Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2023 | Nov. 03, 2023 | |
Document And Entity Information [Line Items] | ||
Entity Registrant Name | Yum China Holdings, Inc. | |
Entity Central Index Key | 0001673358 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q3 | |
Document Type | 10-Q | |
Trading Symbol | YUMC | |
Amendment Flag | false | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Document Period End Date | Sep. 30, 2023 | |
Entity Common Stock Shares Outstanding | 413,654,270 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Title of 12(b) Security | Common Stock, par value $0.01 per share | |
Entity Incorporation, State or Country Code | DE | |
Security Exchange Name | NYSE | |
Entity Shell Company | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 001-37762 | |
Entity Tax Identification Number | 81-2421743 | |
Entity Address, Address Line One | 101 East Park Boulevard, Suite 805 | |
Entity Address, City or Town | Plano | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 75074 | |
City Area Code | 469 | |
Local Phone Number | 980-2898 | |
Entity Address, Country | US | |
The Stock Exchange of Hong Kong Limited [Member] | ||
Document And Entity Information [Line Items] | ||
Trading Symbol | 9987 | |
Other Address [Member] | ||
Document And Entity Information [Line Items] | ||
Entity Address, Address Line One | Yum China Building | |
Entity Address, City or Town | Shanghai | |
Entity Address, Postal Zip Code | 200030 | |
Entity Address, Country | CN | |
Entity Address, Address Line Two | 20 Tian Yao Qiao Road |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income (Unaudited) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | ||
Revenues | |||||
Total revenues | $ 2,914 | $ 2,685 | $ 8,485 | $ 7,481 | |
Costs and Expenses, Net | |||||
General and administrative expenses | 169 | 157 | 485 | 449 | |
Other operating costs and expenses | 29 | 18 | 77 | 53 | |
Closures and impairment expenses, net | 4 | 17 | 20 | ||
Other expenses, net | 24 | 1 | 73 | ||
Total costs and expenses, net | 2,591 | 2,369 | 7,489 | 6,893 | |
Operating Profit | 323 | 316 | 996 | 588 | |
Interest income, net | [1] | 46 | 25 | 124 | 51 |
Investment loss | [1] | (4) | (15) | (32) | (32) |
Income Before Income Taxes and Equity in Net Earnings (Losses) from Equity Method Investments | 365 | 326 | 1,088 | 607 | |
Income tax provision | (100) | (97) | (296) | (183) | |
Equity in net earnings (losses) from equity method investments | 2 | (2) | 2 | (4) | |
Net income – including noncontrolling interests | 267 | 227 | 794 | 420 | |
Net income – noncontrolling interests | 23 | 21 | 64 | 31 | |
Net Income – Yum China Holdings, Inc. | $ 244 | $ 206 | $ 730 | $ 389 | |
Weighted-average common shares outstanding (in millions): | |||||
Basic | [2] | 416 | 420 | 417 | 422 |
Diluted | [2] | 420 | 424 | 421 | 426 |
Basic Earnings Per Common Share | $ 0.59 | $ 0.49 | $ 1.75 | $ 0.92 | |
Diluted Earnings Per Common Share | $ 0.58 | $ 0.49 | $ 1.73 | $ 0.92 | |
Company Sales [Member] | |||||
Revenues | |||||
Revenues | $ 2,759 | $ 2,561 | $ 8,048 | $ 7,135 | |
Franchise [Member] | |||||
Revenues | |||||
Revenues | 23 | 22 | 69 | 65 | |
Costs and Expenses, Net | |||||
Cost of goods and services sold | 9 | 9 | 28 | 27 | |
Transactions With Franchisees [Member] | |||||
Revenues | |||||
Revenues | 100 | 80 | 282 | 219 | |
Costs and Expenses, Net | |||||
Cost of goods and services sold | 95 | 76 | 270 | 212 | |
Other Revenues [Member] | |||||
Revenues | |||||
Revenues | 32 | 22 | 86 | 62 | |
Company Restaurant Expenses [Member] | |||||
Costs and Expenses, Net | |||||
Food and paper | 858 | 787 | 2,466 | 2,206 | |
Payroll and employee benefits | 699 | 603 | 2,047 | 1,819 | |
Occupancy and other operating expenses | 732 | 691 | 2,098 | 2,034 | |
Cost of goods and services sold | $ 2,289 | $ 2,081 | $ 6,611 | $ 6,059 | |
[1] Amounts have not been allocated to any segment for performance reporting purposes. As a result of the separation, shares of Yum China common stock were distributed to YUM’s shareholders of record as of October 19, 2016 and were included in the calculated weighted-average common shares outstanding. Holders of outstanding YUM equity awards generally received both adjusted YUM awards and Yum China awards, or adjusted awards of either YUM or Yum China in their entirety. Any subsequent exercise of these awards, whether held by the Company’s employees or YUM’s employees, would increase the number of common shares outstanding. The incremental shares arising from outstanding equity awards are included in the computation of diluted EPS, if there is dilutive effect. |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income - including noncontrolling interests | $ 267 | $ 227 | $ 794 | $ 420 |
Other comprehensive loss, net of tax of nil: | ||||
Foreign currency translation adjustments | (29) | (306) | (274) | (573) |
Comprehensive income (loss) - including noncontrolling interests | (238) | (79) | 520 | (153) |
Comprehensive income (loss) - noncontrolling interests | (20) | (23) | 29 | (52) |
Comprehensive Income (Loss) - Yum China Holdings, Inc. | $ (218) | $ (56) | $ 491 | $ (101) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | ||
Cash Flows – Operating Activities | |||
Net income - including noncontrolling interests | $ 794 | $ 420 | |
Depreciation and amortization | 339 | 467 | |
Non-cash operating lease cost | 301 | 333 | |
Closures and impairment expenses | 17 | 20 | |
Investment loss | [1] | 32 | 32 |
Equity in net (earnings) losses from equity method investments | (2) | 4 | |
Distributions of income received from equity method investments | 8 | 7 | |
Deferred income taxes | (6) | (7) | |
Share-based compensation expense | 46 | 31 | |
Changes in accounts receivable | (2) | (6) | |
Changes in inventories | (25) | 71 | |
Changes in prepaid expenses, other current assets and VAT assets | (10) | 216 | |
Changes in accounts payable and other current liabilities | 112 | (19) | |
Changes in income taxes payable | 71 | 70 | |
Changes in non-current operating lease liabilities | (295) | (299) | |
Other, net | (46) | (11) | |
Net Cash Provided by Operating Activities | 1,334 | 1,329 | |
Cash Flows – Investing Activities | |||
Capital spending | (499) | (509) | |
Purchases of short-term investments, long-term bank deposits and notes | (3,287) | (4,290) | |
Maturities of short-term investments, long-term bank deposits and notes | 2,730 | 4,226 | |
Acquisition of business, net of cash acquired | (23) | ||
Other, net | 4 | 3 | |
Net Cash Used in Investing Activities | (1,052) | (593) | |
Cash Flows – Financing Activities | |||
Proceeds from short-term borrowings | 212 | ||
Repurchase of shares of common stock | (280) | (411) | |
Cash dividends paid on common stock | (162) | (152) | |
Dividends paid to noncontrolling interests | (37) | (29) | |
Contributions from noncontrolling interests | 35 | 18 | |
Payment of acquisition related holdback | (3) | (7) | |
Other, net | (5) | (2) | |
Net Cash Used in Financing Activities | (240) | (583) | |
Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash | (41) | (78) | |
Net Increase in Cash, Cash Equivalents and Restricted Cash | 1 | 75 | |
Cash, Cash Equivalents, and Restricted Cash - Beginning of Period | 1,130 | 1,136 | |
Cash, Cash Equivalents, and Restricted Cash - End of Period | 1,131 | 1,211 | |
Supplemental Cash Flow Data | |||
Cash paid for income tax | 245 | 124 | |
Cash paid for interest | 3 | ||
Non-cash Investing and Financing Activities | |||
Capital expenditures included in accounts payable and other current liabilities | $ 180 | $ 133 | |
[1] Amounts have not been allocated to any segment for performance reporting purposes. |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Millions | Sep. 30, 2023 | Dec. 31, 2022 |
Current Assets | ||
Cash and cash equivalents | $ 1,131 | $ 1,130 |
Short-term investments | 2,001 | 2,022 |
Accounts receivable, net | 62 | 64 |
Inventories, net | 419 | 417 |
Prepaid expenses and other current assets | 310 | 307 |
Total Current Assets | 3,923 | 3,940 |
Property, plant and equipment, net | 2,117 | 2,118 |
Operating lease right-of-use assets | 2,083 | 2,219 |
Goodwill | 1,879 | 1,988 |
Intangible assets, net | 147 | 159 |
Long-term bank deposits and notes | 1,237 | 680 |
Equity investments | 319 | 361 |
Deferred income tax assets | 106 | 113 |
Other assets | 259 | 248 |
Total Assets | 12,070 | 11,826 |
Current Liabilities | ||
Accounts payable and other current liabilities | 2,129 | 2,096 |
Short-term borrowings | 210 | 2 |
Income taxes payable | 133 | 68 |
Total Current Liabilities | 2,472 | 2,166 |
Non-current operating lease liabilities | 1,787 | 1,906 |
Non-current finance lease liabilities | 41 | 42 |
Deferred income tax liabilities | 364 | 390 |
Other liabilities | 147 | 162 |
Total Liabilities | 4,811 | 4,666 |
Redeemable Noncontrolling Interest | 13 | 12 |
Equity | ||
Common stock, $0.01 par value; 1,000 million shares authorized; 415 million shares and 419 million shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively. | 4 | 4 |
Additional paid-in capital | 4,382 | 4,390 |
Retained earnings | 2,526 | 2,191 |
Accumulated other comprehensive loss | (341) | (103) |
Total Yum China Holdings, Inc. Stockholders' Equity | 6,571 | 6,482 |
Noncontrolling interests | 675 | 666 |
Total Equity | 7,246 | 7,148 |
Total Liabilities, Redeemable Noncontrolling Interest and Equity | $ 12,070 | $ 11,826 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares shares in Millions | Sep. 30, 2023 | Dec. 31, 2022 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 1,000 | 1,000 |
Common stock, shares issued | 415 | 419 |
Common stock, shares outstanding | 415 | 419 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Equity (Unaudited) - USD ($) shares in Millions, $ in Millions | Total | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive (Loss) Income [Member] | Treasury Stock [Member] | Noncontrolling Interests [Member] | Redeemable Noncontrolling Interest [Member] |
Balance at Dec. 31, 2021 | $ 7,908 | $ 4 | $ 4,695 | $ 2,892 | $ 268 | $ (803) | $ 852 | $ 14 |
Balance (in shares) at Dec. 31, 2021 | 449 | (21) | ||||||
Net Income | 420 | 389 | 31 | |||||
Foreign currency translation adjustments | (573) | (490) | (83) | |||||
Comprehensive income (loss) - including noncontrolling interests | (153) | |||||||
Cash dividends declared | (152) | (152) | ||||||
Distributions to/contributions from noncontrolling interests | (63) | (63) | ||||||
Repurchase and retirement of shares | (413) | (315) | (901) | $ 803 | ||||
Repurchase and retirement of shares (shares) | (30) | 21 | ||||||
Exercise and vesting of share-based awards | (3) | (3) | ||||||
Exercise and vesting of share-based awards, shares | 1 | |||||||
Share-based compensation | 31 | 31 | ||||||
Acquisition of noncontrolling interest | (1) | |||||||
Balance at Sep. 30, 2022 | 7,155 | $ 4 | 4,408 | 2,228 | (222) | 737 | 13 | |
Balance (in shares) at Sep. 30, 2022 | 419 | |||||||
Balance at Dec. 31, 2021 | 7,908 | $ 4 | 4,695 | 2,892 | 268 | $ (803) | 852 | 14 |
Balance (in shares) at Dec. 31, 2021 | 449 | (21) | ||||||
Acquisition of noncontrolling interest | 15 | |||||||
Balance at Dec. 31, 2022 | 7,148 | $ 4 | 4,390 | 2,191 | (103) | 666 | 12 | |
Balance (in shares) at Dec. 31, 2022 | 419 | |||||||
Balance at Jun. 30, 2022 | 7,289 | $ 4 | 4,402 | 2,083 | 40 | 760 | 13 | |
Balance (in shares) at Jun. 30, 2022 | 420 | |||||||
Net Income | 227 | 206 | 21 | |||||
Foreign currency translation adjustments | (306) | (262) | (44) | |||||
Comprehensive income (loss) - including noncontrolling interests | (79) | |||||||
Cash dividends declared | (51) | (51) | ||||||
Repurchase and retirement of shares | (13) | (3) | (10) | |||||
Exercise and vesting of share-based awards | (1) | (1) | ||||||
Share-based compensation | 10 | 10 | ||||||
Balance at Sep. 30, 2022 | 7,155 | $ 4 | 4,408 | 2,228 | (222) | 737 | 13 | |
Balance (in shares) at Sep. 30, 2022 | 419 | |||||||
Balance at Dec. 31, 2022 | 7,148 | $ 4 | 4,390 | 2,191 | (103) | 666 | 12 | |
Balance (in shares) at Dec. 31, 2022 | 419 | |||||||
Net Income | 794 | 730 | 64 | 1 | ||||
Foreign currency translation adjustments | (274) | (238) | (36) | |||||
Comprehensive income (loss) - including noncontrolling interests | 520 | 1 | ||||||
Cash dividends declared | (162) | (162) | ||||||
Distributions to/contributions from noncontrolling interests | (19) | (19) | ||||||
Repurchase and retirement of shares | (285) | (52) | (233) | |||||
Repurchase and retirement of shares (shares) | (5) | |||||||
Exercise and vesting of share-based awards | (2) | (2) | ||||||
Exercise and vesting of share-based awards, shares | 1 | |||||||
Share-based compensation | 46 | 46 | ||||||
Balance at Sep. 30, 2023 | 7,246 | $ 4 | 4,382 | 2,526 | (341) | 675 | 13 | |
Balance (in shares) at Sep. 30, 2023 | 415 | |||||||
Balance at Jun. 30, 2023 | 7,205 | $ 4 | 4,396 | 2,465 | (316) | 656 | 12 | |
Balance (in shares) at Jun. 30, 2023 | 417 | |||||||
Net Income | 267 | 244 | 23 | 1 | ||||
Foreign currency translation adjustments | (29) | (25) | (4) | |||||
Comprehensive income (loss) - including noncontrolling interests | (238) | 1 | ||||||
Cash dividends declared | (54) | (54) | ||||||
Repurchase and retirement of shares | (160) | (31) | (129) | |||||
Repurchase and retirement of shares (shares) | (3) | |||||||
Share-based compensation | 17 | 17 | ||||||
Balance at Sep. 30, 2023 | $ 7,246 | $ 4 | $ 4,382 | $ 2,526 | $ (341) | $ 675 | $ 13 | |
Balance (in shares) at Sep. 30, 2023 | 415 |
Condensed Consolidated Statem_5
Condensed Consolidated Statements of Equity (Unaudited) (Parenthetical) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Statement of Stockholders' Equity [Abstract] | ||||
Cash dividends declared, per common share | $ 0.13 | $ 0.12 | $ 0.39 | $ 0.36 |
Description of Business
Description of Business | 9 Months Ended |
Sep. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business | Note 1 – Description of Business Yum China Holdings, Inc. (“Yum China” and, together with its subsidiaries, the “Company,” “we,” “us” and “our”) was incorporated in Delaware on April 1, 2016 . The Company owns, franchises or has ownership in entities that own and operate restaurants (also referred to as “stores” or “units”) under the KFC, Pizza Hut, Taco Bell, Lavazza, Little Sheep and Huang Ji Huang concepts (collectively, the “concepts”). In connection with the separation of the Company in 2016 from its former parent company, Yum! Brands, Inc. (“YUM”), a master license agreement was entered into between Yum Restaurants Consulting (Shanghai) Company Limited (“YCCL”), a wholly-owned indirect subsidiary of the Company and YUM, through YRI China Franchising LLC, a subsidiary of YUM, effective from January 1, 2020 and previously through Yum! Restaurants Asia Pte. Ltd., another subsidiary of YUM, from October 31, 2016 to December 31, 2019, for the exclusive right to use and sublicense the use of intellectual property owned by YUM and its subsidiaries for the development and operation of the KFC, Pizza Hut and, subject to achieving certain agreed-upon milestones amended in April 2022, Taco Bell brands and their related marks and other intellectual property rights for restaurant services in the People’s Republic of China (the “PRC” or “China”), excluding Hong Kong, Macau and Taiwan. The term of the license is 50 years from October 31, 2016 for the KFC and Pizza Hut brands and, subject to achieving certain agreed-upon milestones, 50 years from April 15, 2022 for the Taco Bell brand, with automatic renewals for additional consecutive renewal terms of 50 years each, subject only to us being in “good standing” and unless we give notice of our intent not to renew. In exchange, we pay a license fee to YUM equal to 3 % of net system sales from both our Company and franchise restaurants. We own the intellectual property of Little Sheep and Huang Ji Huang and pay no license fee related to these concepts. In 1987, KFC was the first major global restaurant brand to enter China. As of September 30, 2023, there were over 9,900 KFC stores in China. We maintain a controlling interest of 58 %, 70 %, 83 %, 92 % and approximately 60 % in the entities that own and operate the KFCs in and around Shanghai, Beijing, Wuxi, Suzhou and Hangzhou, respectively. The first Pizza Hut in China opened in 1990. As of September 30, 2023, there were over 3 ,200 Pizza Hut restaurants in China. In the second quarter of 2020, the Company partnered with Luigi Lavazza S.p.A. (“Lavazza Group”), the world-renowned family-owned Italian coffee company, and entered into a joint venture to explore and develop the Lavazza coffee concept in China. In September 2021, the Company and Lavazza Group entered into agreements for the previously formed joint venture (“Lavazza joint venture”) to accelerate the expansion of Lavazza coffee shops in China. Upon execution of these agreements, the Company controls and consolidates the joint venture with its 65 % equity interest. The acquisition was considered immaterial. In 2017, the Company acquired a controlling interest in the holding company of DAOJIA.com.cn (“Daojia”), an online food delivery service provider in China. This business was extended to also include a team managing the delivery services for restaurants, including restaurants in our system, with their results reported under our delivery operating segment. As part of our strategy to drive growth from off-premise occasions, we also developed our own retail brand operations, Shaofaner, which sells packaged foods through online and offline channels. The operating results of Shaofaner are included in our e-commerce business operating segment. The Company has two reportable segments: KFC and Pizza Hut. Our remaining operating segments, including the operations of Taco Bell, Lavazza, Little Sheep, Huang Ji Huang, our delivery operating segment and our e-commerce business, are combined and referred to as All Other Segments, as those operating segments are insignificant both individually and in the aggregate. For 2022, All Other Segments also included COFFii & JOY and East Dawning. The Company decided to wind down the operations of the East Dawning brand in 2021, and closed all stores by March 2022. In addition, the Company decided to wind down the operations of COFFii & JOY and closed all stores in 2022. Additional details on our segment reporting are included in Note 15. The Company’s common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “YUMC”. On September 10, 2020, the Company completed a secondary listing of its common stock on the Main Board of the Hong Kong Stock Exchange (“HKEX”) under the stock code “9987,” in connection with a global offering of 41,910,700 shares of its common stock. Net proceeds raised by the Company from the global offering after deducting underwriting fees and the offering expenses amounted to $ 2.2 billion. On October 24, 2022, the Company’s voluntary conversion of its secondary listing status to a primary listing status on the HKEX became effective (“Primary Conversion”) and the Company became a dual primary listed company on the NYSE and HKEX. On the same day, the Company’s shares of common stock traded on the HKEX were included in the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect. The Company’s common stock listed on the NYSE and HKEX continue to be fully fungible. |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2023 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Note 2 – Basis of Presentation Our preparation of the accompanying Condensed Consolidated Financial Statements in conformity with Generally Accepted Accounting Principles in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. We have prepared the Condensed Consolidated Financial Statements in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The Condensed Consolidated Financial Statements include all normal and recurring adjustments considered necessary to present fairly our financial position as of September 30, 2023, and our results of operations, comprehensive income and statements of equity for the quarters and years to date ended September 30, 2023 and 2022, and cash flows for the years to date ended September 30, 2023 and 2022. Our results of operations, comprehensive income and cash flows for these interim periods are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K as filed with the SEC on March 1, 2023. Through the acquisition of Daojia, the Company also acquired a variable interest entity (“VIE”) and subsidiaries of the VIE effectively controlled by Daojia. There exists a parent-subsidiary relationship between Daojia and its VIE as a result of certain exclusive agreements