Profit to Core Operating Profit

Year to Date Ended 6/30/2024

KFC

Pizza Hut

All Other

Segments

Corporate

and

Unallocated⁽¹⁾

Elimination

Total

GAAP Operating Profit (Loss)

$            636

$              87

$                     (8)

$                   (75)

$                  —

$            640

Special Items, Operating Profit 

—

—

—

—

—

—

Adjusted Operating Profit (Loss)

$            636

$              87

$                     (8)

$                   (75)

$                  —

$            640

F/X impact

29

4

—

(2)

—

31

Core Operating Profit (Loss)

$            665

$              91

$                     (8)

$                   (77)

$                  —

$            671

Year to Date Ended 6/30/2023

KFC

Pizza Hut

All Other Segments

Corporate

and

Unallocated⁽¹⁾

Elimination

Total

Company sales

$         4,120

$         1,137

$                     32

$                     —

$                  —

$         5,289

Franchise fees and income

32

4

10

—

—

46

Revenues from transactions with franchisees⁽²⁾

21

2

36

123

—

182

Other revenues

9

8

306

20

(289)

54

Total revenues

$         4,182

$         1,151

$                   384

$                   143

$              (289)

$         5,571

Company restaurant expenses

3,301

986

36

—

(1)

4,322

General and administrative expenses

135

59

21

101

—

316

Franchise expenses

16

2

1

—

—

19

Expenses for transactions with franchisees⁽²⁾

18

2

33

122

—

175

Other operating costs and expenses

8

7

303

18

(288)

48

Closures and impairment expenses, net

9

5

3

—

—

17

Other expenses (income), net

2

—

—

(1)

—

1

Total costs and expenses, net

3,489

1,061

397

240

(289)

4,898

Operating Profit (Loss)

$            693

$              90

$                   (13)

$                   (97)

$                  —

$            673

Reconciliation of GAAP Operating Profit to Restaurant Profit

Year to Date Ended 6/30/2023

KFC

Pizza Hut

All Other

Segments

Corporate

and

Unallocated⁽¹⁾

Elimination

Total

GAAP Operating Profit (Loss)

$            693

$              90

$                   (13)

$                   (97)

$                  —

$            673

Less:

   Franchise fees and income

32

4

10

—

—

46

   Revenues from transactions with franchisees⁽²⁾

21

2

36

123

—

182

   Other revenues

9

8

306

20

(289)

54

Add:

   General and administrative expenses

135

59

21

101

—

316

   Franchise expenses

16

2

1

—

—

19

   Expenses for transactions with franchisees⁽²⁾

18

2

33

122

—

175

   Other operating costs and expenses

8

7

303

18

(288)

48

   Closures and impairment expenses, net

9

5

3

—

—

17

   Other expenses (income), net

2

—

—

(1)

—

1

Restaurant profit (loss)

$            819

$            151

$                     (4)

$                     —

$                    1

$            967

Company sales

4,120

1,137

32

—

—

5,289

Restaurant margin %

19.9 %

13.3 %

(15.1) %

N/A

N/A

18.3 %

Reconciliation of GAAP Operating Profit to Core Operating Profit

Year to Date Ended 6/30/2023

KFC

Pizza Hut

All Other

Segments

Corporate

and

Unallocated⁽¹⁾

Elimination

Total

GAAP Operating Profit (Loss)

$            693

$              90

$                   (13)

$                   (97)

$                  —

$            673

Special Items, Operating Profit 

—

—

—

5

—

5

Adjusted Operating Profit (Loss)

$            693

$              90

$                   (13)

$                   (92)

$                  —

$            678

Items Affecting Comparability

   Temporary relief from landlords

(9)

(1)

—

—

—

(10)

   Temporary relief from government agencies

(3)

—

—

—

—

(3)

   VAT deductions

(24)

(3)

(1)

—

—

(28)

   Amortization of reacquired franchise rights

2

—

—

—

—

2

F/X impact

—

—

—

—

—

—

Core Operating Profit (Loss)

$            659

$              86

$                   (14)

$                   (92)

$                  —

$            639

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.

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