Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | May 04, 2020 | |
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 | 2020 | |
Document Fiscal Period Focus | Q1 | |
Document Type | 10-Q | |
Trading Symbol | YUMC | |
Amendment Flag | false | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Document Period End Date | Mar. 31, 2020 | |
Entity Common Stock Shares Outstanding | 376,432,999 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Title of 12(b) Security | Common Stock, par value $0.01 per share | |
Entity Incorporation, State or Country Code | DE | |
Security Exchange Name | NYSE | |
Entity Shell Company | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 001-37762 | |
Entity Tax Identification Number | 81-2421743 | |
Entity Address, Address Line One | 7100 Corporate Drive | |
Entity Address, City or Town | Plano | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 75024 | |
City Area Code | 469 | |
Local Phone Number | 980-2898 | |
Entity Address, Country | US | |
Other Address [Member] | ||
Document And Entity Information [Line Items] | ||
Entity Address, Address Line One | Yum China Building | |
Entity Address, City or Town | Shanghai | |
Entity Address, Postal Zip Code | 200030 | |
Entity Address, Country | CN | |
Entity Address, Address Line Two | 20 Tian Yao Qiao Road |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income (Unaudited) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | ||
Revenues | |||
Total revenues | $ 1,754 | $ 2,304 | |
Costs and Expenses, Net | |||
General and administrative expenses | 99 | 114 | |
Other operating costs and expenses | 10 | 5 | |
Closures and impairment expenses, net | 8 | 11 | |
Other income, net | (16) | (19) | |
Total costs and expenses, net | 1,657 | 2,001 | |
Operating Profit | 97 | 303 | |
Interest income, net | [1] | 9 | 9 |
Investment (loss) gain | (8) | 10 | |
Income Before Income Taxes | 98 | 322 | |
Income tax provision | (32) | (93) | |
Net income – including noncontrolling interests | 66 | 229 | |
Net income – noncontrolling interests | 4 | 7 | |
Net Income – Yum China Holdings, Inc. | $ 62 | $ 222 | |
Weighted-average common shares outstanding (in millions): | |||
Basic | [2] | 376 | 379 |
Diluted | 386 | 388 | |
Basic Earnings Per Common Share | $ 0.16 | $ 0.59 | |
Diluted Earnings Per Common Share | $ 0.16 | $ 0.57 | |
Company Sales [Member] | |||
Revenues | |||
Revenues | $ 1,548 | $ 2,089 | |
Franchise [Member] | |||
Revenues | |||
Revenues | 35 | 39 | |
Costs and Expenses, Net | |||
Cost of goods and services sold | 17 | 20 | |
Transactions With Franchisees and Unconsolidated Affiliates [Member] | |||
Revenues | |||
Revenues | 161 | 170 | |
Costs and Expenses, Net | |||
Cost of goods and services sold | 156 | 167 | |
Other Revenues [Member] | |||
Revenues | |||
Revenues | 10 | 6 | |
Company Restaurant Expenses [Member] | |||
Costs and Expenses, Net | |||
Food and paper | 495 | 638 | |
Payroll and employee benefits | 394 | 466 | |
Occupancy and other operating expenses | 494 | 599 | |
Cost of goods and services sold | $ 1,383 | $ 1,703 | |
[1] | Amounts have not been allocated to any segment for performance reporting purposes. | ||
[2] | 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 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 | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Statement Of Income And Comprehensive Income [Abstract] | ||
Net income - including noncontrolling interests | $ 66 | $ 229 |
Other comprehensive income, net of tax of nil: | ||
Foreign currency translation adjustments | (42) | 59 |
Comprehensive income - including noncontrolling interests | 24 | 288 |
Comprehensive income - noncontrolling interests | 2 | 10 |
Comprehensive Income - Yum China Holdings, Inc. | $ 22 | $ 278 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash Flows – Operating Activities | ||
Net income - including noncontrolling interests | $ 66 | $ 229 |
Depreciation and amortization | 109 | 111 |
Non-cash operating lease cost | 88 | 83 |
Closures and impairment expenses | 8 | 11 |
Investment loss (gain) | 8 | (10) |
Equity income from investments in unconsolidated affiliates | (20) | (23) |
Distributions of income received from unconsolidated affiliates | 8 | 28 |
Deferred income taxes | 2 | 6 |
Share-based compensation expense | 7 | 6 |
Changes in accounts receivable | 9 | 5 |
Changes in inventories | 57 | 34 |
Changes in prepaid expenses and other current assets | 10 | (3) |
Changes in accounts payable and other current liabilities | (192) | (39) |
Changes in income taxes payable | 5 | 24 |
Changes in non-current operating lease liabilities | (102) | (103) |
Other, net | (3) | (15) |
Net Cash Provided by Operating Activities | 60 | 344 |
Cash Flows – Investing Activities | ||
Capital spending | (87) | (110) |
Purchases of short-term investments | (275) | (235) |
Maturities of short-term investments | 390 | 76 |
Prepayment for investment | (27) | |
Other, net | 1 | 2 |
Net Cash Provided by (Used in) Investing Activities | 2 | (267) |
Cash Flows – Financing Activities | ||
Repurchase of shares of common stock | (8) | (68) |
Cash dividends paid on common stock | (45) | (46) |
Other, net | 1 | 1 |
Net Cash Used in Financing Activities | (52) | (113) |
Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash | (8) | 17 |
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | 2 | (19) |
Cash, Cash Equivalents and Restricted Cash - Beginning of Period | 1,055 | 1,266 |
Cash, Cash Equivalents and Restricted Cash - End of Period | 1,057 | 1,247 |
Supplemental Cash Flow Data | ||
Cash paid for income tax | 25 | 53 |
Non-cash Investing and Financing Activities | ||
Capital expenditures included in accounts payables and other current liabilities | $ 111 | $ 106 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Current Assets | ||
Cash and cash equivalents | $ 1,048 | $ 1,046 |
Short-term investments | 490 | 611 |
Accounts receivable, net | 78 | 88 |
Inventories, net | 317 | 380 |
Prepaid expenses and other current assets | 112 | 134 |
Total Current Assets | 2,045 | 2,259 |
Property, plant and equipment, net | 1,500 | 1,594 |
Operating lease right-of-use assets | 1,899 | 1,985 |
Goodwill | 250 | 254 |
Intangible assets, net | 89 | 94 |
Deferred income taxes | 92 | 95 |
Investments in unconsolidated affiliates | 107 | 89 |
Other assets | 595 | 580 |
Total Assets | 6,577 | 6,950 |
Current Liabilities | ||
Accounts payable and other current liabilities | 1,434 | 1,691 |
Income taxes payable | 49 | 45 |
Total Current Liabilities | 1,483 | 1,736 |
Non-current operating lease liabilities | 1,704 | 1,803 |
Non-current finance lease liabilities | 25 | 26 |
Other liabilities | 211 | 210 |
Total Liabilities | 3,423 | 3,775 |
Equity | ||
Common stock, $0.01 par value; 1,000 million shares authorized; 396 million shares and 395 million shares issued at March 31, 2020 and December 31, 2019, respectively; 376 million shares and 376 million shares outstanding at March 31, 2020 and December 31, 2019, respectively | 4 | 4 |
Treasury stock | (728) | (721) |
Additional paid-in capital | 2,434 | 2,427 |
Retained earnings | 1,433 | 1,416 |
Accumulated other comprehensive loss | (89) | (49) |
Total Yum China Holdings, Inc. Stockholders' Equity | 3,054 | 3,077 |
Noncontrolling interests | 100 | 98 |
Total Equity | 3,154 | 3,175 |
Total Liabilities, Redeemable Noncontrolling Interest and Equity | $ 6,577 | $ 6,950 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2020 | Dec. 31, 2019 |
Statement Of Financial Position [Abstract] | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 1,000,000,000 | 1,000,000,000 |
Common stock, shares issued | 396,000,000 | 395,000,000 |
Common stock, shares outstanding | 376,000,000 | 376,000,000 |
Description of Business
Description of Business | 3 Months Ended |
Mar. 31, 2020 | |
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, Little Sheep, COFFii & JOY, East Dawning and Taco Bell concepts (collectively, the “concepts”). In connection with the separation of the Company in 2016 from its former parent company, YUM! Brands, Inc. (“YUM”), Yum! Restaurants Asia Pte. Ltd., a wholly-owned indirect subsidiary of YUM, and Yum Restaurants Consulting (Shanghai) Company Limited (“YCCL”), a wholly-owned indirect subsidiary of the Company, entered into a 50-year master license agreement with automatic renewals for additional consecutive renewal terms of 50 years each, subject only to YCCL being in “good standing” and unless YCCL gives notice of its intent not to renew, 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, 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, Taiwan and Macau. 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, COFFii & JOY and East Dawning, and pay no license fee related to these concepts. The Company also owns a controlling interest in the holding company of DAOJIA.com.cn (“Daojia”), an established online food delivery service provider in China. In addition, the Company started a new e-commerce business in 2017, offering a wide selection of products including electronics, home and kitchen accessories, fresh groceries, and other general merchandise to customers directly through the Company’s e-commerce platform. |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2020 | |
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 March 31, 2020 and our results of operations, comprehensive income and cash flows for the quarters ended March 31, 2020 and 2019. 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 defined and included in the Company’s Annual Report on Form 10-K as filed with the SEC on February 27, 2020. 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 p rimary 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. Recently Adopted Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework –changes to the Disclosure Requirements for Fair Value Measurement In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808), Clarifying the Interaction between Topic 808 and Topic 606 Revenue from Contracts with Customers (Topic 606) |
Revenue Recognition
Revenue Recognition | 3 Months Ended |
Mar. 31, 2020 | |
Revenue From Contract With Customer [Abstract] | |
Revenue Recognition | Note 3 – Revenue Recognition The Company’s revenues primarily include Company sales, Franchise fees and income and Revenues from transactions with franchisees and unconsolidated affiliates. 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. For delivery orders placed through our mobile applications, we use our dedicated riders, while for orders placed through third-party aggregators’ platforms, we either used our dedicated riders or, in the past, third-party aggregators’ delivery staff. With respect to delivery orders delivered 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 were fulfilled by the delivery staff of third-party aggregators, who control and determine the price for the delivery service, we recognized revenue, excluding delivery fees, when control of the food was transferred to the third-party aggregators’ delivery staff. The payment terms with respect to those sales were short-term in nature. Starting in 2019, we use our own dedicated riders to deliver orders placed through aggregators’ platforms to customers of KFC and Pizza Hut stores. 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. Our privilege membership programs offer privilege members rights to multiple benefits, such as free delivery and discounts on certain products. For certain KFC and Pizza Hut 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 the Pizza Hut family privilege membership program 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 in accordance with ASC 606. The franchise agreement term is generally 10 years Revenues from Transactions with Franchisees and Unconsolidated Affiliates Revenues from transactions with franchisees and unconsolidated affiliates consist primarily of sales of food and paper products, advertising services and other services provided to franchisees The Company centrally purchases substa ntially all food and paper products from suppliers for substantially all of our restaurants, including franchisees and unconsolidated affiliates, and then sells and delivers them to the restaurants. 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 the procurement service on its own. We consider ourselves the principal in this arrangement as we have the abili ty to control a promised good or service before transferring that good or service to the franchisees and unconsolidated affiliates. Revenue is recognized upon transfer of control over ordered items, generally upon delivery to the franchisees and unconsolid ated affiliates. 