that require Daojia to consolidate its VIE and subsidiaries of the VIE because Daojia is the primary beneficiary that possesses the power to direct the activities of the VIE that most significantly impact its economic performance, and is entitled to substantially all of the profits and has the obligation to absorb all of the expected losses of the VIE. The acquired VIE and its subsidiaries were considered immaterial, both individually and in the aggregate. The results of Daojia’s operations have been included in the Company’s Condensed Consolidated Financial Statements since the acquisition date. Certain comparative items in the Condensed Consolidated Financial Statements have been reclassified to conform to the current period’s presentation to facilitate comparison. Recently Adopted Accounting Pronouncements In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08 Business Combinations (Topic 805) — Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). It requires issuers to apply ASC 606 Revenue from Contracts with Customers to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. We adopted this standard on January 1, 2023, and such adoption did not have a material impact on our financial statements. In March 2022, the FASB issued ASU 2022-01 Fair Value Hedging—Portfolio Layer Method (“ASU 2022-01”), which allows entities to expand their use of the portfolio layer method for fair value hedges of interest rate risk. Under the guidance, entities can hedge all financial assets under the portfolio layer method and designate multiple hedged layers within a single closed portfolio. The guidance also clarifies the accounting for fair value hedge basis adjustments in portfolio layer hedges and how these adjustments should be disclosed. We adopted this standard on January 1, 2023, and such adoption did not have a material impact on our financial statements. In March 2022, the FASB issued ASU 2022-02 Financial Instrument—Credit Losses (“ASU 2022-02”), amending ASC 310 to eliminate the recognition and measurement guidance for a troubled debt restructuring for creditors that have adopted ASC 326 and requiring them to make enhanced disclosures about loan modifications for borrowers experiencing financial difficulty. The guidance also requires entities to present gross write-offs by year of origination in their vintage disclosures. We adopted this standard on January 1, 2023, and such adoption did not have a material impact on our financial statements. In June 2022, the FASB issued ASU 2022-03 Fair Value Measurement—Fair Value Measurement of Equity Securities Subject to Contractual Sale Restriction (“ASU 2022-03”), clarifying that a contractual restriction on sales of an equity security is not considered part of the unit of account of the equity security, and therefore, is not considered when measuring fair value. The guidance also clarifies that a contractual sales restriction should not be recognized as a separate unit of account. We adopted this standard on January 1, 2023, and such adoption did not have a material impact on our financial statements. In September 2022, the FASB issued ASU 2022-04 Liabilities—Disclosure of Supplier Finance Program Obligations (“ASU 2022-04”), requiring entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the programs and information about their obligations outstanding at the end of the reporting period. We adopted this standard on January 1, 2023, and such adoption did not have a material impact on our financial statements. |
Business Acquisitions and Equit
Business Acquisitions and Equity Investments | 9 Months Ended |
Sep. 30, 2023 | |
Business Acquisitions And Equity Investments [Abstract] | |
Business Acquisitions and Equity Investments | Note 3 – Business Acquisitions and Equity Investments Consolidation of Hangzhou KFC and Equity Investment in Hangzhou Catering In the fourth quarter of 2021, the Company completed its investment in a 28 % equity interest in Hangzhou Catering for cash consideration of $ 255 million. Hangzhou Catering holds a 45 % equity interest in Hangzhou KFC, of which the Company previously held a 47 % equity interest. Along with the investment, the Company also obtained two additional seats on the board of directors of Hangzhou KFC. Upon completion of the transaction, the Company directly and indirectly holds an approximately 60 % equity interest in Hangzhou KFC and has majority representation on the board, and thus obtained control over Hangzhou KFC and started to consolidate its results from the acquisition date. As a result of the acquisition of Hangzhou KFC, $ 66 million of the purchase price was allocated to the reacquired franchise right, which is amortized over the remaining franchise contract period of 1 year. In addition to its equity interest in Hangzhou KFC, Hangzhou Catering operates approximately 60 Chinese dining restaurants under four time-honored brands and a food processing business. The Company applies the equity method of accounting to the 28 % equity interest in Hangzhou Catering excluding the Hangzhou KFC business and classified this investment in Equity investments based on its then fair value. The Company elected to report its share of Hangzhou Catering’s financial results with a one-quarter lag because its results are not available in time for the Company to record them in the concurrent period. The Company's equity losses from Hangzhou Catering, net of taxes, were immaterial for both the quarters and years to date ended September 30, 2023 and 2022, and included in Equity in net earnings (losses) from equity method investments in our Condensed Consolidated Statement of Income. As of September 30, 2023 and December 31, 2022, the carrying amount of the Company’s equity method investment in Hangzhou Catering was $ 39 million and $ 37 million, respectively, exceeding the Company’s interest in Hangzhou Catering’s underlying net assets by $ 24 million and $ 26 million, respectively. Substantially all of this difference was attributable to its self-owned properties and impact of related deferred tax liabilities determined upon acquisition, which is being depreciated over a weighted-average remaining useful life of 20 years . Consolidation of Suzhou KFC In the third quarter of 2020, the Company completed the acquisition of an additional 25 % equity interest in Suzhou KFC for cash consideration of $ 149 million, increasing its equity interest to 72 %, and thus the Company obtained control over Suzhou KFC and started to consolidate its results from the acquisition date. As a result of the acquisition of Suzhou KFC, $ 61 million of the purchase price was allocated to the reacquired franchise right, which is amortized over the remaining franchise contract period of 2.4 years. In December 2022, the Company acquired an additional 20 % equity interest in Suzhou KFC for cash consideration of $ 115 million, bringing its total ownership to 92 %. As the Company has previously obtained control of Suzhou KFC, this transaction was accounted for as an equity transaction. Upon completion of the transaction, the excess of purchase consideration over the carrying amount of the non-controlling interests was $ 15 million, which was recorded in Additional paid-in capital. As a result of the acquisitions of all former unconsolidated affiliates that operate our concepts by December 2021, the Company consolidated their results since their respective acquisition dates, and therefore we no longer have franchise fees and expenses and revenues and expenses from transactions with unconsolidated affiliates for the quarters and years to date ended September 30, 2023 and 2022. Fujian Sunner Development Co., Ltd. (“Sunner”) Investment In the first quarter of 2021, the Company acquired a 5 % equity interest in Sunner, a Shenzhen Stock Exchange-listed company, for a total consideration of approximately $ 261 million. Sunner is China’s largest white-feathered chicken producer and the Company’s largest poultry supplier. The Company then accounted for the equity securities at fair value based on their closing market price on each measurement date. In May 2021, a senior executive of the Company was nominated and appointed to Sunner’s board of directors upon Sunner’s shareholder approval. Through this representation, the Company participates in Sunner’s policy making process. The representation on the board, along with the Company being one of Sunner’s significant shareholders, provides the Company with the ability to exercise significant influence over the operating and financial policies of Sunner. As a result, the Company started to apply the equity method of accounting to the investment in May 2021 based on its then fair value. The Company elected to report its share of Sunner’s financial results with a one-quarter lag because Sunner’s results are not available in time for the Company to record them in the concurrent period. In the quarters and years to date ended September 30, 2023 and 2022, the Company's equity income (losses) from Sunner, net of taxes, was immaterial, which was included in Equity in net earnings (losses) from equity method investments in our Condensed Consolidated Statement of Income. The Company purchased inventories of $ 136 million and $ 116 million from Sunner for the quarters ended September 30, 2023 and 2022, respectively, and $ 392 million and $ 307 million for the years to date ended September 30, 2023 and 2022, respectively. The Company’s accounts payable and other current liabilities due to Sunner were $ 50 million and $ 53 million as of September 30, 2023 and December 31, 2022, respectively. As of September 30, 2023 and December 31, 2022, the Company’s investment in Sunner was classified in Equity investments and the carrying amounts were $ 217 million and $ 227 million, respectively, exceeding the Company’s interest in Sunner’s underlying net assets by $ 148 million and $ 157 million, respectively. As of September 30, 2023 and December 31, 2022, $ 16 million and $ 18 million of these basis differences were related to finite-lived intangible assets determined upon acquisition, respectively, which are being amortized over the estimated useful life of 20 years . The remaining differences were related to goodwill and indefinite-lived intangible assets, which are not subject to amortization, as well as deferred tax liabilities impact. As of September 30, 2023 and December 31, 2022, the market value of the Company’s investment in Sunner was $ 164 million and $ 214 million based on its quoted closing price, respectively. Meituan Dianping (“Meituan”) Investment In the third quarter of 2018, the Company subscribed for 8.4 million, or less than 1 %, of the ordinary shares of Meituan, an e-commerce platform for services in China, for a total consideration of approximately $ 74 million, when it launched its initial public offering on the HKEX in September 2018. In the second quarter of 2020, the Company sold 4.2 million of the ordinary shares of Meituan. The Company accounts for the equity securities at fair value with subsequent fair value changes recorded in our Condensed Consolidated Statements of Income. The fair value of the investment in Meituan is determined based on the closing market price for the shares at the end of each reporting period. The fair value change, to the extent the closing market price of shares of Meituan as of the end of reporting period is higher than our cost, is subject to U.S. tax. A summary of pre-tax gains or losses on investment in equity securities of Meituan recognized, which were included in Investment gain or loss in our Condensed Consolidated Statements of Income, is as follows: Quarter Ended Year to Date Ended 9/30/2023 9/30/2022 9/30/2023 9/30/2022 Unrealized losses recorded on equity securities still held $ ( 4 ) $ ( 15 ) $ ( 33 ) $ ( 33 ) |
Revenue Recognition
Revenue Recognition | 9 Months Ended |
Sep. 30, 2023 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition | Note 4 – Revenue Recognition The Company’s revenues include Company sales, Franchise fees and income, Revenues from transactions with franchisees, and Other revenues. Company Sales Revenues from Company-owned restaurants are recognized when a customer takes possession of the food and tenders payment, which is when our obligation to perform is satisfied. The Company presents sales net of sales-related taxes. We also offer our customers delivery through both our own mobile applications and third-party aggregators’ platforms, and we primarily use our dedicated riders to deliver orders. When orders are fulfilled by our dedicated riders, we control and determine the price for the delivery service and generally recognize revenue, including delivery fees, when a customer takes possession of the food. When orders are fulfilled by the delivery staff of third-party aggregators, who control and determine the price for the delivery service, we recognize revenue, excluding delivery fees, when control of the food is transferred to the third-party aggregators’ delivery staff. The payment terms with respect to these sales are short-term in nature. We recognize revenues from prepaid stored-value products, including gift cards and product vouchers, when they are redeemed by the customer. Prepaid gift cards sold at any given point generally expire over the next 36 months, and product vouchers generally expire over a period of up to 12 months. We recognize breakage revenue, which is the amount of prepaid stored-value products that is not expected to be redeemed, either (1) proportionally in earnings as redemptions occur, in situations where the Company expects to be entitled to a breakage amount, or (2) when the likelihood of redemption is remote, in situations where the Company does not expect to be entitled to breakage, provided that there is no requirement for remitting balances to government agencies under unclaimed property laws. The Company reviews its breakage estimates at least annually based upon the latest available information regarding redemption and expiration patterns. Our privilege membership programs offer privilege members rights to multiple benefits, such as free delivery and discounts on certain products. For certain privilege membership programs offering a pre-defined amount of benefits that can be redeemed ratably over the membership period, revenue is ratably recognized over the period based on the elapse of time. With respect to privilege membership programs offering members a mix of distinct benefits, including a welcome gift and assorted discount coupons with pre-defined quantities, consideration collected is allocated to the benefits provided based on their relative standalone selling price and revenue is recognized when food or services are delivered or the benefits expire. In determining the relative standalone selling price of the benefits, the Company considers likelihood of future redemption based on historical redemption pattern and reviews such estimates periodically based upon the latest available information regarding redemption and expiration patterns. Franchise Fees and Income Franchise fees and income primarily include upfront franchise fees, such as initial fees and renewal fees, and continuing fees. We have determined that the services we provide in exchange for upfront franchise fees and continuing fees are highly interrelated with the franchise right. We recognize upfront franchise fees received from a franchisee as revenue over the term of the franchise agreement or the renewal agreement because the franchise rights are accounted for as rights to access our symbolic intellectual property. The franchise agreement term is generally 10 years for KFC and Pizza Hut, generally five years for Little Sheep and three to 10 years for Huang Ji Huang. We recognize continuing fees, which are based upon a percentage of franchisee sales, as those sales occur. Revenues from Transactions with Franchisees Revenues from transactions with franchisees consist primarily of sales of food and paper products, advertising services, delivery services and other services provided to franchisees. The Company centrally purchases substantially all food and paper products from suppliers for substantially all of our restaurants, including franchisees, and then sells and delivers them to the restaurants. In addition, the Company owns seasoning facilities for its Chinese dining business unit, which manufacture and sell seasoning products to Huang Ji Huang and Little Sheep franchisees. The Company also provides delivery services to franchisees. The performance obligation arising from such transactions is considered distinct from the franchise agreement as it is not highly dependent on the franchise agreement and the customer can benefit from such services on its own. We consider ourselves the principal in this arrangement as we have the ability to control a promised good or service before transferring that good or service to the franchisees. Revenue is recognized upon transfer of control over ordered items or services, generally upon delivery to the franchisees. For advertising services, the Company often engages third parties to provide services and acts as a principal in the transaction based on our responsibilities of defining the nature of the services and administering and directing all marketing and advertising programs in accordance with the provisions of our franchise agreements. The Company collects advertising contributions, which are generally based on certain percentage of sales from substantially all of our restaurants, including franchisees. Other services provided to franchisees consist primarily of customer and technology support services. Advertising services and other services provided are highly interrelated to franchise right, and are not considered individually distinct. We recognize revenue when the related sales occur. Other Revenues Other revenues primarily include i) sales of products to customers through e-commerce channels and the sale of our seasoning products to distributors, and ii) revenues from logistics and warehousing services provided to third parties through our supply chain network. Our segment disclosures also include revenues relating to delivery services that were provided to our Company-owned restaurants and, therefore, were eliminated for consolidation purposes. Other revenues are recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Loyalty Programs Each of the Company’s KFC and Pizza Hut reportable segments operates a loyalty program that allows registered members to earn points for each qualifying purchase. Points, which generally expire 18 months after being earned, may be redeemed for future purchases of KFC or Pizza Hut branded products or other products for free or at a discounted price. Points cannot be redeemed or exchanged for cash. The estimated value of points earned by the loyalty program members is recorded as a reduction of revenue at the time the points are earned, based on the percentage of points that are projected to be redeemed, with a corresponding deferred revenue liability included in Accounts payable and other current liabilities on the Condensed Consolidated Balance Sheets and subsequently recognized into revenue when the points are redeemed or expire. The Company estimates the value of the future redemption obligations based on the estimated value of the product for which points are expected to be redeemed and historical redemption patterns and reviews such estimates periodically based upon the latest available information regarding redemption and expiration patterns . Disaggregation of Revenue The following tables present revenue disaggregated by types of arrangements and segments: Quarter Ended 9/30/2023 Revenues KFC Pizza Hut All Other Corporate and Unallocated Combined Elimination Consolidated Company sales $ 2,154 $ 591 $ 14 $ — $ 2,759 $ — $ 2,759 Franchise fees and income 16 2 5 — 23 — 23 Revenues from transactions 12 1 20 67 100 — 100 Other revenues 4 5 162 12 183 ( 151 ) 32 Total revenues $ 2,186 $ 599 $ 201 $ 79 $ 3,065 $ ( 151 ) $ 2,914 Quarter Ended 9/30/2022 Revenues KFC Pizza Hut All Other Corporate and Unallocated Combined Elimination Consolidated Company sales $ 1,992 $ 556 $ 13 $ — $ 2,561 $ — $ 2,561 Franchise fees and income 15 2 5 — 22 — 22 Revenues from transactions 9 1 11 59 80 — 80 Other revenues 1 2 157 12 172 ( 150 ) 22 Total revenues $ 2,017 $ 561 $ 186 $ 71 $ 2,835 $ ( 150 ) $ 2,685 Year to Date Ended 9/30/2023 Revenues KFC Pizza Hut All Other Corporate and Unallocated Combined Elimination Consolidated Company sales $ 6,274 $ 1,728 $ 46 $ — $ 8,048 $ — $ 8,048 Franchise fees and income 48 6 15 — 69 — 69 Revenues from transactions 33 3 56 