Document and Entity Information
Document and Entity Information - USD ($) $ in Billions | 12 Months Ended | ||
Dec. 31, 2020 | Feb. 22, 2021 | Jun. 30, 2020 | |
Document And Entity Information [Line Items] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2020 | ||
Document Fiscal Year Focus | 2020 | ||
Document Fiscal Period Focus | FY | ||
Trading Symbol | YUMC | ||
Entity Registrant Name | Yum China Holdings, Inc. | ||
Entity Central Index Key | 0001673358 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well Known Seasoned Issuer | Yes | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Common Stock Shares Outstanding | 420,407,023 | ||
Entity Public Float | $ 18.1 | ||
Entity Shell Company | false | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
Entity Interactive Data Current | Yes | ||
Entity File Number | 001-37762 | ||
Entity Incorporation, State or Country Code | DE | ||
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 | ||
Entity Address, Country | US | ||
City Area Code | 469 | ||
Local Phone Number | 980-2898 | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Title of 12(b) Security | Common Stock, Par Value $0.01 Per Share | ||
Security Exchange Name | NYSE | ||
ICFR Auditor Attestation Flag | true | ||
Documents Incorporated by Reference | DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive proxy statement for the registrant’s 2021 annual meeting of stockholders (the “2021 Proxy Statement”), to be filed not later than 120 days after the end of the registrant’s fiscal year, are incorporated by reference into Part III of this Form 10-K. | ||
The Stock Exchange of Hong Kong Limited [Member] | |||
Document And Entity Information [Line Items] | |||
Trading Symbol | 9987 | ||
Other Address [Member] | |||
Document And Entity Information [Line Items] | |||
Entity Address, Address Line One | Yum China Building | ||
Entity Address, City or Town | Shanghai | ||
Entity Address, Postal Zip Code | 200030 | ||
Entity Address, Country | CN | ||
Entity Address, Address Line Two | 20 Tian Yao Qiao Road |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) shares in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Revenues | ||||
Total revenues | $ 8,263 | $ 8,776 | $ 8,415 | |
Costs and Expenses, Net | ||||
General and administrative expenses | 479 | 487 | 456 | |
Other operating costs and expenses | 57 | 37 | 29 | |
Closures and impairment expenses, net | 55 | 36 | 41 | |
Other income, net | (285) | (60) | (152) | |
Total costs and expenses, net | 7,302 | 7,875 | 7,474 | |
Operating Profit | 961 | 901 | 941 | |
Interest income, net | [1] | 43 | 39 | 36 |
Investment gain (loss) | [1] | 104 | 63 | (27) |
Income Before Income Taxes | 1,108 | 1,003 | 950 | |
Income tax provision | (295) | (260) | (214) | |
Net income – including noncontrolling interests | 813 | 743 | 736 | |
Net income – noncontrolling interests | 29 | 30 | 28 | |
Net Income – Yum China Holdings, Inc. | $ 784 | $ 713 | $ 708 | |
Weighted-average common shares outstanding (in millions): | ||||
Basic | [2] | 390 | 377 | 384 |
Diluted | 402 | 388 | 395 | |
Basic Earnings Per Common Share | $ 2.01 | $ 1.89 | $ 1.84 | |
Diluted Earnings Per Common Share | $ 1.95 | $ 1.84 | $ 1.79 | |
Company Sales [Member] | ||||
Revenues | ||||
Revenues | $ 7,396 | $ 7,925 | $ 7,633 | |
Franchise [Member] | ||||
Revenues | ||||
Revenues | 148 | 148 | 141 | |
Costs and Expenses, Net | ||||
Cost of goods and services sold | 65 | 71 | 71 | |
Transactions With Franchisees and Unconsolidated Affiliates [Member] | ||||
Revenues | ||||
Revenues | 647 | 654 | 603 | |
Costs and Expenses, Net | ||||
Cost of goods and services sold | 633 | 645 | 595 | |
Other Revenues [Member] | ||||
Revenues | ||||
Revenues | 72 | 49 | 38 | |
Company Restaurant Expenses [Member] | ||||
Costs and Expenses, Net | ||||
Food and paper | 2,342 | 2,479 | 2,326 | |
Payroll and employee benefits | 1,730 | 1,807 | 1,714 | |
Occupancy and other operating expenses | 2,226 | 2,373 | 2,394 | |
Cost of goods and services sold | $ 6,298 | $ 6,659 | $ 6,434 | |
[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. See Note 14 for a further discussion of share-based compensation. In September 2020, 41,910,700 common shares were issued as a result of the Company’s global offering and secondary listing on the HKEX and they were included in the calculated weighted-average common shares outstanding. |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Statement Of Income And Comprehensive Income [Abstract] | |||
Net income - including noncontrolling interests | $ 813 | $ 743 | $ 736 |
Other comprehensive income (loss), net of tax of nil | |||
Foreign currency gain (loss) arising during the year | 230 | (32) | (160) |
Comprehensive income - including noncontrolling interests | 1,043 | 711 | 576 |
Comprehensive income - noncontrolling interests | 43 | 30 | 22 |
Comprehensive Income - Yum China Holdings, Inc. | $ 1,000 | $ 681 | $ 554 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Cash Flows – Operating Activities | ||||
Net income - including noncontrolling interests | $ 813 | $ 743 | $ 736 | |
Depreciation and amortization | 450 | 428 | 445 | |
Non-cash operating lease cost | 368 | 339 | ||
Closures and impairment expenses | 55 | 36 | 41 | |
Gain from re-measurement of equity interest upon acquisition | [1] | (239) | (98) | |
Investment (gain) loss | [2] | (104) | (63) | 27 |
Equity income from investments in unconsolidated affiliates | (62) | (69) | (65) | |
Distributions of income received from unconsolidated affiliates | 55 | 73 | 63 | |
Deferred income taxes | 111 | 16 | 33 | |
Share-based compensation expense | 36 | 26 | 24 | |
Changes in accounts receivable | (15) | (9) | (13) | |
Changes in inventories | 17 | (77) | (23) | |
Changes in prepaid expenses and other current assets | (15) | (3) | (22) | |
Changes in accounts payable and other current liabilities | 65 | 171 | 254 | |
Changes in income taxes payable | 17 | (8) | 17 | |
Changes in non-current operating lease liabilities | (394) | (381) | ||
Other, net | (44) | (37) | (86) | |
Net Cash Provided by Operating Activities | 1,114 | 1,185 | 1,333 | |
Cash Flows – Investing Activities | ||||
Capital spending | (419) | (435) | (470) | |
Purchases of short-term investments | (4,499) | (1,024) | (604) | |
Purchase of long-term time deposits | (57) | |||
Maturities of short-term investments | 2,061 | 534 | 680 | |
Contribution to unconsolidated affiliates | (17) | |||
Acquisition of business, net of cash acquired | (288) | (91) | ||
Disposal of (investment in) equity securities | 54 | (74) | ||
Other, net | 56 | 15 | 7 | |
Net Cash Used in Investing Activities | (3,109) | (910) | (552) | |
Cash Flows – Financing Activities | ||||
Common stock issuance proceeds, net of issuance costs | 2,195 | |||
Repurchase of shares of common stock | (8) | (265) | (307) | |
Cash dividends paid on common stock | (95) | (181) | (161) | |
Dividends paid to noncontrolling interests | (33) | (32) | (36) | |
Other, net | (1) | (2) | (14) | |
Net Cash Provided by (Used in) Financing Activities | 2,058 | (480) | (518) | |
Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash | 40 | (6) | (56) | |
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | 103 | (211) | 207 | |
Cash, Cash Equivalents and Restricted Cash - Beginning of Year | 1,055 | 1,266 | 1,059 | |
Cash, Cash Equivalents and Restricted Cash - End of Year | 1,158 | 1,055 | 1,266 | |
Supplemental Cash Flow Data | ||||
Cash paid for income tax | 170 | 255 | 208 | |
Non-cash Investing and Financing Activities | ||||
Capital expenditures included in accounts payables and other current liabilities | $ 203 | $ 150 | $ 137 | |
[1] | As a result of the acquisition of Suzhou KFC and Wuxi KFC, as disclosed in Note 5, the Company recognized a gain of $239 million and $98 million in 2020 and 2018, respectively, from the re-measurement of our previously held 47% equity interest at fair value, which was not allocated to any segment for performance reporting purposes. | |||
[2] | Amounts have not been allocated to any segment for performance reporting purposes. |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Current Assets | ||
Cash and cash equivalents | $ 1,158 | $ 1,046 |
Short-term investments | 3,105 | 611 |
Accounts receivable, net | 99 | 88 |
Inventories, net | 398 | 380 |
Prepaid expenses and other current assets | 176 | 134 |
Total Current Assets | 4,936 | 2,259 |
Property, plant and equipment, net | 1,765 | 1,594 |
Operating lease right-of-use assets | 2,164 | 1,985 |
Goodwill | 832 | 254 |
Intangible assets, net | 246 | 94 |
Deferred income taxes | 98 | 95 |
Investments in unconsolidated affiliates | 85 | 89 |
Other assets | 749 | 580 |
Total Assets | 10,875 | 6,950 |
Current Liabilities | ||
Accounts payable and other current liabilities | 1,995 | 1,691 |
Income taxes payable | 72 | 45 |
Total Current Liabilities | 2,067 | 1,736 |
Non-current operating lease liabilities | 1,915 | 1,803 |
Non-current finance lease obligations | 28 | 26 |
Other liabilities | 394 | 210 |
Total Liabilities | 4,404 | 3,775 |
Redeemable Noncontrolling Interest | 12 | |
Equity | ||
Common stock, $0.01 par value; 1,000 million shares authorized; 440 million shares and 395 million shares issued at December 31, 2020 and 2019, respectively; 420 million shares and 376 million shares outstanding at December 31, 2020 and 2019, respectively | 4 | 4 |
Treasury stock | (728) | (721) |
Additional paid-in capital | 4,658 | 2,427 |
Retained earnings | 2,105 | 1,416 |
Accumulated other comprehensive income (loss) | 167 | (49) |
Total Yum China Holdings, Inc. Stockholders' Equity | 6,206 | 3,077 |
Noncontrolling interests | 253 | 98 |
Total Equity | 6,459 | 3,175 |
Total Liabilities, Redeemable Noncontrolling Interest and Equity | $ 10,875 | $ 6,950 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2020 | Dec. 31, 2019 | Oct. 31, 2016 |
Statement Of Financial Position [Abstract] | |||
Common stock, par value | $ 0.01 | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 1,000,000,000 | 1,000,000,000 | 1,000,000,000 |
Common stock, shares issued | 440,000,000 | 395,000,000 | 363,758,219 |
Common stock, shares outstanding | 420,000,000 | 376,000,000 | 363,758,219 |
Consolidated Statements of Equi
Consolidated Statements of Equity - USD ($) shares in Millions, $ in Millions | Total | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Retained Earnings [Member]Cumulative Effect Period of Adoption Adjustment [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Noncontrolling Interests [Member] | Noncontrolling Interests [Member]Cumulative Effect Period of Adoption Adjustment [Member] | Treasury Stock [Member] | Total equity Including Noncontrolling Interest [Member] | Total equity Including Noncontrolling Interest [Member]Cumulative Effect Period of Adoption Adjustment [Member] | Redeemable Noncontrolling Interest [Member] | |
Balance at Dec. 31, 2017 | $ 4 | $ 2,375 | $ 397 | $ 137 | $ 77 | $ (148) | $ 2,842 | $ 5 | |||||
Balance (in shares) at Dec. 31, 2017 | 389 | (4) | [1] | ||||||||||
Net Income (loss) | $ 736 | 708 | 29 | 737 | (1) | ||||||||
Foreign currency translation adjustment | (160) | (154) | (6) | (160) | |||||||||
Comprehensive income - including noncontrolling interests | 576 | 577 | (1) | ||||||||||
Dividends declared | (33) | (33) | |||||||||||
Cash dividends declared | (161) | (161) | |||||||||||
Acquisition of business | 36 | 36 | |||||||||||
Repurchase of shares of common stock | $ (312) | $ (312) | (312) | ||||||||||
Repurchase of shares of common stock (in shares) | (9) | (9) | [1] | ||||||||||
Exercise and vesting of share-based awards (in shares) | 3 | ||||||||||||
Share-based compensation | 24 | 24 | |||||||||||
Revaluation of redeemable noncontrolling interest | 3 | 3 | (3) | ||||||||||
Balance at Dec. 31, 2018 | $ 4 | 2,402 | 944 | (17) | 103 | $ (460) | 2,976 | 1 | |||||
Balance (in shares) at Dec. 31, 2018 | 392 | (13) | [1] | ||||||||||
Net Income (loss) | $ 743 | 713 | 32 | 745 | (2) | ||||||||
Foreign currency translation adjustment | (32) | (32) | (32) | ||||||||||
Comprehensive income - including noncontrolling interests | 711 | 713 | (2) | ||||||||||
Dividends declared | (34) | (34) | |||||||||||
Cash dividends declared | (181) | (181) | |||||||||||
Repurchase of shares of common stock | $ (261) | $ (261) | (261) | ||||||||||
Repurchase of shares of common stock (in shares) | (6.2) | (6) | [1] | ||||||||||
Exercise and vesting of share-based awards (in shares) | 3 | ||||||||||||
Share-based compensation | 26 | 26 | |||||||||||
Revaluation of redeemable noncontrolling interest | (1) | (1) | 1 | ||||||||||
Balance at Dec. 31, 2019 | $ 3,175 | $ 4 | 2,427 | 1,416 | $ (60) | (49) | 98 | $ (3) | $ (721) | 3,175 | $ (63) | ||
Balance (in shares) at Dec. 31, 2019 | 395 | (19) | [1] | ||||||||||
Net Income (loss) | 813 | 784 | 29 | 813 | |||||||||
Foreign currency translation adjustment | 230 | 216 | 14 | 230 | |||||||||
Comprehensive income - including noncontrolling interests | 1,043 | 1,043 | |||||||||||
Dividends declared | (32) | (32) | |||||||||||
Cash dividends declared | (95) | (95) | |||||||||||
Acquisition of business | 144 | 144 | 12 | ||||||||||
Issuance of common stock, net of issuance costs | 2,193 | 2,193 | |||||||||||
Issuance of common stock, net of issuance costs (in shares) | 42 | ||||||||||||
Repurchase of shares of common stock | $ (7) | $ (7) | (7) | ||||||||||
Repurchase of shares of common stock (in shares) | (0.2) | ||||||||||||
Exercise and vesting of share-based awards | 2 | 2 | |||||||||||
Exercise and vesting of share-based awards (in shares) | 3 | ||||||||||||
Share-based compensation | 36 | 36 | |||||||||||
Balance at Dec. 31, 2020 | $ 6,459 | $ 4 | $ 4,658 | $ 2,105 | $ 167 | $ 253 | $ (728) | $ 6,459 | $ 12 | ||||
Balance (in shares) at Dec. 31, 2020 | 440 | (20) | [1] | ||||||||||
[1] | Shares may not add due to rounding. |
Consolidated Statements of Eq_2
Consolidated Statements of Equity (Parenthetical) - $ / shares | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Statement Of Stockholders Equity [Abstract] | |||
Cash dividends declared, per common share | $ 0.24 | $ 0.48 | $ 0.42 |
Description of Business
Description of Business | 12 Months Ended |
Dec. 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, Huang Ji Huang, COFFii & JOY, East Dawning and Taco Bell, and Lavazza concepts (collectively, the “concepts”). In connection with the separation of the Company in 2016 from its former parent company, Yum! Brands, Inc. (“YUM”), a 50-year master license agreement was entered into between Yum Restaurants Consulting (Shanghai) Company Limited (“YCCL”), a wholly-owned indirect subsidiary of the Company and YUM, through YRI China Franchising LLC, a subsidiary of YUM, effective from January 1, 2020 and previously through Yum! Restaurants Asia Pte. Ltd., another subsidiary of YUM, from October 31, 2016 to December 31, 2019, 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, Macau and Taiwan. 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, Huang Ji Huang, COFFii & JOY and East Dawning, and pay no license fee related to these concepts. In 1987, KFC was the first quick-service restaurant brand to enter China. As of December 31, 2020, there are over 7,000 KFC stores in China. We maintain a 58% and 70% controlling interest in the entities that own and operate the KFCs in Shanghai and Beijing, respectively. During the first quarter of 2018, the Company completed the acquisition of an additional 36% equity interest in an unconsolidated affiliate that operates KFC stores in and around Wuxi, China (“Wuxi KFC”), for cash consideration of approximately $98 million, increasing the Company’s equity interest to 83%, allowing the Company to consolidate the entity. During the third quarter of 2020, the Company completed the acquisition of an additional 25% equity interest in an unconsolidated affiliate that operates KFC stores in and around Suzhou, China (“Suzhou KFC”), for cash consideration of $149 million. Upon closing of the acquisition, the Company increased its equity interest to 72%, allowing the Company to consolidate Suzhou KFC. These acquisitions were considered immaterial. We began consolidating Wuxi KFC and Suzhou KFC upon the completion of acquisition. We have a 47% noncontrolling ownership in our unconsolidated affiliate that owns and operates KFCs in and around Hangzhou. The first Pizza Hut in China opened in 1990. As of December 31, 2020, there are over 2,300 Pizza Hut restaurants in China. 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. On April 8, 2020, the Company completed the acquisition of a 93.3% interest in the Huang Ji Huang group (“Huang Ji Huang”), a leading Chinese-style casual dining franchise business, for cash consideration of $185 million. Huang Ji Huang became an operating segment of the Company. The acquisition was considered immaterial. Following the acquisition, we established a Chinese dining business unit comprising our three Chinese dining brands, namely Little Sheep, Huang Ji Huang and East Dawning. In the quarter ended June 30, 2020, the Company partnered with Lavazza Group, the world renowned family-owned Italian coffee company, and entered into a joint venture to explore and develop the Lavazza coffee shop concept in China. The Company has two reportable segments: KFC and Pizza Hut. Our remaining operating segments, including the operations of Little Sheep, Huang Ji Huang, COFFii & JOY, East Dawning, Taco Bell, Lavazza and Daojia, are combined and referred to as All Other Segments, as those operating segments are insignificant both individually and in the aggregate. Starting from the first quarter of 2019, our COFFii & JOY concept and e-commerce business became operating segments, as their financial results started being regularly reviewed by the Company’s chief operating decision maker. Segment financial information for prior years has been recast to align with this change in segment reporting. There was no impact to the consolidated financial statements of the Company as a result of this change. Additional details on our segment reporting are included in Note 17. The Company’s common stock is listed on the New York Stock Exchange ("NYSE") under the symbol “YUMC”. On September 10, 2020, the Company completed a secondary listing of its common stock on the Main Board of the Hong Kong Stock Exchange ("HKEX") under the stock code “9987”, in connection with a global offering of 41,910,700 shares of its common stock at the public offering price of HK$412.00 per share, or US$53.16 per share. The shares listed on the HKEX are fully fungible with the shares listed on the NYSE. Net proceeds raised by the Company from the global offering after deducting underwriting fees and the offering expenses amounted to US$2.2 billion. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting Policies Our preparation of the accompanying 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. Basis of Preparation and Principles of Consolidation. Intercompany accounts and transactions have been eliminated in consolidation. We consolidate entities in which we have a controlling financial interest, the usual condition of which is ownership of a majority voting interest. We also consider consolidating an entity in which we have certain interests where the controlling financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a variable interest entity (“VIE”), is required to be consolidated by its primary beneficiary. The primary beneficiary is the entity that possesses the power to direct the activities of the VIE that most significantly impact its economic performance and has the obligation to absorb losses or the right to receive benefits from the VIE that are significant to it. Our most significant variable interests are in entities that operate restaurants under franchise arrangements. We do not generally have an equity interest in our franchisee businesses. Additionally, we do not typically provide significant financial support such as loans or guarantees to our franchisees. We have variable interests in certain entities that operate restaurants under franchise agreements through real estate lease arrangements with them to which we are a party. At December 31, 2020, the Company had future lease payments due from franchisees, on a nominal basis, of approximately $41 million. As our franchise arrangements provide our franchisee entities the power to direct the activities that most significantly impact their economic performance, we do not consider ourselves the primary beneficiary of any such entity that might otherwise be considered a VIE. Through the acquisition of Daojia, the Company also acquired a VIE and subsidiaries of the VIE effectively controlled by Daojia. There exists a parent-subsidiary relationship between Daojia and its VIE as a result of certain exclusive agreements that require Daojia to consolidate its VIE and subsidiaries of the VIE because Daojia is the primary beneficiary that possesses the power to direct the activities of the VIE that most significantly impact its economic performance, and is entitled to substantially all of the profits and has the obligation to absorb all of the expected losses of the VIE. We consolidate the entities that operate KFCs in Shanghai, Beijing, Wuxi and Suzhou where we have controlling interests of 58%, 70%, 83% and 72%, respectively. We have a noncontrolling 47% interest in the entity that operates the KFCs in and around Hangzhou. This entity is not a VIE and our lack of majority voting rights precludes us from controlling this affiliate. Thus, we do not consolidate this affiliate. Instead, we account for it under the equity method. Our share of the net income or loss of the unconsolidated affiliate is included in Other income, net in our Consolidated Statements of Income. The results of Huang Ji Huang and Suzhou KFC’s operations have been included in the Company’s Consolidated Financial Statements since the acquisition dates of April 8, 2020 and August 3, 2020, respectively. Comparative Information. Certain comparative items in the Consolidated Financial Statements have been reclassified to conform to the current year’s presentation to facilitate comparison. Fiscal Calendar. Our fiscal year ends on December 31, with each quarter comprised of three months. Foreign Currency. Our functional currency for the operating entities in China is the Chinese Renminbi (“RMB”), the currency of the primary economic environment in which they operate. Income and expense accounts for our operations are then translated into U.S. dollars at the average exchange rates prevailing during the period. Assets and liabilities are then translated into U.S. dollars at exchange rates in effect at the balance sheet date. Foreign currency translation adjustments are recorded in the Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets. Gains and losses arising from the impact of foreign currency exchange rate fluctuations on transactions in foreign currency, to the extent they arise, are included in Other income, net in our Consolidated Statements of Income. Franchise Operations. We execute agreements which set out the terms of our arrangement with franchisees. Our franchise agreements typically require the franchisee to pay an initial, non-refundable fee and continuing fees based upon a percentage of sales. Subject to our approval and their payment of a renewal fee, a franchisee may generally renew the franchise agreement upon its expiration. The 3% license fees we pay to YUM for the right to sublicense the KFC, Pizza Hut and Taco Bell intellectual property to franchisees and unconsolidated affiliates are recorded in Franchise expenses. License fees due to YUM for our Company-owned stores are included within restaurant margin in Occupancy and other operating expenses. Total license fees paid to YUM were $256 million, $273 million and $263 million during the years ended December 31, 2020, 2019 and 2018, respectively. Certain direct costs of our franchise operations are charged to Franchise expenses. These costs include provisions for estimated uncollectible fees, rent or depreciation expense associated with restaurants we sub-lease to franchisees, and certain other direct incremental franchise support costs. We also have certain transactions with franchisees and unconsolidated affiliates, which consist primarily of sales of food and paper products, advertising services and other services provided to franchisees and unconsolidated affiliates. Related expenses are included in Expenses for transactions with franchisees and unconsolidated affiliates. Revenue Recognition. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”), to provide principles within a single framework for revenue recognition of transactions involving contracts with customers across all industries. The standard allows for either a full retrospective or modified retrospective transition method. Additional amendments were subsequently issued by the FASB to clarify the implementation guidance. The Company adopted these standards on January 1, 2018, and applied the full retrospective approach. Therefore, revenue for all three years in the accompanying Consolidated Financial Statements was consistently accounted for in accordance with ASC 606. 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 third-party aggregators’ delivery staff in the past. 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 are fulfilled by the delivery staff of third-party aggregators, who control and determine the price for the delivery service, we recognize revenue, excluding delivery fees, when control of the food is transferred to the third-party aggregators’ delivery staff. The payment terms with respect to these sales are short-term in nature. Starting in 2019, we used 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. We recognize breakage revenue, which is the amount of prepaid stored-value products that is not expected to be redeemed, either (1) proportionally in earnings as redemptions occur, in situations where the Company expects to be entitled to a breakage amount, or (2) when the likelihood of redemption is remote, in situations where the Company does not expect to be entitled to breakage, provided that there is no requirement for remitting balances to government agencies under unclaimed property laws. The Company reviews its breakage estimates at least annually based upon the latest available information regarding redemption and expiration patterns. Our privilege membership programs offer privilege members rights to multiple benefits, such as free delivery and discounts on certain products. For certain 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 KFC and 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 and unconsolidated affiliates. The Company centrally purchases substantially 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. In addition, the Company owns seasoning facilities for its Chinese dining business unit, which manufacture and sell seasoning products to Huang Ji Huang and Little Sheep franchisees. The 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 ability 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 unconsolidated 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 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 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 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. Direct Marketing Costs. We charge direct marketing costs to expense ratably in relation to revenues over the year in which incurred and, in the case of advertising production costs, in the year the advertisement is first shown. Deferred direct marketing costs, which are classified as prepaid expenses, consist of media and related advertising production costs which will generally be used for the first time in the next fiscal year and have historically not been significant. Our direct marketing expenses incurred for Company-owned restaurants were $307 million, $344 million and $341 million in 2020, 2019 and 2018, respectively, and were included in Occupancy and other operating expenses. In addition, the direct marketing costs incurred for franchisees and unconsolidated affiliates were $60 million, $65 million and $62 million in 2020, 2019 and 2018, respectively, and were recorded in Expenses for transactions with franchisees and unconsolidated affiliates. Research and Development Expenses. Research and development expenses associated with our food innovation activities, which are expensed as incurred, are reported in general and administrative ("G&A") expenses. Research and development expenses were $3 million, $4 million and $4 million in 2020, 2019 and 2018, respectively. Share-Based Compensation. Prior to the separation, all employee equity awards were granted by YUM. Upon the separation, 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, to maintain the pre-separation intrinsic value of the awards. The modified equity awards have the same terms and conditions as the awards held immediately before the separation, except the number of shares and the price were adjusted. The incremental compensation cost, measured as the excess of the fair value of the award immediately after the modification over the fair value of the award immediately before the modification, based on Black-Scholes option-pricing model was immaterial, and YUM and the Company continue to recognize the unamortized fair value of the awards over the remaining requisite service period as their respective employees continue to provide services. All awards granted following the separation were granted under the Company’s Long Term Incentive Plan (the “2016 Plan”). We recognize all share-based payments to employees and directors, including grants of stock options, restricted stock units (“RSUs”), stock appreciation rights (“SARs”) and performance share units (“PSUs”), in the Consolidated Financial Statements as compensation cost over the service period based on their fair value on the date of grant. This compensation cost is recognized over the service period on a straight-line basis, net of an assumed forfeiture rate, for awards that actually vest and when performance conditions are probable of being achieved, if applicable. Forfeiture rates are estimated at grant date based on historical experience and compensation cost is adjusted in subsequent periods for differences in actual forfeitures from the previous estimates. We present this compensation cost consistent with the other compensation costs for the employee recipient in either payroll and employee benefits or G&A expenses. Impairment or Disposal of Long-Lived Assets. Long-lived assets, primarily Property, plant and equipment (“PP&E”) and operating lease right-of-use (“ROU”) assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The assets are not recoverable if their carrying value is less than the undiscounted cash flows we expect to generate from such assets. If the assets are not deemed to be recoverable, impairment is measured based on the excess of their carrying value over their fair value. For purposes of impairment testing for our restaurants, we have concluded that an individual restaurant is the lowest level of independent cash flows unless our intent is to refranchise restaurants as a group. We review our long-lived assets of such individual restaurants (primarily operating lease ROU assets and When we believe it is more likely than not a restaurant or groups of restaurants will be refranchised for a price less than their carrying value, but do not believe the restaurant(s) have met the criteria to be classified as held for sale, we review the restaurants for impairment. We evaluate the recoverability of these restaurant assets by comparing estimated sales proceeds plus holding period cash flows, if any, to the carrying value of the restaurant or group of restaurants. For restaurant assets that are not deemed to be recoverable, we recognize impairment for any excess of carrying value over the fair value of the restaurants, which is based on the expected net sales proceeds. To the extent ongoing agreements to be entered into with the franchisee simultaneous with the refranchising are expected to contain terms, such as royalty rates, not at prevailing market rates, we consider the off-market terms in our impairment evaluation. We recognize any such impairment charges in Refranchising gain. Refranchising gain includes the gains or losses from the sales of our restaurants to new and existing franchisees, including any impairment charges discussed above. We recognize gains on restaurant refranchising when the sale transaction closes, the franchisee has a minimum amount of the purchase price in at-risk equity and we are satisfied that the franchisee can meet its financial obligations. When we decide to close a restaurant, it is reviewed for impairment, and depreciable lives are adjusted based on the expected disposal date. Other costs incurred when closing a restaurant such as costs of disposing of the assets as well as other facility-related expenses are generally expensed as incurred. Additionally, at the time we decide to close a restaurant, we reassess whether it is reasonably certain that we will exercise the termination option, and remeasure lease liability to reflect changes in lease term and remaining lease payments based on the planned exit date, if applicable. The amount of the re-measurement of the lease liability is recorded as an adjustment to the operating lease ROU asset first, with any remaining amount recorded in Closures and impairment expenses if the carrying amount of the operating lease ROU asset is reduced to zero. Any costs recorded upon store closure as well as any subsequent adjustments to remaining operating lease ROU assets and lease liabilities as a result of lease termination are recorded in Closures and impairment expenses. In the event we are forced to close a store and receive compensation for such closure, that compensation is recorded in Closures and impairment expenses. To the extent we sell assets associated with a closed store, any gain or loss upon that sale is also recorded in Closures and impairment expenses. Considerable management judgment is necessary to estimate future cash flows, including cash flows from continuing use, terminal value, lease term and refranchising proceeds. Accordingly, actual results could vary significantly from our estimates. Government Subsidies. Government subsidies generally consist of financial subsidies received from provincial and local governments for operating a business in their jurisdictions and compliance with specific policies promoted by the local governments. There are no defined rules and regulations to govern the criteria necessary for companies to receive such benefits, and the amount of financial subsidy is determined at the discretion of the relevant government authorities. Government subsidies are recognized when it is probable that the Company will comply with the conditions attached to them, and the subsidies are received. If the subsidy is related to an expense item, it is recognized as a reduction to the related expense to match the subsidy to the costs that it is intended to compensate. If the subsidy is related to an asset, it is deferred and recorded in other liabilities and then recognized ratably over the expected useful life of the related asset in the Consolidated Statements of Income. Income Taxes. We record deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as operating loss, capital loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences or carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Additionally, in determining the need for recording a valuation allowance against the carrying amount of deferred tax assets, we consider the amount of taxable income and periods over which it must be earned, actual levels of past taxable income and known trends and events or transactions that are expected to affect future levels of taxable income. Where we determine that it is more likely than not that all or a portion of an asset will not be realized, we record a valuation allowance. On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law effective for tax years beginning after December 31, 2017. The Tax Act requires complex computations with significant estimates to be performed, significant judgments to be made in interpretation of the provisions, and the preparation and analysis of information not previously relevant or regularly produced. The U.S. Treasury Department, the IRS, the SEC and other standard-setting bodies could interpret or issue guidance on how provisions of the Tax Act will be applied or otherwise administered that is different from our current interpretation. We completed our analysis of the Tax Act in the fourth quarter of 2018 according to guidance released by the U.S. Treasury Department and the IRS as of December 2018 and made an adjustment of $36 million to reduce the provisional amount for transition tax recorded in 2017 accordingly. The U.S. Treasury Department and the 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 income tax expense of $8 million for the transition tax accordingly. 