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 a certain percentage of sales from substantially all of our restaurants, including franchisees and unconsolidated affiliates. Other services provided to franchisees and unconsolidated affiliates consist primarily of customer and technology support services. Advertising services and other services provided are highly interrelated to the franchise right, and are not considered individually distinct. We recognize revenue when the related sales occur. 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 table presents revenue disaggregated by types of arrangements and segments: Quarter Ended 3/31/2020 Revenues KFC Pizza Hut All Other Segments Corporate and Unallocated Combined Elimination Consolidated Company sales $ 1,220 $ 322 $ 6 $ — $ 1,548 $ — $ 1,548 Franchise fees and income 33 1 1 — 35 — 35 Revenues from transactions with franchisees and unconsolidated affiliates 16 1 5 139 161 — 161 Other revenues — — 16 1 17 (7 ) 10 Total revenues $ 1,269 $ 324 $ 28 $ 140 $ 1,761 $ (7 ) $ 1,754 Quarter Ended 3/31/2019 Revenues KFC Pizza Hut All OtherSegments Corporate and Unallocated Combined Elimination Consolidated Company sales $ 1,539 $ 541 $ 9 $ — $ 2,089 $ — $ 2,089 Franchise fees and income 36 1 2 — 39 — 39 Revenues from transactions with franchisees and unconsolidated affiliates 17 1 7 145 170 — 170 Other revenues — — 14 1 15 (9 ) 6 Total revenues $ 1,592 $ 543 $ 32 $ 146 $ 2,313 $ (9 ) $ 2,304 Accounts Receivable Accounts receivable consist of trade receivables and royalties from franchisees and unconsolidated affiliates, and are generally due within 30 days of the period in which the corresponding sales occur and are classified as Accounts receivable on the Condensed Consolidated Balance Sheets. Prior to the adoption of ASC 326, our provision for uncollectible receivable balances was based upon pre-defined aging criteria or upon the occurrence of other events that indicated that we may not collect the balance due. Upon adoption of ASC 326 starting from January 1, 2020, 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. Trade receivables 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 March 31, 2020 and December 31, 2019, the ending balances of provision for accounts receivable were both $1 million, and amounts of accounts receivable past due were immaterial. Receivables due from unconsolidated affiliates including trade receivables and dividend receivables were $43 million and $58 million as of March 31, 2020 and December 31, 2019, respectively. 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 and unconsolidated affiliates, 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 and unconsolidated affiliates. The Company did not incur any impairment losses related to costs to obtain contracts during any of the periods presented. Costs to obtain contracts were $9 million at both March 31, 2020 and December 31, 2019. Contract Liabilities Contract liabilities at March 31, 2020 and December 31, 2019 were as follows: Contract liabilities 3/31/2020 12/31/2019 - Deferred revenue related to prepaid stored-value products $ 81 $ 86 - Deferred revenue related to upfront franchise fees 39 39 - Deferred revenue related to customer loyalty programs 27 24 - Deferred revenue related to privilege membership programs 15 16 - Others 3 3 Total $ 165 $ 168 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 on 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 on the Condensed Consolidated Balance Sheets. Revenue recognized that was included in the contract liability balance at the beginning of each period amounted to $38 million and $33 million for the quarters ended March 31, 2020 and 2019, 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 the 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 and unconsolidated affiliates based on a certain percentage of sales, as those sales occur. |
Earnings Per Common Share ("EPS
Earnings Per Common Share ("EPS") | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Earning Per Common Share (EPS) | Note 4 – Earnings Per Common Share (“EPS”) The following table summarizes the components of basic and diluted EPS (in millions, except per share data): Quarter Ended 3/31/2020 3/31/2019 Net Income – Yum China Holdings, Inc. $ 62 $ 222 Weighted-average common shares outstanding (for basic calculation) (a) 376 379 Effect of dilutive share-based awards (a) 6 7 Effect of dilutive warrants (b) 4 2 Weighted-average common and dilutive potential common shares outstanding (for diluted calculation) 386 388 Basic Earnings Per Common Share $ 0.16 $ 0.59 Diluted Earnings Per Common Share $ 0.16 $ 0.57 Share-based awards excluded from the diluted EPS computation (c) 3 2 (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 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) Pursuant to the investment agreements dated September 1, 2016, Yum China issued to strategic investors two tranches of warrants on January 9, 2017, with each tranche initially providing the right to purchase 8,200,405 shares of Yum China common stock, at an initial exercise price of $31.40 and $39.25 per share, respectively, subject to customary anti-dilution adjustments. The warrants may be exercised at any time through October 31, 2021. The incremental shares arising from outstanding warrants are included in the computation of diluted EPS, if there is dilutive effect when the average market price of Yum China common stock for the period exceeds the applicable exercise price of the warrants. (c) The Company excluded 2 million outstanding stock appreciation rights (“SARs”) and restricted stock units (“RSUs”) from the computation of diluted EPS because to do so would have been antidilutive for the quarters presented, and 1 million performance stock units (“PSUs”) because they are contingently issuable based on the achievement of performance and market conditions, which have not been met as of March 31, 2020. |
Equity
Equity | 3 Months Ended |
Mar. 31, 2020 | |
Stockholders Equity Note [Abstract] | |
Equity | Note 5 – Equity Changes in Equity and Redeemable Noncontrolling Interest (in millions) Yum China Holdings, Inc. Accumulated Common Additional Other Redeemable Stock Paid-in Retained Comprehensive Treasury Stock Noncontrolling Total Noncontrolling Shares* Amount Capital Earnings Loss Shares* Amount Interests Equity Interest Balance at December 31, 2019 395 $ 4 $ 2,427 $ 1,416 $ (49 ) (19 ) $ (721 ) $ 98 $ 3,175 $ — Net Income 62 4 66 Foreign currency translation adjustments (40 ) (2 ) (42 ) Comprehensive income 24 Cash dividends declared ($0.12 per common share) (45 ) (45 ) Repurchase of shares of common stock — (7 ) (7 ) Exercise and vesting of share-based awards 1 — — — Share-based compensation 7 7 Balance at March 31, 2020 396 $ 4 $ 2,434 $ 1,433 $ (89 ) (20 ) $ (728 ) $ 100 $ 3,154 $ — Yum China Holdings, Inc. Accumulated Common Additional Other Redeemable Stock Paid-in Retained Comprehensive Treasury Stock Noncontrolling Total Noncontrolling Shares* Amount Capital Earnings (Loss) Income Shares* Amount Interests Equity Interest Balance at December 31, 2018 392 $ 4 $ 2,402 $ 944 $ (17 ) (13 ) $ (460 ) $ 103 $ 2,976 $ 1 Net Income 222 7 229 Foreign currency translation adjustments 56 3 59 Comprehensive income 288 Cash dividends declared ($0.12 per common share) (46 ) (46 ) Dividends declared (34 ) (34 ) Repurchase of shares of common stock (2 ) (65 ) (65 ) Exercise and vesting of share-based awards 2 — — — Share-based compensation 6 6 Cumulative effect of accounting change (60 ) (3 ) (63 ) Balance at March 31, 2019 394 $ 4 $ 2,408 $ 1,060 $ 39 (15 ) $ (525 ) $ 76 $ 3,062 $ 1 *: Shares may not to add due to rounding. Share Repurchase Program Our Board of Directors has authorized an aggregate of $1.4 billion for our share repurchase program. The Company repurchased 0.2 million and 1.7 million shares of Yum China common stock at a total cost of $7 million and $65 million for the quarters ended March 31, 2020 and 2019, respectively. The total cost includes $2 million settled subsequent to March 31, 2019, for shares repurchased with trade dates on or prior to March 31, 2019. |
Items Affecting Comparability o
Items Affecting Comparability of Net Income and Cash Flows | 3 Months Ended |
Mar. 31, 2020 | |
Items Affecting Comparability Of Net Income And Cash Flows [Abstract] | |
Items Affecting Comparability of Net Income and Cash Flows | Note 6 – Items Affecting Comparability of Net Income and Cash Flows Impact of COVID-19 Pandemic The COVID-19 pandemic has significantly impacted the Company’s operations in the first quarter of 2020. The decrease in Operating profit for the quarter was mainly driven by same-store sales declines and temporary store closures resulting from the COVID-19 pandemic, and offset by one-time rent concessions of $14 million from landlords and a one-time government subsidy in the form of a reduction in social security contributions of $20 million. Operating profit for the quarter ended March 31, 2020 was $97 million, a decrease of 68% from the first quarter ended March 31, 2019. Restaurant -l evel I mpairment In the first quarter of 2020, we considered the adverse economic effects of the COVID-19 pandemic an impairment indicator, and performed an additional impairment evaluation for long-lived assets of restaurants. As a result of the evaluation, we recorded a restaurant-level impairment charge of $9 million. In the first quarter of 2019, we also performed an additional impairment evaluation as a result of adopting ASC 842 and recorded a restaurant-level impairment charge of $12 million. See Note 11 for additional information. 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 total consideration of approximately $74 million, when it launched its initial public offering on the Hong Kong Stock Exchange in September 2018. The Company accounted 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 related unrealized loss of $8 million and unrealized gain of $10 million was included in Investment gain or loss in our Condensed Consolidated Statements of Income for the quarters ended March 31, 2020 and 2019, respectively. Transition Tax The U.S. Treasury Department and Internal Revenue Service (“IRS”) released the final transition tax regulations in the first quarter of 2019. We completed the evaluation of the impact on our transition tax computation based on the final regulations released in the first quarter of 2019 and recorded an additional amount of $8 million for the transition tax accordingly. See Note 12 for additional information. Partner PSU Awards In February 2020, the Company’s Board of Directors approved new grants of SARs, RSUs and PSUs to employees under the Yum China Holdings, Inc. Long Term Incentive Plan (the “2016 Plan”). The awards will be earned based on their respective vesting terms, with PSUs subject to market conditions or performance conditions. A special award of PSUs (“Partner PSU Awards”) was granted to select employees who were deemed critical to the Company’s execution of its strategic operating plan. These Partner PSU Awards will only vest if threshold performance goals are achieved over a four-year |
Other Income, Net
Other Income, Net | 3 Months Ended |
Mar. 31, 2020 | |
Other Income And Expenses [Abstract] | |
Other Income, Net | Note 7 – Other Income, net Quarter Ended 3/31/2020 3/31/2019 Equity income from investments in unconsolidated affiliates $ 20 $ 23 Foreign exchange impact and other (4 ) (4 ) Other income, net $ 16 $ 19 |
Supplemental Balance Sheet Info
Supplemental Balance Sheet Information | 3 Months Ended |
Mar. 31, 2020 | |
Balance Sheet Related Disclosures [Abstract] | |