190 282 — 282 Other revenues 13 13 468 32 526 ( 440 ) 86 Total revenues $ 6,368 $ 1,750 $ 585 $ 222 $ 8,925 $ ( 440 ) $ 8,485 Year to Date Ended 9/30/2022 Revenues KFC Pizza Hut All Other Corporate and Unallocated Combined Elimination Consolidated Company sales $ 5,554 $ 1,541 $ 40 $ — $ 7,135 $ — $ 7,135 Franchise fees and income 44 6 15 — 65 — 65 Revenues from transactions 24 3 29 163 219 — 219 Other revenues 6 6 407 31 450 ( 388 ) 62 Total revenues $ 5,628 $ 1,556 $ 491 $ 194 $ 7,869 $ ( 388 ) $ 7,481 Accounts Receivable Accounts receivable primarily consist of trade receivables and royalties from franchisees, and are generally due within 30 days of the period in which the corresponding sales occur. Our provision of credit losses for accounts receivable is based upon the current expected credit losses (“CECL”) model. The CECL model requires an estimate of the credit losses expected over the life of accounts receivable since initial recognition, and accounts receivable with similar risk characteristics are grouped together when estimating CECL. In assessing the CECL, the Company considers both quantitative and qualitative information that is reasonable and supportable, including historical credit loss experience, adjusted for relevant factors impacting collectability and forward-looking information indicative of external market conditions. While we use the best information available in making our determination, the ultimate recovery of recorded receivables is also dependent upon future economic events and other conditions that may be beyond our control. Accounts receivable that are ultimately deemed to be uncollectible, and for which collection efforts have been exhausted, are written off against the allowance for doubtful accounts. As of September 30, 2023 and December 31, 2022, the ending balances of provision for accounts receivable were both $ 2 million, and amounts of accounts receivable past due were immaterial. Costs to Obtain Contracts Costs to obtain contracts consist of upfront franchise fees that we paid to YUM prior to the separation in relation to initial fees or renewal fees we received from franchisees, as well as license fees that are payable to YUM in relation to our deferred revenue of prepaid stored-value products, privilege membership programs and customer loyalty programs. They meet the requirements to be capitalized as they are incremental costs of obtaining contracts with customers and the Company expects to generate future economic benefits from such costs incurred. Such costs to obtain contracts are included in Other assets on the Condensed Consolidated Balance Sheets and are amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the assets relate. Subsequent to the separation, we are no longer required to pay YUM initial or renewal fees that we receive from franchisees. The Company did no t incur any impairment losses related to costs to obtain contracts during any of the periods presented. Costs to obtain contracts were both $ 6 million at September 30, 2023 and December 31, 2022, respectively. Contract Liabilities Contract liabilities at September 30, 2023 and December 31, 2022 were as follows: Contract liabilities 9/30/2023 12/31/2022 – Deferred revenue related to prepaid stored-value products $ 134 $ 139 – Deferred revenue related to upfront franchise fees 34 32 – Deferred revenue related to customer loyalty programs 24 23 – Deferred revenue related to privilege membership programs 21 16 – Others 1 — Total $ 214 $ 210 Contract liabilities primarily consist of deferred revenue related to prepaid stored-value products, privilege membership programs, customer loyalty programs and upfront franchise fees. Deferred revenue related to prepaid stored-value products, privilege membership programs and customer loyalty programs is included in Accounts payable and other current liabilities in the Condensed Consolidated Balance Sheets. Deferred revenue related to upfront franchise fees that we expect to recognize as revenue in the next 12 months is included in Accounts payable and other current liabilities, and the remaining balance is included in Other liabilities in the Condensed Consolidated Balance Sheets. Revenue recognized that was included in the contract liability balance at the beginning of each period amounted to $ 53 million and $ 60 million for the quarters ended September 30, 2023 and 2022, respectively, and $ 97 million and $ 103 million for the years to date ended September 30, 2023 and 2022, respectively. Changes in contract liability balances were not materially impacted by business acquisition, change in estimate of transaction price or any other factors during any of the periods presented. The Company has elected, as a practical expedient, not to disclose the value of remaining performance obligations associated with sales-based royalty promised to franchisees in exchange for franchise right and other related services. The remaining duration of the performance obligation is the remaining contractual term of each franchise agreement. We recognize continuing franchisee fees and revenues from advertising services and other services provided to franchisees based on a certain percentage of sales, as those sales occur. |
Earnings Per Common Share ("EPS
Earnings Per Common Share ("EPS") | 9 Months Ended |
Sep. 30, 2023 | |
Earnings Per Share [Abstract] | |
Earning Per Common Share (EPS) | Note 5 – Earnings Per Common Share (“EPS”) The following table summarizes the components of basic and diluted EPS (in millions, except per share data): Quarter Ended Year to Date Ended 9/30/2023 9/30/2022 9/30/2023 9/30/2022 Net Income – Yum China Holdings, Inc. $ 244 $ 206 $ 730 $ 389 Weighted-average common shares outstanding (a) 416 420 417 422 Effect of dilutive share-based awards (a) 4 4 4 4 Weighted-average common and dilutive potential common shares (a) 420 424 421 426 Basic Earnings Per Common Share $ 0.59 $ 0.49 $ 1.75 $ 0.92 Diluted Earnings Per Common Share $ 0.58 $ 0.49 $ 1.73 $ 0.92 Share-based awards excluded from the diluted EPS computation (b) 3 4 2 4 (a) As a result of the separation, shares of Yum China common stock were distributed to YUM’s shareholders of record as of October 19, 2016 and were included in the calculated weighted-average common shares outstanding. Holders of outstanding YUM equity awards generally received both adjusted YUM awards and Yum China awards, or adjusted awards of either YUM or Yum China in their entirety. Any subsequent exercise of these awards, whether held by the Company’s employees or YUM’s employees, would increase the number of common shares outstanding. The incremental shares arising from outstanding equity awards are included in the computation of diluted EPS, if there is dilutive effect. (b) These outstanding stock appreciation rights (“SARs”), restricted stock units (“RSUs”) and performance stock units (“PSUs”) were excluded from the computation of diluted EPS because to do so would have been antidilutive for the periods presented, or because certain PSUs are contingently issuable based on the achievement of performance and market conditions, which have not been met as of September 30, 2023 and 2022. |
Equity
Equity | 9 Months Ended |
Sep. 30, 2023 | |
Stockholders' Equity Note [Abstract] | |
Equity | Note 6 – Equity Share Repurchase and Retirement As of September 30, 2023, our Board of Directors had authorized an aggregate of $ 2.4 billion for our share repurchase program. During the years to date ended September 30, 2023 and 2022, the Company repurchased 4 .9 million shares of common stock for $ 281 million, and 9.3 million shares of common stock for $ 413 million, respectively, under the repurchase program. The total repurchase cost included $ 2 million settled subsequent to both September 30, 2023 and 2022, for shares repurchased with trade dates on and prior to September 30, 2023 and 2022, respectively. As of September 30, 2023, approximately $ 870 million remained available for future share repurchases under the authorization. The Inflation Reduction Act of 2022 (“IRA”), which is discussed further in Note 14, imposes an excise tax of 1 % on net share repurchases that occur after December 31, 2022. Estimated excise tax on net share repurchases, which was recognized as part of the cost of the shares repurchased, amounted to $ 3 million for the year to date ended September 30, 2023. |
Items Affecting Comparability o
Items Affecting Comparability of Net Income | 9 Months Ended |
Sep. 30, 2023 | |
Items Affecting Comparability Of Net Income [Abstract] | |
Items Affecting Comparability of Net Income | Note 7 – Items Affecting Comparability of Net Income Impact of COVID-19 Pandemic Starting in the first quarter of 2020, the COVID-19 pandemic significantly impacted the Company’s operations and caused significant volatility in our operations. The Company’s tremendous efforts in seizing opportunities as the country pivoted from strict COVID-19 measures drove strong sales growth in 2023 . Operating profit was $ 323 million and $ 316 million for the quarters ended September 30, 2023 and 2022, respectively, and $ 996 million and $ 588 million for the years to date ended September 30, 2023 and 2022, respectively. The increase in Operating profit for the quarter and year to date ended September 30, 2023 was primarily driven by sales leveraging, partially offset by lapping austerity measures and the temporary relief in the prior year. The temporary relief of $ 1 million and $ 30 million was recognized for the quarters ended September 30, 2023 and 2022, respectively , and $ 14 million and $ 61 million was recognized for the years to date ended September 30, 2023 and 2022, respectively. Fair Value Changes for Investment in Equity Securities In September 2018, we invested in the equity securities of Meituan, the fair value of which is determined based on the closing market price for the shares at the end of each reporting period, with subsequent fair value changes recorded as Investment loss in our Condensed Consolidated Statements of Income. We recorded related pre-tax unrealized investment loss of $ 4 million and $ 15 million for the quarters ended September 30, 2023 and 2022, respectively, and pre-tax unrealized investment loss of $ 33 million for both the years to date ended September 30, 2023 and 2022. See Note 3 for additional information on our investment in Meituan. |
Other Expenses, Net
Other Expenses, Net | 9 Months Ended |
Sep. 30, 2023 | |
Other Income and Expenses [Abstract] | |
Other Expenses, Net | Note 8 – Other Expenses, net Quarter Ended Year to Date Ended 9/30/2023 9/30/2022 9/30/2023 9/30/2022 Amortization of reacquired franchise rights (a) $ — $ 24 $ 2 $ 74 Foreign exchange impact and others — — ( 1 ) ( 1 ) Other expenses, net $ — $ 24 $ 1 $ 73 (a) As a result of the acquisition 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 are being amortized over the remaining franchise contract period of 1 year, 2.4 years and 5 years. The above reacquired franchise rights were substantially amortized as of December 31, 2022 and resulted in the decrease of amortization expenses in the quarter and year to date ended September 30, 2023. |
Supplemental Balance Sheet Info
Supplemental Balance Sheet Information | 9 Months Ended |
Sep. 30, 2023 | |
Balance Sheet Related Disclosures [Abstract] | |
Supplemental Balance Sheet Information | Note 9 – Supplemental Balance Sheet Information Accounts Receivable, net 9/30/2023 12/31/2022 Accounts receivable, gross $ 64 $ 66 Allowance for doubtful accounts ( 2 ) ( 2 ) Accounts receivable, net $ 62 $ 64 Prepaid Expenses and Other Current Assets 9/30/2023 12/31/2022 VAT assets $ 84 $ 88 Receivables from payment processors and aggregators 52 53 Interest receivables 36 31 Deposits, primarily lease deposits 26 24 Dividends receivable from equity method investees 8 6 Other prepaid expenses and current assets 104 105 Prepaid expenses and other current assets $ 310 $ 307 Property, Plant and Equipment (“PP&E”) 9/30/2023 12/31/2022 Buildings and improvements, and construction in progress $ 2,893 $ 2,912 Finance leases, primarily buildings 63 62 Machinery and equipment 1,635 1,612 PP&E, gross 4,591 4,586 Accumulated depreciation ( 2,474 ) ( 2,468 ) PP&E, net $ 2,117 $ 2,118 Equity Investments 9/30/2023 12/31/2022 Investment in equity method investees $ 257 $ 266 Investment in equity securities 62 95 Equity investments $ 319 $ 361 Other Assets 9/30/2023 12/31/2022 Land use right $ 113 $ 123 Long-term deposits, primarily lease deposits 89 90 Prepayment for acquisition of PP&E (a) 29 6 Costs to obtain contracts 6 6 VAT assets 6 5 Others 16 18 Other assets $ 259 $ 248 (a) The increase was primarily due to a prepayment made in relation to the acquisition of a building located in Shanghai to house the Company’s headquarters and flagship stores, which is currently expected to be delivered to the Company around 2026. Accounts Payable and Other Current Liabilities 9/30/2023 12/31/2022 Accounts payable $ 758 $ 727 Operating lease liabilities 405 448 Accrued compensation and benefits 306 285 Contract liabilities 186 182 Accrued capital expenditures 180 181 Dividends payable 79 51 Accrued marketing expenses 85 72 Other current liabilities 130 150 Accounts payable and other current liabilities $ 2,129 $ 2,096 Other Liabilities 9/30/2023 12/31/2022 Accrued income tax payable $ 38 $ 52 Contract liabilities 28 28 Other non-current liabilities 81 82 Other liabilities $ 147 $ 162 |
Short-term Borrowings
Short-term Borrowings | 9 Months Ended |
Sep. 30, 2023 | |
Short-Term Debt [Abstract] | |
Short-term Borrowings | Note 11 – Short-term Borrowings As of September 30, 2023 and December 31, 2022, the Company had outstanding short-term bank borrowings of $ 210 million and $ 2 million, respectively, mainly to manage working capital at its operating subsidiaries, which were secured by short-term investments of $ 106 million and $ 1 million, respectively. The RMB denominated bank borrowings bear a weighted-average interest rate of 1.7 %, and are due within one year from their issuance dates. Borrowings are recognized initially at fair value, net of debt discounts or premiums and debt issuance costs, if applicable. Debt discounts or premiums and debt issuance costs are recorded as an adjustment to the principal amount and the related accretion is amortized into interest expense in the Condensed Consolidated Statements of Income over the term of the borrowings using the effective interest method. Borrowings are subsequently measured at amortized cost. Interest expense is recognized over the term of the borrowing and recorded in the Condensed Consolidated Statements of Income. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 9 Months Ended |
Sep. 30, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Note 10 – Goodwill and Intangible Assets The changes in the carrying amount of goodwill are as follows: Total KFC Pizza Hut All Other Balance as of December 31, 2022 Goodwill, gross $ 2,379 $ 1,893 $ 19 $ 467 Accumulated impairment losses (a) ( 391 ) — — ( 391 ) Goodwill, net 1,988 1,893 19 76 Effect of currency translation adjustments ( 109 ) ( 104 ) ( 1 ) ( 4 ) Balance as of September 30, 2023 Goodwill, gross 2,270 1,789 18 463 Accumulated impairment losses (a) ( 391 ) — — ( 391 ) Goodwill, net $ 1,879 $ 1,789 $ 18 $ 72 (a) Accumulated impairment losses represent goodwill impairment attributable to the reporting units of Little Sheep and Daojia. Intangible assets, net as of September 30, 2023 and December 31, 2022 are as follows: 9/30/2023 12/31/2022 Gross (a) Accumulated (a) Accumulated Impairment Losses (b) Net Carrying Amount Gross Accumulated Accumulated Impairment Losses (b) Net Carrying Amount Finite-lived intangible assets Reacquired franchise $ 261 $ ( 258 ) $ — $ 3 $ 276 $ ( 271 ) $ — $ 5 Huang Ji Huang 20 ( 3 ) — 17 22 ( 3 ) — 19 Daojia platform 16 ( 4 ) ( 12 ) — 16 ( 4 ) ( 12 ) — Customer-related assets 12 ( 10 ) ( 2 ) — 12 ( 9 ) ( 2 ) 1 Others 8 ( 5 ) — 3 9 ( 5 ) — 4 $ 317 $ ( 280 ) $ ( 14 ) $ 23 $ 335 $ ( 292 ) $ ( 14 ) $ 29 Indefinite-lived intangible Little Sheep trademark $ 50 $ — $ — $ 50 $ 52 $ — $ — $ 52 Huang Ji Huang 74 — — 74 78 — — 78 $ 124 $ — $ — $ 124 $ 130 $ — $ — $ 130 Total intangible assets $ 441 $ ( 280 ) $ ( 14 ) $ 147 $ 465 $ ( 292 ) $ ( 14 ) $ 159 (a) Changes in gross carrying amount and accumulated amortization include the effect of currency translation adjustments. (b) Accumulated impairment losses represent impairment charges on intangible assets acquired from Daojia primarily attributable to the Daojia platform. Amortization expense for finite-lived intangible assets was $ 1 million and $ 24 million for the quarters ended September 30, 2023 and 2022, respectively, and $ 4 million and $ 76 million for the years to date ended September 30, 2023 and 2022, respectively. The decrease in amortized expense for finite-lived intangible assets in 2023 was primarily due to certain reacquired franchise rights being substantially amortized as of December 31, 2022 (See Note 8 for details). As of September 30, 2023, expected amortization expense for the unamortized finite-lived intangible assets is approximately $ 1 million for the remainder of 2023, and $ 2 million in each of 2024, 2025, 2026 and 2027. |
Leases
Leases | 9 Months Ended |
Sep. 30, 2023 | |
Leases [Abstract] | |
Leases | Note 12 – Leases As of September 30, 2023, we leased over 12,000 properties in China for our Company-owned restaurants. We generally enter into lease agreements for our restaurants with initial terms of 10 to 20 years . Most of our lease agreements contain termination options that permit us to terminate the lease agreement early if the restaurant’s unit contribution is negative for a specified period of time. We generally do not have renewal options for our leases. Such options are accounted for only when it is reasonably certain that we will exercise the options. The rent under the majority of our current restaurant lease agreements is generally payable in one of three ways: (i) fixed rent; (ii) the higher of a fixed base rent or a percentage of the restaurant’s sales; or (iii) a percentage of the restaurant’s sales. Most leases require us to pay common area maintenance fees for the leased property. In addition to restaurants leases, we also lease office spaces, logistics centers and equipment. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. In limited cases, we sub-lease certain restaurants to franchisees in connection with refranchising transactions or lease our properties to other third parties. The lease payments under these leases are generally based on the higher of a fixed base rent or a percentage of the restaurant’s annual sales. Income from sub-lease agreements with franchisees or lease agreements with other third parties are included in Franchise fees and income and Other revenues, respectively, within our Condensed Consolidated Statements of Income. Supplemental Balance Sheet 9/30/2023 12/31/2022 Account Classification Assets Operating lease right-of-use assets $ 2,083 $ 2,219 Operating lease right-of-use assets Finance lease right-of-use assets 38 38 PP&E, net Total leased assets (a) $ 2,121 $ 2,257 Liabilities Current Operating lease liabilities $ 405 $ 448 Accounts payable and other current liabilities Finance lease liabilities 4 5 Accounts payable and other current liabilities Non-current Operating lease liabilities 1,787 1,906 Non-current operating lease liabilities Finance lease liabilities 41 42 Non-current finance lease liabilities Total lease liabilities (a) $ 2,237 $ 2,401 Summary of Lease Cost Quarter Ended Year to Date Ended 9/30/2023 9/30/2022 9/30/2023 9/30/2022 Account Classification Operating lease cost $ 125 $ 133 $ 386 $ 433 Occupancy and other operating expenses, Finance lease cost Amortization of leased assets 1 1 3 3 Occupancy and other operating expenses Interest on lease liabilities 1 1 2 2 Interest income, net Variable lease cost (b) 115 89 316 248 Occupancy and other operating expenses Short-term lease cost 3 3 12 10 Occupancy and other operating expenses Sub-lease income ( 5 ) ( 5 ) ( 16 ) ( 18 ) Franchise fees and income or Total lease cost $ 240 $ 222 $ 703 $ 678 (a) As of September 30, 2023, the decrease of right-of-use (“ROU”) assets was primarily due to amortization, a higher portion of our new leases with variable lease payments and the impact of foreign currency translation. The decrease of lease liabilities was consistent with the decrease of ROU assets. (b) The Company was granted less than $ 1 million and $ 13 million in lease concessions from landlords related to the effects of the COVID-19 pandemic during the quarters ended September 30, 2023 and 2022, respectively, and $ 10 million and $ 27 million during the years to date ended September 30, 2023 and 2022, respectively. 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. The Company applied the interpretive guidance in a FASB staff question-and-answer document issued in April 2020 and elected: (1) not to evaluate whether a concession received in response to the COVID-19 pandemic is a lease modification and (2) to assume such concession was contemplated as part of the existing lease contract with no contract modification. Such concession was recognized as negative variable lease cost in the period the concession was granted. Supplemental Cash Flow Information Year to Date Ended 9/30/2023 9/30/2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 401 $ 416 Operating cash flows from finance leases 2 2 Financing cash flows from finance leases 4 3 Right-of-use assets obtained in exchange for lease liabilities (c) : Operating leases $ 281 $ 106 Finance leases 4 4 (c) This supplemental non-cash disclosure for ROU assets obtained in exchange for lease liabilities includes an increase in lease liabilities associated with obtaining new ROU assets of $ 281 million and $ 232 million for the years to date ended September 30, 2023 and 2022, respectively, as well as adjustments to lease liabilities or ROU assets due to modification or other reassessment events, which resulted in a $ 4 million increase and $ 122 million decrease in lease liabilities for the years to date ended September 30, 2023 and 2022, respectively. Lease Term and Discount Rate 9/30/2023 9/30/2022 Weighted-average remaining lease term (years) Operating leases 7.1 7.1 Finance leases 11.1 11.3 Weighted-average discount rate Operating leases 4.9 % 5.2 % Finance leases 5.0 % 5.3 % Summary of Future Lease Payments and Lease Liabilities Maturities of lease liabilities as of September 30, 2023 were as follows: Amount of Amount of Total Remainder of 2023 $ 148 $ 2 $ 150 2024 461 6 467 2025 406 6 412 2026 359 6 365 2027 306 5 311 Thereafter 922 34 956 Total undiscounted lease payment 2,602 59 2,661 Less: imputed interest (d) 410 14 424 Present value of lease liabilities $ 2,192 $ 45 $ 2,237 (d) As the rate implicit in the lease cannot be readily determined, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the imputed interest and present value of lease payments. We used the incremental borrowing rate on January 1, 2019 for operating leases that commenced prior to that date. As of September 30, 2023, we have additional lease agreements that have been signed but not yet commenced, with total undiscounted minimum lease payments of $ 122 million. These leases will commence between the fourth quarter of 2023 and 2026 with lease terms of 1 year to 20 years. |