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. We recognize the benefit of positions taken or expected to be taken in our tax returns when it is more likely than not that the position would be sustained upon examination by these tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. We have investments in our foreign subsidiaries where the carrying values for financial reporting exceed the tax basis. Except for the planned but yet to be distributed earnings, we have not provided deferred tax on the portion of the excess that we believe is indefinitely reinvested, as we have the ability and intent to indefinitely postpone the basis differences from reversing with a tax consequence. The Company’s separation from YUM was intended to qualify as a tax-free reorganization for U.S. income tax purposes resulting in the excess of financial reporting basis over tax basis in our investment in the China business continuing to be indefinitely reinvested. The excess of financial reporting basis over tax basis as of December 31 2017 was subject to the one-time transition tax under the Tax Act as a deemed repatriation of accumulated undistributed earnings from the foreign subsidiaries. However, we continue to believe that the portion of the excess of financial reporting basis over tax basis (including earnings and profits subject to the one-time transition tax) is indefinitely reinvested in our foreign subsidiaries for foreign withholding tax purposes. Pursuant to the China Enterprise Income Tax Law (“EIT Law”), a 10% PRC withholding tax is generally levied on dividends declared by companies in China to their non-resident enterprise investors unless otherwise reduced according to treaties or arrangements between the Chinese central government and the governments of other countries or regions where the non-China resident enterprises are incorporated. Hong Kong has a tax arrangement with mainland China that provides for a 5% withholding tax on dividends distributed to a Hong Kong resident enterprise, upon meeting certain conditions and requirements, including, among others, that the Hong Kong resident enterprise own at least 25% equity interest of the Chinese enterprise and is a “beneficial owner” of the dividends. We believe that our Hong Kong subsidiary, which is the equity holder of our Chinese subsidiaries, met the relevant requirements pursuant to the tax arrangement between mainland China and Hong Kong in 2018 and is expected to meet the requirements in the subsequent years; thus, it is more likely than not that our dividends declared or earnings expected to be repatriated since 2018 are subject to the reduced withholding tax of 5%. See Note 16 for a further discussion of our income taxes. Fair Value Measurements. Fair value is the price we would receive to sell an asset or pay to transfer a liability (exit price) in an orderly transaction between market participants. For those assets and liabilities we record or disclose at fair value, we determine fair value based upon the quoted market price, if available. If a quoted market price is not available for identical assets, we determine fair value based upon the quoted market price of similar assets or the present value of expected future cash flows considering the risks involved, including counterparty performance risk if appropriate, and using discount rates appropriate for the duration. The fair values are assigned a level within the fair value hierarchy, depending on the source of the inputs into the calculation. Level 1 Inputs based upon quoted prices in active markets for identical assets. Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly. Level 3 Inputs that are unobservable for the asset. Cash and Cash Equivalents. Cash equivalents represent highly liquid investments with original maturities not exceeding three months and are primarily comprised of time deposits. Cash and overdraft balances that meet the criteria for right to offset are presented net on our Consolidated Balance Sheets. Short-term Investments. Short-term investments primarily represent time deposits with original maturities of over three months but less than one year when purchased. 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 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. Additionally, we monitor the financial condition of our franchisees and record provisions for estimated losses on receivables when we believe it is probable that our franchisees will be unable to make their required payments. 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. Accounts 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 December 31, 2020 and 2019, the ending balances of provision for accounts receivable were $1 million and $1 million, respectively, and amounts of accounts receivable past due were immaterial. Receivables due from unconsolidated affiliates including accounts receivables and dividend receivables were $50 million and $58 million as of December 31, 2020 and 2019, respectively. Receivables from Payment Processors or Aggregators. Receivables from payment processors such as WeChat and Alipay or aggregators are cash due from them for clearing transactions and are included in Prepaid expenses and other current assets. The cash was paid by customers through these payment processors or aggregators for food provided by the Company. The Company considers and monitors the credit worthiness of the third-party payment processors and aggregators used. Prior to the adoption of ASC 326, an allowance for doubtful accounts is recorded in the period in which a loss is determined to be probable. Upon adoption of ASC 326 starting from January 1, 2020, we adopted the same methodology of estimating expected credit losses based u |
Revenue
Revenue | 12 Months Ended |
Dec. 31, 2020 | |
Revenue From Contract With Customer [Abstract] | |
Revenue | Note 3 – Revenue The following table presents revenue disaggregated by types of arrangements and segments: 2020 Revenues KFC Pizza Hut All Other Segments Corporate and Unallocated Combined Elimination Consolidated Company sales $ 5,633 $ 1,721 $ 42 $ — $ 7,396 $ — $ 7,396 Franchise fees and income 125 5 18 — 148 — 148 Revenues from transactions with franchisees and unconsolidated affiliates 61 4 49 533 647 — 647 Other revenues 2 — 96 32 130 (58 ) 72 Total revenues $ 5,821 $ 1,730 $ 205 $ 565 $ 8,321 $ (58 ) $ 8,263 2019 Revenues KFC Pizza Hut All Other Segments Corporate and Unallocated Combined Elimination Consolidated Company sales $ 5,839 $ 2,045 $ 41 $ — $ 7,925 $ — $ 7,925 Franchise fees and income 136 4 8 — 148 — 148 Revenues from transactions with franchisees and unconsolidated affiliates 64 4 28 558 654 — 654 Other revenues 1 1 81 4 87 (38 ) 49 Total revenues $ 6,040 $ 2,054 $ 158 $ 562 $ 8,814 $ (38 ) $ 8,776 2018 Revenues KFC Pizza Hut All Other Segments Corporate and Unallocated (a) Combined Elimination Consolidated Company sales $ 5,495 $ 2,106 $ 32 $ — $ 7,633 $ — $ 7,633 Franchise fees and income 132 3 6 — 141 — 141 Revenues from transactions with franchisees and unconsolidated affiliates 61 2 26 514 603 — 603 Other revenues — — 51 3 54 (16 ) 38 Total revenues $ 5,688 $ 2,111 $ 115 $ 517 $ 8,431 $ (16 ) $ 8,415 (a) As COFFii & JOY and our e-commerce business became operating segments starting from the first quarter of 2019, revenue by segment information for 2018 has been recast to align with the change in segment reporting. Additional details on our reportable segments are included in Note 17. Franchise Fees and Income 2020 2019 2018 Initial fees, including renewal fees $ 8 $ 8 $ 7 Continuing fees and rental income 140 140 134 Franchise fees and income $ 148 $ 148 $ 141 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 in the 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 December 31, 2020 and 2019. Contract Liabilities Contract liabilities at December 31, 2020 and 2019 were as follows: 2020 2019 Contract liabilities - Deferred revenue related to prepaid stored-value products $ 117 $ 86 - Deferred revenue related to upfront franchise fees 38 39 - Deferred revenue related to customer loyalty programs 23 24 - Deferred revenue related to privilege membership programs 27 16 - Others 1 3 Total $ 206 $ 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 in the Consolidated Balance Sheets. Deferred revenue related to upfront franchise fees that we expect to recognize as revenue in the next 12 months is included in Accounts payable and other current liabilities, and the remaining balance is included in Other liabilities in the Consolidated Balance Sheets. Revenue recognized that was included in the contract liability balance at the beginning of the year amounted to $95 million and $68 million in 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 years presented. The Company has elected, as a practical expedient, not to disclose the value of remaining performance obligations associated with sales-based royalty promised to franchisees in exchange for franchise right and other related services. The remaining duration of the performance obligation is the remaining contractual term of each franchise agreement. We recognize continuing franchisee fees and revenues from advertising services and other services provided to franchisees and unconsolidated affiliates based on certain percentage of sales, as those sales occur. |
Earnings Per Common Share ("EPS
Earnings Per Common Share ("EPS") | 12 Months Ended |
Dec. 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 earnings per share (in millions, except for per share data): 2020 2019 2018 Net Income – Yum China Holdings, Inc. $ 784 $ 713 $ 708 Weighted-average common shares outstanding (for basic calculation) (a) 390 377 384 Effect of dilutive share-based awards (a) 7 8 9 Effect of dilutive warrants (b) 5 3 2 Weighted-average common and dilutive potential common shares outstanding (for diluted calculation) 402 388 395 Basic Earnings Per Share $ 2.01 $ 1.89 $ 1.84 Diluted Earnings Per Share $ 1.95 $ 1.84 $ 1.79 Share-based awards and warrants excluded from the diluted EPS computation (c) 3 2 6 (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. See Note 14 for a further discussion of share-based compensation. In September 2020, 41,910,700 common shares were issued as a result of the Company’s global offering and secondary listing on the HKEX and they were included in the calculated weighted-average common shares outstanding. (b) Pursuant to the investment agreements dated September 1, 2016 (Note 10), 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 year exceeds the applicable exercise price of the warrants. (c) These outstanding employee stock appreciation rights, RSUs, PSUs and warrants were excluded from the computation of diluted EPS because to do so would have been antidilutive for the years presented, or because certain PSUs are contingently issuable based on the achievement of performance and market conditions, which have not been met as of December 31, 2020. |
Items Affecting Comparability o
Items Affecting Comparability of Net Income | 12 Months Ended |
Dec. 31, 2020 | |
Items Affecting Comparability Of Net Income [Abstract] | |
Items Affecting Comparability of Net Income | Note 5 – Items Affecting Comparability of Net Income Impact of COVID-19 pandemic The COVID-19 pandemic has significantly impacted the Company’s operations in 2020. The Company’s operations improved sequentially since the first quarter, although still impacted by the lingering effects of the COVID-19 pandemic. Operating profit for the years ended December 31, 2020 and 2019 was $961 million and $901 million, respectively. Excluding the impact of a $239 million gain from the re-measurement of our previously held equity interest in Suzhou KFC upon the acquisition as further described below, the decrease in Operating profit for the year ended December 31, 2020 was mainly driven by same-store sales declines and temporary store closures due to the COVID-19 pandemic, partially offset by one-time lease concession totaling $36 million from landlords and a one-time government relief of $59 million. Consolidation of former unconsolidated affiliates In the third quarter of 2020, the Company completed the acquisition of an additional 25% equity interest in Suzhou KFC for cash consideration of $149 million, increasing our equity interest to 72%, and thus we began to consolidate Suzhou KFC since the acquisition date. In the first quarter of 2018, the Company completed the acquisition of an additional 36% equity interest in Wuxi KFC for cash consideration of $98 million, increasing our equity interest to 83%, and thus we began to consolidate Wuxi KFC since the acquisition date. As a result of the acquisitions of Suzhou KFC and Wuxi KFC, the Company also recognized a gain of $239 million and $98 million, respectively, from the re-measurement of our previously held 47% equity interest at fair value using a discounted cash flow valuation approach and incorporating assumptions and estimates that are Level 3 inputs. Key assumptions used in estimating future cash flows included projected revenue growth and costs and expenses, which were based on internal projections, historical performance of stores, and the business environment, as well as the selection of an appropriate discount rate based on weighted-average cost of capital and company-specific risk premium. The gain was recorded in Other income, net and not allocated to any segment for performance reporting purposes. Additionally, as a result of the acquisition of Suzhou KFC and Wuxi KFC, $61 million and $61 million of the purchase price was allocated to intangible assets related to reacquired franchise rights, respectively, which are being amortized over the remaining franchise contract period of 2.4 years and 5 years, respectively. Meituan Dianping (“Meituan”) investment In the third quarter of 2018, the Company subscribed for 8.4 million, or less than 1%, of the ordinary shares of Meituan, an e-commerce platform for services in China, for a total consideration of approximately $74 million, when it launched its initial public offering on the Hong Kong Stock Exchange in September 2018. In the second quarter of 2020, the Company sold 4.2 million of the ordinary shares of Meituan for proceeds of approximately $54 million, and realized a $17 million pre-tax gain which was recognized during the holding period. The Company recorded $29 million of U.S. tax in the year ended December 31, 2020 related to the gains on our investment in equity securities of Meituan, which were recognized during the year ended December 31, 2020 and prior year. The Company accounted for the equity securities at fair value with subsequent fair value changes recorded in our Consolidated Statements of Income. The fair value of the investment in Meituan is determined based on the closing market price for the shares at the end of each reporting period. The fair value change, to the extent the closing market price of shares of Meituan as of the end of reporting period is higher than our cost, is subject to U.S. tax. A summary of pre-tax gains or losses in investment in equity securities recognized, which was included in Investment gain or loss in our Consolidated Statements of Income is as follows: 2020 2019 2018 Unrealized gains (losses) recorded on equity securities still held as of the end of the year $ 105 $ 63 $ (27 ) Losses recorded on equity securities sold during the year (1 ) — — Gains (losses) recorded on equity securities $ 104 $ 63 $ (27 ) Store Impairment Charges We recorded store impairment charges of $66 million, $38 million and $40 million for the years ended December 31, 2020, 2019 and 2018, respectively. The increase in store impairment charges in 2020 mainly resulted from the adverse effects of the COVID-19 pandemic. See Note 12 for additional information. Daojia impairment During the years ended December 31, 2019 and 2018, we recorded impairment charges of $2 million and $12 million, respectively, on the intangible assets acquired from the Daojia business primarily attributable to its platform. Additionally, during the year ended December 31, 2019, goodwill related to Daojia reporting unit was fully impaired, resulting in an impairment charge of $9 million. The fair values of Daojia intangible assets and reporting unit were based on the estimated price a willing buyer would pay, using unobservable inputs (level 3). The fair values of intangible assets were determined using a relief-from-royalty valuation approach, with estimated future sales and royalty rates as significant inputs. The fair value of the reporting unit was determined using an income approach with future cash flow estimates supported by estimated future sales and margin. Both valuation approaches incorporated a selection of an appropriate discount rate based on weighted-average cost of capital and company-specific risk premium. For the years ended December 31, 2019 and 2018, these non-cash impairment charges totaling $11 million and $12 million, respectively, were included in Closures and impairment expenses in our Consolidated Statements of Income, but were not allocated to any segment for performance reporting purposes. We recorded tax benefit of $1 million and $3 million associated with the impairment, respectively, and allocated $2 million and $1 million of the after-tax impairment charge to Net Income - noncontrolling interests, respectively, which resulted in a net impairment charge of $8 million and $8 million allocated to Net Income – Yum China Holdings, Inc., respectively, for the years ended December 31, 2019 and 2018. 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 Transition Tax We completed our analysis of the Tax Act in the fourth quarter of 2018 according to guidance released by the U.S. Treasury Department and IRS as of December 2018 and made an adjustment of $36 million to reduce the provisional amount for transition tax recorded in 2017 accordingly. $8 |