Supplemental Balance Sheet Information | Note 8 – Supplemental Balance Sheet Information Accounts Receivable, net 3/31/2020 12/31/2019 Accounts receivable, gross $ 79 $ 89 Allowance for doubtful accounts (1 ) (1 ) Accounts receivable, net $ 78 $ 88 Prepaid Expenses and Other Current Assets 3/31/2020 12/31/2019 Receivables from payment processors and aggregators $ 20 $ 41 Prepaid rent 1 2 Dividends receivable from unconsolidated affiliates — 8 Other prepaid expenses and current assets 91 83 Prepaid expenses and other current assets $ 112 $ 134 Property, Plant and Equipment 3/31/2020 12/31/2019 Buildings and improvements $ 2,174 $ 2,159 Finance leases, primarily buildings 30 30 Machinery and equipment, and construction in progress 1,211 1,282 Property, plant and equipment, gross 3,415 3,471 Accumulated depreciation (1,915 ) (1,877 ) Property, plant and equipment, net $ 1,500 $ 1,594 Other Assets 3/31/2020 12/31/2019 VAT assets $ 241 $ 243 Land use right 129 133 Investment in equity securities 102 110 Long-term deposits 73 71 Prepayment for investment (a) 27 — Restricted cash (a) 9 9 Costs to obtain contracts 9 9 Others 5 5 Other Assets $ 595 $ 580 Accounts Payable and Other Current Liabilities 3/31/2020 12/31/2019 Accounts payable $ 466 $ 623 Operating leases liabilities 403 382 Accrued compensation and benefits 142 223 Contract liabilities 133 135 Accrued capital expenditures 111 150 Accrued marketing expenses 79 64 Other current liabilities 100 114 Accounts payable and other current liabilities $ 1,434 $ 1,691 Other Liabilities 3/31/2020 12/31/2019 Accrued income tax payable $ 70 $ 69 Deferred income tax liabilities 66 67 Contract liabilities 32 33 Other non-current liabilities 43 41 Other liabilities $ 211 $ 210 Reconciliation of Cash, Cash equivalents, and Restricted Cash for Condensed Consolidated Statements of Cash Flows 3/31/2020 12/31/2019 Cash and cash equivalents as presented in Condensed Consolidated Balance Sheets $ 1,048 $ 1,046 Restricted cash included in Other assets (a) 9 9 Cash, Cash Equivalents and Restricted Cash as presented in Condensed Consolidated Statements of Cash Flows $ 1,057 $ 1,055 (a) Restricted cash included in Other assets within our Condensed Consolidated Balance Sheet represents amounts deposited into an escrow account pursuant to a definitive agreement entered into in August 2019 to acquire a controlling interest in the Huang Ji Huang group, a leading Chinese-style casual dining franchise business. In addition, the Company made a prepayment of $27 million during the first quarter of 2020 when certain closing conditions were met, and it was included in Other assets within our Condensed Consolidated Balance Sheet as of March 31, 2020. The acquisition was completed in April 2020. See Note 15 for additional information. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Note 9 – Goodwill and Intangible Assets The changes in the carrying amount of goodwill are as follows: Total Company KFC Pizza Hut All Other Segments Balance as of December 31, 2019 Goodwill, gross $ 645 $ 235 $ 19 $ 391 Accumulated impairment losses (a) (391 ) — — (391 ) Goodwill, net 254 235 19 — Effect of currency translation adjustment (4 ) (4 ) — — Balance as of March 31, 2020 Goodwill, gross 641 231 19 391 Accumulated impairment losses (a) (391 ) — — (391 ) Goodwill, net $ 250 $ 231 $ 19 $ — ( a ) Accumulated impairment losses represent goodwill impairment attributable to the Little Sheep and Daojia reporting unit. Intangible assets, net as of March 31, 2020 and December 31, 2019 are as follows: 3/31/2020 12/31/2019 Gross Carrying Amount (a) Accumulated Amortization Accumulated Impairment Losses (b) Net Carrying Amount Gross Carrying Amount Accumulated Amortization Accumulated Impairment Losses (b) Net Carrying Amount Finite-lived intangible assets Reacquired franchise rights $ 147 $ (115 ) $ — $ 32 $ 148 $ (113 ) $ — $ 35 Daojia platform 16 (4 ) (12 ) — 16 (4 ) (12 ) — Customer-related assets 12 (9 ) (2 ) 1 12 (8 ) (2 ) 2 Others 9 (4 ) — 5 9 (4 ) — 5 $ 184 $ (132 ) $ (14 ) $ 38 $ 185 $ (129 ) $ (14 ) $ 42 Indefinite-lived intangible assets Little Sheep trademark $ 51 $ — $ — $ 51 $ 52 $ — $ — $ 52 Total intangible assets $ 235 $ (132 ) $ (14 ) $ 89 $ 237 $ (129 ) $ (14 ) $ 94 (a) Changes in gross carrying amount include effect of currency translation adjustment. (b) Accumulated impairment losses represent impairment charges on intangible assets acquired from Daojia primarily attributable to the Daojia platform. Amortization expense of finite-lived intangible assets was $3 million and $6 million for the quarters ended March 31, 2020 and 2019, respectively. As of March 31, 2020, expected amortization expense for the unamortized definite-lived intangible assets is approximately $9 million for the remainder of 2020, $12 million in 2021, $12 million in 2022, $2 million in 2023 and $1 million in 2024. |
Leases
Leases | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Leases | Note 10 – Leases As of March 31, 2020, we operated over 7,400 Company-owned restaurants, leasing the underlying land and/or building. 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 revenue, respectively, within our Condensed Consolidated Statements of Income. The financial impact of our accounting as a lessor was not significant. Supplemental Balance Sheet 3/31/2020 12/31/2019 Account Classification Assets Operating lease right-of-use assets $ 1,899 $ 1,985 Operating lease right-of-use assets Finance lease right-of-use assets 17 18 Property, plant and equipment, net Total leased assets $ 1,916 $ 2,003 Liabilities Current Operating lease liabilities $ 403 $ 382 Accounts payable and other current liabilities Finance lease liabilities 2 2 Accounts payable and other current liabilities Non-current Operating lease liabilities 1,704 1,803 Non-current operating lease liabilities Finance lease liabilities 25 26 Non-current finance lease liabilities Total lease liabilities $ 2,134 $ 2,213 Summary of Lease Cost Quarter Ended 3/31/2020 3/31/2019 Account Classification Operating lease cost $ 121 $ 117 Occupancy and other operating expenses, G&A or Franchise expenses Finance lease cost Amortization of leased assets 1 — Occupancy and other operating expenses Variable lease cost (a) 49 91 Occupancy and other operating expenses or Franchise expenses Short-term lease cost 3 3 Occupancy and other operating expenses or G&A Sub-lease income (6 ) (7 ) Franchise fees and income or Other revenues Total lease cost $ 168 $ 204 (a) In the first quarter of 2020, the Company was granted $14 million in lease concessions from landlords related to the effects of the COVID-19 pandemic. 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 Q&A 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 Quarter Ended 3/31/2020 3/31/2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 107 $ 127 Financing cash flows from finance leases 1 — Right-of-use assets obtained in exchange for new lease liabilities (b) Operating leases $ 32 $ 57 Finance leases — (1 ) (b) This supplemental non-cash disclosure for right-of-use (“ROU”) assets obtained in exchange for new lease liabilities also includes non-cash transactions resulting in adjustments to the lease liability or ROU asset due to modification or other reassessment events. Quarter Ended Lease Term and Discount Rate 3/31/2020 3/31/2019 Weighted-average remaining lease term (years) Operating leases 6.9 7.3 Finance leases 11.3 12.0 Weighted-average discount rate Operating leases 6.0 % 6.1 % Finance leases 5.9 % 5.7 % Summary of Future Lease Payments and Lease Liabilities Maturities of lease liabilities as of March 31, 2020 were as follows: Amount of Operating Leases Amount of Finance Leases Total Remainder of 2020 $ 397 $ 3 $ 400 2021 447 4 451 2022 388 3 391 2023 325 3 328 2024 261 3 264 Thereafter 771 21 792 Total lease payment 2,589 37 2,626 Less: imputed undiscounted interest (c) 482 10 492 Present value of lease liabilities $ 2,107 $ 27 $ 2,134 (c) 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 March 31, 2020, we have additional lease agreements that have been signed but not yet commenced, with total undiscounted minimum lease payments of $109 million. These leases will commence between the second quarter of 2020 and 2023 with lease terms of 1 year to 20 years. |
Fair Value Measurements and Dis
Fair Value Measurements and Disclosures | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements and Disclosures | Note 11 – Fair Value Measurements The Company’s financial assets and liabilities primarily consist of cash and cash equivalents, short-term investments, accounts receivable, accounts payable and lease liabilities, and the carrying values of these assets and liabilities approximate their fair value in general. The Company accounts for its investment in the equity securities of Meituan at fair value, 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 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 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 ended March 31, 2020 and 2019. Fair Value Measurement or Disclosure at March 31, 2020 Balance at March 31, 2020 Level 1 Level 2 Level 3 Cash equivalents: Time deposits $ 440 $ — $ 440 $ — Money market funds 182 182 Total cash equivalents 622 182 440 — Short-term investments: Time deposits 440 440 Fixed rate debt securities (a) 50 50 Total short-term investments 490 — 490 — Other assets: Investment in equity securities 102 102 Total $ 1,214 $ 284 $ 930 $ — (a) Classified as held-to-maturity investments and measured at amortized cost. Fair Value Measurement or Disclosure at December 31, 2019 Balance at December 31, 2019 Level 1 Level 2 Level 3 Cash equivalents: Time deposits $ 407 $ 407 Money market funds 331 331 Total cash equivalents 738 331 407 — Short-term investments: Time deposits 611 611 Total short-term investments 611 611 Other assets: Investment in equity securities 110 110 Total $ 1,459 $ 441 $ 1,018 $ — Non-Recurring Fair Value Measurements In addition, certain of the Company’s restaurant-level assets (including operating lease ROU assets, property, plant and equipment), 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 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 remaining restaurants assets, even if that use differs from the current use by the Company. The after-tax cash flows incorporate reaso nable 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 e stimate 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 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 concep ts. As a result of adopting ASU 2018-13 in the first quarter of 2020, the following disclosure was included in relation to significant unobservable inputs used in the fair value measurement. As of March 31, 2020, 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 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 valued by an independent valuation specialist. The direct comparison approach is used as the valuation technique by assuming sub-lease of each of these 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 the 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 ended March 31, 2020 and 2019. These amounts exclude fair value measurements made for restaurants that were subsequently closed or refranchised prior to those respective period-end dates. Quarter Ended 3/31/2020 3/31/2019 Account Classification Restaurant-level impairment (a) $ 9 $ 12 Closure and impairment expenses, net ROU impairment prior to the adoption of ASC 842 (b) — 82 Retained Earnings Total $ 9 $ 94 (a) Restaurant-level impairment charges are recorded in Closure and impairment expenses, net and resulted from our 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. We performed an additional impairment evaluation in the first quarter of 2020, considering the adverse economic effects of the COVID-19 pandemic an impairment indicator. We also performed an additional impairment evaluation upon adoption of ASC 842 in the first quarter of 2019. The remaining net book value of assets measured at fair value for the quarter ended March 31, 2020 was $29 million and the remaining net book value of assets measured at fair value for the quarter ended March 31, 2019 was insignificant. (b) ROU impairment prior to the adoption of ASC 842 represents an impairment charge on operating lease ROU assets arising from existing operating leases as of January 1, 2019. After netting with the related impact on deferred taxes of $19 million and the impact on noncontrolling interests of $3 million, we recorded a cumulative adjustment of $60 million to retained earnings in accordance with the transition guidance for the new lease standard. For those restaurants under operating leases with full impairment on their long-lived assets (primarily property, plant and equipment) before January 1, 2019, an additional impairment charge would have been recorded before January 1, 2019 had the operating lease ROU assets been recognized at the time of impairment. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 12 – Income Taxes Quarter Ended 3/31/2020 3/31/2019 Income tax provision $ 32 $ 93 Effective tax rate 32.7 % 28.9 % The higher effective tax rate for the quarter ended March 31, 2020 was primarily due to a non-deductible loss in the first quarter of 2020, while non-taxable gain in the first quarter of 2019 related to our investment in equity securities of Meituan. 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 U.S. Treasury Department and IRS released the final transition tax regulations in the first quarter of 2019. We completed the evaluation of the impact on our transition tax computation based on the final regulations released in the first quarter of 2019 and recorded an additional amount of $8 million for the transition tax accordingly. The Tax Act GILTI") In response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020 in the U.S., includes measures to assist companies, including temporary changes to income and non-income-based tax laws. For the quarter ended March 31, 2020, the CARES Act had no material tax impact on our Condensed Consolidated Financial Statements. We continue to monitor additional guidance issued by the U.S. Treasury Department, the IRS and others. We are subject to reviews, examinations and audits by Chinese tax authorities, the IRS and other taxing 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 (“ |