Fair Value Measurements and Dis
Fair Value Measurements and Disclosures | 9 Months Ended |
Sep. 30, 2023 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements and Disclosures | Note 13 – Fair Value Measurements and Disclosures The Company’s financial assets and liabilities primarily consist of cash and cash equivalents, short-term investments, long-term bank deposits and notes, accounts receivable, accounts payable, short-term borrowings and lease liabilities, and the carrying values of these assets and liabilities approximate their fair value in general. The Company’s financial assets also include its investment in the equity securities of Meituan, which is measured at fair value based on the closing market price for the shares at the end of each reporting period, with subsequent fair value changes recorded in our Condensed Consolidated Statements of Income. The following table is a summary of our financial assets measured on a recurring basis or disclosed at fair value and the level within the fair value hierarchy in which the measurement falls. The Company classifies its cash equivalents, short-term investments, long-term bank deposits and notes, and investment in equity securities within Level 1 or Level 2 in the fair value hierarchy because it uses quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine their fair value, respectively. No transfers among the levels within the fair value hierarchy occurred during the quarters and years to date ended September 30, 2023 and 2022. Fair Value Measurement or Disclosure Balance at Level 1 Level 2 Level 3 Cash equivalents: Time deposits $ 377 $ 377 Money market funds 11 11 Total cash equivalents 388 11 377 — Short-term investments: Time deposits 1,622 1,622 Fixed income debt securities (a) 200 200 Structured deposits 152 152 Variable return investments 27 27 Total short-term investments 2,001 27 1,974 — Long-term bank deposits and notes: Time deposits 879 879 Fixed income bank notes (a) 358 358 Total long-term bank deposits and notes 1,237 — 1,237 — Equity investments: Investment in equity securities 62 62 Total $ 3,688 $ 100 $ 3,588 $ — Fair Value Measurement or Disclosure Balance at Level 1 Level 2 Level 3 Cash equivalents: Time deposits $ 355 $ 355 Fixed income debt securities (a) 129 29 100 Money market funds 59 59 Total cash equivalents 543 88 455 — Short-term investments: Time deposits 1,434 1,434 Fixed income debt securities (a) 500 500 Structured deposits 88 88 Total short-term investments 2,022 — 2,022 — Long-term bank deposits and notes: Time deposits 680 680 Equity investments: Investment in equity securities 95 95 Total $ 3,340 $ 183 $ 3,157 $ — (a) Classified as held-to-maturity investments and measured at amortized cost. The Company is required to place bank deposits or purchase insurance to secure the balance of prepaid stored-value cards issued by the Company pursuant to regulatory requirements. $ 21 million of time deposits in Short-term investments and $ 27 million of time deposits in Long-term bank deposits and notes were restricted for use as of September 30, 2023, and $ 81 million of time deposits in Long-term bank deposits and notes was restricted for use as of December 31, 2022. The decrease was primarily due to insurance purchased by the Company to secure a portion of prepaid stored-value cards. Non-Recurring Fair Value Measurements In addition, certain of the Company’s restaurant-level assets (including operating lease ROU assets and PP&E), goodwill and intangible assets are measured at fair value based on unobservable inputs (Level 3) on a non-recurring basis, if determined to be impaired. In determining the fair value of restaurant-level assets, the Company considered the highest and best use of the assets from a market participants’ perspective, which is represented by the higher of the forecasted discounted cash flows from operating restaurants and the price market participants would pay to sub-lease the ROU assets and acquire the remaining restaurants assets, even if that use differs from the current use by the Company. The after-tax cash flows incorporate reasonable assumptions we believe a franchisee would make, such as sales growth, and include a deduction for royalties we would receive under a franchise agreement with terms substantially at market. The discount rate used in the fair value calculation is our estimate of the required rate-of-return that a franchisee would expect to receive when purchasing a similar restaurant and the related long-lived assets. In situations where the highest and best use of restaurant-level assets are represented by sub-leasing the operating lease ROU assets and acquiring the remaining restaurant assets, the Company continues to use these assets in operating its restaurant business, which is consistent with its long-term strategy of growing revenue through operating restaurant concepts. As of each relevant measurement date, the fair value of restaurant-level assets, if determined to be impaired, are primarily represented by the price market participant would pay to sub-lease the operating lease ROU assets and acquire the remaining restaurants assets, which reflects the highest and best use of the assets. Significant unobservable inputs used in the fair value measurement include market rental prices, which were determined with the assistance of an independent valuation specialist. The direct comparison approach is used as the valuation technique by assuming a sub-lease of each of the properties in its existing state with vacant possession. By making reference to lease transactions as available in the relevant market, comparable properties in close proximity have been selected and adjustments have been made to account for any difference in factors such as location and property size. The following table presents amounts recognized from all non-recurring fair value measurements based on unobservable inputs (Level 3) during the quarters and years to date ended September 30, 2023 and 2022. These amounts exclude fair value measurements made for restaurants that were subsequently closed or refranchised prior to those respective period-end dates. Quarter Ended Year to Date Ended 9/30/2023 9/30/2022 9/30/2023 9/30/2022 Account Classification Restaurant-level impairment (a) $ — $ — $ 14 $ 15 Closure and impairment expenses, net Restaurant-level impairment charges are recorded in Closures and impairment expenses, net and resulted mainly from our semi-annual impairment evaluation of long-lived assets of individual restaurants that were being operated at the time of impairment and had not been offered for refranchising. After considering the impairment charges recorded during the corresponding periods, the fair value of such assets as of the relevant measurement date was $ 55 million and $ 67 million for the years to date ended September 30, 2023 and 2022, respectively. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 14 – Income Taxes Quarter Ended Year to Date Ended 9/30/2023 9/30/2022 9/30/2023 9/30/2022 Income tax provision $ 100 $ 97 $ 296 $ 183 Effective tax rate 27.5 % 29.9 % 27.2 % 30.1 % The lower effective tax rate for the quarter ended September 30, 2023 was primarily due to a reduction in valuation allowance for improved performance at certain subsidiaries and an increase in benefits from preferential tax treatment at qualified subsidiaries. The lower effective tax rate for the year to date ended September 30, 2023 was primarily due to a reduction in valuation allowance for improved performance at certain subsidiaries, an increase in benefits from preferential tax treatment at qualified subsidiaries, and the impact of higher pre-tax income. In December 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Tax Act”), which included a broad range of tax reforms. The Tax Act requires a U.S. shareholder to be subject to tax on Global Intangible Low Taxed Income (“GILTI”) earned by certain foreign subsidiaries. We have elected the option to account for current year GILTI tax as a period cost as incurred, and therefore included it in estimating the annual effective tax rate. In August 2022, the IRA was signed into law in the U.S., which contains certain tax measures, including a Corporate Alternative Minimum Tax (“CAMT”) of 15 % on certain large corporations. On December 27, 2022, the U.S. Treasury Department and the Internal Revenue Services (the “IRS”) released Notice 2023-7, announcing their intention to issue proposed regulations addressing the application of the new CAMT. Notice 2023-7 also provides interim guidance regarding certain CAMT issues, and states that the U.S. Treasury Department and the IRS plan to issue additional interim guidance addressing other issues before publishing proposed regulations. The Company will monitor the regulatory developments and continue to evaluate the impact on our financial statements, if any. In December 2022, a refined Foreign Sourced Income Exemption (“FSIE”) regime was published in Hong Kong and took effect from January 1, 2023. Under the new FSIE regime, certain foreign sourced income would be deemed as being sourced from Hong Kong and chargeable to Hong Kong Profits Tax, if the recipient entity fails to meet the prescribed exception requirements. Certain dividends, interests and disposal gains, if any, received by us and our Hong Kong subsidiaries will be subject to the new tax regime. Based on our preliminary analysis, we do not believe this legislation will have a material impact on our financial statements. The Company will monitor the regulatory developments and continue to evaluate the impact, if any. We are subject to reviews, examinations and audits by Chinese tax authorities, the IRS and other tax authorities with respect to income and non-income based taxes. Since 2016, we have been under a national audit on transfer pricing by the Chinese State Taxation Administration (the “STA”) in China regarding our related party transactions for the period from 2006 to 2015. The information and views currently exchanged with the tax authorities focus on our franchise arrangement with YUM. We continue to provide information requested by the tax authorities to the extent it is available to the Company. It is reasonably possible that there could be significant developments, including expert review and assessment by the STA, within the next 12 months. The ultimate assessment and decision of the STA will depend upon further review of the information provided, as well as ongoing technical and other discussions with the STA and in-charge local tax authorities, and therefore, it is not possible to reasonably estimate the potential impact at this time. We will continue to defend our transfer pricing position. However, if the STA prevails in the assessment of additional tax due based on its ruling, the assessed tax, interest and penalties, if any, could have a material adverse impact on our financial position, results of operations and cash flows. |
Segment Reporting
Segment Reporting | 9 Months Ended |
Sep. 30, 2023 | |
Segment Reporting [Abstract] | |
Segment Reporting | Note 15 – Segment Reporting We have two reportable segments: KFC and Pizza Hut. Our remaining non-reportable operating segments, including the operations of Taco Bell, Lavazza, Little Sheep, Huang Ji Huang, our delivery operating segment and our e-commerce business, and for 2022, also including COFFii & JOY and East Dawning, are combined and referred to as All Other Segments, as these operating segments are insignificant both individually and in aggregate. Quarter Ended 9/30/2023 Revenues KFC Pizza Hut All Other Corporate and Unallocated (a) Combined Elimination Consolidated Revenue from external $ 2,186 $ 599 $ 50 $ 79 $ 2,914 $ — $ 2,914 Inter-segment revenue — — 151 — 151 ( 151 ) — Total $ 2,186 $ 599 $ 201 $ 79 $ 3,065 $ ( 151 ) $ 2,914 Quarter Ended 9/30/2022 Revenues KFC Pizza Hut All Other Corporate and Unallocated (a) Combined Elimination Consolidated Revenue from external $ 2,017 $ 561 $ 41 $ 66 $ 2,685 $ — $ 2,685 Inter-segment revenue — — 145 5 150 ( 150 ) — Total $ 2,017 $ 561 $ 186 $ 71 $ 2,835 $ ( 150 ) $ 2,685 Year to Date Ended 9/30/2023 Revenues KFC Pizza Hut All Other Corporate and Unallocated (a) Combined Elimination Consolidated Revenue from external $ 6,368 $ 1,750 $ 145 $ 222 $ 8,485 $ — $ 8,485 Inter-segment revenue — — 440 — 440 ( 440 ) — Total $ 6,368 $ 1,750 $ 585 $ 222 $ 8,925 $ ( 440 ) $ 8,485 Year to Date Ended 9/30/2022 Revenues KFC Pizza Hut All Other Corporate and Unallocated (a) Combined Elimination Consolidated Revenue from external $ 5,628 $ 1,556 $ 115 $ 182 $ 7,481 $ — $ 7,481 Inter-segment revenue — — 376 12 388 ( 388 ) — Total $ 5,628 $ 1,556 $ 491 $ 194 $ 7,869 $ ( 388 ) $ 7,481 Quarter Ended Year to Date Ended Operating Profit (Loss) 9/30/2023 9/30/2022 9/30/2023 9/30/2022 KFC $ 342 $ 328 $ 1,035 $ 670 Pizza Hut 47 49 137 90 All Other Segments ( 7 ) ( 9 ) ( 20 ) ( 39 ) Unallocated revenues from transactions with franchisees (b) 67 59 190 163 Unallocated other revenues 12 12 32 31 Unallocated expenses for transactions with franchisees (b) ( 66 ) ( 58 ) ( 188 ) ( 163 ) Unallocated other operating costs and expenses ( 12 ) ( 10 ) ( 30 ) ( 28 ) Unallocated and corporate G&A expenses ( 60 ) ( 55 ) ( 161 ) ( 138 ) Unallocated other income, net — — 1 2 Operating Profit $ 323 $ 316 $ 996 $ 588 Interest income, net (a) 46 25 124 51 Investment loss (a) ( 4 ) ( 15 ) ( 32 ) ( 32 ) Income Before Income Taxes and Equity in $ 365 $ 326 $ 1,088 $ 607 Quarter Ended Year to Date Ended Impairment Charges 9/30/2023 9/30/2022 9/30/2023 9/30/2022 KFC (c) $ 2 $ 5 $ 14 $ 24 Pizza Hut (c) 1 — 6 5 All Other Segments (c) — 2 4 8 $ 3 $ 7 $ 24 $ 37 Total Assets 9/30/2023 12/31/2022 KFC $ 5,053 $ 5,296 Pizza Hut 856 880 All Other Segments 356 381 Corporate and Unallocated (d) 5,805 5,269 $ 12,070 $ 11,826 (a) Amounts have not been allocated to any segment for performance reporting purposes. (b) 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 then sells and delivers to KFC and Pizza Hut restaurants, including franchisees. Amounts have not been allocated to any segment for purposes of making operating decisions or assessing financial performance as the transactions are deemed corporate revenues and expenses in nature. (c) Primarily includes store closure impairment charges and restaurant-level impairment charges resulting from our semi-annual impairment evaluation. (d) Primarily includes cash and cash equivalents, short-term investments, long-term bank deposits and notes, equity investments, inventories that are centrally managed and PP&E that are not specifically identifiable within each segment. As substantially all of the Company's revenue is derived from the PRC and substantially all of the Company's long-lived assets are located in the PRC, no geographical information is presented. In addition, revenue derived from and long-lived assets located in the U.S., the Company’s country of domicile, are immaterial. |
Contingencies
Contingencies | 9 Months Ended |
Sep. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Note 16 – Contingencies Indemnification of China Tax on Indirect Transfers of Assets In February 2015, the STA issued Bulletin 7 on Income arising from Indirect Transfers of Assets by Non-Resident Enterprises. Pursuant to Bulletin 7, an “indirect transfer” of Chinese taxable assets, including equity interests in a Chinese resident enterprise, by a non-resident enterprise, may be recharacterized and treated as a direct transfer of Chinese taxable assets, if such arrangement does not have reasonable commercial purpose and the transferor has avoided payment of Chinese enterprise income tax. As a result, gains derived from such an indirect transfer may be subject to Chinese enterprise income tax at a rate of 10 %. YUM concluded, and we concurred, that it is more likely than not that YUM will not be subject to this tax with respect to the pro rata distribution of all outstanding shares of Yum China common stock to shareholders of YUM in connection with the separation (the “distribution”). However, there are significant uncertainties regarding what constitutes a reasonable commercial purpose, how the safe harbor provisions for group restructurings are to be interpreted, and how the taxing authorities will ultimately view the distribution. As a result, YUM’s position could be challenged by Chinese tax authorities resulting in a 10 % tax assessed on the difference between the fair market value and the tax basis of the separated China business. As YUM’s tax basis in the China business is minimal, the amount of such a tax could be significant. Any tax liability arising from the application of Bulletin 7 to the distribution is expected to be settled in accordance with the tax matters agreement between the Company and YUM. Pursuant to the tax matters agreement, to the extent any Chinese indirect transfer tax pursuant to Bulletin 7 is imposed, such tax and related losses will be allocated between YUM and the Company in proportion to their respective share of the combined market capitalization of YUM and the Company during the 30 trading days after the separation. Such a settlement could be significant and have a material adverse effect on our results of operations and our financial condition. At the inception of the tax indemnity being provided to YUM, the fair value of the non-contingent obligation to stand ready to perform was insignificant and the liability for the contingent obligation to make payment was not probable or estimable. Guarantees for Franchisees From time to time, we have guaranteed certain lines of credit and loans of franchisees. As of September 30, 2023, no guarantees were outstanding for franchisees. Legal Proceedings The Company is subject to various lawsuits covering a variety of allegations from time to time. The Company believes that the ultimate liability, if any, in excess of amounts already provided for these matters in the Condensed Consolidated Financial Statements, is not likely to have a material adverse effect on the Company’s results of operations, financial condition or cash flows. Matters faced by the Company from time to time include, but are not limited to, claims from landlords, employees, customers and others related to operational, contractual or employment issues. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 17 – Subsequent Events Cash Dividend On October 31, 2023 , the Company announced that the Board of Directors declared a cash dividend of $ 0.13 per share on Yum China ’ s common stock, payable on December 19, 2023 , to stockholders of record as of the close of business on November 28, 2023 . Total estimated cash dividend payable is approximately $ 54 million. Share Repurchase Authorization On November 2, 2023, the Company announced that the Board of Directors increased the share repurchase authorization by $ 1 billion to an aggregate of $ 3.4 billion. With the increase of share repurchase authorization, approximately $ 1.8 billion remained available for future share repurchases under the authorization. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2023 | |