Other Income, Net
Other Income, Net | 12 Months Ended |
Dec. 31, 2020 | |
Other Income And Expenses [Abstract] | |
Other Income, Net | Note 6 – Other Income, net 2020 2019 2018 Gain from re-measurement of equity interest upon acquisition (a) $ 239 $ — $ 98 Equity income from investments in unconsolidated affiliates 62 69 65 Derecognition of indemnification asset (b) (3 ) — — Foreign exchanges and other (13 ) (9 ) (11 ) Other income, net $ 285 $ 60 $ 152 (a) As a result of the acquisition of Suzhou KFC and Wuxi KFC, as disclosed in Note 5, the Company recognized a gain of $239 million and $98 million in 2020 and 2018, respectively, from the re-measurement of our previously held 47% equity interest at fair value, which was not allocated to any segment for performance reporting purposes. (b) In the second quarter of 2020, the Company derecognized a $3 million indemnification asset previously recorded for the Daojia acquisition as the indemnification right pursuant to the purchase agreement expired. The expense was included in Other income, net, but was not allocated to any segment for performance reporting purposes. |
Supplemental Balance Sheet Info
Supplemental Balance Sheet Information | 12 Months Ended |
Dec. 31, 2020 | |
Balance Sheet Related Disclosures [Abstract] | |
Supplemental Balance Sheet Information | Note 7 – Supplemental Balance Sheet Information Accounts Receivables, net 2020 2019 Accounts receivables, gross $ 100 $ 89 Allowance for doubtful accounts (1 ) (1 ) Accounts receivables, net $ 99 $ 88 Prepaid Expenses and Other Current Assets 2020 2019 Receivables from payment processors and aggregators $ 47 $ 39 Dividends receivable from unconsolidated affiliates 10 8 Other prepaid expenses and current assets 119 87 Prepaid expenses and other current assets $ 176 $ 134 Property, Plant and Equipment 2020 2019 Buildings and improvements $ 2,367 $ 2,159 Finance leases, primarily buildings 36 30 Machinery and equipment and construction in progress 1,490 1,282 Property, plant and equipment, gross 3,893 3,471 Accumulated depreciation (2,128 ) (1,877 ) Property, plant and equipment, net $ 1,765 $ 1,594 Depreciation and amortization expense related to property, plant and equipment was $421 million, $408 million and $414 million in 2020, 2019 and 2018, respectively. Other Assets 2020 2019 VAT assets $ 270 $ 243 Investment in equity securities 160 110 Land use right (a) 140 133 Long-term deposits 83 71 Investment in long-term time deposits (b) 61 — Costs to obtain contracts 9 9 Restricted cash — 9 Others 26 5 Other Assets $ 749 $ 580 (a) Amortization expense related to land use right was $5 million, $4 million and $5 million in 2020, 2019 and 2018, respectively. (b) As of December 31, 2020, the Company had $61 million invested in long-term time deposits, bearing a fixed interest rate with original maturity of three years. The asset is restricted for use in order to secure the balance of prepaid stored-value cards issued by the Company pursuant to regulatory requirements. Accounts Payable and Other Current Liabilities 2020 2019 Accounts payable $ 708 $ 623 Operating leases liabilities 448 382 Accrued compensation and benefits 238 223 Accrued capital expenditures 203 150 Contract liabilities 175 135 Accrued marketing expenses 73 64 Other current liabilities 150 114 Accounts payable and other current liabilities $ 1,995 $ 1,691 Other Liabilities 2020 2019 Deferred income tax liabilities (c) $ 227 $ 67 Accrued income tax payable 66 69 Contract liabilities 31 33 Other noncurrent liabilities 70 41 Other liabilities $ 394 $ 210 (c) Increase in deferred income tax liabilities balances in 2020 primarily resulted from Suzhou KFC and Huang Ji Huang acquisitions. Reconciliation of Cash, Cash equivalents, and Restricted Cash for Consolidated Statements of Cash Flows 2020 2019 Cash and cash equivalents as presented in Consolidated Balance Sheets $ 1,158 $ 1,046 Restricted cash included in Other assets (d) — 9 Cash, Cash Equivalents and Restricted Cash as presented in Consolidated Statements of Cash Flows $ 1,158 $ 1,055 (d) As of December 31, 2019, the $9 million of restricted cash 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. The Huang Ji Huang acquisition was completed on April 8, 2020. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 12 Months Ended |
Dec. 31, 2020 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Note 8 – 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, 2018 Goodwill, gross $ 648 $ 238 $ 19 $ 391 Accumulated impairment losses (a) (382 ) — — (382 ) Goodwill, net 266 238 19 9 Goodwill impairment (b) (9 ) — — (9 ) Effect of currency translation adjustment and other (3 ) (3 ) — — Balance as of December 31, 2019 Goodwill, gross 645 235 19 391 Accumulated impairment losses (391 ) — — (391 ) Goodwill, net 254 235 19 — Goodwill acquired (c) 524 465 59 Effect of currency translation adjustment and other 54 48 1 5 Balance as of December 31, 2020 Goodwill, gross 1,223 748 20 455 Accumulated impairment losses (391 ) — — (391 ) Goodwill, net $ 832 $ 748 $ 20 $ 64 ( a ) Accumulated impairment losses represent Little Sheep goodwill related impairment. ( b ) In 2019, we recorded an impairment charge of $9 million on goodwill attributable to the Daojia reporting unit (Note 5). (c) Goodwill acquired resulted from the acquisition of Suzhou KFC and Huang Ji Huang. (Note 1). Intangible assets, net as of December 31, 2020 and 2019 are as follows: 2020 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 (c) $ 223 $ (144 ) $ — $ 79 $ 148 $ (113 ) $ — $ 35 Huang Ji Huang franchise related assets (d) 23 (1 ) — 22 — — — — Daojia platform 16 (4 ) (12 ) — 16 (4 ) (12 ) — Customer-related assets 12 (8 ) (2 ) 2 12 (8 ) (2 ) 2 Other 9 (4 ) — 5 9 (4 ) — 5 $ 283 $ (161 ) $ (14 ) $ 108 $ 185 $ (129 ) $ (14 ) $ 42 Indefinite-lived intangible assets Little Sheep trademark $ 56 $ — $ — $ 56 $ 52 $ — $ — $ 52 Huang Ji Huang trademark (d) 82 — — 82 — — — — $ 138 $ — $ — $ 138 $ 52 $ — $ — $ 52 Total intangible assets $ 421 $ (161 ) $ (14 ) $ 246 $ 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. ( c ) Increase in gross carrying amount of reacquired franchise rights during the year ended December 31, 2020 primarily resulted from the acquisition of Suzhou KFC (Note 5). ( d ) Increase in gross carrying amount of finite-lived and indefinite-lived intangible assets primarily resulted from the acquisition of Huang Ji Huang group (Note 1). Amortization expense for finite-lived intangible assets was $24 million in 2020, $16 million in 2019 and $26 million in 2018. Amortization expense for finite-lived intangible assets is expected to approximate $40 million in 2021, $40 million in 2022, $5 million in 2023, $2 million in 2024 and $2 million in 2025. |
Credit Facilities
Credit Facilities | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Credit Facilities | Note 9 – Credit Facilities As of December 31, 2020, the Company had credit facilities of RMB3,305 million (approximately $506 million), comprised of onshore credit facilities of RMB2,000 million (approximately $306 million) in the aggregate and offshore credit facilities of $200 million in the aggregate. The credit facilities had remaining terms ranging from less than one year to two years as of December 31, 2020. Each credit facility bears interest based on the prevailing rate stipulated by the People’s Bank of China, Loan Prime Rate (“LPR”) published by the National Interbank Funding Centre of the PRC or London Interbank Offered Rate (“LIBOR”) administered by the ICE Benchmark Administration. Each credit facility contains a cross-default provision whereby our failure to make any payment on a principal amount from any credit facility will constitute a default on other credit facilities. Some of the credit facilities contain covenants limiting, among other things, certain additional indebtedness and liens, and certain other transactions specified in the respective agreement. Interest on any outstanding borrowings is due at least monthly. Some of the onshore credit facilities contain sub-limits for overdrafts, non-financial bonding, standby letters of credit and guarantees. As of December 31, 2020, we had outstanding bank guarantees of RMB 114 million (approximately $18 million) to secure our lease payment to landlords for certain Company-owned restaurants. The credit facilities were therefore reduced by the same amount, while there were no borrowings outstanding as of December 31, 2020. |
Investment Agreements with Stra
Investment Agreements with Strategic Investors | 12 Months Ended |
Dec. 31, 2020 | |
Stockholders Equity Note [Abstract] | |
Investment Agreements with Strategic Investors | Note 10 – Investment Agreements with Strategic Investors On September 1, 2016, YUM and the Company entered into investment agreements (the “Investment Agreements”) with each of Pollos Investment L.P., an affiliate of Primavera Capital Group (“Primavera”), and API (Hong Kong) Investment Limited, an affiliate of Zhejiang Ant Small and Micro Financial Services Group Co., Ltd. (“Ant Financial” and, together with Primavera, the “Investors”). Pursuant to the Investment Agreements, on November 1, 2016 (“Closing Date”), Primavera and Ant Financial invested $410 million and $50 million, respectively, for a collective $460 million investment (the “Investment”) in the Company in exchange for: (i) shares of Yum China common stock representing in the aggregate 5% of Yum China common stock issued and outstanding immediately following the separation subject to Post-Closing Adjustment for a final aggregate ownership of between 4.3% and 5.9% in Yum China and (ii) two tranches of warrants (the “Warrants”), exercisable for an approximate additional 4% ownership, in the aggregate, of Yum China common stock issued and outstanding after the separation, taking into account the shares previously issued to the Investors. Immediately before the closing of the Investment, Yum China had 363,758,219 shares of common stock issued and outstanding, with a par value $0.01 per share. Pursuant to the Investment Agreements, on November 1, 2016, Yum China issued 17,064,172.74 and 2,080,996.68 shares of common stock (the “Closing Shares”) at $24.03 per share (“Closing Price”) to Primavera and Ant Financial, respectively, subject to adjustment as described below. Pursuant to the Investment Agreements, the Investors and the Company determined the volume weighted-average trading price (“VWAP”) per share of Company common stock over the trading days occurring over the period from December 1, 2016 to December 30, 2016 (the “Measurement Period”), and discounted such VWAP by 8% (the “Adjusted VWAP Price Per Share”). Since the Adjusted VWAP Price Per Share of $25.05 exceeded the Closing Price of $24.03 paid by the Investors at the Closing Date, on January 9, 2017, the Company repurchased from Primavera and Ant Financial 699,394.74 and 85,291.68 shares of common stock, respectively, at par value of $0.01 per share, based on the Adjusted VWAP Price Per Share as determined on December 30, 2016. The repurchased shares were included in Treasury Stock as of December 31, 2016 in the Consolidated Financial Statements. In addition, pursuant to the terms of the , Yum China issued to each of the Investors two tranches of Warrants. Upon exercise, the first tranche of Warrants initially provided Primavera and Ant Financial with the right to purchase 7,309,057 and 891,348 shares of Yum China common stock, respectively, at an initial exercise price of $31.40 per share. The second tranche of Warrants initially provided Primavera and Ant Financial with the right to purchase the same number of shares of Yum China common stock purchasable by Primavera and Ant Financial under the first tranche of Warrants, at an initial exercise price of $39.25 per share. through October 31, 2021 and As a result of the issuance of the Closing Shares and the Post-Closing Adjustment (excluding shares issuable upon exercise of the Warrants), Primavera and Ant Financial collectively beneficially owned approximately 4.8% of the outstanding shares of Yum China common stock as of January 9, 2017, or approximately 8.7% of the outstanding shares of Yum China common stock as of January 9, 2017 assuming the full exercise of both tranches of Warrants by each of the Investors. Total cash proceeds of $460 million from the closing of the Investment were first allocated to the Post-Closing Adjustment and Warrants based on their fair value on November 1, 2016, with the residual value of $364 million allocated to the shares of common stock issued. As of December 31, 2020, Primavera and Ant Financial had separately entered into pre-paid forward sale transactions with respect to all of their Warrants with several financial institutions, pursuant to which Primavera and Ant Financial are obligated to deliver their respective Warrants on the applicable settlement date. |
Leases
Leases | 12 Months Ended |
Dec. 31, 2020 | |
Leases [Abstract] | |
Leases | Note 11 – Leases As of December 31, 2020, we operated over 8,100 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 Consolidated Statements of Income. The impact of ASC 842 on our accounting as a lessor was not significant. Supplemental Balance Sheet 2020/12/31 2019/12/31 Account Classification Assets Operating lease right-of-use assets (a) $ 2,164 $ 1,985 Operating lease right-of-use assets Finance lease right-of-use assets 20 18 Property, plant and equipment, net Total leased assets $ 2,184 $ 2,003 Liabilities Current Operating lease liabilities (a) $ 448 $ 382 Accounts payable and other current liabilities Finance lease liabilities 2 2 Accounts payable and other current liabilities Non-current Operating lease liabilities (a) 1,915 1,803 Non-current operating lease liabilities Finance lease liabilities 28 26 Non-current finance lease liabilities Total lease liabilities $ 2,393 $ 2,213 (a) Increase in balances of operating lease right-of-use assets and liabilities mainly resulted from the acquisition of Suzhou KFC. Summary of Lease Cost Account Classification 2020 2019 Operating lease cost $ 496 $ 472 Occupancy and other operating expenses, G&A or Franchise expenses Finance lease cost Amortization of leased assets 2 1 Occupancy and other operating expenses Interest on lease liabilities 2 2 Interest expense, net Variable lease cost (b) 262 325 Occupancy and other operating expenses or Franchise expenses Short-term lease cost 10 10 Occupancy and other operating expenses or G&A Sublease income (24 ) (27 ) Franchise fees and income or Other revenues Total lease cost $ 748 $ 783 (b) The Company was granted $36 million in lease concessions from landlords related to the effects of the COVID-19 pandemic for the year ended December 31, 2020. 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 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 493 $ 481 Operating cash flows from finance leases 2 1 Financing cash flows from finance leases 2 2 Right-of-use assets obtained in exchange for new lease liabilities (c) Operating leases $ 337 $ 346 Finance leases 2 4 (c) This supplemental non-cash disclosure for ROU obtained in exchange for new lease liabilities also includes noncash transactions resulting in adjustments to the lease liability or ROU asset due to modification or other reassessment events. Lease Term and Discount Rate 2020 2019 Weighted-average remaining lease term (years) Operating leases 7.0 7.1 Finance leases 10.9 11.5 Weighted-average discount rate Operating leases 5.8 % 6.1 % Finance leases 5.8 % 5.9 % Summary of Future Lease Payments and Lease Liabilities Maturities of lease liabilities as of December 31, 2020 were as follows: Amount of Operating Leases Amount of Finance Leases Total 2021 $ 568 $ 4 $ 572 2022 474 4 478 2023 410 4 414 2024 343 4 347 2025 279 4 283 Thereafter 818 21 839 Total undiscounted lease payment 2,892 41 2,933 Less: imputed interest (d) 529 11 540 Present value of lease liabilities $ 2,363 $ 30 $ 2,393 (d) As the rate implicit in the lease cannot be readily determined, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the imputed interest and present value of lease payments. We used the incremental borrowing rate on January 1, 2019 for operating leases that commenced prior to that date. As of December 31, 2020, we have additional lease agreements that have been signed but not yet commenced, with total undiscounted minimum lease payments of $141 million. These leases will commence between 2021 and 2023 with lease terms of 1 year to 20 years. |
Fair Value Measurements and Dis
Fair Value Measurements and Disclosures | 12 Months Ended |