Segment Reporting
Segment Reporting | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Segment Reporting | Note 13 –Segment Reporting We have two reportable segments: KFC and Pizza Hut. Our remaining six non-reportable operating segments, including the operations of Little Sheep, COFFii & JOY, East Dawning, Taco Bell, Daojia, and our e-commerce business, are combined and referred to as All Other Segments, as these operating segments are insignificant both individually and in aggregate. Quarter Ended 3/31/2020 Revenues KFC Pizza Hut All Other Segments Corporate and Unallocated (a) Combined Elimination Consolidated Revenue from external customers $ 1,269 $ 324 $ 21 $ 140 1,754 $ — $ 1,754 Inter-segment revenue — — 7 — 7 (7 ) — Total $ 1,269 $ 324 $ 28 $ 140 $ 1,761 $ (7 ) $ 1,754 Quarter Ended 3/31/2019 Revenues KFC Pizza Hut All Other Segments Corporate and Unallocated (a) Combined Elimination Consolidated Revenue from external customers $ 1,592 $ 543 $ 23 $ 146 2,304 $ — $ 2,304 Inter-segment revenue — — 9 — 9 (9 ) — Total $ 1,592 $ 543 $ 32 $ 146 $ 2,313 $ (9 ) $ 2,304 Quarter Ended Operating Profit (Loss) 3/31/2020 3/31/2019 KFC (b) $ 153 $ 288 Pizza Hut (28 ) 50 All Other Segments (10 ) (5 ) Unallocated revenues from transactions with franchisees and unconsolidated affiliates (c) 139 145 Unallocated Other revenues 1 1 Unallocated expenses from transactions with franchisees and unconsolidated affiliates (c) (135 ) (143 ) Unallocated Other operating costs and expenses (1 ) (1 ) Unallocated and corporate G&A expenses (21 ) (33 ) Unallocated Other (loss) income (1 ) 1 Operating Profit $ 97 $ 303 Interest income, net (a) 9 9 Investment (loss) gain (a) (8 ) 10 Income Before Income Taxes $ 98 $ 322 Quarter Ended Impairment Charges 3/31/2020 3/31/2019 KFC (d) $ 4 $ 8 Pizza Hut (d) 6 5 All Other Segments (d) 2 $ 1 $ 12 $ 14 Total Assets 3/31/2020 12/31/2019 KFC (e) $ 3,034 $ 3,160 Pizza Hut 887 950 All Other Segments 158 166 Corporate and Unallocated (f) 2,498 2,674 $ 6,577 $ 6,950 (a) Amounts have not been allocated to any segment for performance reporting purposes. (b) Includes equity income from investments in unconsolidated affiliates of $20 million and $23 million for the quarters ended March 31, 2020 and 2019, respectively. (c) Primarily includes revenues and associated expenses of transactions with franchisee and unconsolidated affiliates derived from the Company’s central procurement model whereby the Company centrally purchases substantially all food and paper products from suppliers and then sells and delivers to restaurants, including franchisees and unconsolidated affiliates. 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. (d) Primarily includes store closure impairment charges, restaurant-level impairment charges resulting from our additional impairment evaluation performed in the first quarter of 2020 in response to adverse impact from the COVID-19 pandemic, and additional impairment evaluation performed in the first quarter of 2019 as a result of adopting ASC 842 (See Note 11). ( e ) Includes investments in unconsolidated affiliates. (f) Primarily includes cash and cash equivalents, short-term investments, investment in equity securities, and inventories that are centrally managed. |
Contingencies
Contingencies | 3 Months Ended |
Mar. 31, 2020 | |
Commitments And Contingencies Disclosure [Abstract] | |
Contingencies | Note 14 – 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 separ ation. 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 and Unconsolidated Affiliates From time to time we have guaranteed certain lines of credit and loans of franchisees and unconsolidated affiliates. As of March 31, 2020, guarantees on behalf of franchisees were immaterial and no guarantees were outstanding for unconsolidated affiliates. 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 | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 15 – Subsequent Events Acquisition of a Controlling Interest in Huang Ji Huang In April 2020, the Company completed the acquisition of a controlling interest in the Huang Ji Huang group, a leading Chinese-style casual dining franchise business, for cash consideration of approximately $185 million. Upon completion of the acquisition, the Company held a 93.3% interest in Huang Ji Huang group. Founded in 2004 and headquartered in Beijing, Huang Ji Huang has over 640 restaurants in China and internationally. The acquisition was considered immaterial. As of the date of this filing, the Company has not yet completed the fair value assessment on the determination of identifiable assets acquired and the liabilities assumed in the acquisition. Acquisition of Additional Interest in Unconsolidated Affiliate In April 2020, the Company entered into a definitive agreement to acquire an additional 25% equity interest in an unconsolidated affiliate that operates KFC stores in and around Suzhou, China (“Suzhou KFC”), for cash consideration of approximately $149 million. Upon closing of the acquisition in the second half of the year, subject to the satisfaction of closing conditions, the Company is expected to increase its equity interest to 72%, allowing the Company to consolidate Suzhou KFC. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework –changes to the Disclosure Requirements for Fair Value Measurement In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808), Clarifying the Interaction between Topic 808 and Topic 606 Revenue from Contracts with Customers (Topic 606) |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Revenue From Contract With Customer [Abstract] | |
Schedule of Disaggregation of Revenue by Types of Arrangements and Segments | The following table presents revenue disaggregated by types of arrangements and segments: Quarter Ended 3/31/2020 Revenues KFC Pizza Hut All Other Segments Corporate and Unallocated Combined Elimination Consolidated Company sales $ 1,220 $ 322 $ 6 $ — $ 1,548 $ — $ 1,548 Franchise fees and income 33 1 1 — 35 — 35 Revenues from transactions with franchisees and unconsolidated affiliates 16 1 5 139 161 — 161 Other revenues — — 16 1 17 (7 ) 10 Total revenues $ 1,269 $ 324 $ 28 $ 140 $ 1,761 $ (7 ) $ 1,754 Quarter Ended 3/31/2019 Revenues KFC Pizza Hut All OtherSegments Corporate and Unallocated Combined Elimination Consolidated Company sales $ 1,539 $ 541 $ 9 $ — $ 2,089 $ — $ 2,089 Franchise fees and income 36 1 2 — 39 — 39 Revenues from transactions with franchisees and unconsolidated affiliates 17 1 7 145 170 — 170 Other revenues — — 14 1 15 (9 ) 6 Total revenues $ 1,592 $ 543 $ 32 $ 146 $ 2,313 $ (9 ) $ 2,304 |
Contract Liabilities | Contract liabilities at March 31, 2020 and December 31, 2019 were as follows: Contract liabilities 3/31/2020 12/31/2019 - Deferred revenue related to prepaid stored-value products $ 81 $ 86 - Deferred revenue related to upfront franchise fees 39 39 - Deferred revenue related to customer loyalty programs 27 24 - Deferred revenue related to privilege membership programs 15 16 - Others 3 3 Total $ 165 $ 168 |
Earnings Per Common Share ("E_2
Earnings Per Common Share ("EPS") (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
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 3/31/2020 3/31/2019 Net Income – Yum China Holdings, Inc. $ 62 $ 222 Weighted-average common shares outstanding (for basic calculation) (a) 376 379 Effect of dilutive share-based awards (a) 6 7 Effect of dilutive warrants (b) 4 2 Weighted-average common and dilutive potential common shares outstanding (for diluted calculation) 386 388 Basic Earnings Per Common Share $ 0.16 $ 0.59 Diluted Earnings Per Common Share $ 0.16 $ 0.57 Share-based awards excluded from the diluted EPS computation (c) 3 2 (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 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) Pursuant to the investment agreements dated September 1, 2016, Yum China issued to strategic investors two tranches of warrants on January 9, 2017, with each tranche initially providing the right to purchase 8,200,405 shares of Yum China common stock, at an initial exercise price of $31.40 and $39.25 per share, respectively, subject to customary anti-dilution adjustments. The warrants may be exercised at any time through October 31, 2021. The incremental shares arising from outstanding warrants are included in the computation of diluted EPS, if there is dilutive effect when the average market price of Yum China common stock for the period exceeds the applicable exercise price of the warrants. (c) The Company excluded 2 million outstanding stock appreciation rights (“SARs”) and restricted stock units (“RSUs”) from the computation of diluted EPS because to do so would have been antidilutive for the quarters presented, and 1 million performance stock units (“PSUs”) because they are contingently issuable based on the achievement of performance and market conditions, which have not been met as of March 31, 2020. |
Equity (Tables)
Equity (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Stockholders Equity Note [Abstract] | |
Changes in Equity and Redeemable Noncontrolling Interest | Yum China Holdings, Inc. Accumulated Common Additional Other Redeemable Stock Paid-in Retained Comprehensive Treasury Stock Noncontrolling Total Noncontrolling Shares* Amount Capital Earnings Loss Shares* Amount Interests Equity Interest Balance at December 31, 2019 395 $ 4 $ 2,427 $ 1,416 $ (49 ) (19 ) $ (721 ) $ 98 $ 3,175 $ — Net Income 62 4 66 Foreign currency translation adjustments (40 ) (2 ) (42 ) Comprehensive income 24 Cash dividends declared ($0.12 per common share) (45 ) (45 ) Repurchase of shares of common stock — (7 ) (7 ) Exercise and vesting of share-based awards 1 — — — Share-based compensation 7 7 Balance at March 31, 2020 396 $ 4 $ 2,434 $ 1,433 $ (89 ) (20 ) $ (728 ) $ 100 $ 3,154 $ — Yum China Holdings, Inc. Accumulated Common Additional Other Redeemable Stock Paid-in Retained Comprehensive Treasury Stock Noncontrolling Total Noncontrolling Shares* Amount Capital Earnings (Loss) Income Shares* Amount Interests Equity Interest Balance at December 31, 2018 392 $ 4 $ 2,402 $ 944 $ (17 ) (13 ) $ (460 ) $ 103 $ 2,976 $ 1 Net Income 222 7 229 Foreign currency translation adjustments 56 3 59 Comprehensive income 288 Cash dividends declared ($0.12 per common share) (46 ) (46 ) Dividends declared (34 ) (34 ) Repurchase of shares of common stock (2 ) (65 ) (65 ) Exercise and vesting of share-based awards 2 — — — Share-based compensation 6 6 Cumulative effect of accounting change (60 ) (3 ) (63 ) Balance at March 31, 2019 394 $ 4 $ 2,408 $ 1,060 $ 39 (15 ) $ (525 ) $ 76 $ 3,062 $ 1 *: Shares may not to add due to rounding. |
Other Income, Net (Tables)
Other Income, Net (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Other Income And Expenses [Abstract] | |
Other Income, Net | Quarter Ended 3/31/2020 3/31/2019 Equity income from investments in unconsolidated affiliates $ 20 $ 23 Foreign exchange impact and other (4 ) (4 ) Other income, net $ 16 $ 19 |
Supplemental Balance Sheet In_2
Supplemental Balance Sheet Information (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Balance Sheet Related Disclosures [Abstract] | |