Accounting Policies [Abstract] | |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08 Business Combinations (Topic 805) — Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). It requires issuers to apply ASC 606 Revenue from Contracts with Customers to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. We adopted this standard on January 1, 2023, and such adoption did not have a material impact on our financial statements. In March 2022, the FASB issued ASU 2022-01 Fair Value Hedging—Portfolio Layer Method (“ASU 2022-01”), which allows entities to expand their use of the portfolio layer method for fair value hedges of interest rate risk. Under the guidance, entities can hedge all financial assets under the portfolio layer method and designate multiple hedged layers within a single closed portfolio. The guidance also clarifies the accounting for fair value hedge basis adjustments in portfolio layer hedges and how these adjustments should be disclosed. We adopted this standard on January 1, 2023, and such adoption did not have a material impact on our financial statements. In March 2022, the FASB issued ASU 2022-02 Financial Instrument—Credit Losses (“ASU 2022-02”), amending ASC 310 to eliminate the recognition and measurement guidance for a troubled debt restructuring for creditors that have adopted ASC 326 and requiring them to make enhanced disclosures about loan modifications for borrowers experiencing financial difficulty. The guidance also requires entities to present gross write-offs by year of origination in their vintage disclosures. We adopted this standard on January 1, 2023, and such adoption did not have a material impact on our financial statements. In June 2022, the FASB issued ASU 2022-03 Fair Value Measurement—Fair Value Measurement of Equity Securities Subject to Contractual Sale Restriction (“ASU 2022-03”), clarifying that a contractual restriction on sales of an equity security is not considered part of the unit of account of the equity security, and therefore, is not considered when measuring fair value. The guidance also clarifies that a contractual sales restriction should not be recognized as a separate unit of account. We adopted this standard on January 1, 2023, and such adoption did not have a material impact on our financial statements. In September 2022, the FASB issued ASU 2022-04 Liabilities—Disclosure of Supplier Finance Program Obligations (“ASU 2022-04”), requiring entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the programs and information about their obligations outstanding at the end of the reporting period. We adopted this standard on January 1, 2023, and such adoption did not have a material impact on our financial statements. |
Fair Value Measurements and Disclosures | Non-Recurring Fair Value Measurements In addition, certain of the Company’s restaurant-level assets (including operating lease ROU assets and PP&E), goodwill and intangible assets are measured at fair value based on unobservable inputs (Level 3) on a non-recurring basis, if determined to be impaired. In determining the fair value of restaurant-level assets, the Company considered the highest and best use of the assets from a market participants’ perspective, which is represented by the higher of the forecasted discounted cash flows from operating restaurants and the price market participants would pay to sub-lease the ROU assets and acquire the remaining restaurants assets, even if that use differs from the current use by the Company. The after-tax cash flows incorporate reasonable assumptions we believe a franchisee would make, such as sales growth, and include a deduction for royalties we would receive under a franchise agreement with terms substantially at market. The discount rate used in the fair value calculation is our estimate of the required rate-of-return that a franchisee would expect to receive when purchasing a similar restaurant and the related long-lived assets. In situations where the highest and best use of restaurant-level assets are represented by sub-leasing the operating lease ROU assets and acquiring the remaining restaurant assets, the Company continues to use these assets in operating its restaurant business, which is consistent with its long-term strategy of growing revenue through operating restaurant concepts. As of each relevant measurement date, the fair value of restaurant-level assets, if determined to be impaired, are primarily represented by the price market participant would pay to sub-lease the operating lease ROU assets and acquire the remaining restaurants assets, which reflects the highest and best use of the assets. Significant unobservable inputs used in the fair value measurement include market rental prices, which were determined with the assistance of an independent valuation specialist. The direct comparison approach is used as the valuation technique by assuming a sub-lease of each of the properties in its existing state with vacant possession. By making reference to lease transactions as available in the relevant market, comparable properties in close proximity have been selected and adjustments have been made to account for any difference in factors such as location and property size. The following table presents amounts recognized from all non-recurring fair value measurements based on unobservable inputs (Level 3) during the quarters and years to date ended September 30, 2023 and 2022. These amounts exclude fair value measurements made for restaurants that were subsequently closed or refranchised prior to those respective period-end dates. Quarter Ended Year to Date Ended 9/30/2023 9/30/2022 9/30/2023 9/30/2022 Account Classification Restaurant-level impairment (a) $ — $ — $ 14 $ 15 Closure and impairment expenses, net |
Revenue Recognition | Company Sales Revenues from Company-owned restaurants are recognized when a customer takes possession of the food and tenders payment, which is when our obligation to perform is satisfied. The Company presents sales net of sales-related taxes. We also offer our customers delivery through both our own mobile applications and third-party aggregators’ platforms, and we primarily use our dedicated riders to deliver orders. When orders are fulfilled by our dedicated riders, we control and determine the price for the delivery service and generally recognize revenue, including delivery fees, when a customer takes possession of the food. When orders are fulfilled by the delivery staff of third-party aggregators, who control and determine the price for the delivery service, we recognize revenue, excluding delivery fees, when control of the food is transferred to the third-party aggregators’ delivery staff. The payment terms with respect to these sales are short-term in nature. We recognize revenues from prepaid stored-value products, including gift cards and product vouchers, when they are redeemed by the customer. Prepaid gift cards sold at any given point generally expire over the next 36 months, and product vouchers generally expire over a period of up to 12 months. We recognize breakage revenue, which is the amount of prepaid stored-value products that is not expected to be redeemed, either (1) proportionally in earnings as redemptions occur, in situations where the Company expects to be entitled to a breakage amount, or (2) when the likelihood of redemption is remote, in situations where the Company does not expect to be entitled to breakage, provided that there is no requirement for remitting balances to government agencies under unclaimed property laws. The Company reviews its breakage estimates at least annually based upon the latest available information regarding redemption and expiration patterns. Our privilege membership programs offer privilege members rights to multiple benefits, such as free delivery and discounts on certain products. For certain privilege membership programs offering a pre-defined amount of benefits that can be redeemed ratably over the membership period, revenue is ratably recognized over the period based on the elapse of time. With respect to privilege membership programs offering members a mix of distinct benefits, including a welcome gift and assorted discount coupons with pre-defined quantities, consideration collected is allocated to the benefits provided based on their relative standalone selling price and revenue is recognized when food or services are delivered or the benefits expire. In determining the relative standalone selling price of the benefits, the Company considers likelihood of future redemption based on historical redemption pattern and reviews such estimates periodically based upon the latest available information regarding redemption and expiration patterns. Franchise Fees and Income Franchise fees and income primarily include upfront franchise fees, such as initial fees and renewal fees, and continuing fees. We have determined that the services we provide in exchange for upfront franchise fees and continuing fees are highly interrelated with the franchise right. We recognize upfront franchise fees received from a franchisee as revenue over the term of the franchise agreement or the renewal agreement because the franchise rights are accounted for as rights to access our symbolic intellectual property. The franchise agreement term is generally 10 years for KFC and Pizza Hut, generally five years for Little Sheep and three to 10 years for Huang Ji Huang. We recognize continuing fees, which are based upon a percentage of franchisee sales, as those sales occur. Revenues from Transactions with Franchisees Revenues from transactions with franchisees consist primarily of sales of food and paper products, advertising services, delivery services and other services provided to franchisees. The Company centrally purchases substantially all food and paper products from suppliers for substantially all of our restaurants, including franchisees, and then sells and delivers them to the restaurants. In addition, the Company owns seasoning facilities for its Chinese dining business unit, which manufacture and sell seasoning products to Huang Ji Huang and Little Sheep franchisees. The Company also provides delivery services to franchisees. The performance obligation arising from such transactions is considered distinct from the franchise agreement as it is not highly dependent on the franchise agreement and the customer can benefit from such services on its own. We consider ourselves the principal in this arrangement as we have the ability to control a promised good or service before transferring that good or service to the franchisees. Revenue is recognized upon transfer of control over ordered items or services, generally upon delivery to the franchisees. For advertising services, the Company often engages third parties to provide services and acts as a principal in the transaction based on our responsibilities of defining the nature of the services and administering and directing all marketing and advertising programs in accordance with the provisions of our franchise agreements. The Company collects advertising contributions, which are generally based on certain percentage of sales from substantially all of our restaurants, including franchisees. Other services provided to franchisees consist primarily of customer and technology support services. Advertising services and other services provided are highly interrelated to franchise right, and are not considered individually distinct. We recognize revenue when the related sales occur. Other Revenues Other revenues primarily include i) sales of products to customers through e-commerce channels and the sale of our seasoning products to distributors, and ii) revenues from logistics and warehousing services provided to third parties through our supply chain network. Our segment disclosures also include revenues relating to delivery services that were provided to our Company-owned restaurants and, therefore, were eliminated for consolidation purposes. Other revenues are recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. |
Loyalty Programs | Loyalty Programs Each of the Company’s KFC and Pizza Hut reportable segments operates a loyalty program that allows registered members to earn points for each qualifying purchase. Points, which generally expire 18 months after being earned, may be redeemed for future purchases of KFC or Pizza Hut branded products or other products for free or at a discounted price. Points cannot be redeemed or exchanged for cash. The estimated value of points earned by the loyalty program members is recorded as a reduction of revenue at the time the points are earned, based on the percentage of points that are projected to be redeemed, with a corresponding deferred revenue liability included in Accounts payable and other current liabilities on the Condensed Consolidated Balance Sheets and subsequently recognized into revenue when the points are redeemed or expire. The Company estimates the value of the future redemption obligations based on the estimated value of the product for which points are expected to be redeemed and historical redemption patterns and reviews such estimates periodically based upon the latest available information regarding redemption and expiration patterns . |
Accounts Receivable | Accounts Receivable Accounts receivable primarily consist of trade receivables and royalties from franchisees, and are generally due within 30 days of the period in which the corresponding sales occur. Our provision of credit losses for accounts receivable is based upon the current expected credit losses (“CECL”) model. The CECL model requires an estimate of the credit losses expected over the life of accounts receivable since initial recognition, and accounts receivable with similar risk characteristics are grouped together when estimating CECL. In assessing the CECL, the Company considers both quantitative and qualitative information that is reasonable and supportable, including historical credit loss experience, adjusted for relevant factors impacting collectability and forward-looking information indicative of external market conditions. While we use the best information available in making our determination, the ultimate recovery of recorded receivables is also dependent upon future economic events and other conditions that may be beyond our control. Accounts receivable that are ultimately deemed to be uncollectible, and for which collection efforts have been exhausted, are written off against the allowance for doubtful accounts. |
Costs to Obtain Contracts | Costs to Obtain Contracts Costs to obtain contracts consist of upfront franchise fees that we paid to YUM prior to the separation in relation to initial fees or renewal fees we received from franchisees, as well as license fees that are payable to YUM in relation to our deferred revenue of prepaid stored-value products, privilege membership programs and customer loyalty programs. They meet the requirements to be capitalized as they are incremental costs of obtaining contracts with customers and the Company expects to generate future economic benefits from such costs incurred. Such costs to obtain contracts are included in Other assets on the Condensed Consolidated Balance Sheets and are amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the assets relate. |
Business Acquisitions and Equ_2
Business Acquisitions and Equity Investments (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Meituan Dianping [Member] | |
Schedule Of Trading Securities And Other Trading Assets [Line Items] | |
Summary of Pre-tax Gains or Losses on Investment in Equity Securities | A summary of pre-tax gains or losses on investment in equity securities of Meituan recognized, which were included in Investment gain or loss in our Condensed Consolidated Statements of Income, is as follows: Quarter Ended Year to Date Ended 9/30/2023 9/30/2022 9/30/2023 9/30/2022 Unrealized losses recorded on equity securities still held $ ( 4 ) $ ( 15 ) $ ( 33 ) $ ( 33 ) |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Disaggregation of Revenue by Types of Arrangements and Segments | The following tables present revenue disaggregated by types of arrangements and segments: Quarter Ended 9/30/2023 Revenues KFC Pizza Hut All Other Corporate and Unallocated Combined Elimination Consolidated Company sales $ 2,154 $ 591 $ 14 $ — $ 2,759 $ — $ 2,759 Franchise fees and income 16 2 5 — 23 — 23 Revenues from transactions 12 1 20 67 100 — 100 Other revenues 4 5 162 12 183 ( 151 ) 32 Total revenues $ 2,186 $ 599 $ 201 $ 79 $ 3,065 $ ( 151 ) $ 2,914 Quarter Ended 9/30/2022 Revenues KFC Pizza Hut All Other Corporate and Unallocated Combined Elimination Consolidated Company sales $ 1,992 $ 556 $ 13 $ — $ 2,561 $ — $ 2,561 Franchise fees and income 15 2 5 — 22 — 22 Revenues from transactions 9 1 11 59 80 — 80 Other revenues 1 2 157 12 172 ( 150 ) 22 Total revenues $ 2,017 $ 561 $ 186 $ 71 $ 2,835 $ ( 150 ) $ 2,685 Year to Date Ended 9/30/2023 Revenues KFC Pizza Hut All Other Corporate and Unallocated Combined Elimination Consolidated Company sales $ 6,274 $ 1,728 $ 46 $ — $ 8,048 $ — $ 8,048 Franchise fees and income 48 6 15 — 69 — 69 Revenues from transactions 33 3 56 190 282 — 282 Other revenues 13 13 468 32 526 ( 440 ) 86 Total revenues $ 6,368 $ 1,750 $ 585 $ 222 $ 8,925 $ ( 440 ) $ 8,485 Year to Date Ended 9/30/2022 Revenues KFC Pizza Hut All Other Corporate and Unallocated Combined Elimination Consolidated Company sales $ 5,554 $ 1,541 $ 40 $ — $ 7,135 $ — $ 7,135 Franchise fees and income 44 6 15 — 65 — 65 Revenues from transactions 24 3 29 163 219 — 219 Other revenues 6 6 407 31 450 ( 388 ) 62 Total revenues $ 5,628 $ 1,556 $ 491 $ 194 $ 7,869 $ ( 388 ) $ 7,481 |
Contract Liabilities | Contract liabilities at September 30, 2023 and December 31, 2022 were as follows: Contract liabilities 9/30/2023 12/31/2022 – Deferred revenue related to prepaid stored-value products $ 134 $ 139 – Deferred revenue related to upfront franchise fees 34 32 – Deferred revenue related to customer loyalty programs 24 23 – Deferred revenue related to privilege membership programs 21 16 – Others 1 — Total $ 214 $ 210 |
Earnings Per Common Share ("E_2
Earnings Per Common Share ("EPS") (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Earnings Per Share [Abstract] | |
Earnings Per Common Share | The following table summarizes the components of basic and diluted EPS (in millions, except per share data): Quarter Ended Year to Date Ended 9/30/2023 9/30/2022 9/30/2023 9/30/2022 Net Income – Yum China Holdings, Inc. $ 244 $ 206 $ 730 $ 389 Weighted-average common shares outstanding (a) 416 420 417 422 Effect of dilutive share-based awards (a) 4 4 4 4 Weighted-average common and dilutive potential common shares (a) 420 424 421 426 Basic Earnings Per Common Share $ 0.59 $ 0.49 $ 1.75 $ 0.92 Diluted Earnings Per Common Share $ 0.58 $ 0.49 $ 1.73 $ 0.92 Share-based awards excluded from the diluted EPS computation (b) 3 4 2 4 (a) As a result of the separation, shares of Yum China common stock were distributed to YUM’s shareholders of record as of October 19, 2016 and were included in the calculated weighted-average common shares outstanding. Holders of outstanding YUM equity awards generally received both adjusted YUM awards and Yum China awards, or adjusted awards of either YUM or Yum China in their entirety. Any subsequent exercise of these awards, whether held by the Company’s employees or YUM’s employees, would increase the number of common shares outstanding. The incremental shares arising from outstanding equity awards are included in the computation of diluted EPS, if there is dilutive effect. (b) These outstanding stock appreciation rights (“SARs”), restricted stock units (“RSUs”) and performance stock units (“PSUs”) were excluded from the computation of diluted EPS because to do so would have been antidilutive for the periods presented, or because certain PSUs are contingently issuable based on the achievement of performance and market conditions, which have not been met as of September 30, 2023 and 2022. |