Dec. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements and Disclosures | Note 12 – Fair Value Measurements and Disclosures The Company’s financial assets and liabilities primarily consist of cash and cash equivalents, short-term investments, long-term time deposits, 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 Consolidated Statements of Income. The following table is a summary of our financial assets measured on a recurring basis or disclosed at fair value and the level within the fair value hierarchy in which the measurement falls. The Company classifies its cash equivalents, short-term investments, long-term time deposits, 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 in 2020 and 2019. Fair Value Measurement or Disclosure at December 31, 2020 Balance at December 31, 2020 Level 1 Level 2 Level 3 Cash equivalents: Time deposits $ 601 $ 601 Fixed income debt securities (a) 207 207 Total cash equivalents 808 207 601 — Short-term investments: Time deposits 2,165 2,165 Fixed income debt securities (a) 784 104 680 Variable return investments 156 156 Total short-term investments 3,105 260 2,845 — Other assets: Equity securities 160 160 Time deposits 61 61 Total $ 4,134 $ 627 $ 3,507 $ — (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. As of December 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 determined with the assistance of 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 years ended December 31, 2020, 2019 and 2018. These amounts exclude fair value measurements made for restaurants that were subsequently closed or refranchised prior to those respective year-end dates. 2020 2019 2018 Account Classification Restaurant-level impairment (a) 52 28 27 Closure and impairment expenses, net ROU impairment prior to the adoption of ASC 842 (b) — 82 — Retained Earnings Daojia impairment (c) — 11 12 Closure and impairment expenses, net Total $ 52 $ 121 $ 39 ( a ) Restaurant-level impairment charges are recorded in Closures and impairment expenses, net and resulted primarily from our semi-annual impairment evaluation of long-lived assets of individual restaurants that were being operated at the time of impairment and had not been offered for refranchising. We performed an additional impairment evaluation in the first quarter of 2020, considering the adverse effects of the COVID-19 pandemic as an impairment indicator. A trend of continuing operating losses for certain restaurants due to the COVID-19 pandemic resulted in higher impairment during 2020. . ( 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. (c) See Note 5 for further discussion. |
Retirement Plans
Retirement Plans | 12 Months Ended |
Dec. 31, 2020 | |
Compensation And Retirement Disclosure [Abstract] | |
Retirement Plans | Note 13 –Retirement Plans For executives who were hired or re-hired after September 30, 2001, YUM has implemented the YUM LRP. This is an unfunded, unsecured account-based retirement plan which allocates a percentage of pay to an account payable to the executive following the executive’s separation of employment from YUM or attainment of age 55. The Company adopted the YCHLRP upon separation while the assets and liabilities associated with these employees under YUM LRP were transferred to YCHLRP. YCHLRP will continue to be in effect until terminated by the Company’s board of directors. The terms of the YCHLRP are substantially similar to the terms of the YUM LRP. Under the YCHLRP, certain executives who are at least age 21, who are classified as salary level 12, who are not eligible to participate in a tax-qualified defined benefit plan, and who satisfy certain additional requirements as to work location and assignment, are eligible to participate in the YCHLRP if selected for participation by the Company. The YCHLRP is an unfunded, unsecured account-based retirement plan that allocates a percentage of pay to an account payable to an executive following the later to occur of the executive’s separation of employment from the Company or attainment of age 55. Under the YCHLRP, participants aged 55 or older are entitled to a lump sum distribution of their account balance on the last day of the calendar quarter that occurs on or follows their separation of employment. The liabilities of $0.2 million and $4.8 million attributable to our employees under the YCHLRP as of December 31, 2020 and 2019, respectively, are included in our Consolidated Balance Sheets. YUM offers certain of the Company’s executives working in China retirement benefits under the Bai Sheng Restaurants China Holdings Limited Retirement Scheme (previously known as the Bai Sheng Restaurants (Hong Kong) Ltd. Retirement Scheme). Under this defined contribution plan, YUM provides a company funded contribution ranging from 5% to 10% of an executive’s base salary. Upon termination, participants will receive a lump sum equal to a percentage of the Company’s contributions inclusive of investment return. This percentage is based on a vesting schedule that provides participants with a vested 30% interest upon completion of a minimum of 3 years of service, and an additional 10% vested interest for each additional completed year, up to a maximum of 100%. The Company adopted the same plan after the separation and the contribution amount to the plan for the years ended December 31, 2020, 2019 and 2018 was insignificant. As stipulated by Chinese state regulations, the Company participates in a government-sponsored defined contribution retirement plan. Substantially all employees are entitled to an annual pension equal to a fixed proportion of the average basic salary amount of the geographical area of their last employment at their retirement date. We are required to make contributions to the local social security bureau between 12% and 20% of the previous year’s average basic salary amount of the geographical area where the employees are under our employment. Contributions are recorded in the Consolidated Statements of Income as they become payable. We have no obligation for the payment of pension benefits beyond the annual contributions as set out above. In 2020, the Company also received one-time government subsidy related to COVID-19 in the form of a reduction in social security contributions, which was recognized as reduction to the related expenses when it was granted. The Company contributed $167 million, $160 million and $174 million to the government-sponsored plan for 2020, 2019 and 2018, respectively. |
Share-Based Compensation
Share-Based Compensation | 12 Months Ended |
Dec. 31, 2020 | |
Compensation Related Costs [Abstract] | |
Share-Based Compensation | Note 14 – Share-Based Compensation Overview Upon the separation, 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, to maintain the pre-separation intrinsic value of the awards. Depending on the tax laws of the country of employment, awards were modified using either the shareholder method or the employer method. Share issuances for Yum China awards held by YUM’s employees will be satisfied by Yum China. Share issuances for YUM awards held by the Company’s employees will be satisfied by YUM. The shareholder method was based on the premise that employees holding YUM awards prior to the separation should receive an equal number of awards of both YUM and Yum China. Under the employer method, employees holding YUM awards prior to the separation had their awards converted into awards of the company that they worked for subsequent to the separation. As a result, Yum China may issue shares of common stock to YUM’s employees upon exercise or vesting of various types of awards, including stock options, SARs, RSUs, and awards from the executive income deferral plan. The modified equity awards have the same terms and conditions as the awards held immediately before the separation, except that the number of shares and the price were adjusted. In accordance with ASC 718, the Company compared the fair value of the awards immediately prior to the separation to the fair value immediately after the separation to measure the incremental compensation cost, using the Black-Scholes option-pricing model (the “BS model”). The incremental compensation cost was insignificant, and YUM and the Company continue to recognize the unamortized original grant-date fair value of the modified awards over the remaining requisite service period as their respective employees continue to provide services. Share-based compensation for the Company’s employees is based on both YUM awards and Yum China awards held by those employees. Effective October 31, 2016, the Company adopted the Yum China Holdings, Inc. Long Term Incentive Plan (the “2016 Plan”). The Company has reserved for issuance under the 2016 Plan of 45,000,000 shares of our common stock. Under this plan, the exercise price of stock options and SARs granted must be equal to or greater than the fair market value of the Company’s stock on the date of grant. Potential awards to employees and non-employee directors under the 2016 Plan include stock options, incentive options, SARs, restricted stock, stock units, RSUs, performance shares, performance units, and cash incentive awards. We have issued only stock options, SARs, RSUs and PSUs under the 2016 Plan. While awards under the 2016 Plan can have varying vesting provisions and exercise periods, outstanding awards under the 2016 Plan vest in periods ranging from three to five years. Stock options and SARs expire ten years after grant. The Company recognizes all share-based payments to employees and non-employee directors in the Consolidated Financial Statements as compensation cost on a straight-line basis over the service period based on their fair value on the date of grant, for awards that actually vest and when performance conditions are probable of being achieved, if applicable. If no substantive service condition exists, the grant-date fair value is fully recognized as expense upon grant. Certain awards are subject to specific retirement conditions, which allow the awards to fully vest as long as the employee is actively employed for at least one year following the grant date, provides at least six months notification of intention to retire, and signs non-solicitation and non-compete agreements. Under such circumstances, the grant-date fair value of the award is recognized as expense on a straight-line basis over the one-year service period from the grant date. Award Valuation Stock Options and SARs The Company estimated the fair value of each stock option and SAR award granted to the Company’s employees as of the date of grant, using the BS model with the following assumptions: 2020 2019 2018 Risk-free interest rate 1.5 % 2.5 % 2.5 % Expected term (years) 6.50 6.50 6.50 Expected volatility 33.2 % 32.0 % 33.0 % Expected dividend yield 1.1 % 1.2 % 1.0 % Share option and SAR awards granted to employees typically have a graded vesting schedule of 25% per year over four years and expire 10 years after grant. The Company uses a single weighted-average term for awards that have a graded vesting schedule. Based on analysis of the historical exercise and post-vesting termination behavior, the Company determined that employees exercised the awards on average after 6.5 years. Forfeitures were estimated based on historical experience. Historical data used to estimate the expected term and forfeiture rate were based on data associated with the Company’s employees who were granted share-based awards by YUM prior to the separation. For those awards granted by the Company after the separation, the Company considered the volatility of common shares of comparable companies in the same business as the Company, as well as the historical volatility of the Company stock. The dividend yield was estimated based on the Company’s dividend policy at the time of the grant. RSUs and PSUs RSU awards generally vest over a three-year During 2019 and 2018, the Company granted PSUs that are subject to market conditions and service conditions, cliff vesting at the end of the performance period. The number of shares to be distributed is based on the Company’s performance on its total shareholder return relative to its peer group in the MSCI International China Index, measured over a three-year three-year In February 2020, the Company’s board of directors approved new grants of a special award of PSUs ("Partner PSU Awards") to select employees who were deemed critical to the Company’s execution of its strategic operating plan under the 2016 Plan. These Partner PSU Awards are subject to market and performance conditions, and will cliff vest only if threshold performance goals are achieved over a four-year The annual PSU awards granted in February 2020 are cliff vested based only on the Company’s achievement of performance goals with a relative total shareholder return payout modifier against the MSCI China Index, measured over a three-year Compensation costs associated with annual and Partner PSU Awards are recognized on a straight-line basis over the performance period when performance conditions are probable of being achieved, adjusted for estimated forfeiture rate. Others Commencing from November 11, 2016, Yum China also granted annual awards of common stock to non-employee directors for their service on Yum China’s board of directors. The fair value of these awards is based on the closing price per share of the Company’s common stock on the date of grant. The shares were issued outright to the directors on the date of grant, with no conditions attached. Therefore, the fair value of the awards was fully recognized as expenses upon grant. For the years ended December 31, 2020 and 2019, a total of 54,757 and 60,419 shares of Yum China common stock, respectively, were granted to non-employee directors and the grant-date fair value of $2.6 million and $2.4 million, respectively, was immediately recognized in full in the Consolidated Statements of Income. Award Activity Stock Options and SARs Shares (in Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (years) Aggregate Value Outstanding at the beginning of 2020 14,373 24.22 Granted 1,314 42.71 Exercised (3,585 ) 19.19 Forfeited or expired (252 ) 38.22 Outstanding at the end of 2020 11,850 (a) 27.49 5.12 351 Exercisable at the end of 2020 8,841 23.32 4.11 299 (a) Outstanding awards include 348,407 stock options and 11,501,517 SARs with weighted-average exercise prices of $19.91 and $27.72, respectively. Outstanding awards represent Yum China awards held by employees of both the Company and YUM. The weighted-average grant-date fair value of SARs granted in 2020, 2019 and 2018 was $13.36, $13.43 and $13.52, respectively. The total intrinsic value of stock options and SARs exercised by the Company’s employees during the years ended December 31, 2020, 2019 and 2018 was $75 million, $39 million and $31 million, respectively. As of December 31, 2020, $25 million of unrecognized compensation cost related to unvested stock options and SARs, which will be reduced by any forfeitures that occur, is expected to be recognized over a remaining weighted-average vesting period of approximately 1.69 years. This reflects unrecognized cost for both Yum China awards and YUM awards held by the Company’s employees. The total fair value at grant date or modification date of awards held by the Company’s employees that vested during 2020, 2019 and 2018 was $15 million, $14 million and $14 million, respectively. RSUs and PSUs Shares (in thousands) Weighted- Average Grant Date Fair Value Unvested at the beginning of 2020 971 36.08 Granted 1,214 40.49 Vested (448 ) 30.76 Forfeited or expired (37 ) 41.25 Unvested at the end of 2020 1,700 40.52 The weighted-average grant-date fair value of RSUs and PSUs granted in 2020, 2019 and 2018 was $40.49, $44.75 and $39.50, respectively. As of December 31, 2020, $10 million of unrecognized compensation cost related to 551,642 unvested RSUs and $29 million of unrecognized compensation cost related to 1,148,042 PSUs, which will be reduced by any forfeiture that occurs, are expected to be recognized over a remaining weighted-average vesting period of approximately 1.50 and 2.82 years, respectively. The total fair value at grant date of awards that vested during 2020, 2019 and 2018 was $14 million, $4 million and $4 million, respectively. Impact on Net Income Share-based compensation expense was $36 million, $26 million and $24 million for 2020, 2019 and 2018, respectively. Deferred tax benefits of $1 million, $1 million, $1 million was recognized in 2020, 2019 and 2018, respectively. |
Equity
Equity | 12 Months Ended |
Dec. 31, 2020 | |
Stockholders Equity Note [Abstract] | |