Accounts Receivable, Net | Accounts Receivable, net 3/31/2020 12/31/2019 Accounts receivable, gross $ 79 $ 89 Allowance for doubtful accounts (1 ) (1 ) Accounts receivable, net $ 78 $ 88 |
Prepaid Expenses and Other Current Assets | Prepaid Expenses and Other Current Assets 3/31/2020 12/31/2019 Receivables from payment processors and aggregators $ 20 $ 41 Prepaid rent 1 2 Dividends receivable from unconsolidated affiliates — 8 Other prepaid expenses and current assets 91 83 Prepaid expenses and other current assets $ 112 $ 134 |
Property, Plant and Equipment | Property, Plant and Equipment 3/31/2020 12/31/2019 Buildings and improvements $ 2,174 $ 2,159 Finance leases, primarily buildings 30 30 Machinery and equipment, and construction in progress 1,211 1,282 Property, plant and equipment, gross 3,415 3,471 Accumulated depreciation (1,915 ) (1,877 ) Property, plant and equipment, net $ 1,500 $ 1,594 |
Accounts Payable and Other Current Liabilities | Other Assets 3/31/2020 12/31/2019 VAT assets $ 241 $ 243 Land use right 129 133 Investment in equity securities 102 110 Long-term deposits 73 71 Prepayment for investment (a) 27 — Restricted cash (a) 9 9 Costs to obtain contracts 9 9 Others 5 5 Other Assets $ 595 $ 580 Accounts Payable and Other Current Liabilities 3/31/2020 12/31/2019 Accounts payable $ 466 $ 623 Operating leases liabilities 403 382 Accrued compensation and benefits 142 223 Contract liabilities 133 135 Accrued capital expenditures 111 150 Accrued marketing expenses 79 64 Other current liabilities 100 114 Accounts payable and other current liabilities $ 1,434 $ 1,691 |
Other Liabilities and Deferred Credits | Other Liabilities 3/31/2020 12/31/2019 Accrued income tax payable $ 70 $ 69 Deferred income tax liabilities 66 67 Contract liabilities 32 33 Other non-current liabilities 43 41 Other liabilities $ 211 $ 210 |
Reconciliation of Cash, Cash Equivalents, and Restricted Cash | Reconciliation of Cash, Cash equivalents, and Restricted Cash for Condensed Consolidated Statements of Cash Flows 3/31/2020 12/31/2019 Cash and cash equivalents as presented in Condensed Consolidated Balance Sheets $ 1,048 $ 1,046 Restricted cash included in Other assets (a) 9 9 Cash, Cash Equivalents and Restricted Cash as presented in Condensed Consolidated Statements of Cash Flows $ 1,057 $ 1,055 (a) Restricted cash included in Other assets within our Condensed Consolidated Balance Sheet represents amounts deposited into an escrow account pursuant to a definitive agreement entered into in August 2019 to acquire a controlling interest in the Huang Ji Huang group, a leading Chinese-style casual dining franchise business. In addition, the Company made a prepayment of $27 million during the first quarter of 2020 when certain closing conditions were met, and it was included in Other assets within our Condensed Consolidated Balance Sheet as of March 31, 2020. The acquisition was completed in April 2020. See Note 15 for additional information. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
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 Company KFC Pizza Hut All Other Segments Balance as of December 31, 2019 Goodwill, gross $ 645 $ 235 $ 19 $ 391 Accumulated impairment losses (a) (391 ) — — (391 ) Goodwill, net 254 235 19 — Effect of currency translation adjustment (4 ) (4 ) — — Balance as of March 31, 2020 Goodwill, gross 641 231 19 391 Accumulated impairment losses (a) (391 ) — — (391 ) Goodwill, net $ 250 $ 231 $ 19 $ — ( a ) Accumulated impairment losses represent goodwill impairment attributable to the Little Sheep and Daojia reporting unit. |
Schedule of Finite and Indefinite Lived Intangible Assets by Major Class | Intangible assets, net as of March 31, 2020 and December 31, 2019 are as follows: 3/31/2020 12/31/2019 Gross Carrying Amount (a) Accumulated Amortization Accumulated Impairment Losses (b) Net Carrying Amount Gross Carrying Amount Accumulated Amortization Accumulated Impairment Losses (b) Net Carrying Amount Finite-lived intangible assets Reacquired franchise rights $ 147 $ (115 ) $ — $ 32 $ 148 $ (113 ) $ — $ 35 Daojia platform 16 (4 ) (12 ) — 16 (4 ) (12 ) — Customer-related assets 12 (9 ) (2 ) 1 12 (8 ) (2 ) 2 Others 9 (4 ) — 5 9 (4 ) — 5 $ 184 $ (132 ) $ (14 ) $ 38 $ 185 $ (129 ) $ (14 ) $ 42 Indefinite-lived intangible assets Little Sheep trademark $ 51 $ — $ — $ 51 $ 52 $ — $ — $ 52 Total intangible assets $ 235 $ (132 ) $ (14 ) $ 89 $ 237 $ (129 ) $ (14 ) $ 94 (a) Changes in gross carrying amount include effect of currency translation adjustment. (b) Accumulated impairment losses represent impairment charges on intangible assets acquired from Daojia primarily attributable to the Daojia platform. |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Summary of Supplemental Balance Sheet | Supplemental Balance Sheet 3/31/2020 12/31/2019 Account Classification Assets Operating lease right-of-use assets $ 1,899 $ 1,985 Operating lease right-of-use assets Finance lease right-of-use assets 17 18 Property, plant and equipment, net Total leased assets $ 1,916 $ 2,003 Liabilities Current Operating lease liabilities $ 403 $ 382 Accounts payable and other current liabilities Finance lease liabilities 2 2 Accounts payable and other current liabilities Non-current Operating lease liabilities 1,704 1,803 Non-current operating lease liabilities Finance lease liabilities 25 26 Non-current finance lease liabilities Total lease liabilities $ 2,134 $ 2,213 |
Summary of Lease Cost | Summary of Lease Cost Quarter Ended 3/31/2020 3/31/2019 Account Classification Operating lease cost $ 121 $ 117 Occupancy and other operating expenses, G&A or Franchise expenses Finance lease cost Amortization of leased assets 1 — Occupancy and other operating expenses Variable lease cost (a) 49 91 Occupancy and other operating expenses or Franchise expenses Short-term lease cost 3 3 Occupancy and other operating expenses or G&A Sub-lease income (6 ) (7 ) Franchise fees and income or Other revenues Total lease cost $ 168 $ 204 (a) In the first quarter of 2020, the Company was granted $14 million in lease concessions from landlords related to the effects of the COVID-19 pandemic. 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 Q&A 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 Quarter Ended 3/31/2020 3/31/2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 107 $ 127 Financing cash flows from finance leases 1 — Right-of-use assets obtained in exchange for new lease liabilities (b) Operating leases $ 32 $ 57 Finance leases — (1 ) (b) This supplemental non-cash disclosure for right-of-use (“ROU”) assets obtained in exchange for new lease liabilities also includes non-cash transactions resulting in adjustments to the lease liability or ROU asset due to modification or other reassessment events. |
Schedule of Lease Terms and Discount Rate | Quarter Ended Lease Term and Discount Rate 3/31/2020 3/31/2019 Weighted-average remaining lease term (years) Operating leases 6.9 7.3 Finance leases 11.3 12.0 Weighted-average discount rate Operating leases 6.0 % 6.1 % Finance leases 5.9 % 5.7 % |
Summary of Maturities of Lease Liabilities | Maturities of lease liabilities as of March 31, 2020 were as follows: Amount of Operating Leases Amount of Finance Leases Total Remainder of 2020 $ 397 $ 3 $ 400 2021 447 4 451 2022 388 3 391 2023 325 3 328 2024 261 3 264 Thereafter 771 21 792 Total lease payment 2,589 37 2,626 Less: imputed undiscounted interest (c) 482 10 492 Present value of lease liabilities $ 2,107 $ 27 $ 2,134 (c) 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) | 3 Months Ended |
Mar. 31, 2020 | |
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 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 ended March 31, 2020 and 2019. Fair Value Measurement or Disclosure at March 31, 2020 Balance at March 31, 2020 Level 1 Level 2 Level 3 Cash equivalents: Time deposits $ 440 $ — $ 440 $ — Money market funds 182 182 Total cash equivalents 622 182 440 — Short-term investments: Time deposits 440 440 Fixed rate debt securities (a) 50 50 Total short-term investments 490 — 490 — Other assets: Investment in equity securities 102 102 Total $ 1,214 $ 284 $ 930 $ — (a) Classified as held-to-maturity investments and measured at amortized cost. Fair Value Measurement or Disclosure at December 31, 2019 Balance at December 31, 2019 Level 1 Level 2 Level 3 Cash equivalents: Time deposits $ 407 $ 407 Money market funds 331 331 Total cash equivalents 738 331 407 — Short-term investments: Time deposits 611 611 Total short-term investments 611 611 Other assets: Investment in equity securities 110 110 Total $ 1,459 $ 441 $ 1,018 $ — |
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 ended March 31, 2020 and 2019. These amounts exclude fair value measurements made for restaurants that were subsequently closed or refranchised prior to those respective period-end dates. Quarter Ended 3/31/2020 3/31/2019 Account Classification Restaurant-level impairment (a) $ 9 $ 12 Closure and impairment expenses, net ROU impairment prior to the adoption of ASC 842 (b) — 82 Retained Earnings Total $ 9 $ 94 (a) Restaurant-level impairment charges are recorded in Closure and impairment expenses, net and resulted from our 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. We performed an additional impairment evaluation in the first quarter of 2020, considering the adverse economic effects of the COVID-19 pandemic an impairment indicator. We also performed an additional impairment evaluation upon adoption of ASC 842 in the first quarter of 2019. The remaining net book value of assets measured at fair value for the quarter ended March 31, 2020 was $29 million and the remaining net book value of assets measured at fair value for the quarter ended March 31, 2019 was insignificant. (b) ROU impairment prior to the adoption of ASC 842 represents an impairment charge on operating lease ROU assets arising from existing operating leases as of January 1, 2019. After netting with the related impact on deferred taxes of $19 million and the impact on noncontrolling interests of $3 million, we recorded a cumulative adjustment of $60 million to retained earnings in accordance with the transition guidance for the new lease standard. For those restaurants under operating leases with full impairment on their long-lived assets (primarily property, plant and equipment) before January 1, 2019, an additional impairment charge would have been recorded before January 1, 2019 had the operating lease ROU assets been recognized at the time of impairment. |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Tax And Effective Tax Rate | Quarter Ended 3/31/2020 3/31/2019 Income tax provision $ 32 $ 93 Effective tax rate 32.7 % 28.9 % |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information, by Segment | Quarter Ended 3/31/2020 Revenues KFC Pizza Hut All Other Segments Corporate and Unallocated (a) Combined Elimination Consolidated Revenue from external customers $ 1,269 $ 324 $ 21 $ 140 1,754 $ — $ 1,754 Inter-segment revenue — — 7 — 7 (7 ) — Total $ 1,269 $ 324 $ 28 $ 140 $ 1,761 $ (7 ) $ 1,754 Quarter Ended 3/31/2019 Revenues KFC Pizza Hut All Other Segments Corporate and Unallocated (a) Combined Elimination Consolidated Revenue from external customers $ 1,592 $ 543 $ 23 $ 146 2,304 $ — $ 2,304 Inter-segment revenue — — 9 — 9 (9 ) — Total $ 1,592 $ 543 $ 32 $ 146 $ 2,313 $ (9 ) $ 2,304 Quarter Ended Operating Profit (Loss) 3/31/2020 3/31/2019 KFC (b) $ 153 $ 288 Pizza Hut (28 ) 50 All Other Segments (10 ) (5 ) Unallocated revenues from transactions with franchisees and unconsolidated affiliates (c) 139 145 Unallocated Other revenues 1 1 Unallocated expenses from transactions with franchisees and unconsolidated affiliates (c) (135 ) (143 ) Unallocated Other operating costs and expenses (1 ) (1 ) Unallocated and corporate G&A expenses (21 ) (33 ) Unallocated Other (loss) income (1 ) 1 Operating Profit $ 97 $ 303 Interest income, net (a) 9 9 Investment (loss) gain (a) (8 ) 10 Income Before Income Taxes $ 98 $ 322 Quarter Ended Impairment Charges 3/31/2020 3/31/2019 KFC (d) $ 4 $ 8 Pizza Hut (d) 6 5 All Other Segments (d) 2 $ 1 $ 12 $ 14 Total Assets 3/31/2020 12/31/2019 KFC (e) $ 3,034 $ 3,160 Pizza Hut 887 950 All Other Segments 158 166 Corporate and Unallocated (f) 2,498 2,674 $ 6,577 $ 6,950 (a) Amounts have not been allocated to any segment for performance reporting purposes. (b) Includes equity income from investments in unconsolidated affiliates of $20 million and $23 million for the quarters ended March 31, 2020 and 2019, respectively. (c) Primarily includes revenues and associated expenses of transactions with franchisee and unconsolidated affiliates derived from the Company’s central procurement model whereby the Company centrally purchases substantially all food and paper products from suppliers and then sells and delivers to restaurants, including franchisees and unconsolidated affiliates. Amounts have not been allocated to any segment for purposes of making operating decisions or assessing financial performance as the transactions are deemed corporate revenues and expenses in nature. (d) Primarily includes store closure impairment charges, restaurant-level impairment charges resulting from our additional impairment evaluation performed in the first quarter of 2020 in response to adverse impact from the COVID-19 pandemic, and additional impairment evaluation performed in the first quarter of 2019 as a result of adopting ASC 842 (See Note 11). ( e ) Includes investments in unconsolidated affiliates. (f) Primarily includes cash and cash equivalents, short-term investments, investment in equity securities, and inventories that are centrally managed. |