Other Expenses, Net (Tables)
Other Expenses, Net (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Other Income and Expenses [Abstract] | |
Other Expenses, Net | Quarter Ended Year to Date Ended 9/30/2023 9/30/2022 9/30/2023 9/30/2022 Amortization of reacquired franchise rights (a) $ — $ 24 $ 2 $ 74 Foreign exchange impact and others — — ( 1 ) ( 1 ) Other expenses, net $ — $ 24 $ 1 $ 73 (a) As a result of the acquisition 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 are being amortized over the remaining franchise contract period of 1 year, 2.4 years and 5 years. The above reacquired franchise rights were substantially amortized as of December 31, 2022 and resulted in the decrease of amortization expenses in the quarter and year to date ended September 30, 2023. |
Supplemental Balance Sheet In_2
Supplemental Balance Sheet Information (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Balance Sheet Related Disclosures [Abstract] | |
Accounts Receivable, Net | Accounts Receivable, net 9/30/2023 12/31/2022 Accounts receivable, gross $ 64 $ 66 Allowance for doubtful accounts ( 2 ) ( 2 ) Accounts receivable, net $ 62 $ 64 |
Prepaid Expenses and Other Current Assets | Prepaid Expenses and Other Current Assets 9/30/2023 12/31/2022 VAT assets $ 84 $ 88 Receivables from payment processors and aggregators 52 53 Interest receivables 36 31 Deposits, primarily lease deposits 26 24 Dividends receivable from equity method investees 8 6 Other prepaid expenses and current assets 104 105 Prepaid expenses and other current assets $ 310 $ 307 |
Property, Plant and Equipment | Property, Plant and Equipment (“PP&E”) 9/30/2023 12/31/2022 Buildings and improvements, and construction in progress $ 2,893 $ 2,912 Finance leases, primarily buildings 63 62 Machinery and equipment 1,635 1,612 PP&E, gross 4,591 4,586 Accumulated depreciation ( 2,474 ) ( 2,468 ) PP&E, net $ 2,117 $ 2,118 |
Equity Investments | Equity Investments 9/30/2023 12/31/2022 Investment in equity method investees $ 257 $ 266 Investment in equity securities 62 95 Equity investments $ 319 $ 361 |
Accounts Payable and Other Current Liabilities | Other Assets 9/30/2023 12/31/2022 Land use right $ 113 $ 123 Long-term deposits, primarily lease deposits 89 90 Prepayment for acquisition of PP&E (a) 29 6 Costs to obtain contracts 6 6 VAT assets 6 5 Others 16 18 Other assets $ 259 $ 248 (a) The increase was primarily due to a prepayment made in relation to the acquisition of a building located in Shanghai to house the Company’s headquarters and flagship stores, which is currently expected to be delivered to the Company around 2026. Accounts Payable and Other Current Liabilities 9/30/2023 12/31/2022 Accounts payable $ 758 $ 727 Operating lease liabilities 405 448 Accrued compensation and benefits 306 285 Contract liabilities 186 182 Accrued capital expenditures 180 181 Dividends payable 79 51 Accrued marketing expenses 85 72 Other current liabilities 130 150 Accounts payable and other current liabilities $ 2,129 $ 2,096 |
Other Liabilities and Deferred Credits | Other Liabilities 9/30/2023 12/31/2022 Accrued income tax payable $ 38 $ 52 Contract liabilities 28 28 Other non-current liabilities 81 82 Other liabilities $ 147 $ 162 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Changes in the Carrying Amount of Goodwill | The changes in the carrying amount of goodwill are as follows: Total KFC Pizza Hut All Other Balance as of December 31, 2022 Goodwill, gross $ 2,379 $ 1,893 $ 19 $ 467 Accumulated impairment losses (a) ( 391 ) — — ( 391 ) Goodwill, net 1,988 1,893 19 76 Effect of currency translation adjustments ( 109 ) ( 104 ) ( 1 ) ( 4 ) Balance as of September 30, 2023 Goodwill, gross 2,270 1,789 18 463 Accumulated impairment losses (a) ( 391 ) — — ( 391 ) Goodwill, net $ 1,879 $ 1,789 $ 18 $ 72 (a) Accumulated impairment losses represent goodwill impairment attributable to the reporting units of Little Sheep and Daojia. |
Schedule of Finite and Indefinite Lived Intangible Assets by Major Class | Intangible assets, net as of September 30, 2023 and December 31, 2022 are as follows: 9/30/2023 12/31/2022 Gross (a) Accumulated (a) Accumulated Impairment Losses (b) Net Carrying Amount Gross Accumulated Accumulated Impairment Losses (b) Net Carrying Amount Finite-lived intangible assets Reacquired franchise $ 261 $ ( 258 ) $ — $ 3 $ 276 $ ( 271 ) $ — $ 5 Huang Ji Huang 20 ( 3 ) — 17 22 ( 3 ) — 19 Daojia platform 16 ( 4 ) ( 12 ) — 16 ( 4 ) ( 12 ) — Customer-related assets 12 ( 10 ) ( 2 ) — 12 ( 9 ) ( 2 ) 1 Others 8 ( 5 ) — 3 9 ( 5 ) — 4 $ 317 $ ( 280 ) $ ( 14 ) $ 23 $ 335 $ ( 292 ) $ ( 14 ) $ 29 Indefinite-lived intangible Little Sheep trademark $ 50 $ — $ — $ 50 $ 52 $ — $ — $ 52 Huang Ji Huang 74 — — 74 78 — — 78 $ 124 $ — $ — $ 124 $ 130 $ — $ — $ 130 Total intangible assets $ 441 $ ( 280 ) $ ( 14 ) $ 147 $ 465 $ ( 292 ) $ ( 14 ) $ 159 (a) Changes in gross carrying amount and accumulated amortization include the effect of currency translation adjustments. (b) Accumulated impairment losses represent impairment charges on intangible assets acquired from Daojia primarily attributable to the Daojia platform. |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Leases [Abstract] | |
Summary of Supplemental Balance Sheet | Supplemental Balance Sheet 9/30/2023 12/31/2022 Account Classification Assets Operating lease right-of-use assets $ 2,083 $ 2,219 Operating lease right-of-use assets Finance lease right-of-use assets 38 38 PP&E, net Total leased assets (a) $ 2,121 $ 2,257 Liabilities Current Operating lease liabilities $ 405 $ 448 Accounts payable and other current liabilities Finance lease liabilities 4 5 Accounts payable and other current liabilities Non-current Operating lease liabilities 1,787 1,906 Non-current operating lease liabilities Finance lease liabilities 41 42 Non-current finance lease liabilities Total lease liabilities (a) $ 2,237 $ 2,401 (a) As of September 30, 2023, the decrease of right-of-use (“ROU”) assets was primarily due to amortization, a higher portion of our new leases with variable lease payments and the impact of foreign currency translation. The decrease of lease liabilities was consistent with the decrease of ROU assets. |
Summary of Lease Cost | Summary of Lease Cost Quarter Ended Year to Date Ended 9/30/2023 9/30/2022 9/30/2023 9/30/2022 Account Classification Operating lease cost $ 125 $ 133 $ 386 $ 433 Occupancy and other operating expenses, Finance lease cost Amortization of leased assets 1 1 3 3 Occupancy and other operating expenses Interest on lease liabilities 1 1 2 2 Interest income, net Variable lease cost (b) 115 89 316 248 Occupancy and other operating expenses Short-term lease cost 3 3 12 10 Occupancy and other operating expenses Sub-lease income ( 5 ) ( 5 ) ( 16 ) ( 18 ) Franchise fees and income or Total lease cost $ 240 $ 222 $ 703 $ 678 (b) The Company was granted less than $ 1 million and $ 13 million in lease concessions from landlords related to the effects of the COVID-19 pandemic during the quarters ended September 30, 2023 and 2022, respectively, and $ 10 million and $ 27 million during the years to date ended September 30, 2023 and 2022, respectively. 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. The Company applied the interpretive guidance in a FASB staff question-and-answer document issued in April 2020 and elected: (1) not to evaluate whether a concession received in response to the COVID-19 pandemic is a lease modification and (2) to assume such concession was contemplated as part of the existing lease contract with no contract modification. Such concession was recognized as negative variable lease cost in the period the concession was granted. |
Schedule of Supplemental Cash Flow Information | Supplemental Cash Flow Information Year to Date Ended 9/30/2023 9/30/2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 401 $ 416 Operating cash flows from finance leases 2 2 Financing cash flows from finance leases 4 3 Right-of-use assets obtained in exchange for lease liabilities (c) : Operating leases $ 281 $ 106 Finance leases 4 4 (c) This supplemental non-cash disclosure for ROU assets obtained in exchange for lease liabilities includes an increase in lease liabilities associated with obtaining new ROU assets of $ 281 million and $ 232 million for the years to date ended September 30, 2023 and 2022, respectively, as well as adjustments to lease liabilities or ROU assets due to modification or other reassessment events, which resulted in a $ 4 million increase and $ 122 million decrease in lease liabilities for the years to date ended September 30, 2023 and 2022, respectively. |
Schedule of Lease Terms and Discount Rate | Lease Term and Discount Rate 9/30/2023 9/30/2022 Weighted-average remaining lease term (years) Operating leases 7.1 7.1 Finance leases 11.1 11.3 Weighted-average discount rate Operating leases 4.9 % 5.2 % Finance leases 5.0 % 5.3 % |
Summary of Maturities of Lease Liabilities | Maturities of lease liabilities as of September 30, 2023 were as follows: Amount of Amount of Total Remainder of 2023 $ 148 $ 2 $ 150 2024 461 6 467 2025 406 6 412 2026 359 6 365 2027 306 5 311 Thereafter 922 34 956 Total undiscounted lease payment 2,602 59 2,661 Less: imputed interest (d) 410 14 424 Present value of lease liabilities $ 2,192 $ 45 $ 2,237 (d) As the rate implicit in the lease cannot be readily determined, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the imputed interest and present value of lease payments. We used the incremental borrowing rate on January 1, 2019 for operating leases that commenced prior to that date. |
Fair Value Measurements and D_2
Fair Value Measurements and Disclosures (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Fair Value Disclosures [Abstract] | |
Assets Measured on Recurring Basis or Disclosed at Fair Value | The following table is a summary of our financial assets measured on a recurring basis or disclosed at fair value and the level within the fair value hierarchy in which the measurement falls. The Company classifies its cash equivalents, short-term investments, long-term bank deposits and notes, and investment in equity securities within Level 1 or Level 2 in the fair value hierarchy because it uses quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine their fair value, respectively. No transfers among the levels within the fair value hierarchy occurred during the quarters and years to date ended September 30, 2023 and 2022. Fair Value Measurement or Disclosure Balance at Level 1 Level 2 Level 3 Cash equivalents: Time deposits $ 377 $ 377 Money market funds 11 11 Total cash equivalents 388 11 377 — Short-term investments: Time deposits 1,622 1,622 Fixed income debt securities (a) 200 200 Structured deposits 152 152 Variable return investments 27 27 Total short-term investments 2,001 27 1,974 — Long-term bank deposits and notes: Time deposits 879 879 Fixed income bank notes (a) 358 358 Total long-term bank deposits and notes 1,237 — 1,237 — Equity investments: Investment in equity securities 62 62 Total $ 3,688 $ 100 $ 3,588 $ — Fair Value Measurement or Disclosure Balance at Level 1 Level 2 Level 3 Cash equivalents: Time deposits $ 355 $ 355 Fixed income debt securities (a) 129 29 100 Money market funds 59 59 Total cash equivalents 543 88 455 — Short-term investments: Time deposits 1,434 1,434 Fixed income debt securities (a) 500 500 Structured deposits 88 88 Total short-term investments 2,022 — 2,022 — Long-term bank deposits and notes: Time deposits 680 680 Equity investments: Investment in equity securities 95 95 Total $ 3,340 $ 183 $ 3,157 $ — (a) Classified as held-to-maturity investments and measured at amortized cost. |
Schedule of Amounts Recognized From Non-recurring Fair Value Measurements | The following table presents amounts recognized from all non-recurring fair value measurements based on unobservable inputs (Level 3) during the quarters and years to date ended September 30, 2023 and 2022. These amounts exclude fair value measurements made for restaurants that were subsequently closed or refranchised prior to those respective period-end dates. Quarter Ended Year to Date Ended 9/30/2023 9/30/2022 9/30/2023 9/30/2022 Account Classification Restaurant-level impairment (a) $ — $ — $ 14 $ 15 Closure and impairment expenses, net Restaurant-level impairment charges are recorded in Closures and impairment expenses, net and resulted mainly from our semi-annual impairment evaluation of long-lived assets of individual restaurants that were being operated at the time of impairment and had not been offered for refranchising. After considering the impairment charges recorded during the corresponding periods, the fair value of such assets as of the relevant measurement date was $ 55 million and $ 67 million for the years to date ended September 30, 2023 and 2022, respectively. |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Tax And Effective Tax Rate | Quarter Ended Year to Date Ended 9/30/2023 9/30/2022 9/30/2023 9/30/2022 Income tax provision $ 100 $ 97 $ 296 $ 183 Effective tax rate 27.5 % 29.9 % 27.2 % 30.1 % |
Segment Reporting (Tables)
Segment Reporting (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information, by Segment | Quarter Ended 9/30/2023 Revenues KFC Pizza Hut All Other Corporate and Unallocated (a) Combined Elimination Consolidated Revenue from external $ 2,186 $ 599 $ 50 $ 79 $ 2,914 $ — $ 2,914 Inter-segment revenue — — 151 — 151 ( 151 ) — Total $ 2,186 $ 599 $ 201 $ 79 $ 3,065 $ ( 151 ) $ 2,914 Quarter Ended 9/30/2022 Revenues KFC Pizza Hut All Other Corporate and Unallocated (a) Combined Elimination Consolidated Revenue from external $ 2,017 $ 561 $ 41 $ 66 $ 2,685 $ — $ 2,685 Inter-segment revenue — — 145 5 150 ( 150 ) — Total $ 2,017 $ 561 $ 186 $ 71 $ 2,835 $ ( 150 ) $ 2,685 Year to Date Ended 9/30/2023 Revenues KFC Pizza Hut All Other Corporate and Unallocated (a) Combined Elimination Consolidated Revenue from external $ 6,368 $ 1,750 $ 145 $ 222 $ 8,485 $ — $ 8,485 Inter-segment revenue — — 440 — 440 ( 440 ) — Total $ 6,368 $ 1,750 $ 585 $ 222 $ 8,925 $ ( 440 ) $ 8,485 Year to Date Ended 9/30/2022 Revenues KFC Pizza Hut All Other Corporate and Unallocated (a) Combined Elimination Consolidated Revenue from external $ 5,628 $ 1,556 $ 115 $ 182 $ 7,481 $ — $ 7,481 Inter-segment revenue — — 376 12 388 ( 388 ) — Total $ 5,628 $ 1,556 $ 491 $ 194 $ 7,869 $ ( 388 ) $ 7,481 Quarter Ended Year to Date Ended Operating Profit (Loss) 9/30/2023 9/30/2022 9/30/2023 9/30/2022 KFC $ 342 $ 328 $ 1,035 $ 670 Pizza Hut 47 49 137 90 All Other Segments ( 7 ) ( 9 ) ( 20 ) ( 39 ) Unallocated revenues from transactions with franchisees (b) 67 59 190 163 Unallocated other revenues 12 12 32 31 Unallocated expenses for transactions with franchisees (b) ( 66 ) ( 58 ) ( 188 ) ( 163 ) Unallocated other operating costs and expenses ( 12 ) ( 10 ) ( 30 ) ( 28 ) Unallocated and corporate G&A expenses ( 60 ) ( 55 ) ( 161 ) ( 138 ) Unallocated other income, net — — 1 2 Operating Profit $ 323 $ 316 $ 996 $ 588 Interest income, net (a) 46 25 124 51 Investment loss (a) ( 4 ) ( 15 ) ( 32 ) ( 32 ) Income Before Income Taxes and Equity in $ 365 $ 326 $ 1,088 $ 607 Quarter Ended Year to Date Ended Impairment Charges 9/30/2023 9/30/2022 9/30/2023 9/30/2022 KFC (c) $ 2 $ 5 $ 14 $ 24 Pizza Hut (c) 1 — 6 5 All Other Segments (c) — 2 4 8 $ 3 $ 7 $ 24 $ 37 Total Assets 9/30/2023 12/31/2022 KFC $ 5,053 $ 5,296 Pizza Hut 856 880 All Other Segments 356 381 Corporate and Unallocated (d) 5,805 5,269 $ 12,070 $ 11,826 (a) Amounts have not been allocated to any segment for performance reporting purposes. (b) 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 then sells and delivers to KFC and Pizza Hut restaurants, including franchisees. Amounts have not been allocated to any segment for purposes of making operating decisions or assessing financial performance as the transactions are deemed corporate revenues and expenses in nature. (c) Primarily includes store closure impairment charges and restaurant-level impairment charges resulting from our semi-annual impairment evaluation. (d) Primarily includes cash and cash equivalents, short-term investments, long-term bank deposits and notes, equity investments, inventories that are centrally managed and PP&E that are not specifically identifiable within each segment. As substantially all of the Company's revenue is derived from the PRC and substantially all of the Company's long-lived assets are located in the PRC, no geographical information is presented. In addition, revenue derived from and long-lived assets located in the U.S., the Company’s country of domicile, are immaterial. |
Description of Business - Narra
Description of Business - Narrative (Details) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 10, 2020 USD ($) shares | Dec. 31, 2021 USD ($) | Sep. 30, 2020 USD ($) | Sep. 30, 2023 Restaurant Segment | Dec. 31, 2022 USD ($) | Sep. 30, 2021 | |
Segment Reporting Information [Line Items] | ||||||
Entity, date of incorporation | Apr. 01, 2016 | |||||
Entity Incorporation, State or Country Code | DE | |||||
Additional consecutive renewal terms of license agreement | 50 years | |||||
Percentage of license fees on net sales | 3% | |||||
Number of reportable segments | Segment | 2 | |||||
Number of restaurants | 12,000 | |||||
Global Offering [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Global offering shares of common stock | shares | 41,910,700 | |||||
Net proceeds from global offering | $ | $ 2,200 | |||||
Lavazza Joint Venture [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Joint venture equity interest percentage | 65% | |||||
KFC [Member] | Minimum [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Number of restaurants | 9,900 | |||||
KFC [Member] | Shanghai [Member] | Owner and Operator of KFC [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Controlling ownership percentage maintained | 58% | |||||
KFC [Member] | Beijing [Member] | Owner and Operator of KFC [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Controlling ownership percentage maintained | 70% | |||||
KFC [Member] | Wuxi [Member] | Owner and Operator of KFC [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Controlling ownership percentage maintained | 83% | |||||
KFC [Member] | Suzhou [Member] | Owner and Operator of KFC [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Controlling ownership percentage maintained | 92% | |||||
KFC [Member] | Hangzhou [Member] | Owner and Operator of KFC [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Controlling ownership percentage maintained | 60% | |||||
Pizza Hut [Member] | Minimum [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Number of restaurants | 200 | |||||
KFC and Pizza Hut [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Expiration term of license agreement | 50 years | |||||
Taco Bell [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Expiration term of license agreement | 50 years | |||||
Suzhou KFC [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Percentage of additional equity interest acquired | 25% | 20% | ||||
Cash consideration paid to acquire interest | $ | $ 149 | $ 115 | ||||
Hangzhou Catering [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Percentage of additional equity interest acquired | 28% | |||||
Cash consideration paid to acquire interest | $ | $ 255 | |||||
Number of restaurants | 60 |
Business Acquisitions and Equ_3
Business Acquisitions and Equity Investments - Narrative (Details) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||
Sep. 30, 2023 USD ($) Restaurant | Sep. 30, 2022 USD ($) | Dec. 31, 2021 USD ($) | Mar. 31, 2021 USD ($) | Sep. 30, 2020 USD ($) | Sep. 30, 2023 USD ($) Restaurant | Sep. 30, 2022 USD ($) | Dec. 31, 2022 USD ($) | Dec. 31, 2020 USD ($) | Jun. 30, 2020 shares | Sep. 30, 2018 USD ($) shares | |
Business Acquisitions And Equity Investments [Line Items] | |||||||||||
Number of restaurants | Restaurant | 12,000 | 12,000 | |||||||||
Due to related parties, current | $ 130 | $ 130 | $ 150 | ||||||||
Additional Paid-in Capital [Member] | |||||||||||