Equity | Note 15 – Equity Immediately after the separation on October 31, 2016, Yum China authorized capital stock consisted of 1,000 million shares of common stock, par value $0.01 per share, and 364 million shares of Yum China common stock were issued and outstanding. As of December 31, 2020, 440 million shares of Yum China common stock were issued and 420 million shares were outstanding. Share Repurchase Program The Company repurchased 0.2 million, 6.2 million and 9.0 million shares of common stock at a total cost of $7 million, $261 million and $312 million for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, $692 million remained available for repurchase under the current authorization. The Company suspended the share repurchase in the second, third and fourth quarter of 2020. Cash Dividend On October 4, 2017, the board of directors approved a regular quarterly cash dividend program, and declared an initial cash dividend of $0.10 per share on Yum China’s common stock. Total cash dividends of $38 Accumulated Other Comprehensive Income (“AOCI”) The Company’s other comprehensive income (loss) for the years ended December 31, 2020, 2019, and 2018 and AOCI balances as of December 31, 2020 and 2019 were comprised solely of foreign currency translation adjustments. Other comprehensive income was $230 million for the year ended December 31, 2020 and other comprehensive loss was $32 million and $160 million for the years ended December 31, 2019 and 2018, respectively. The accumulated balances reported in AOCI in the Consolidated Balance Sheets for currency translation adjustments were net income of $167 million as of December 31, 2020 and net loss of $49 million as of December 31, 2019. There was no tax effect related to the components of other comprehensive income for all years presented. Restricted net assets The Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries. Relevant PRC statutory laws and regulations permit payments of dividends by the Company’s PRC subsidiaries only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the Consolidated Financial Statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of the Company’s subsidiaries. In accordance with the PRC Regulations on Enterprises with Foreign Investment and the articles of association of the Company’s PRC subsidiaries, a foreign-invested enterprise established in the PRC is required to provide certain statutory reserves, namely general reserve fund, the enterprise expansion fund and staff welfare and bonus fund which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A foreign-invested enterprise is required to allocate at least 10% of its annual after-tax profit to the general reserve until such reserve has reached 50% of its respective registered capital based on the enterprise’s PRC statutory accounts. Appropriations to the enterprise expansion fund and staff welfare and bonus fund are at the discretion of the board of directors for all foreign-invested enterprises. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. As a result of these PRC laws and regulations subject to the limit discussed above that require annual appropriations of 10% of after-tax income to be set aside, prior to payment of dividends as general reserve fund, the Company’s PRC subsidiaries are restricted in their ability to transfer a portion of their net assets to the Company in the form of dividend payments, loans or advances. The restricted net assets of the PRC subsidiaries is approximately $855 million as of December 31, 2020. Furthermore, cash transfers from the Company’s PRC subsidiaries to its subsidiaries outside of China are subject to PRC government control of currency conversion. Shortages in the availability of foreign currency may restrict the ability of the PRC subsidiaries to remit sufficient foreign currency to pay dividends or other payments to the Company, or otherwise satisfy their foreign currency-denominated obligations. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 16 – Income Taxes In December 2017, the U.S. enacted the Tax Act, which included a broad range of tax reforms, including, but not limited to, the establishment of a flat corporate income tax rate of 21%, the elimination or reduction of certain business deductions, and the imposition of tax on deemed repatriation of accumulated undistributed foreign earnings. The Tax Act has impacted Yum China in two material aspects: (1) in general, all of the foreign-source dividends received by Yum China from its foreign subsidiaries will be exempted from taxation starting from its tax year beginning after December 31, 2017 and (2) Yum China recorded additional income tax expense in the fourth quarter of 2017, including an estimated one-time transition tax on its deemed repatriation of accumulated undistributed foreign earnings and additional tax related to the revaluation of certain deferred tax assets. Based on the information available, we made a reasonable estimate of the effects and recorded the provisional amount of $ 164 130 We completed our analysis of the Tax Act in the fourth quarter of 2018 according to guidance released by the U.S. Treasury Department and the IRS as of December 2018 and made a reversal to provisional amount in the amount of $36 million for the transition tax recorded in 2017 accordingly. The U.S. Treasury Department and the 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 income tax expense of $8 million for the transition tax accordingly. The Tax Act requires a U.S. shareholder to be subject to tax on Global Intangible Low Taxed Income (“ U.S. and foreign income (loss) before taxes are set forth below: 2020 2019 2018 U.S. $ (10 ) $ (7 ) $ (3 ) Mainland China 1,014 941 979 Other Foreign $ 104 69 (26 ) $ 1,108 $ 1,003 $ 950 The details of our income tax provision (benefit) are set forth below: 2020 2019 2018 Current: Federal $ 1 $ 16 $ (33 ) Foreign 183 228 214 $ 184 $ 244 $ 181 Deferred: Federal $ 26 $ (1 ) $ — Foreign 85 17 33 $ 111 $ 16 $ 33 $ 295 $ 260 $ 214 The reconciliation of income taxes calculated at the U.S. federal statutory rate to our effective tax rate is set forth below: 2020 2019 2018 U.S. federal statutory rate $ 233 21.0 % $ 211 21.0 % $ 199 21.0 % Impact from the Tax Act — — 8 0.8 (36 ) (3.8 ) Statutory rate differential attributable to foreign operations 63 5.7 53 5.3 56 5.8 Adjustments to reserves and prior years (6 ) (0.6 ) (2 ) (0.2 ) (4 ) (0.4 ) Change in valuation allowances 1 0.1 2 0.2 (4 ) (0.4 ) Impact from investment (gain) loss 7 0.7 (10 ) (1.0 ) 4 0.5 Other, net (3 ) (0.3 ) (2 ) (0.2 ) (1 ) (0.1 ) Effective income tax rate $ 295 26.6 % $ 260 25.9 % $ 214 22.6 % Statutory rate differential attributable to foreign operations. This item includes local taxes, withholding taxes, and shareholder-level taxes, net of foreign tax credits. A majority of our income is earned in China, which is generally subject to a 25% tax rate. The negative impact in 2020, 2019 and 2018 is primarily due to the U.S. federal statutory rate of 21%, which is lower than China’s statutory income tax rate. Adjustments to reserves and prior years. This item includes: (1) changes in tax reserves, including interest thereon, established for potential exposure we may incur if a taxing authority takes a position on a matter contrary to our position; and (2) the effects of reconciling income tax amounts recorded in our Consolidated Statements of Income to amounts reflected on our tax returns, including any adjustments to the Consolidated Balance Sheets. The impact of certain effects or changes may offset items reflected in the ‘Statutory rate differential attributable to foreign operations’ line. Change in valuation allowances. This item relates to changes for deferred tax assets generated or utilized during the current year and changes in our judgment regarding the likelihood of using deferred tax assets that existed at the beginning of the year. The impact of certain changes may offset items reflected in ‘ . Impact from investment (gain) loss. This item relates to the gain or loss on investment in equity securities of Meituan. The Company recorded $29 million of U.S. tax in 2020, including $22 million and $7 million related to gains on investment in equity securities of Meituan recognized during the year of 2020 and prior year, respectively. Others. This item primarily includes the impact of permanent differences related to current year earnings, as well as U.S. tax credits and deductions. The details of 2020 and 2019 deferred tax assets (liabilities) are set forth below: 2020 2019 Operating losses and tax credit carryforwards $ 24 $ 25 Tax benefit from Little Sheep restructuring 17 18 Employee benefits 3 4 Share-based compensation 5 5 Lease 62 61 Other liabilities 13 13 Deferred income and other 75 58 Gross deferred tax assets 199 184 Deferred tax asset valuation allowances (42 ) (47 ) Net deferred tax assets $ 157 $ 137 Intangible assets (61 ) (23 ) Property, plant and equipment (85 ) (59 ) Gain from re-measurement of equity interest upon acquisition (87 ) (22 ) Unrealized gains from equity securities (26 ) — Withholding tax on distributable earnings (27 ) (5 ) Gross deferred tax liabilities $ (286 ) $ (109 ) Net deferred tax assets (liabilities) $ (129 ) $ 28 Reported in Consolidated Balance Sheets as: Deferred income taxes 98 95 Other liabilities (227 ) (67 ) $ (129 ) $ 28 We have investments in our foreign subsidiaries where the carrying values for financial reporting exceed the tax basis. Except for the planned but yet to be distributed earnings, we have not provided deferred tax on the portion of the excess that we believe is indefinitely reinvested, as we have the ability and intent to indefinitely postpone the basis differences from reversing with a tax consequence. The Company’s separation from YUM was intended to qualify as a tax-free reorganization for U.S. income tax purposes resulting in the excess of financial reporting basis over tax basis in our investment in the China business continuing to be indefinitely reinvested. The excess of financial reporting basis over tax basis as of December 31, 2017 was subject to the one-time transition tax under the Tax Act as a deemed repatriation of accumulated undistributed earnings from the foreign subsidiaries. However, we continue to believe that the portion of the excess of financial reporting basis over tax basis (including earnings and profits subject to the one-time transition tax) is indefinitely reinvested in our foreign subsidiaries for foreign withholding tax purposes. We estimate that our total temporary difference for which we have not provided foreign withholding taxes is approximately $2 billion at December 31, 2020. The foreign withholding tax rate on this amount is 5% or 10% depending on the manner of repatriation and the applicable tax treaties or tax arrangements. At December 31, 2020, the Company had operating loss carryforwards of $111 million, primarily related to our Little Sheep and Daojia business as well as certain underperforming entities, most of which will expire by 2025. These losses are being carried forward in jurisdictions where we are permitted to use tax losses from prior periods to reduce future taxable income. Cash payments for tax liabilities on income tax returns filed were $170 million, $255 million and $208 million in 2020, 2019 and 2018, respectively. We recognize the benefit of positions taken or expected to be taken in tax returns in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. A recognized tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: 2020 2019 Beginning of Year $ 19 $ 22 Additions on tax positions 8 4 Reductions due to statute expiration (6 ) (7 ) End of Year $ 21 $ 19 In 2020 and 2019, our unrecognized tax benefits were increased by $8 million and $4 million, respectively. The unrecognized tax benefits balance of $21 million as of December 31, 2020 related to the uncertainty with regard to the deductibility of certain business expenses incurred, all of which, if recognized upon audit settlement or statute expiration, would affect the effective tax rate. The Company believes it is reasonably possible its unrecognized tax benefits of $21 million as of December 31, 2020, which is included in Other liabilities on the Consolidated Balance Sheet, may decrease by approximately $6 million in the next 12 months, which if recognized, would affect the 2021 effective tax rate. The accrued interest and penalties related to income taxes at December 31, 2020 and 2019 are set forth below: 2020 2019 Accrued interest and penalties $ 5 $ 5 During 2020, 2019 and 2018, a net benefit of nil, $1 million and $1 million for interest and penalties was recognized in our Consolidated Statements of Income as components of our income tax provision, respectively. The Company’s results are subject to examination in the U.S. federal jurisdiction as well as various U.S. state jurisdictions as part of YUM’s and our own income tax filings, and separately in foreign jurisdictions. Any liability arising from these examinations related to periods prior to the separation is expected to be settled among the Company, YCCL and YUM in accordance with the tax matters agreement we entered into in connection with the separation. We are subject to reviews, examinations and audits by Chinese tax authorities, the IRS and other tax authorities with respect to income and non-income based taxes. Since 2016, we have been under a national audit on transfer pricing by the STA in China regarding our related party transactions for the period from 2006 to 2015. The information and views currently exchanged with the tax authorities focuses on our franchise arrangement with YUM. We continue to provide information requested by the tax authorities to the extent it is available to the Company. It is reasonably possible that there could be significant developments, including expert review and assessment by the STA, within the next 12 months. The ultimate assessment and decision of the STA will depend upon further review of the information provided, as well as ongoing technical and other discussions with the STA and in-charge local tax authorities, and therefore, it is not possible to reasonably estimate the potential impact at this time. We will continue to defend our transfer pricing position. However, if the STA prevails in the assessment of additional tax due based on its ruling, the assessed tax, interest and penalties, if any, could have a material adverse impact on our financial position, results of operations and cash flows. |
Segment Reporting
Segment Reporting | 12 Months Ended |
Dec. 31, 2020 | |
Segment Reporting [Abstract] | |
Segment Reporting | Note 17 The Company has two reportable segments: KFC and Pizza Hut. Starting from the first quarter of 2019, our COFFii & JOY concept and e-commerce business became operating segments, as their financial results started being regularly reviewed by the Company’s chief operating decision maker. Our remaining operating segments, including the operations of Little Sheep, Huang Ji Huang, COFFii & JOY, East Dawning, Taco Bell, Lavazza and Daojia, are combined and referred to as All Other Segments, as these operating segments are insignificant both individually and in the aggregate. Segment financial information for prior years has been recast due to alignment with this change in segment reporting. There was no impact on the Consolidated Financial Statements of the Company as a result of this change. See Note 1. 2020 KFC Pizza Hut All Other Segments Corporate and Unallocated (a) Combined Elimination Consolidated Revenues Revenue from external customers $ 5,821 $ 1,730 $ 173 $ 539 $ 8,263 $ — $ 8,263 Inter-segment revenue — — 32 26 58 (58 ) — Total $ 5,821 $ 1,730 $ 205 $ 565 $ 8,321 $ (58 ) $ 8,263 2019 KFC Pizza Hut All Other Segments Corporate and Unallocated (a) Combined Elimination Consolidated Revenues Revenue from external customers $ 6,039 $ 2,054 $ 121 $ 562 $ 8,776 $ — $ 8,776 Inter-segment revenue 1 — 37 — 38 (38 ) — Total $ 6,040 $ 2,054 $ 158 $ 562 $ 8,814 $ (38 ) $ 8,776 2018 KFC Pizza Hut All Other Segments Corporate and Unallocated (a) Combined Elimination Consolidated Revenues Revenue from external customers $ 5,688 $ 2,111 $ 99 $ 517 $ 8,415 $ — $ 8,415 Inter-segment revenue — — 16 — 16 (16 ) — Total $ 5,688 $ 2,111 $ 115 $ 517 $ 8,431 $ (16 ) $ 8,415 Operating Profit 2020 2019 2018 KFC (b) $ 801 $ 949 $ 895 Pizza Hut 62 114 97 All Other Segments (7 ) (14 ) (12 ) Unallocated revenues from transactions with franchisees and unconsolidated affiliates (c) 533 558 514 Unallocated Other revenues 32 4 3 Unallocated expenses for transactions with franchisees and unconsolidated affiliates (c) (531 ) (554 ) (512 ) Unallocated Other operating costs and expenses (30 ) (4 ) (2 ) Unallocated and corporate G&A expenses (144 ) (145 ) (128 ) Unallocated Closures and impairment expense (d) — (11 ) (12 ) Unallocated Other income (e) 245 4 98 Operating Profit 961 901 941 Interest income, net (a) 43 39 36 Investment gain (loss) (a) 104 63 (27 ) Income Before Income Taxes $ 1,108 $ 1,003 $ 950 Depreciation and Amortization 2020 2019 2018 KFC $ 315 $ 290 $ 296 Pizza Hut 113 120 129 All Other Segments 8 5 8 Corporate and Unallocated 14 13 12 $ 450 $ 428 $ 445 Impairment Charges 2020 2019 2018 KFC (f) $ 32 $ 16 $ 14 Pizza Hut (f) 29 20 26 All Other Segments (f) 5 2 — Corporate and Unallocated (d) — 11 12 $ 66 $ 49 $ 52 Capital Spending 2020 2019 2018 KFC $ 257 $ 264 $ 292 Pizza Hut 61 71 77 All Other Segments 5 10 6 Corporate and Unallocated 96 90 95 $ 419 $ 435 $ 470 Total Assets 2020 2019 KFC (g) $ 4,084 $ 3,160 Pizza Hut 906 950 All Other Segments 378 166 Corporate and Unallocated (h) 5,507 2,674 $ 10,875 $ 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 $63 million, $69 million and $65 million in 2020, 2019 and 2018, respectively. (c) Primarily includes revenues and associated expenses of transactions with franchisees and unconsolidated affiliates derived from the Company’s central procurement model whereby the Company centrally purchases substantially all food and paper products from suppliers then sells and delivers to KFC and Pizza Hut restaurants, including franchisees 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) Includes impairment charges on intangible assets and goodwill attributable to the Daojia business in 2019 and 2018, respectively. See Note 5. ( e ) In 2020 and 2018, the unallocated other income primarily includes gain from re-measurement of previously held equity interest in connection with the acquisition of Suzhou KFC and Wuxi KFC, respectively. See Note 5. (f) Primarily includes store closure impairment charges, restaurant-level impairment charges resulting from our semi-annual impairment evaluation as well as our additional impairment evaluation performed in the first quarter of 2020 in response to adverse impact from the COVID-19 pandemic, and incremental restaurant-level impairment charges in the first quarter of 2019 as a result of adopting ASC 842. (See Note 12). ( g ) Includes investments in unconsolidated affiliates. ( h ) Primarily includes cash and cash equivalents, short-term investments, investment in equity securities, long-term time deposits and inventories that are centrally managed. As substantially all of the Company's revenue is derived from the PRC and substantially all of the Company's long-lived assets are located in the PRC, no geographical information is presented. In addition, revenue derived from and long-lived assets located in the U.S., the Company’s country of domicile, are immaterial. |
Contingencies
Contingencies | 12 Months Ended |
Dec. 31, 2020 | |
Commitments And Contingencies Disclosure [Abstract] | |