Description of Business - Narra
Description of Business - Narrative (Details) | 3 Months Ended |
Mar. 31, 2020 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Entity, date of incorporation | Apr. 1, 2016 |
Entity incorporation, state name | DE |
Expiration term of master license agreement | 50 years |
Additional consecutive renewal terms of license agreement | 50 years |
Percentage of license fees on net sales | 3.00% |
Revenue Recognition - Narrative
Revenue Recognition - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
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 | $ 1 | $ 1 | |
Receivables due from unconsolidated affiliates including trade receivables and dividend receivables | 43 | 58 | |
Impairment losses related to costs to obtain contracts | 0 | $ 0 | |
Costs to obtain contracts | 9 | $ 9 | |
Revenue recognized | $ 38 | $ 33 | |
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] | Minimum [Member] | |||
Revenue From Contract With Customer [Line Items] | |||
Franchisee agreement term | 5 years | ||
Little Sheep [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 | ||
Mar. 31, 2020 | Mar. 31, 2019 | ||
Disaggregation Of Revenue [Line Items] | |||
Total revenues | $ 1,754 | $ 2,304 | |
KFC [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Total revenues | 1,269 | 1,592 | |
Pizza Hut [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Total revenues | 324 | 543 | |
All Other Segments [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Total revenues | 21 | 23 | |
Corporate and Unallocated [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Total revenues | [1] | 140 | 146 |
Combined [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Total revenues | 1,761 | 2,313 | |
Elimination [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Total revenues | (7) | (9) | |
Elimination [Member] | All Other Segments [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Total revenues | 7 | 9 | |
Operating Segments [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Total revenues | 1,754 | 2,304 | |
Operating Segments [Member] | KFC [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Total revenues | 1,269 | 1,592 | |
Operating Segments [Member] | Pizza Hut [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Total revenues | 324 | 543 | |
Operating Segments [Member] | All Other Segments [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Total revenues | 28 | 32 | |
Company Sales [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 1,548 | 2,089 | |
Company Sales [Member] | KFC [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 1,220 | 1,539 | |
Company Sales [Member] | Pizza Hut [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 322 | 541 | |
Company Sales [Member] | All Other Segments [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 6 | 9 | |
Company Sales [Member] | Combined [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 1,548 | 2,089 | |
Franchise [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 35 | 39 | |
Franchise [Member] | KFC [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 33 | 36 | |
Franchise [Member] | Pizza Hut [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 1 | 1 | |
Franchise [Member] | All Other Segments [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 1 | 2 | |
Franchise [Member] | Combined [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 35 | 39 | |
Transactions With Franchisees and Unconsolidated Affiliates [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 161 | 170 | |
Transactions With Franchisees and Unconsolidated Affiliates [Member] | KFC [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 16 | 17 | |
Transactions With Franchisees and Unconsolidated Affiliates [Member] | Pizza Hut [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 1 | 1 | |
Transactions With Franchisees and Unconsolidated Affiliates [Member] | All Other Segments [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 5 | 7 | |
Transactions With Franchisees and Unconsolidated Affiliates [Member] | Corporate and Unallocated [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 139 | 145 | |
Transactions With Franchisees and Unconsolidated Affiliates [Member] | Combined [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 161 | 170 | |
Other Revenues [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 10 | 6 | |
Other Revenues [Member] | All Other Segments [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 16 | 14 | |
Other Revenues [Member] | Corporate and Unallocated [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 1 | 1 | |
Other Revenues [Member] | Combined [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | 17 | 15 | |
Other Revenues [Member] | Elimination [Member] | |||
Disaggregation Of Revenue [Line Items] | |||
Revenues | $ (7) | $ (9) | |
[1] | Amounts have not been allocated to any segment for performance reporting purposes. |
Revenue Recognition - Contract
Revenue Recognition - Contract Liabilities (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Contract liabilities | ||
Contract liabilities | $ 165 | $ 168 |
Deferred Revenue Related To Prepaid Stored Value Products [Member] | ||
Contract liabilities | ||
Contract liabilities | 81 | 86 |
Deferred Revenue Related To Upfront Franchise Fees [Member] | ||
Contract liabilities | ||
Contract liabilities | 39 | 39 |
Deferred Revenue Related To Customer Loyalty Programs [Member] | ||
Contract liabilities | ||
Contract liabilities | 27 | 24 |
Deferred Revenue Related To Privilege Membership Programs [Member] | ||
Contract liabilities | ||
Contract liabilities | 15 | 16 |
Others [Member] | ||
Contract liabilities | ||
Contract liabilities | $ 3 | $ 3 |
Earnings Per Common Share ("E_3
Earnings Per Common Share ("EPS") (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | ||
Earnings Per Share [Abstract] | |||
Net Income – Yum China Holdings, Inc. | $ 62 | $ 222 | |
Weighted-average common shares outstanding (for basic calculation) | [1] | 376 | 379 |
Effect of dilutive share-based awards | [1] | 6 | 7 |
Effect of dilutive warrants | [2] | 4 | 2 |
Weighted-average common and dilutive potential common shares outstanding (for diluted calculation) | 386 | 388 | |
Basic Earnings Per Common Share | $ 0.16 | $ 0.59 | |
Diluted Earnings Per Common Share | $ 0.16 | $ 0.57 | |
Share-based awards excluded from the diluted EPS computation | [3] | 3 | 2 |
[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 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. | ||
[2] | Pursuant to the investment agreements dated September 1, 2016, Yum China issued to strategic investors two tranches of warrants on January 9, 2017, with each tranche initially providing the right to purchase 8,200,405 shares of Yum China common stock, at an initial exercise price of $31.40 and $39.25 per share, respectively, subject to customary anti-dilution adjustments. The warrants may be exercised at any time through October 31, 2021. The incremental shares arising from outstanding warrants are included in the computation of diluted EPS, if there is dilutive effect when the average market price of Yum China common stock for the period exceeds the applicable exercise price of the warrants. | ||
[3] | The Company excluded 2 million outstanding stock appreciation rights (“SARs”) and restricted stock units (“RSUs”) from the computation of diluted EPS because to do so would have been antidilutive for the quarters presented, and 1 million performance stock units (“PSUs”) because they are contingently issuable based on the achievement of performance and market conditions, which have not been met as of March 31, 2020. |
Earnings Per Common Share ("E_4
Earnings Per Common Share ("EPS") (Parenthetical) (Details) | Jan. 09, 2017Tranche$ / sharesshares |
Class Of Warrant Or Right [Line Items] | |
Number of tranches of warrants | Tranche | 2 |
Tranche One Warrants [Member] | |
Class Of Warrant Or Right [Line Items] | |
Warrants to purchase shares of common stock | shares | 8,200,405 |
Exercise price of warrants | $ / shares | $ 31.40 |
Tranche Two Warrants [Member] | |
Class Of Warrant Or Right [Line Items] | |
Warrants to purchase shares of common stock | shares | 8,200,405 |
Exercise price of warrants | $ / shares | $ 39.25 |
Earnings Per Common Share ("E_5
Earnings Per Common Share ("EPS") (Parenthetical) (Details) 1 - shares shares in Millions | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | ||
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | |||
Share-based awards excluded from the diluted EPS computation | [1] | 3 | 2 |
Stock Appreciation Rights and Restricted Stock Units [Member] | |||
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | |||
Share-based awards excluded from the diluted EPS computation | 2 | ||
Performance Stock Units [Member] | |||
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | |||
Share-based awards excluded from the diluted EPS computation | 1 | ||
[1] | The Company excluded 2 million outstanding stock appreciation rights (“SARs”) and restricted stock units (“RSUs”) from the computation of diluted EPS because to do so would have been antidilutive for the quarters presented, and 1 million performance stock units (“PSUs”) because they are contingently issuable based on the achievement of performance and market conditions, which have not been met as of March 31, 2020. |
Equity (Details)
Equity (Details) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | ||
Class Of Stock [Line Items] | |||
Beginning balance | $ 3,175 | $ 2,976 | |
Net Income | 66 | 229 | |
Foreign currency translation adjustments | (42) | 59 | |
Comprehensive income - including noncontrolling interests | 24 | 288 | |
Cash dividends declared | (45) | (46) | |
Dividends declared | (34) | ||
Repurchase of shares of common stock | $ (7) | $ (65) | |
Repurchase of shares of common stock, shares | (0.2) | (1.7) | |
Share-based compensation | $ 7 | $ 6 | |
Cumulative effect of accounting change | (63) | ||
Ending balance | 3,154 | 3,062 | |
Common Stock [Member] | |||
Class Of Stock [Line Items] | |||
Beginning balance | $ 4 | $ 4 | |
Beginning balance (in shares) | [1] | 395 | 392 |
Exercise and vesting of share-based awards, shares | [1] | 1 | 2 |
Ending balance | $ 4 | $ 4 | |
Ending balance (in shares) | [1] | 396 | 394 |
Additional Paid-in Capital [Member] | |||
Class Of Stock [Line Items] | |||
Beginning balance | $ 2,427 | $ 2,402 | |
Share-based compensation | 7 | 6 | |
Ending balance | 2,434 | 2,408 | |
Retained Earnings [Member] | |||
Class Of Stock [Line Items] | |||
Beginning balance | 1,416 | 944 | |
Net Income | 62 | 222 | |
Cash dividends declared | (45) | (46) | |
Cumulative effect of accounting change | (60) | ||
Ending balance | 1,433 | 1,060 | |
Accumulated Other Comprehensive Income (Loss) [Member] | |||
Class Of Stock [Line Items] | |||
Beginning balance | (49) | (17) | |
Foreign currency translation adjustments | (40) | 56 | |
Ending balance | (89) | 39 | |
Treasury Stock [Member] | |||
Class Of Stock [Line Items] | |||
Beginning balance | $ (721) | $ (460) | |
Beginning balance (in shares) | [1] | (19) | (13) |
Repurchase of shares of common stock | $ (7) | $ (65) | |
Repurchase of shares of common stock, shares | [1] | (2) | |