Business Acquisitions And Equity Investments [Line Items] | |||||||||||
Acquisition of noncontrolling interest | 15 | ||||||||||
Fujian Sunner Development Co., Ltd. [Member] | |||||||||||
Business Acquisitions And Equity Investments [Line Items] | |||||||||||
Percentage of equity interest acquired | 5% | ||||||||||
Total consideration paid to acquire interest | $ 261 | ||||||||||
Purchase of inventories | 136 | $ 116 | 392 | $ 307 | |||||||
Investment carrying amount | 217 | 227 | |||||||||
Market value | 164 | 164 | 214 | ||||||||
Investment in net assets excess of carrying amount | $ 148 | $ 148 | 157 | ||||||||
Finite-lived intangible asset, useful life | 20 years | 20 years | |||||||||
Fujian Sunner Development Co., Ltd. [Member] | Finite-Lived Intangible Assets [Member] | |||||||||||
Business Acquisitions And Equity Investments [Line Items] | |||||||||||
Investment in net assets excess of carrying amount | $ 16 | $ 16 | 18 | ||||||||
Fujian Sunner Development Co., Ltd. [Member] | Accounts payable and other current liabilities [Member] | Related Party [Member] | |||||||||||
Business Acquisitions And Equity Investments [Line Items] | |||||||||||
Due to related parties, current | 50 | 50 | 53 | ||||||||
Meituan Dianping [Member] | |||||||||||
Business Acquisitions And Equity Investments [Line Items] | |||||||||||
Unrealized investment gain (loss) | $ (4) | $ (15) | $ (33) | $ (33) | |||||||
Number of ordinary shares subscribed | shares | 8.4 | ||||||||||
Maximum percentage of ordinary shares subscribed | 1% | ||||||||||
Fair value of Investment in Meituan's ordinary shares | $ 74 | ||||||||||
Number of ordinary shares sold | shares | 4.2 | ||||||||||
Reacquired Franchise Rights [Member] | Hangzhou KFC [Member] | |||||||||||
Business Acquisitions And Equity Investments [Line Items] | |||||||||||
Purchase price allocated to intangible assets | $ 66 | ||||||||||
Remaining franchise contract period | 1 year | ||||||||||
Hangzhou KFC [Member] | |||||||||||
Business Acquisitions And Equity Investments [Line Items] | |||||||||||
Percentage of equity interest previously held by company | 47% | ||||||||||
Percentage of equity interest by company | 60% | ||||||||||
Hangzhou Catering [Member] | |||||||||||
Business Acquisitions And Equity Investments [Line Items] | |||||||||||
Percentage of additional equity interest acquired | 28% | ||||||||||
Cash consideration paid to acquire interest | $ 255 | ||||||||||
Number of restaurants | Restaurant | 60 | 60 | |||||||||
Investment carrying amount | $ 39 | 37 | |||||||||
Investment in net assets excess of carrying amount | $ 24 | $ 24 | $ 26 | ||||||||
Finite-lived intangible asset, useful life | 20 years | 20 years | |||||||||
Hangzhou Catering [Member] | Hangzhou KFC [Member] | |||||||||||
Business Acquisitions And Equity Investments [Line Items] | |||||||||||
Percentage of equity interest acquired | 45% | ||||||||||
Hangzhou Catering [Member] | Unconsolidated Affiliates [Member] | |||||||||||
Business Acquisitions And Equity Investments [Line Items] | |||||||||||
Percentage of equity interest acquired | 28% | 28% | |||||||||
Suzhou KFC [Member] | |||||||||||
Business Acquisitions And Equity Investments [Line Items] | |||||||||||
Percentage of additional equity interest acquired | 25% | 20% | |||||||||
Equity interest in acquiree, including subsequent acquisition, percentage | 72% | 92% | |||||||||
Cash consideration paid to acquire interest | $ 149 | $ 115 | |||||||||
Suzhou KFC [Member] | Reacquired Franchise Rights [Member] | |||||||||||
Business Acquisitions And Equity Investments [Line Items] | |||||||||||
Purchase price allocated to intangible assets | $ 61 | $ 61 | $ 61 | ||||||||
Remaining franchise contract period | 2 years 4 months 24 days | 2 years 4 months 24 days | 2 years 4 months 24 days |
Business Acquisitions and Equ_4
Business Acquisitions and Equity Investments - Summary of Pre-tax Gains or Losses in Investment in Equity Securities (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Meituan Dianping [Member] | ||||
Debt and Equity Securities, FV-NI [Line Items] | ||||
Unrealized (losses) gains recorded on equity securities still held as of the end of the period | $ (4) | $ (15) | $ (33) | $ (33) |
Revenue Recognition - Narrative
Revenue Recognition - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Revenue From Contract With Customer [Line Items] | |||||
Prepaid gift cards expiration period | 36 months | ||||
Product vouchers maximum expiration period | 12 months | ||||
Points expiration period | 18 months | ||||
Number of days from the period in which the corresponding sales occur that trade receivables are generally due | 30 days | ||||
Provision for accounts receivable | $ 2 | $ 2 | $ 2 | ||
Impairment losses related to costs to obtain contracts | 0 | 0 | |||
Costs to obtain contracts | 6 | 6 | $ 6 | ||
Revenue recognized | $ 53 | $ 60 | $ 97 | $ 103 | |
KFC [Member] | |||||
Revenue From Contract With Customer [Line Items] | |||||
Franchisee agreement term | 10 years | ||||
Pizza Hut [Member] | |||||
Revenue From Contract With Customer [Line Items] | |||||
Franchisee agreement term | 10 years | ||||
Little Sheep [Member] | |||||
Revenue From Contract With Customer [Line Items] | |||||
Franchisee agreement term | 5 years | ||||
Huang Ji Huang [Member] | Minimum [Member] | |||||
Revenue From Contract With Customer [Line Items] | |||||
Franchisee agreement term | 3 years | ||||
Huang Ji Huang [Member] | Maximum [Member] | |||||
Revenue From Contract With Customer [Line Items] | |||||
Franchisee agreement term | 10 years |
Revenue Recognition - Schedule
Revenue Recognition - Schedule of Disaggregation of Revenue by Types of Arrangements and Segments (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | ||
Disaggregation Of Revenue [Line Items] | |||||
Total revenues | $ 2,914 | $ 2,685 | $ 8,485 | $ 7,481 | |
Combined [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Total revenues | 3,065 | 2,835 | 8,925 | 7,869 | |
Elimination [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Total revenues | (151) | (150) | (440) | (388) | |
Operating Segments [Member] | KFC [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Total revenues | 2,186 | 2,017 | 6,368 | 5,628 | |
Operating Segments [Member] | Pizza Hut [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Total revenues | 599 | 561 | 1,750 | 1,556 | |
Operating Segments [Member] | All Other Segments [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Total revenues | 201 | 186 | 585 | 491 | |
Operating Segments [Member] | Corporate and Unallocated [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Total revenues | [1] | 79 | 71 | 222 | 194 |
Company Sales [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 2,759 | 2,561 | 8,048 | 7,135 | |
Company Sales [Member] | Combined [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 2,759 | 2,561 | 8,048 | 7,135 | |
Company Sales [Member] | Operating Segments [Member] | KFC [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 2,154 | 1,992 | 6,274 | 5,554 | |
Company Sales [Member] | Operating Segments [Member] | Pizza Hut [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 591 | 556 | 1,728 | 1,541 | |
Company Sales [Member] | Operating Segments [Member] | All Other Segments [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 14 | 13 | 46 | 40 | |
Franchise [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 23 | 22 | 69 | 65 | |
Franchise [Member] | Combined [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 23 | 22 | 69 | 65 | |
Franchise [Member] | Operating Segments [Member] | KFC [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 16 | 15 | 48 | 44 | |
Franchise [Member] | Operating Segments [Member] | Pizza Hut [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 2 | 2 | 6 | 6 | |
Franchise [Member] | Operating Segments [Member] | All Other Segments [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 5 | 5 | 15 | 15 | |
Transactions With Franchisees [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 100 | 80 | 282 | 219 | |
Transactions With Franchisees [Member] | Combined [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 100 | 80 | 282 | 219 | |
Transactions With Franchisees [Member] | Operating Segments [Member] | KFC [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 12 | 9 | 33 | 24 | |
Transactions With Franchisees [Member] | Operating Segments [Member] | Pizza Hut [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 1 | 1 | 3 | 3 | |
Transactions With Franchisees [Member] | Operating Segments [Member] | All Other Segments [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 20 | 11 | 56 | 29 | |
Transactions With Franchisees [Member] | Operating Segments [Member] | Corporate and Unallocated [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 67 | 59 | 190 | 163 | |
Other Revenues [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 32 | 22 | 86 | 62 | |
Other Revenues [Member] | Combined [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 183 | 172 | 526 | 450 | |
Other Revenues [Member] | Elimination [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | (151) | (150) | (440) | (388) | |
Other Revenues [Member] | Operating Segments [Member] | KFC [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 4 | 1 | 13 | 6 | |
Other Revenues [Member] | Operating Segments [Member] | Pizza Hut [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 5 | 2 | 13 | 6 | |
Other Revenues [Member] | Operating Segments [Member] | All Other Segments [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | 162 | 157 | 468 | 407 | |
Other Revenues [Member] | Operating Segments [Member] | Corporate and Unallocated [Member] | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenues | $ 12 | $ 12 | $ 32 | $ 31 | |
[1] Amounts have not been allocated to any segment for performance reporting purposes. |
Revenue Recognition - Contract
Revenue Recognition - Contract Liabilities (Details) - USD ($) $ in Millions | Sep. 30, 2023 | Dec. 31, 2022 |
Contract liabilities | ||
Contract liabilities | $ 214 | $ 210 |
Deferred Revenue Related To Prepaid Stored Value Products [Member] | ||
Contract liabilities | ||
Contract liabilities | 134 | 139 |
Deferred Revenue Related To Upfront Franchise Fees [Member] | ||
Contract liabilities | ||
Contract liabilities | 34 | 32 |
Deferred Revenue Related To Customer Loyalty Programs [Member] | ||
Contract liabilities | ||
Contract liabilities | 24 | 23 |
Deferred Revenue Related To Privilege Membership Programs [Member] | ||
Contract liabilities | ||
Contract liabilities | 21 | $ 16 |
Others [Member] | ||
Contract liabilities | ||
Contract liabilities | $ 1 |
Earnings Per Common Share ("E_3
Earnings Per Common Share ("EPS") (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | ||
Earnings Per Share [Abstract] | |||||
Net Income - Yum China Holdings, Inc. | $ 244 | $ 206 | $ 730 | $ 389 | |
Weighted-average common shares outstanding (for basic calculation) | [1] | 416 | 420 | 417 | 422 |
Effect of dilutive share-based awards | [1] | 4 | 4 | 4 | 4 |
Weighted-average common and dilutive potential common shares outstanding (for diluted calculation) | [1] | 420 | 424 | 421 | 426 |
Basic Earnings Per Common Share | $ 0.59 | $ 0.49 | $ 1.75 | $ 0.92 | |
Diluted Earnings Per Common Share | $ 0.58 | $ 0.49 | $ 1.73 | $ 0.92 | |
Share-based awards excluded from the diluted EPS computation | [2] | 3 | 4 | 2 | 4 |
[1] As a result of the separation, shares of Yum China common stock were distributed to YUM’s shareholders of record as of October 19, 2016 and were included in the calculated weighted-average common shares outstanding. Holders of outstanding YUM equity awards generally received both adjusted YUM awards and Yum China awards, or adjusted awards of either YUM or Yum China in their entirety. Any subsequent exercise of these awards, whether held by the Company’s employees or YUM’s employees, would increase the number of common shares outstanding. The incremental shares arising from outstanding equity awards are included in the computation of diluted EPS, if there is dilutive effect. These outstanding stock appreciation rights (“SARs”), restricted stock units (“RSUs”) and performance stock units (“PSUs”) were excluded from the computation of diluted EPS because to do so would have been antidilutive for the periods presented, or because certain PSUs are contingently issuable based on the achievement of performance and market conditions, which have not been met as of September 30, 2023 and 2022. |
Equity - Narrative (Details)
Equity - Narrative (Details) - USD ($) shares in Millions, $ in Millions | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Class Of Stock [Line Items] | ||
Stock repurchase program, authorized amount | $ 2,400 | |
Treasury stock repurchased, shares | 0.9 | 9.3 |
Treasury stock repurchased, value | $ 281 | $ 413 |
Stock repurchase program, remaining authorized repurchase amount | $ 870 | |
Excise tax on net share repurchases | 1% | |
Excise tax on net share repurchases cost | $ 3 | |
$2 Million Settled Subsequent to June 30, 2023 [Member] | ||
Class Of Stock [Line Items] | ||
Treasury stock repurchased, cost | $ 2 | $ 2 |
Items Affecting Comparability_2
Items Affecting Comparability of Net Income - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Operating profit | $ 323 | $ 316 | $ 996 | $ 588 |
Meituan Dianping [Member] | ||||
Unrealized investment gain (loss) | (4) | (15) | (33) | (33) |
COVID-19 [Member] | ||||
Temporary relief recognized | $ 1 | $ 30 | $ 14 | $ 61 |
Other Expenses, Net (Details)
Other Expenses, Net (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | ||
Other Income and Expenses [Abstract] | ||||
Amortization of reacquired franchise rights | [1] | $ 24 | $ 2 | $ 74 |
Foreign exchange impact and others | (1) | (1) | ||
Other expenses, net | $ 24 | $ 1 | $ 73 | |
[1] As a result of the acquisition 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 are being amortized over the remaining franchise contract period of 1 year, 2.4 years and 5 years. The above reacquired franchise rights were substantially amortized as of December 31, 2022 and resulted in the decrease of amortization expenses in the quarter and year to date ended September 30, 2023. |
Other Expenses, Net (Parentheti
Other Expenses, Net (Parenthetical) (Details) - Reacquired Franchise Rights [Member] - USD ($) $ in Millions | Sep. 30, 2023 | Dec. 31, 2020 |
Suzhou KFC [Member] | ||
Other Operating Income Expense Net [Line Items] | ||
Purchase price allocated to intangible assets | $ 61 | $ 61 |
Remaining franchise contract period | 2 years 4 months 24 days | 2 years 4 months 24 days |
Hangzhou KFC [Member] | ||
Other Operating Income Expense Net [Line Items] | ||
Purchase price allocated to intangible assets | $ 66 | |
Remaining franchise contract period | 1 year | |
Wuxi KFC [Member] | ||
Other Operating Income Expense Net [Line Items] | ||
Purchase price allocated to intangible assets | $ 61 | |
Remaining franchise contract period | 5 years |
Supplemental Balance Sheet In_3
Supplemental Balance Sheet Information (Details) - USD ($) $ in Millions | Sep. 30, 2023 | Dec. 31, 2022 | |
Accounts Receivable, net | |||
Accounts receivable, gross | $ 64 | $ 66 | |
Allowance for doubtful accounts | (2) | (2) | |
Accounts receivable, net | 62 | 64 | |
Prepaid Expenses and Other Current Assets | |||
VAT assets | 84 | 88 | |
Receivables from payment processors and aggregators | 52 | 53 | |
Interest receivables | 36 | 31 | |
Deposits, primarily lease deposits | 26 | 24 | |
Dividends receivable from equity method investees | 8 | 6 | |
Other prepaid expenses and current assets | 104 | 105 | |
Prepaid expenses and other current assets | 310 | 307 | |
Equity Investments | |||
Investment in equity method investees | 257 | 266 | |
Investment in equity securities | 62 | 95 | |
Equity investments | 319 | 361 | |
Other Assets | |||
Land use right | 113 | 123 | |
Long-term deposits, primarily lease deposits | 89 | 90 | |
Prepayment for acquisition of PP&E | [1] | 29 | 6 |
Costs to obtain contracts | 6 | 6 | |
VAT assets | 6 | 5 | |
Others | 16 | 18 | |
Other assets | 259 | 248 | |
Accounts Payable and Other Current Liabilities | |||
Accounts payable | 758 | 727 | |
Operating lease liabilities | 405 | 448 | |
Accrued compensation and benefits | 306 | 285 | |
Contract liabilities | 186 | 182 | |
Accrued capital expenditures | 180 | 181 | |
Dividends payable | 79 | 51 | |
Accrued marketing expenses | 85 | 72 | |
Other current liabilities | 130 | 150 | |
Accounts payable and other current liabilities | 2,129 | 2,096 | |
Other Liabilities | |||
Accrued income tax payable | 38 | 52 | |
Contract liabilities | 28 | 28 | |
Other non-current liabilities | 81 | 82 | |
Other liabilities | $ 147 | $ 162 | |
[1] The increase was primarily due to a prepayment made in relation to the acquisition of a building located in Shanghai to house the Company’s headquarters and flagship stores, which is currently expected to be delivered to the Company around 2026. |
Supplemental Balance Sheet In_4
Supplemental Balance Sheet Information (Details 1) - USD ($) $ in Millions | Sep. 30, 2023 | Dec. 31, 2022 |
Property Plant And Equipment [Line Items] | ||
PP&E, gross | $ 4,591 | $ 4,586 |
Accumulated depreciation | (2,474) | (2,468) |
PP&E, net | 2,117 | 2,118 |
Buildings and Improvements, and Construction in Progress [Member] | ||
Property Plant And Equipment [Line Items] | ||
PP&E, gross | 2,893 | 2,912 |
Finance Leases, Primarily Buildings [Member] | ||
Property Plant And Equipment [Line Items] | ||
PP&E, gross | 63 | 62 |
Machinery and Equipment [Member] | ||
Property Plant And Equipment [Line Items] | ||
PP&E, gross | $ 1,635 | $ 1,612 |
Short-term Borrowings (Addition
Short-term Borrowings (Additional Information) (Details) - USD ($) $ in Millions | Sep. 30, 2023 | Dec. 31, 2022 |
Short-Term Debt [Line Items] | ||
Short-term bank borrowing outstanding | $ 210 | $ 2 |
Short-term investments | 2,001 | 2,022 |
Short-Term Debt [Member] | ||
Short-Term Debt [Line Items] | ||
Short-term investments | $ 106 | $ 1 |
Weighted average interest rate | 1.70% |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets (Details) - USD ($) $ in Millions | 9 Months Ended | ||
Sep. 30, 2023 | Dec. 31, 2022 | ||
Goodwill [Line Items] | |||
Goodwill, gross | $ 2,270 | $ 2,379 | |
Accumulated impairment losses | [1] | (391) | (391) |
Goodwill, net | 1,879 | 1,988 | |
Effect of currency translation adjustment | (109) | ||
KFC [Member] | |||
Goodwill [Line Items] | |||
Goodwill, gross | 1,789 | 1,893 | |
Goodwill, net | 1,789 | 1,893 | |
Effect of currency translation adjustment | (104) | ||
Pizza Hut [Member] | |||
Goodwill [Line Items] | |||
Goodwill, gross | 18 | 19 | |
Goodwill, net | 18 | 19 | |
Effect of currency translation adjustment | (1) | ||
All Other Segments [Member] | |||
Goodwill [Line Items] | |||
Goodwill, gross | 463 | 467 | |
Accumulated impairment losses | [1] | (391) | (391) |
Goodwill, net | 72 | $ 76 | |
Effect of currency translation adjustment | $ (4) | ||
[1] Accumulated impairment losses represent goodwill impairment attributable to the reporting units of Little Sheep and Daojia. |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets (Details 1) - USD ($) $ in Millions | Sep. 30, 2023 | Dec. 31, 2022 | ||
Finite-lived intangible assets | ||||
Gross Carrying Amount | $ 317 | [1] | $ 335 | |
Accumulated Amortization | (280) | [1] | (292) | |
Accumulated impairment losses | [2] | (14) | (14) | |
Net Carrying Amount | 23 | 29 | ||
Indefinite-lived intangible assets | ||||
Net Carrying Amount | 124 | 130 | ||
Total intangible assets | ||||
Gross Carrying Amount | 441 | [1] | 465 | |
Intangible assets, net | 147 | 159 | ||
Reacquired franchise rights [Member] | ||||
Finite-lived intangible assets | ||||
Gross Carrying Amount | 261 | [1] | 276 | |
Accumulated Amortization | (258) | [1] | (271) | |
Net Carrying Amount | 3 | 5 | ||
Daojia platform [Member] | ||||
Finite-lived intangible assets | ||||
Gross Carrying Amount | 16 | [1] | 16 | |
Accumulated Amortization | (4) | [1] | (4) | |
Accumulated impairment losses | [2] | (12) | (12) | |
Customer-related assets [Member] | ||||
Finite-lived intangible assets | ||||
Gross Carrying Amount | 12 | [1] | 12 | |
Accumulated Amortization | (10) | [1] | (9) | |
Accumulated impairment losses | [2] | (2) | (2) | |
Net Carrying Amount | 1 | |||
Others [Member] | ||||
Finite-lived intangible assets | ||||
Gross Carrying Amount | 8 | [1] | 9 | |
Accumulated Amortization | (5) | [1] | (5) | |
Net Carrying Amount | 3 | 4 | ||
Huang Ji Huang Group [Member] | ||||
Finite-lived intangible assets | ||||
Gross Carrying Amount | 20 | [1] | 22 | |
Accumulated Amortization | (3) | [1] | (3) | |