Contingencies | Note 18 – 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 (“Chinese interests”), 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 distribution. However, given how recently Bulletin 7 was promulgated, there are significant uncertainties regarding what constitutes a reasonable commercial purpose, how the safe harbor provisions for group restructurings are to be interpreted and how the taxing authorities will ultimately view the distribution. As a result, YUM’s position could be challenged by Chinese tax authorities resulting in a 10% tax assessed on the difference between the fair market value and the tax basis of the separated China business. As YUM’s tax basis in the China business is minimal, the amount of such a tax could be significant. Any tax liability arising from the application of Bulletin 7 to the distribution is expected to be settled in accordance with the tax matters agreement between the Company and YUM. Pursuant to the tax matters agreement, to the extent any Chinese indirect transfer tax pursuant to Bulletin 7 is imposed, such tax and related losses will be allocated between YUM and the Company in proportion to their respective share of the combined market capitalization of YUM and the Company during the 30 trading days after the separation. Such a settlement could be significant and have a material adverse effect on our results of operations and our financial condition. At the inception of the tax indemnity being provided to YUM, the fair value of the non-contingent obligation to stand ready to perform was insignificant and the liability for the contingent obligation to make payment was not probable or estimable. Guarantees for Franchisees and Unconsolidated Affiliates From time to time we have guaranteed certain lines of credit and loans of franchisees and unconsolidated affiliates. As of December 31, 2020, guarantees on behalf of franchisees were immaterial and no guarantees were outstanding for unconsolidated affiliates. Indemnification of Officers and Directors The Company’s amended and restated certificate of incorporation and amended and restated bylaws include provisions that require the Company to indemnify directors or officers for monetary damages for actions taken as a director or officer of the Company or while serving at the Company’s request as a director or officer or another position at another corporation or enterprise, as the case may be. The Company purchases standard directors and officers insurance to cover claims or a portion of the claims made against its directors and officers. Since a maximum obligation is not explicitly stated in the Company’s bylaws or in the indemnification agreements and will depend on the facts and circumstances that arise out of any future claims, the overall maximum amount of the obligations cannot be reasonably estimated. The Company has not been required to make payments related to these obligations, and the fair value for these obligations is zero as of December 31, 2020. 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 Consolidated Financial Statements, is not likely to have a material adverse effect on the Company’s annual 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. |
Selected Quarterly Financial Da
Selected Quarterly Financial Data (Unaudited) | 12 Months Ended |
Dec. 31, 2020 | |
Quarterly Financial Information Disclosure [Abstract] | |
Selected Quarterly Financial Data (Unaudited) | Note 19 – Selected Quarterly Financial Data (unaudited; in millions, except per share amounts) 2020 First Quarter Second Quarter Third Quarter Fourth Quarter Total Revenues: Company sales $ 1,548 $ 1,692 $ 2,118 $ 2,038 $ 7,396 Franchise fees and income 35 37 40 36 148 Revenues from transactions with franchisees and unconsolidated affiliates 161 157 170 159 647 Other revenues 10 16 20 26 72 Total revenues 1,754 1,902 2,348 2,259 8,263 Restaurant profit 165 231 394 308 1,098 Operating Profit 97 128 556 180 961 Net Income – Yum China Holdings, Inc. 62 132 439 151 784 Basic earnings per common share $ 0.16 $ 0.35 $ 1.13 $ 0.36 $ 2.01 Diluted earnings per common share $ 0.16 $ 0.34 $ 1.10 $ 0.35 $ 1.95 2019 First Quarter Second Quarter Third Quarter Fourth Quarter Total Revenues: Company sales $ 2,089 $ 1,926 $ 2,097 $ 1,813 $ 7,925 Franchise fees and income 39 36 38 35 148 Revenues from transactions with franchisees and unconsolidated affiliates 170 154 172 158 654 Other revenues 6 8 12 23 49 Total revenues 2,304 2,124 2,319 2,029 8,776 Restaurant profit 386 283 372 225 1,266 Operating Profit 303 204 300 94 901 Net Income – Yum China Holdings, Inc. 222 178 223 90 713 Basic earnings per common share $ 0.59 $ 0.47 $ 0.59 $ 0.24 $ 1.89 Diluted earnings per common share $ 0.57 $ 0.46 $ 0.58 $ 0.23 $ 1.84 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 20 – Subsequent Events Cash Dividend On February 3, 2021, the Company announced that the board of directors declared a cash dividend of $0.12 per share on Yum China’s common stock, payable as of the close of business on March 25, 2021, to stockholders of record as of the close of business on March 3, 2021. Total estimated cash dividend payable is approximately $50 million. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Preparation and Principles of Consolidation | Basis of Preparation and Principles of Consolidation. Intercompany accounts and transactions have been eliminated in consolidation. We consolidate entities in which we have a controlling financial interest, the usual condition of which is ownership of a majority voting interest. We also consider consolidating an entity in which we have certain interests where the controlling financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a variable interest entity (“VIE”), is required to be consolidated by its primary beneficiary. The primary beneficiary is the entity that possesses the power to direct the activities of the VIE that most significantly impact its economic performance and has the obligation to absorb losses or the right to receive benefits from the VIE that are significant to it. Our most significant variable interests are in entities that operate restaurants under franchise arrangements. We do not generally have an equity interest in our franchisee businesses. Additionally, we do not typically provide significant financial support such as loans or guarantees to our franchisees. We have variable interests in certain entities that operate restaurants under franchise agreements through real estate lease arrangements with them to which we are a party. At December 31, 2020, the Company had future lease payments due from franchisees, on a nominal basis, of approximately $41 million. As our franchise arrangements provide our franchisee entities the power to direct the activities that most significantly impact their economic performance, we do not consider ourselves the primary beneficiary of any such entity that might otherwise be considered a VIE. Through the acquisition of Daojia, the Company also acquired a VIE and subsidiaries of the VIE effectively controlled by Daojia. There exists a parent-subsidiary relationship between Daojia and its VIE as a result of certain exclusive agreements that require Daojia to consolidate its VIE and subsidiaries of the VIE because Daojia is the primary beneficiary that possesses the power to direct the activities of the VIE that most significantly impact its economic performance, and is entitled to substantially all of the profits and has the obligation to absorb all of the expected losses of the VIE. We consolidate the entities that operate KFCs in Shanghai, Beijing, Wuxi and Suzhou where we have controlling interests of 58%, 70%, 83% and 72%, respectively. We have a noncontrolling 47% interest in the entity that operates the KFCs in and around Hangzhou. This entity is not a VIE and our lack of majority voting rights precludes us from controlling this affiliate. Thus, we do not consolidate this affiliate. Instead, we account for it under the equity method. Our share of the net income or loss of the unconsolidated affiliate is included in Other income, net in our Consolidated Statements of Income. The results of Huang Ji Huang and Suzhou KFC’s operations have been included in the Company’s Consolidated Financial Statements since the acquisition dates of April 8, 2020 and August 3, 2020, respectively. |
Comparative Information | Comparative Information. Certain comparative items in the Consolidated Financial Statements have been reclassified to conform to the current year’s presentation to facilitate comparison. |
Fiscal Calendar | Fiscal Calendar. Our fiscal year ends on December 31, with each quarter comprised of three months. |
Foreign Currency | Foreign Currency. Our functional currency for the operating entities in China is the Chinese Renminbi (“RMB”), the currency of the primary economic environment in which they operate. Income and expense accounts for our operations are then translated into U.S. dollars at the average exchange rates prevailing during the period. Assets and liabilities are then translated into U.S. dollars at exchange rates in effect at the balance sheet date. Foreign currency translation adjustments are recorded in the Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets. Gains and losses arising from the impact of foreign currency exchange rate fluctuations on transactions in foreign currency, to the extent they arise, are included in Other income, net in our Consolidated Statements of Income. |
Franchise and License Operations | Franchise Operations. We execute agreements which set out the terms of our arrangement with franchisees. Our franchise agreements typically require the franchisee to pay an initial, non-refundable fee and continuing fees based upon a percentage of sales. Subject to our approval and their payment of a renewal fee, a franchisee may generally renew the franchise agreement upon its expiration. The 3% license fees we pay to YUM for the right to sublicense the KFC, Pizza Hut and Taco Bell intellectual property to franchisees and unconsolidated affiliates are recorded in Franchise expenses. License fees due to YUM for our Company-owned stores are included within restaurant margin in Occupancy and other operating expenses. Total license fees paid to YUM were $256 million, $273 million and $263 million during the years ended December 31, 2020, 2019 and 2018, respectively. Certain direct costs of our franchise operations are charged to Franchise expenses. These costs include provisions for estimated uncollectible fees, rent or depreciation expense associated with restaurants we sub-lease to franchisees, and certain other direct incremental franchise support costs. We also have certain transactions with franchisees and unconsolidated affiliates, which consist primarily of sales of food and paper products, advertising services and other services provided to franchisees and unconsolidated affiliates. Related expenses are included in Expenses for transactions with franchisees and unconsolidated affiliates. |
Revenue Recognition | Revenue Recognition. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”), to provide principles within a single framework for revenue recognition of transactions involving contracts with customers across all industries. The standard allows for either a full retrospective or modified retrospective transition method. Additional amendments were subsequently issued by the FASB to clarify the implementation guidance. The Company adopted these standards on January 1, 2018, and applied the full retrospective approach. Therefore, revenue for all three years in the accompanying Consolidated Financial Statements was consistently accounted for in accordance with ASC 606. 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 third-party aggregators’ delivery staff in the past. 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 are fulfilled by the delivery staff of third-party aggregators, who control and determine the price for the delivery service, we recognize revenue, excluding delivery fees, when control of the food is transferred to the third-party aggregators’ delivery staff. The payment terms with respect to these sales are short-term in nature. Starting in 2019, we used 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. We recognize breakage revenue, which is the amount of prepaid stored-value products that is not expected to be redeemed, either (1) proportionally in earnings as redemptions occur, in situations where the Company expects to be entitled to a breakage amount, or (2) when the likelihood of redemption is remote, in situations where the Company does not expect to be entitled to breakage, provided that there is no requirement for remitting balances to government agencies under unclaimed property laws. The Company reviews its breakage estimates at least annually based upon the latest available information regarding redemption and expiration patterns. Our privilege membership programs offer privilege members rights to multiple benefits, such as free delivery and discounts on certain products. For certain 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 KFC and 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 and unconsolidated affiliates. The Company centrally purchases substantially 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. In addition, the Company owns seasoning facilities for its Chinese dining business unit, which manufacture and sell seasoning products to Huang Ji Huang and Little Sheep franchisees. The 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 ability 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 unconsolidated 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 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 franchise right, and are not considered individually distinct. We recognize revenue when the related sales occur. |
Loyalty Programs | Loyalty Programs Each of the Company’s KFC and Pizza Hut reportable segments operates a loyalty program that allows registered members to earn points for each qualifying purchase. Points, which generally expire 18 months after being earned, may be redeemed for future purchases of KFC or Pizza Hut branded products or other products for free or at a discounted price. Points cannot be redeemed or exchanged for cash. The estimated value of points earned by the loyalty program members is recorded as a reduction of revenue at the time the points are earned, based on the percentage of points that are projected to be redeemed, with a corresponding deferred revenue liability included in Accounts payable and other current liabilities on the 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. |
Direct Marketing Costs | Direct Marketing Costs. We charge direct marketing costs to expense ratably in relation to revenues over the year in which incurred and, in the case of advertising production costs, in the year the advertisement is first shown. Deferred direct marketing costs, which are classified as prepaid expenses, consist of media and related advertising production costs which will generally be used for the first time in the next fiscal year and have historically not been significant. Our direct marketing expenses incurred for Company-owned restaurants were $307 million, $344 million and $341 million in 2020, 2019 and 2018, respectively, and were included in Occupancy and other operating expenses. In addition, the direct marketing costs incurred for franchisees and unconsolidated affiliates were $60 million, $65 million and $62 million in 2020, 2019 and 2018, respectively, and were recorded in Expenses for transactions with franchisees and unconsolidated affiliates. |
Research and Development Expenses | Research and Development Expenses. Research and development expenses associated with our food innovation activities, which are expensed as incurred, are reported in general and administrative ("G&A") expenses. Research and development expenses were $3 million, $4 million and $4 million in 2020, 2019 and 2018, respectively. |
Share-Based Compensation | Share-Based Compensation. Prior to the separation, all employee equity awards were granted by YUM. Upon the separation, 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, to maintain the pre-separation intrinsic value of the awards. The modified equity awards have the same terms and conditions as the awards held immediately before the separation, except the number of shares and the price were adjusted. The incremental compensation cost, measured as the excess of the fair value of the award immediately after the modification over the fair value of the award immediately before the modification, based on Black-Scholes option-pricing model was immaterial, and YUM and the Company continue to recognize the unamortized fair value of the awards over the remaining requisite service period as their respective employees continue to provide services. All awards granted following the separation were granted under the Company’s Long Term Incentive Plan (the “2016 Plan”). We recognize all share-based payments to employees and directors, including grants of stock options, restricted stock units (“RSUs”), stock appreciation rights (“SARs”) and performance share units (“PSUs”), in the Consolidated Financial Statements as compensation cost over the service period based on their fair value on the date of grant. This compensation cost is recognized over the service period on a straight-line basis, net of an assumed forfeiture rate, for awards that actually vest and when performance conditions are probable of being achieved, if applicable. Forfeiture rates are estimated at grant date based on historical experience and compensation cost is adjusted in subsequent periods for differences in actual forfeitures from the previous estimates. We present this compensation cost consistent with the other compensation costs for the employee recipient in either payroll and employee benefits or G&A expenses. |