Ending balance | $ (728) | $ (525) | |
Ending balance (in shares) | [1] | (20) | (15) |
Noncontrolling Interests [Member] | |||
Class Of Stock [Line Items] | |||
Beginning balance | $ 98 | $ 103 | |
Net Income | 4 | 7 | |
Foreign currency translation adjustments | (2) | 3 | |
Dividends declared | (34) | ||
Cumulative effect of accounting change | (3) | ||
Ending balance | $ 100 | 76 | |
Redeemable Noncontrolling Interest [Member] | |||
Class Of Stock [Line Items] | |||
Beginning balance | 1 | ||
Ending balance | $ 1 | ||
[1] | Shares may not to add due to rounding. |
Equity (Parenthetical) (Details
Equity (Parenthetical) (Details) - $ / shares | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Equity [Abstract] | ||
Cash dividends declared, per common share | $ 0.12 | $ 0.12 |
Equity - Narrative (Details)
Equity - Narrative (Details) - USD ($) shares in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Equity [Abstract] | ||
Stock repurchase program, authorized amount | $ 1,400,000,000 | |
Treasury stock repurchased, shares | 0.2 | 1.7 |
Treasury stock repurchased, value | $ 7,000,000 | $ 65,000,000 |
Cost of shares repurchased with trade dates in the current reporting quarter, but settlement dates subsequent to the current quarter | 2,000,000 | |
Stock repurchase program, remaining authorized repurchase amount | $ 692,000,000 |
Items Affecting Comparability_2
Items Affecting Comparability of Net Income and Cash Flows - Narrative (Details) - USD ($) shares in Millions, $ in Millions | 1 Months Ended | 3 Months Ended | ||
Feb. 29, 2020 | Mar. 31, 2020 | Mar. 31, 2019 | Sep. 30, 2018 | |
Operating profit | $ 97 | $ 303 | ||
Unrealized investment gain (loss) | (8) | 10 | ||
Estimated additional income tax expense (benefit) | 8 | |||
Long Term Incentive Plan (the "2016" Plan) [Member] | Employees [Member] | Performance Stock Units [Member] | ||||
Performance period | 4 years | |||
Compensation expense recognized | 1 | |||
Long Term Incentive Plan (the "2016" Plan) [Member] | Minimum [Member] | Employees [Member] | Performance Stock Units [Member] | ||||
Stock-based compensation PSU award percentage | 0.00% | |||
Long Term Incentive Plan (the "2016" Plan) [Member] | Maximum [Member] | Employees [Member] | Performance Stock Units [Member] | ||||
Stock-based compensation PSU award percentage | 200.00% | |||
Meituan Dianping [Member] | ||||
Number of ordinary shares subscribed | 8.4 | |||
Maximum percentage of ordinary shares subscribed | 1.00% | |||
Fair value of Investment in Meituan's ordinary shares | $ 74 | |||
Unrealized investment gain (loss) | (8) | 10 | ||
ASU 2016-02 [Member] | ||||
Impairment of long lived asset | $ 12 | |||
COVID-19 [Member] | ||||
One-time concessions on rent | 14 | |||
One-time reduction of social security contributions | 20 | |||
Operating profit | $ 97 | |||
Decrease in operating profit, percentage | 68.00% | |||
Impairment of long lived asset | $ 9 |
Other Income, Net (Details)
Other Income, Net (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Other Income And Expenses [Abstract] | ||
Equity income from investments in unconsolidated affiliates | $ 20 | $ 23 |
Foreign exchange impact and other | (4) | (4) |
Other income, net | $ 16 | $ 19 |
Supplemental Balance Sheet In_3
Supplemental Balance Sheet Information (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | |
Accounts Receivable, net | |||||
Accounts receivable, gross | $ 79 | $ 89 | |||
Allowance for doubtful accounts | (1) | (1) | |||
Accounts receivable, net | 78 | 88 | |||
Prepaid Expenses and Other Current Assets | |||||
Receivables from payment processors and aggregators | 20 | 41 | |||
Prepaid rent | 1 | 2 | |||
Dividends receivable from unconsolidated affiliates | 8 | ||||
Other prepaid expenses and current assets | 91 | 83 | |||
Prepaid expenses and other current assets | 112 | 134 | |||
Other Assets | |||||
VAT assets | 241 | 243 | |||
Land use right | 129 | 133 | |||
Investment in equity securities | 102 | 110 | |||
Long-term deposits | 73 | 71 | |||
Prepayment for investment | [1] | 27 | |||
Restricted cash | [1] | 9 | 9 | ||
Costs to obtain contracts | 9 | 9 | |||
Others | 5 | 5 | |||
Other Assets | 595 | 580 | |||
Accounts Payable and Other Current Liabilities | |||||
Accounts payable | 466 | 623 | |||
Operating leases liabilities | 403 | 382 | |||
Accrued compensation and benefits | 142 | 223 | |||
Contract liabilities | 133 | 135 | |||
Accrued capital expenditures | 111 | 150 | |||
Accrued marketing expenses | 79 | 64 | |||
Other current liabilities | 100 | 114 | |||
Accounts payable and other current liabilities | 1,434 | 1,691 | |||
Other Liabilities | |||||
Accrued income tax payable | 70 | 69 | |||
Deferred income tax liabilities | 66 | 67 | |||
Contract liabilities | 32 | 33 | |||
Other non-current liabilities | 43 | 41 | |||
Other liabilities | 211 | 210 | |||
Cash and cash equivalents | 1,048 | 1,046 | |||
Restricted cash included in Other assets | [1] | 9 | 9 | ||
Cash, Cash Equivalents and Restricted Cash as presented in Condensed Consolidated Statements of Cash Flows | $ 1,057 | $ 1,055 | $ 1,247 | $ 1,266 | |
[1] | Restricted cash included in Other assets within our Condensed Consolidated Balance Sheet represents amounts deposited into an escrow account pursuant to a definitive agreement entered into in August 2019 to acquire a controlling interest in the Huang Ji Huang group, a leading Chinese-style casual dining franchise business. In addition, the Company made a prepayment of $27 million during the first quarter of 2020 when certain closing conditions were met, and it was included in Other assets within our Condensed Consolidated Balance Sheet as of March 31, 2020. The acquisition was completed in April 2020. See Note 15 for additional information. |
Supplemental Balance Sheet In_4
Supplemental Balance Sheet Information (Details 1) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 3,415 | $ 3,471 |
Accumulated depreciation | (1,915) | (1,877) |
Property, plant and equipment, net | 1,500 | 1,594 |
Buildings and Improvements [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | 2,174 | 2,159 |
Finance Leases, Primarily Buildings [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | 30 | 30 |
Machinery and Equipment, and Construction in Progress [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 1,211 | $ 1,282 |
Supplemental Balance Sheet In_5
Supplemental Balance Sheet Information (Parenthetical) (Details) - Huang Ji Huang Group [Member] $ in Millions | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Supplemental Balance Sheet Information [Line Items] | |
Prepayment for Investment | $ 27 |
Acquisition date | 2020-04 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2020 | Dec. 31, 2019 | ||
Goodwill [Line Items] | |||
Goodwill, gross | $ 641 | $ 645 | |
Accumulated impairment losses | [1] | (391) | (391) |
Goodwill, net | 250 | 254 | |
Effect of currency translation adjustment | (4) | ||
KFC [Member] | |||
Goodwill [Line Items] | |||
Goodwill, gross | 231 | 235 | |
Goodwill, net | 231 | 235 | |
Effect of currency translation adjustment | (4) | ||
Pizza Hut [Member] | |||
Goodwill [Line Items] | |||
Goodwill, gross | 19 | 19 | |
Goodwill, net | 19 | 19 | |
All Other Segments [Member] | |||
Goodwill [Line Items] | |||
Goodwill, gross | 391 | 391 | |
Accumulated impairment losses | [1] | $ (391) | $ (391) |
[1] | Accumulated impairment losses represent goodwill impairment attributable to the Little Sheep and Daojia reporting unit. |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets (Details 1) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 | ||
Finite-lived intangible assets | ||||
Gross Carrying Amount | $ 184 | [1] | $ 185 | |
Accumulated Amortization | (132) | (129) | ||
Accumulated impairment losses | [2] | (14) | (14) | |
Net Carrying Amount | 38 | 42 | ||
Total intangible assets | ||||
Gross Carrying Amount | 235 | [1] | 237 | |
Intangible assets, net | 89 | 94 | ||
Little Sheep [Member] | Trademark [Member] | ||||
Indefinite-lived intangible assets | ||||
Net Carrying Amount | 51 | 52 | ||
Reacquired franchise rights [Member] | ||||
Finite-lived intangible assets | ||||
Gross Carrying Amount | 147 | [1] | 148 | |
Accumulated Amortization | (115) | (113) | ||
Net Carrying Amount | 32 | 35 | ||
Daojia platform [Member] | ||||
Finite-lived intangible assets | ||||
Gross Carrying Amount | 16 | [1] | 16 | |
Accumulated Amortization | (4) | (4) | ||
Accumulated impairment losses | [2] | (12) | (12) | |
Customer-related assets [Member] | ||||
Finite-lived intangible assets | ||||
Gross Carrying Amount | 12 | [1] | 12 | |
Accumulated Amortization | (9) | (8) | ||
Accumulated impairment losses | [2] | (2) | (2) | |
Net Carrying Amount | 1 | 2 | ||
Others [Member] | ||||
Finite-lived intangible assets | ||||
Gross Carrying Amount | 9 | [1] | 9 | |
Accumulated Amortization | (4) | (4) | ||
Net Carrying Amount | $ 5 | $ 5 | ||
[1] | Changes in gross carrying amount include effect of currency translation adjustment. | |||
[2] | 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 | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Finite-lived intangible assets | ||
Finite-lived intangible assets, amortization expense | $ 3 | $ 6 |
Expected amortization expense for the unamortized definite-lived intangible assets - remainder of 2020 | 9 | |
Expected amortization expense for the unamortized definite-lived intangible assets - 2021 | 12 | |
Expected amortization expense for the unamortized definite-lived intangible assets - 2022 | 12 | |
Expected amortization expense for the unamortized definite-lived intangible assets - 2023 | 2 | |
Expected amortization expense for the unamortized definite-lived intangible assets - 2024 | $ 1 |
Leases - Narrative (Details)
Leases - Narrative (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2020USD ($)Restaurant | |
Schedule Of Lease Assets And Liabilities [Line Items] | |
Number of restaurants operated | Restaurant | 7,400 |
Additional lease signed but not commenced with total undiscounted minimum lease payments | $ | $ 109 |
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 | Mar. 31, 2020 | Dec. 31, 2019 |
Schedule Of Lease Assets And Liabilities [Abstract] | ||
Operating lease right-of-use assets | $ 1,899 | $ 1,985 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | yumc:OperatingLeaseRightOfUseAssetMember | yumc:OperatingLeaseRightOfUseAssetMember |
Finance lease right-of-use assets | $ 17 | $ 18 |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | us-gaap:PropertyPlantAndEquipmentMember | us-gaap:PropertyPlantAndEquipmentMember |
Total leased assets | $ 1,916 | $ 2,003 |
Operating leases liabilities | 403 | 382 |
Finance lease liabilities, Current | $ 2 | $ 2 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | us-gaap:AccountsPayableAndAccruedLiabilitiesCurrent | us-gaap:AccountsPayableAndAccruedLiabilitiesCurrent |
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List] | us-gaap:AccountsPayableAndAccruedLiabilitiesCurrent | us-gaap:AccountsPayableAndAccruedLiabilitiesCurrent |
Non-current operating lease liabilities | $ 1,704 | $ 1,803 |
Non-current finance lease liabilities | $ 25 | $ 26 |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | yumc:NonCurrentOperatingLeasesLiabilitiesMember | yumc:NonCurrentOperatingLeasesLiabilitiesMember |
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | yumc:NonCurrentFinancingLeasesLiabilitiesMember | yumc:NonCurrentFinancingLeasesLiabilitiesMember |
Total lease liabilities | $ 2,134 | $ 2,213 |
Leases - Summary of Lease Cost
Leases - Summary of Lease Cost (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Lease Cost [Abstract] | ||
Operating lease cost | $ 121 | $ 117 |
Finance lease cost | ||
Amortization of leased assets | 1 | |
Variable lease cost | 49 | 91 |
Short-term lease cost | 3 | 3 |
Sub-lease income | (6) | (7) |
Total lease cost | $ 168 | $ 204 |
Leases - Summary of Lease Cos_2
Leases - Summary of Lease Cost (Parenthetical) (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Lease Cost [Abstract] | |
Lease concessions from landlords related to the effects of COVID-19 | $ 14 |
Leases - Schedule of Supplement
Leases - Schedule of Supplemental Cash Flow Information (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows from operating leases | $ 107 | $ 127 |
Financing cash flows from finance leases | 1 | |
Right-of-use assets obtained in exchange for new lease liabilities: | ||