Net Carrying Amount | 17 | 19 | ||
Trademark [Member] | Little Sheep [Member] | ||||
Indefinite-lived intangible assets | ||||
Net Carrying Amount | 50 | 52 | ||
Trademark [Member] | Huang Ji Huang Group [Member] | ||||
Indefinite-lived intangible assets | ||||
Net Carrying Amount | $ 74 | $ 78 | ||
[1] Changes in gross carrying amount and accumulated amortization include the effect of currency translation adjustments. Accumulated impairment losses represent impairment charges on intangible assets acquired from Daojia primarily attributable to the Daojia platform. |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Finite-lived intangible assets | ||||
Finite-lived intangible assets, amortization expense | $ 1 | $ 24 | $ 4 | $ 76 |
Expected amortization expense for the unamortized finite-lived intangible assets - remainder of 2023 | 1 | 1 | ||
Expected amortization expense for the unamortized finite-lived intangible assets - 2024 | 2 | 2 | ||
Expected amortization expense for the unamortized finite-lived intangible assets - 2025 | 2 | 2 | ||
Expected amortization expense for the unamortized finite-lived intangible assets - 2026 | 2 | 2 | ||
Expected amortization expense for the unamortized finite-lived intangible assets - 2027 | $ 2 | $ 2 |
Leases - Narrative (Details)
Leases - Narrative (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2023 USD ($) Restaurant | |
Schedule Of Lease Assets And Liabilities [Line Items] | |
Number of restaurants leased | Restaurant | 12,000 |
Additional lease signed but not commenced with total undiscounted minimum lease payments | $ | $ 122 |
Maximum [Member] | |
Schedule Of Lease Assets And Liabilities [Line Items] | |
Lease agreements initial terms | 20 years |
Lease terms | 20 years |
Minimum [Member] | |
Schedule Of Lease Assets And Liabilities [Line Items] | |
Lease agreements initial terms | 10 years |
Lease terms | 1 year |
Leases - Summary of Supplementa
Leases - Summary of Supplemental Balance Sheet (Details) - USD ($) $ in Millions | Sep. 30, 2023 | Dec. 31, 2022 | |
Schedule Of Lease Assets And Liabilities [Abstract] | |||
Operating lease right-of-use assets | $ 2,083 | $ 2,219 | |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Operating lease right-of-use assets | Operating lease right-of-use assets | |
Finance lease right-of-use assets | $ 38 | $ 38 | |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Property, Plant and Equipment, Net | Property, Plant and Equipment, Net | |
Total leased assets | [1] | $ 2,121 | $ 2,257 |
Operating lease liabilities | 405 | 448 | |
Finance lease liabilities, Current | $ 4 | $ 5 | |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Accounts payable and other current liabilities | Accounts payable and other current liabilities | |
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List] | Accounts payable and other current liabilities | Accounts payable and other current liabilities | |
Non-current operating lease liabilities | $ 1,787 | $ 1,906 | |
Non-current finance lease liabilities | 41 | 42 | |
Total lease liabilities | [1] | $ 2,237 | $ 2,401 |
[1] As of September 30, 2023, the decrease of right-of-use (“ROU”) assets was primarily due to amortization, a higher portion of our new leases with variable lease payments and the impact of foreign currency translation. The decrease of lease liabilities was consistent with the decrease of ROU assets. |
Leases - Summary of Lease Cost
Leases - Summary of Lease Cost (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | ||
Lease, Cost [Abstract] | |||||
Operating lease cost | $ 125 | $ 133 | $ 386 | $ 433 | |
Finance lease cost | |||||
Amortization of leased assets | 1 | 1 | 3 | 3 | |
Interest on lease liabilities | 1 | 1 | 2 | 2 | |
Variable lease cost | [1] | 115 | 89 | 316 | 248 |
Short-term lease cost | 3 | 3 | 12 | 10 | |
Sub-lease income | (5) | (5) | (16) | (18) | |
Total lease cost | $ 240 | $ 222 | $ 703 | $ 678 | |
[1] The Company was granted less than $ 1 million and $ 13 million in lease concessions from landlords related to the effects of the COVID-19 pandemic during the quarters ended September 30, 2023 and 2022, respectively, and $ 10 million and $ 27 million during the years to date ended September 30, 2023 and 2022, respectively. 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. The Company applied the interpretive guidance in a FASB staff question-and-answer document issued in April 2020 and elected: (1) not to evaluate whether a concession received in response to the COVID-19 pandemic is a lease modification and (2) to assume such concession was contemplated as part of the existing lease contract with no contract modification. Such concession was recognized as negative variable lease cost in the period the concession was granted. |
Leases - Summary of Lease Cos_2
Leases - Summary of Lease Cost (Parenthetical) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Schedule Of Lease Assets And Liabilities [Line Items] | ||||
Lease concessions from landlords related to the effects of COVID-19 | $ 13 | $ 10 | $ 27 | |
Maximum [Member] | ||||
Schedule Of Lease Assets And Liabilities [Line Items] | ||||
Lease concessions from landlords related to the effects of COVID-19 | $ 1 |
Leases - Schedule of Supplement
Leases - Schedule of Supplemental Cash Flow Information (Details) - USD ($) $ in Millions | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | ||
Cash paid for amounts included in the measurement of lease liabilities: | |||
Operating cash flows from operating leases | $ 401 | $ 416 | |
Operating cash flows from finance leases | 2 | 2 | |
Financing cash flows from finance leases | 4 | 3 | |
Right-of-use assets obtained in exchange for new lease liabilities | |||
Operating leases | [1] | 281 | 106 |
Finance leases | [1] | $ 4 | $ 4 |
[1] This supplemental non-cash disclosure for ROU assets obtained in exchange for lease liabilities includes an increase in lease liabilities associated with obtaining new ROU assets of $ 281 million and $ 232 million for the years to date ended September 30, 2023 and 2022, respectively, as well as adjustments to lease liabilities or ROU assets due to modification or other reassessment events, which resulted in a $ 4 million increase and $ 122 million decrease in lease liabilities for the years to date ended September 30, 2023 and 2022, respectively. |
Leases - Schedule of Suppleme_2
Leases - Schedule of Supplemental Cash Flow Information (Parenthetical) (Details) - USD ($) $ in Millions | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | ||
Schedule Of Lease Assets And Liabilities [Line Items] | |||
ROU assets non-cash transactions, operating leases | [1] | $ 281 | $ 106 |
Right-of-use assets non-cash transactions, finance leases | [1] | 4 | 4 |
Non Cash Transactions [Member] | |||
Schedule Of Lease Assets And Liabilities [Line Items] | |||
ROU assets non-cash transactions, operating leases | 281 | 232 | |
Modification or Other Reassessment Events [Member] | |||
Schedule Of Lease Assets And Liabilities [Line Items] | |||
ROU assets non-cash transactions, operating leases | $ 4 | $ 122 | |
[1] This supplemental non-cash disclosure for ROU assets obtained in exchange for lease liabilities includes an increase in lease liabilities associated with obtaining new ROU assets of $ 281 million and $ 232 million for the years to date ended September 30, 2023 and 2022, respectively, as well as adjustments to lease liabilities or ROU assets due to modification or other reassessment events, which resulted in a $ 4 million increase and $ 122 million decrease in lease liabilities for the years to date ended September 30, 2023 and 2022, respectively. |
Leases - Schedule of Lease Term
Leases - Schedule of Lease Term and Discount Rate (Details) | Sep. 30, 2023 | Sep. 30, 2022 |
Weighted-average remaining lease term (years) | ||
Operating leases | 7 years 1 month 6 days | 7 years 1 month 6 days |
Finance leases | 11 years 1 month 6 days | 11 years 3 months 18 days |
Weighted-average discount rate | ||
Operating leases | 4.90% | 5.20% |
Finance leases | 5% | 5.30% |
Leases - Summary of Maturities
Leases - Summary of Maturities of Lease Liabilities (Details) $ in Millions | Sep. 30, 2023 USD ($) | |
Amount of Operating Leases | ||
Remainder of 2023 | $ 148 | |
2024 | 461 | |
2025 | 406 | |
2026 | 359 | |
2027 | 306 | |
Thereafter | 922 | |
Total undiscounted lease payment | 2,602 | |
Less: imputed interest | 410 | [1] |
Present value of lease liabilities | 2,192 | |
Amount of Finance Leases | ||
Remainder of 2023 | 2 | |
2024 | 6 | |
2025 | 6 | |
2026 | 6 | |
2027 | 5 | |
Thereafter | 34 | |
Total undiscounted lease payment | 59 | |
Less: imputed interest | 14 | [1] |
Present value of lease liabilities | 45 | |
Amount of Operating And Finance Leases, Total | ||
Remainder of 2023 | 150 | |
2024 | 467 | |
2025 | 412 | |
2026 | 365 | |
2027 | 311 | |
Thereafter | 956 | |
Total undiscounted lease payment | 2,661 | |
Less: imputed interest | 424 | [1] |
Present value of lease liabilities | $ 2,237 | |
[1] As the rate implicit in the lease cannot be readily determined, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the imputed interest and present value of lease payments. We used the incremental borrowing rate on January 1, 2019 for operating leases that commenced prior to that date. |
Fair Value Measurements and D_3
Fair Value Measurements and Disclosures - Narrative (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 | Sep. 30, 2022 |
Fair Value Disclosures [Abstract] | |||
Fair Value Equity Level 1 To Level 2 Transfer Amount | $ 0 | $ 0 | |
Fair Value Equity Level 2 To Level 1 Transfer Amount | 0 | $ 0 | |
Restricted time deposits in short term investments | 21,000,000 | ||
Restricted time deposits in long term investments and notes | $ 27,000,000 | $ 81,000,000 |
Fair Value Measurements and D_4
Fair Value Measurements and Disclosures - Assets Measured on Recurring Basis or Disclosed at Fair Value (Details) - Recurring Fair Value Measurements [Member] - USD ($) $ in Millions | Sep. 30, 2023 | Dec. 31, 2022 | |
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | $ 388 | $ 543 | |
Investments, Fair Value Measurement or Disclosure | 2,001 | 2,022 | |
Long-term bank deposits and notes | 1,237 | ||
Total assets, Fair Value Measurement or Disclosure | 3,688 | 3,340 | |
Level 1 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | 11 | 88 | |
Investments, Fair Value Measurement or Disclosure | 27 | ||
Total assets, Fair Value Measurement or Disclosure | 100 | 183 | |
Level 2 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | 377 | 455 | |
Investments, Fair Value Measurement or Disclosure | 1,974 | 2,022 | |
Total assets, Fair Value Measurement or Disclosure | 3,588 | 3,157 | |
Bank Time Deposits [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | 377 | 355 | |
Investments, Fair Value Measurement or Disclosure | 1,622 | 1,434 | |
Long-term bank deposits and notes | 879 | 680 | |
Bank Time Deposits [Member] | Level 2 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | 377 | 355 | |
Investments, Fair Value Measurement or Disclosure | 1,622 | 1,434 | |
Long-term bank deposits and notes | 879 | 680 | |
Money Market Funds [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | 11 | 59 | |
Money Market Funds [Member] | Level 1 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | 11 | 59 | |
Fixed Income Debt Securities [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | [1] | 129 | |
Investments, Fair Value Measurement or Disclosure | [1] | 200 | 500 |
Long-term bank deposits and notes | [1] | 358 | |
Fixed Income Debt Securities [Member] | Level 1 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | [1] | 29 | |
Fixed Income Debt Securities [Member] | Level 2 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | [1] | 100 | |
Investments, Fair Value Measurement or Disclosure | [1] | 200 | 500 |
Long-term bank deposits and notes | [1] | 358 | |
Investment in Equity Securities [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Equity investments: Investment in equity securities | 62 | 95 | |
Investment in Equity Securities [Member] | Level 1 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Equity investments: Investment in equity securities | 62 | 95 | |
Structured Deposits [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Investments, Fair Value Measurement or Disclosure | 152 | 88 | |
Structured Deposits [Member] | Level 2 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Investments, Fair Value Measurement or Disclosure | 152 | $ 88 | |
Variable Return Investments [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Investments, Fair Value Measurement or Disclosure | 27 | ||
Variable Return Investments [Member] | Level 1 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Investments, Fair Value Measurement or Disclosure | $ 27 | ||
[1] Classified as held-to-maturity investments and measured at amortized cost. |
Fair Value Measurements and D_5
Fair Value Measurements and Disclosures - Schedule of Amounts Recognized From Non-recurring Fair Value Measurements (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Impairment, Long-Lived Asset, Held-for-Use, Statement of Income or Comprehensive Income [Extensible Enumeration] | Closure And Impairment Income Expenses Net | Closure And Impairment Income Expenses Net | Closure And Impairment Income Expenses Net | Closure And Impairment Income Expenses Net |
Fair Value, Measurements, Nonrecurring [Member] | Level 3 [Member] | Restaurant-level impairment [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Restaurant-level impairment | $ 14 | $ 15 |
Fair Value Measurements and D_6
Fair Value Measurements and Disclosures - Schedule of Amounts Recognized From Non-recurring Fair Value Measurements (Parenthetical) (Details) - USD ($) $ in Millions | Sep. 30, 2023 | Sep. 30, 2022 |
Restaurant-level impairment [Member] | Fair Value, Measurements, Nonrecurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | $ 55 | $ 67 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Income Tax Disclosure [Abstract] | ||||
Income tax provision | $ 100 | $ 97 | $ 296 | $ 183 |
Effective tax rate | 27.50% | 29.90% | 27.20% | 30.10% |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) | 1 Months Ended |
Aug. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
Corporate alternative minimum tax rate | 15% |
Segment Reporting - Narrative (
Segment Reporting - Narrative (Details) | 9 Months Ended |
Sep. 30, 2023 Segment | |
Segment Reporting [Abstract] | |
Number of reportable segments | 2 |
Segment Reporting (Details)
Segment Reporting (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | ||
Segment Reporting Information [Line Items] | ||||||
Revenues | $ 2,914 | $ 2,685 | $ 8,485 | $ 7,481 | ||
Operating Profit | 323 | 316 | 996 | 588 | ||
Unallocated other income, net | 1 | 2 | ||||
Interest income, net | [1] | 46 | 25 | 124 | 51 | |
Investment (loss) gain | [1] | (4) | (15) | (32) | (32) | |
Income Before Income Taxes and Equity in Net Earnings (Losses) from Equity Method Investments | 365 | 326 | 1,088 | 607 | ||
Impairment Charges | 3 | 7 | 24 | 37 | ||
Total Assets | 12,070 | 12,070 | $ 11,826 | |||
KFC [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Impairment Charges | [2] | 2 | 5 | 14 | 24 | |
Pizza Hut [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Impairment Charges | [2] | 1 | 6 | 5 | ||
All Other Segments [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Impairment Charges | [2] | 2 | 4 | 8 | ||
Revenue From External Customers [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 2,685 | 8,485 | 7,481 | |||
Corporate and Unallocated [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Unallocated revenues from transactions with franchisees | [3] | 67 | 59 | 190 | 163 | |
Unallocated Other revenues | 12 | 12 | 32 | 31 | ||
Unallocated expenses for transactions with franchisees | [3] | (66) | (58) | (188) | (163) | |
Unallocated Other operating costs and expenses | (12) | (10) | (30) | (28) | ||
Unallocated and corporate G&A expenses | (60) | (55) | (161) | (138) | ||
Total Assets | [4] | 5,805 | 5,805 | 5,269 | ||
Operating Segments [Member] | KFC [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 2,186 | 2,017 | 6,368 | 5,628 | ||
Operating Profit | 342 | 328 | 1,035 | 670 | ||
Total Assets | 5,053 | 5,053 | 5,296 | |||
Operating Segments [Member] | Pizza Hut [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 599 | 561 | 1,750 | 1,556 | ||
Operating Profit | 47 | 49 | 137 | 90 | ||
Total Assets | 856 | 856 | 880 | |||
Operating Segments [Member] | All Other Segments [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 201 | 186 | 585 | 491 | ||
Operating Profit | (7) | (9) | (20) | (39) | ||
Total Assets | 356 | 356 | $ 381 | |||
Operating Segments [Member] | Corporate and Unallocated [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | [1] | 79 | 71 | 222 | 194 | |
Operating Segments [Member] | Revenue From External Customers [Member] | KFC [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 2,186 | 2,017 | 6,368 | 5,628 | ||
Operating Segments [Member] | Revenue From External Customers [Member] | Pizza Hut [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 599 | 561 | 1,750 | 1,556 | ||
Operating Segments [Member] | Revenue From External Customers [Member] | All Other Segments [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 50 | 41 | 145 | 115 | ||
Operating Segments [Member] | Revenue From External Customers [Member] | Corporate and Unallocated [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | [1] | 79 | 66 | 222 | 182 | |
Operating Segments [Member] | Inter-Segment Revenue [Member] | All Other Segments [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 151 | 145 | 440 | 376 | ||
Operating Segments [Member] | Inter-Segment Revenue [Member] | Corporate and Unallocated [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | [1] | 5 | 12 | |||
Elimination [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | (151) | (150) | (440) | (388) | ||
Combined [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 3,065 | 2,835 | 8,925 | 7,869 | ||
Combined [Member] | Revenue From External Customers [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 2,914 | 2,685 | 8,485 | 7,481 | ||
Combined [Member] | Inter-Segment Revenue [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | $ 151 | $ 150 | $ 440 | $ 388 | ||
[1] Amounts have not been allocated to any segment for performance reporting purposes. Primarily includes store closure impairment charges and restaurant-level impairment charges resulting from our semi-annual impairment evaluation. 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 then sells and delivers to KFC and Pizza Hut restaurants, including franchisees. Amounts have not been allocated to any segment for purposes of making operating decisions or assessing financial performance as the transactions are deemed corporate revenues and expenses in nature. Primarily includes cash and cash equivalents, short-term investments, long-term bank deposits and notes, equity investments, inventories that are centrally managed and PP&E that are not specifically identifiable within each segment. As substantially all of the Company's revenue is derived from the PRC and substantially all of the Company's long-lived assets are located in the PRC, no geographical information is presented. In addition, revenue derived from and long-lived assets located in the U.S., the Company’s country of domicile, are immaterial. |
Contingencies - Narrative (Deta
Contingencies - Narrative (Details) - USD ($) | 1 Months Ended | |
Feb. 28, 2015 | Sep. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Income tax rate on gains derived from indirect transfer of assets | 10% | |
Percentage of tax assessed on difference between fair market value and tax basis | 10% | |
Guarantees outstanding of unconsolidated affiliates | $ 0 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Millions | Oct. 31, 2023 | Nov. 02, 2023 | Sep. 30, 2023 |
Subsequent Event [Line Items] | |||
Stock repurchase program, authorized amount | $ 2,400 | ||
Stock repurchase program, remaining authorized repurchase amount | $ 870 | ||
Subsequent Event [Member] | |||
Subsequent Event [Line Items] | |||
Dividends declared date | Oct. 31, 2023 | ||
Dividends payable, amount per share | $ 0.13 | ||
Dividends payable date | Dec. 19, 2023 | ||
Dividends payable, date of record | Nov. 28, 2023 | ||
Estimated cash dividend payable | $ 54 | ||
Increased Amount In Share Repurchase Authorization | $ 1,000 | ||
Stock repurchase program, authorized amount | 3,400 | ||
Stock repurchase program, remaining authorized repurchase amount | $ 1,800 |