Operating leases | $ 32 | 57 |
Finance leases | $ (1) |
Leases - Schedule of Lease Term
Leases - Schedule of Lease Term and Discount Rate (Details) | Mar. 31, 2020 | Mar. 31, 2019 |
Weighted-average remaining lease term (years) | ||
Operating leases | 6 years 10 months 24 days | 7 years 3 months 18 days |
Finance leases | 11 years 3 months 18 days | 12 years |
Weighted-average discount rate | ||
Operating leases | 6.00% | 6.10% |
Finance leases | 5.90% | 5.70% |
Leases - Summary of Maturities
Leases - Summary of Maturities of Lease Liabilities (Details) $ in Millions | Mar. 31, 2020USD ($) |
Amount of Operating Leases | |
Remainder of 2020 | $ 397 |
2021 | 447 |
2022 | 388 |
2023 | 325 |
2024 | 261 |
Thereafter | 771 |
Total lease payment | 2,589 |
Less: imputed undiscounted interest | 482 |
Present value of lease liabilities | 2,107 |
Amount of Finance Leases | |
Remainder of 2020 | 3 |
2021 | 4 |
2022 | 3 |
2023 | 3 |
2024 | 3 |
Thereafter | 21 |
Total lease payment | 37 |
Less: imputed undiscounted interest | 10 |
Present value of lease liabilities | 27 |
Amount of Operating And Finance Leases, Total | |
Remainder of 2020 | 400 |
2021 | 451 |
2022 | 391 |
2023 | 328 |
2024 | 264 |
Thereafter | 792 |
Total lease payment | 2,626 |
Less: imputed undiscounted interest | 492 |
Present value of lease liabilities | $ 2,134 |
Fair Value Measurements and D_3
Fair Value Measurements and Disclosures - Narrative (Details) - USD ($) | Mar. 31, 2020 | Mar. 31, 2019 |
Fair Value Disclosures [Abstract] | ||
Transfer from Level 1 to Level 2 | $ 0 | $ 0 |
Transfer from Level 2 to Level 1 | $ 0 | $ 0 |
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 | Mar. 31, 2020 | Dec. 31, 2019 | |
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | $ 622 | $ 738 | |
Short-term investments, Fair Value Measurement or Disclosure | 490 | 611 | |
Total assets, Fair Value Measurement or Disclosure | 1,214 | 1,459 | |
Level 1 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | 182 | 331 | |
Total assets, Fair Value Measurement or Disclosure | 284 | 441 | |
Level 2 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | 440 | 407 | |
Short-term investments, Fair Value Measurement or Disclosure | 490 | 611 | |
Total assets, Fair Value Measurement or Disclosure | 930 | 1,018 | |
Time Deposits [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | 440 | 407 | |
Short-term investments, Fair Value Measurement or Disclosure | 440 | 611 | |
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 | 440 | 407 | |
Short-term investments, Fair Value Measurement or Disclosure | 440 | 611 | |
Money Market Funds [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | 182 | 331 | |
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 | 182 | 331 | |
Fixed Rate Debt Securities [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Short-term investments, Fair Value Measurement or Disclosure | [1] | 50 | |
Fixed Rate Debt Securities [Member] | Level 2 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Short-term investments, Fair Value Measurement or Disclosure | [1] | 50 | |
Investment in Equity Securities [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Other assets, Fair Value Measurement or Disclosure | 102 | 110 | |
Investment in Equity Securities [Member] | Level 1 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Other assets, Fair Value Measurement or Disclosure | $ 102 | $ 110 | |
[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 | ||
Mar. 31, 2020 | Mar. 31, 2019 | ||
ASU 2016-02 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Total expense recognized from non-recurring fair value measurements | $ 12 | ||
Fair Value, Measurements, Nonrecurring [Member] | Level 3 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Total expense recognized from non-recurring fair value measurements | $ 9 | 94 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 3 [Member] | ASU 2016-02 [Member] | Cumulative Adjustment to Impairment on ROU Due to Adoption of New Accounting Pronouncement [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
ROU impairment prior to the adoption of ASC 842 | [1] | 82 | |
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] | |||
Total expense recognized from non-recurring fair value measurements | [2] | $ 9 | $ 12 |
[1] | ROU impairment prior to the adoption of ASC 842 represents an impairment charge on operating lease ROU assets arising from existing operating leases as of January 1, 2019. After netting with the related impact on deferred taxes of $19 million and the impact on noncontrolling interests of $3 million, we recorded a cumulative adjustment of $60 million to retained earnings in accordance with the transition guidance for the new lease standard. For those restaurants under operating leases with full impairment on their long-lived assets (primarily property, plant and equipment) before January 1, 2019, an additional impairment charge would have been recorded before January 1, 2019 had the operating lease ROU assets been recognized at the time of impairment. | ||
[2] | Restaurant-level impairment charges are recorded in Closure and impairment expenses, net and resulted from our 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. We performed an additional impairment evaluation in the first quarter of 2020, considering the adverse economic effects of the COVID-19 pandemic an impairment indicator. We also performed an additional impairment evaluation upon adoption of ASC 842 in the first quarter of 2019. The remaining net book value of assets measured at fair value for the quarter ended March 31, 2020 was $29 million and the remaining net book value of assets measured at fair value for the quarter ended March 31, 2019 was insignificant. |
Fair Value Measurements and D_6
Fair Value Measurements and Disclosures - Schedule of Amounts Recognized From Non-recurring Fair Value Measurements (Parenthetical) (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2020USD ($) | |
ASU 2016-02 [Member] | |
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |
Cumulative adjustment to retained earnings | $ 60 |
ASU 2016-02 [Member] | Cumulative Adjustment to Deferred Income Tax Expenses Due to Adoption of New Accounting Pronouncement [Member] | |
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |
Cumulative adjustment to opening retained earnings due to adoption of new accounting pronouncement | 19 |
ASU 2016-02 [Member] | Cumulative Adjustment to Net Income (Loss) Attributable to Noncontrolling Interest Due to Adoption of New Accounting Pronouncement [Member] | |
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |
Cumulative adjustment to opening retained earnings due to adoption of new accounting pronouncement | 3 |
Restaurant-level impairment [Member] | Fair Value, Measurements, Nonrecurring [Member] | |
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |
Total assets, Fair Value Measurement or Disclosure | $ 29 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Income tax provision | $ 32 | $ 93 |
Effective tax rate | 32.70% | 28.90% |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Income Tax Disclosure [Abstract] | |
Estimated additional income tax expense (benefit) | $ 8 |
Segment Reporting - Narrative (
Segment Reporting - Narrative (Details) | 3 Months Ended |
Mar. 31, 2020Segment | |
Segment Reporting [Abstract] | |
Number of reportable segments | 2 |
Number of non-reportable operating segments | 6 |
Segment Reporting (Details)
Segment Reporting (Details) - USD ($) $ in Millions | 3 Months Ended | |||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | ||
Segment Reporting Information [Line Items] | ||||
Revenues | $ 1,754 | $ 2,304 | ||
Operating Profit | 97 | 303 | ||
Interest income, net | [1] | 9 | 9 | |
Investment (loss) gain | (8) | 10 | ||
Income Before Income Taxes | 98 | 322 | ||
Impairment Charges | 12 | 14 | ||
Total Assets | 6,577 | $ 6,950 | ||
KFC [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 1,269 | 1,592 | ||
Pizza Hut [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 324 | 543 | ||
All Other Segments [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 21 | 23 | ||
Corporate and Unallocated [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | [1] | 140 | 146 | |
Unallocated revenues from transactions with franchisees and unconsolidated affiliates | [2] | 139 | 145 | |
Unallocated Other revenues | 1 | 1 | ||
Unallocated expenses from transactions with franchisees and unconsolidated affiliates | [2] | (135) | (143) | |
Unallocated Other operating costs and expenses | (1) | (1) | ||
Unallocated and corporate G&A expenses | (21) | (33) | ||
Unallocated Other (loss) income | (1) | 1 | ||
Total Assets | [3] | 2,498 | 2,674 | |
Operating Segments [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 1,754 | 2,304 | ||
Operating Segments [Member] | KFC [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 1,269 | 1,592 | ||
Operating Profit | [4] | 153 | 288 | |
Impairment Charges | [5] | 4 | 8 | |
Total Assets | [6] | 3,034 | 3,160 | |
Operating Segments [Member] | Pizza Hut [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 324 | 543 | ||
Operating Profit | (28) | 50 | ||
Impairment Charges | [5] | 6 | 5 | |
Total Assets | 887 | 950 | ||
Operating Segments [Member] | All Other Segments [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 28 | 32 | ||
Operating Profit | (10) | (5) | ||
Impairment Charges | [5] | 2 | 1 | |
Total Assets | 158 | $ 166 | ||
Elimination [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | (7) | (9) | ||
Elimination [Member] | All Other Segments [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 7 | 9 | ||
Combined [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | $ 1,761 | $ 2,313 | ||
[1] | Amounts have not been allocated to any segment for performance reporting purposes. | |||
[2] | Primarily includes revenues and associated expenses of transactions with franchisee and unconsolidated affiliates derived from the Company’s central procurement model whereby the Company centrally purchases substantially all food and paper products from suppliers and then sells and delivers to restaurants, including franchisees and unconsolidated affiliates. 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. | |||
[3] | Primarily includes cash and cash equivalents, short-term investments, investment in equity securities, and inventories that are centrally managed. | |||
[4] | Includes equity income from investments in unconsolidated affiliates of $20 million and $23 million for the quarters ended March 31, 2020 and 2019, respectively. | |||
[5] | Primarily includes store closure impairment charges, restaurant-level impairment charges resulting from our additional impairment evaluation performed in the first quarter of 2020 in response to adverse impact from the COVID-19 pandemic, and additional impairment evaluation performed in the first quarter of 2019 as a result of adopting ASC 842 (See Note 11). | |||
[6] | Includes investments in unconsolidated affiliates. |
Segment Reporting (Parenthetica
Segment Reporting (Parenthetical) (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Segment Reporting [Abstract] | ||
Equity income from investments in unconsolidated affiliates | $ 20 | $ 23 |
Contingencies - Narrative (Deta
Contingencies - Narrative (Details) - USD ($) | 1 Months Ended | |
Feb. 28, 2015 | Mar. 31, 2020 | |
Commitments And Contingencies Disclosure [Abstract] | ||
Income tax rate on gains derived from indirect transfer of assets | 10.00% | |
Percentage of tax assessed on difference between fair market value and tax basis | 10.00% | |
Guarantees outstanding of unconsolidated affiliates | $ 0 |
Subsequent Events (Details)
Subsequent Events (Details) $ in Millions | 1 Months Ended | |
Apr. 30, 2020USD ($)Restaurant | Mar. 31, 2020Restaurant | |
Subsequent Event [Line Items] | ||
Number of restaurants operated | Restaurant | 7,400 | |
Subsequent Event [Member] | Huang Ji Huang Group [Member] | ||
Subsequent Event [Line Items] | ||
Cash consideration paid to acquire interest | $ | $ 185 | |
Percentage of additional equity interest acquired | 93.30% | |
Number of restaurants operated | Restaurant | 640 | |
Subsequent Event [Member] | Suzhou KFC [Member] | ||
Subsequent Event [Line Items] | ||
Cash consideration paid to acquire interest | $ | $ 149 | |
Percentage of additional equity interest acquired | 25.00% | |
Equity interest in acquiree, including subsequent acquisition, percentage | 72.00% |