Impairment or Disposal of Long-Lived Assets | Impairment or Disposal of Long-Lived Assets. Long-lived assets, primarily Property, plant and equipment (“PP&E”) and operating lease right-of-use (“ROU”) assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The assets are not recoverable if their carrying value is less than the undiscounted cash flows we expect to generate from such assets. If the assets are not deemed to be recoverable, impairment is measured based on the excess of their carrying value over their fair value. For purposes of impairment testing for our restaurants, we have concluded that an individual restaurant is the lowest level of independent cash flows unless our intent is to refranchise restaurants as a group. We review our long-lived assets of such individual restaurants (primarily operating lease ROU assets and When we believe it is more likely than not a restaurant or groups of restaurants will be refranchised for a price less than their carrying value, but do not believe the restaurant(s) have met the criteria to be classified as held for sale, we review the restaurants for impairment. We evaluate the recoverability of these restaurant assets by comparing estimated sales proceeds plus holding period cash flows, if any, to the carrying value of the restaurant or group of restaurants. For restaurant assets that are not deemed to be recoverable, we recognize impairment for any excess of carrying value over the fair value of the restaurants, which is based on the expected net sales proceeds. To the extent ongoing agreements to be entered into with the franchisee simultaneous with the refranchising are expected to contain terms, such as royalty rates, not at prevailing market rates, we consider the off-market terms in our impairment evaluation. We recognize any such impairment charges in Refranchising gain. Refranchising gain includes the gains or losses from the sales of our restaurants to new and existing franchisees, including any impairment charges discussed above. We recognize gains on restaurant refranchising when the sale transaction closes, the franchisee has a minimum amount of the purchase price in at-risk equity and we are satisfied that the franchisee can meet its financial obligations. When we decide to close a restaurant, it is reviewed for impairment, and depreciable lives are adjusted based on the expected disposal date. Other costs incurred when closing a restaurant such as costs of disposing of the assets as well as other facility-related expenses are generally expensed as incurred. Additionally, at the time we decide to close a restaurant, we reassess whether it is reasonably certain that we will exercise the termination option, and remeasure lease liability to reflect changes in lease term and remaining lease payments based on the planned exit date, if applicable. The amount of the re-measurement of the lease liability is recorded as an adjustment to the operating lease ROU asset first, with any remaining amount recorded in Closures and impairment expenses if the carrying amount of the operating lease ROU asset is reduced to zero. Any costs recorded upon store closure as well as any subsequent adjustments to remaining operating lease ROU assets and lease liabilities as a result of lease termination are recorded in Closures and impairment expenses. In the event we are forced to close a store and receive compensation for such closure, that compensation is recorded in Closures and impairment expenses. To the extent we sell assets associated with a closed store, any gain or loss upon that sale is also recorded in Closures and impairment expenses. Considerable management judgment is necessary to estimate future cash flows, including cash flows from continuing use, terminal value, lease term and refranchising proceeds. Accordingly, actual results could vary significantly from our estimates. |
Government Subsidies | Government Subsidies. Government subsidies generally consist of financial subsidies received from provincial and local governments for operating a business in their jurisdictions and compliance with specific policies promoted by the local governments. There are no defined rules and regulations to govern the criteria necessary for companies to receive such benefits, and the amount of financial subsidy is determined at the discretion of the relevant government authorities. Government subsidies are recognized when it is probable that the Company will comply with the conditions attached to them, and the subsidies are received. If the subsidy is related to an expense item, it is recognized as a reduction to the related expense to match the subsidy to the costs that it is intended to compensate. If the subsidy is related to an asset, it is deferred and recorded in other liabilities and then recognized ratably over the expected useful life of the related asset in the Consolidated Statements of Income. |
Income Taxes | Income Taxes. We record deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as operating loss, capital loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences or carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Additionally, in determining the need for recording a valuation allowance against the carrying amount of deferred tax assets, we consider the amount of taxable income and periods over which it must be earned, actual levels of past taxable income and known trends and events or transactions that are expected to affect future levels of taxable income. Where we determine that it is more likely than not that all or a portion of an asset will not be realized, we record a valuation allowance. On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law effective for tax years beginning after December 31, 2017. The Tax Act requires complex computations with significant estimates to be performed, significant judgments to be made in interpretation of the provisions, and the preparation and analysis of information not previously relevant or regularly produced. The U.S. Treasury Department, the IRS, the SEC and other standard-setting bodies could interpret or issue guidance on how provisions of the Tax Act will be applied or otherwise administered that is different from our current interpretation. We completed our analysis of the Tax Act in the fourth quarter of 2018 according to guidance released by the U.S. Treasury Department and the IRS as of December 2018 and made an adjustment of $36 million to reduce the provisional amount for transition tax recorded in 2017 accordingly. The U.S. Treasury Department and the 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 income tax expense of $8 million for the transition tax accordingly. 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. We recognize the benefit of positions taken or expected to be taken in our tax returns when it is more likely than not that the position would be sustained upon examination by these tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. We have investments in our foreign subsidiaries where the carrying values for financial reporting exceed the tax basis. Except for the planned but yet to be distributed earnings, we have not provided deferred tax on the portion of the excess that we believe is indefinitely reinvested, as we have the ability and intent to indefinitely postpone the basis differences from reversing with a tax consequence. The Company’s separation from YUM was intended to qualify as a tax-free reorganization for U.S. income tax purposes resulting in the excess of financial reporting basis over tax basis in our investment in the China business continuing to be indefinitely reinvested. The excess of financial reporting basis over tax basis as of December 31 2017 was subject to the one-time transition tax under the Tax Act as a deemed repatriation of accumulated undistributed earnings from the foreign subsidiaries. However, we continue to believe that the portion of the excess of financial reporting basis over tax basis (including earnings and profits subject to the one-time transition tax) is indefinitely reinvested in our foreign subsidiaries for foreign withholding tax purposes. Pursuant to the China Enterprise Income Tax Law (“EIT Law”), a 10% PRC withholding tax is generally levied on dividends declared by companies in China to their non-resident enterprise investors unless otherwise reduced according to treaties or arrangements between the Chinese central government and the governments of other countries or regions where the non-China resident enterprises are incorporated. Hong Kong has a tax arrangement with mainland China that provides for a 5% withholding tax on dividends distributed to a Hong Kong resident enterprise, upon meeting certain conditions and requirements, including, among others, that the Hong Kong resident enterprise own at least 25% equity interest of the Chinese enterprise and is a “beneficial owner” of the dividends. We believe that our Hong Kong subsidiary, which is the equity holder of our Chinese subsidiaries, met the relevant requirements pursuant to the tax arrangement between mainland China and Hong Kong in 2018 and is expected to meet the requirements in the subsequent years; thus, it is more likely than not that our dividends declared or earnings expected to be repatriated since 2018 are subject to the reduced withholding tax of 5%. See Note 16 for a further discussion of our income taxes. |
Fair Value Measurements | Fair Value Measurements. Fair value is the price we would receive to sell an asset or pay to transfer a liability (exit price) in an orderly transaction between market participants. For those assets and liabilities we record or disclose at fair value, we determine fair value based upon the quoted market price, if available. If a quoted market price is not available for identical assets, we determine fair value based upon the quoted market price of similar assets or the present value of expected future cash flows considering the risks involved, including counterparty performance risk if appropriate, and using discount rates appropriate for the duration. The fair values are assigned a level within the fair value hierarchy, depending on the source of the inputs into the calculation. Level 1 Inputs based upon quoted prices in active markets for identical assets. Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly. Level 3 Inputs that are unobservable for the asset. |
Cash and Cash Equivalents | Cash and Cash Equivalents. Cash equivalents represent highly liquid investments with original maturities not exceeding three months and are primarily comprised of time deposits. Cash and overdraft balances that meet the criteria for right to offset are presented net on our Consolidated Balance Sheets. |
Short-term Investments | Short-term Investments. Short-term investments primarily represent time deposits with original maturities of over three months but less than one year when purchased. |
Accounts Receivable | 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 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. Additionally, we monitor the financial condition of our franchisees and record provisions for estimated losses on receivables when we believe it is probable that our franchisees will be unable to make their required payments. 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. Accounts 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 December 31, 2020 and 2019, the ending balances of provision for accounts receivable were $1 million and $1 million, respectively, and amounts of accounts receivable past due were immaterial. Receivables due from unconsolidated affiliates including accounts receivables and dividend receivables were $50 million and $58 million as of December 31, 2020 and 2019, respectively. |
Receivables from Payment Processors or Aggregators | Receivables from Payment Processors or Aggregators. Receivables from payment processors such as WeChat and Alipay or aggregators are cash due from them for clearing transactions and are included in Prepaid expenses and other current assets. The cash was paid by customers through these payment processors or aggregators for food provided by the Company. The Company considers and monitors the credit worthiness of the third-party payment processors and aggregators used. Prior to the adoption of ASC 326, an allowance for doubtful accounts is recorded in the period in which a loss is determined to be probable. Upon adoption of ASC 326 starting from January 1, 2020, we adopted the same methodology of estimating expected credit losses based upon the CECL model as described above. Receivable balances are written off after all collection efforts have been exhausted. As of December 31, 2020 and 2019, no allowance for doubtful accounts was provided for such receivables. |
Inventories | Inventories. We value our inventories at the lower of cost (computed on the first-in, first-out method) or net realizable value. |
Property, Plant and Equipment | Property, Plant and Equipment. We state PP&E at cost less accumulated depreciation and amortization. We calculate depreciation and amortization on a straight-line basis over the estimated useful lives of the assets as follows: 20 to 50 years for buildings, the lesser of estimated useful lives (5 to 10 years) and remaining lease term for leasehold improvements, 3 to 10 years for restaurant machinery and equipment and 3 to 5 years for capitalized software costs. We suspend depreciation and amortization on assets related to restaurants that are held for sale. |
Leases | Leases. The Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASC 842”) and subsequent amendments issued by FASB on January 1, 2019, using a modified retrospective method for leases that exist at, or are entered into after, January 1, 2019, and has not recast the comparative periods presented in the Consolidated Financial Statements. Prior to the adoption of ASC 842, operating leases were not recognized on the balance sheet of the Company, but rent expenses with fixed escalating payments and/or rent holidays were recognized on a straight-line basis over the lease term. Contingent rentals are generally based on sales levels, and thus are included in rent expense when attainment of the contingency is considered probable (e.g., when Company sales occur). Upon adoption of ASC 842, ROU assets and lease liabilities are recognized upon lease commencement for operating leases based on the present value of lease payments over the lease term. As the rate implicit in the lease cannot be readily determined, we use our incremental borrowing rate at the lease commencement date in determining the imputed interest and present value of lease payments. The incremental borrowing rate was determined using a portfolio approach based on the rate of interest that we would have to borrow an amount equal to the lease payments on a collateralized basis over a similar term. The incremental borrowing rate is primarily influenced by the risk-free interest rate of China, the Company’s credit rating and lease term, and is updated on a quarterly basis for measurement of new lease liabilities. For operating leases, the Company recognizes a single lease cost on a straight-line basis over the remaining lease term. For finance leases, the Company recognizes straight-line amortization of the ROU asset and interest on the lease liability. This is consistent with the historical recognition of finance leases, which was unchanged upon adoption of ASC 842. For rental payments either based on a percentage of the restaurant’s sales in excess of a fixed base amount or solely based on a percentage of the restaurant’s sales, they are recognized as variable lease expenses as incurred. The Company has elected not to recognize ROU assets or lease liabilities for leases with an initial term of 12 months or less; we recognize lease expense for these leases on a straight-line basis over the lease term. In addition, the Company has elected not to separate non-lease components (e.g., common area maintenance fees) from the lease components. From time to time, we purchase the rights to use government-owned land and the building occupying the land for a fixed period of time. Prior to the adoption of ASC 842, these land use rights and related buildings were recorded in Other Assets and Property, Plant and Equipment in our Consolidated Balance Sheets, and are amortized on a straight-line basis over the term of the land use rights. Upon the adoption of ASC 842 on January 1, 2019, land use rights acquired are assessed in accordance with ASC 842 and recognized in right-of-use assets if they meet the definition of lease. See Note 11 for further discussions on our leases. |
Internal Development Costs and Abandoned Sites Costs | Internal Development Costs and Abandoned Site Costs. We capitalize direct costs associated with the site acquisition and construction of a Company unit on that site, including direct internal payroll and payroll-related costs. Only those site-specific costs incurred subsequent to the time that the site acquisition is considered probable are capitalized. If we subsequently make a determination that it is probable a site for which internal development costs have been capitalized will not be acquired or developed, any previously capitalized internal development costs are expensed and included in G&A expenses. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets. From time to time, the Company acquires restaurants from our existing franchisees or acquires another business, including restaurants business of unconsolidated affiliates. Goodwill from these acquisitions represents the excess of the cost of a business acquired over the net of the amounts assigned to assets acquired, including identifiable intangible assets and liabilities assumed. Goodwill is not amortized and has been assigned to reporting units for purposes of impairment testing. Our reporting units are our individual operating segments. We evaluate goodwill for impairment on an annual basis or more often if an event occurs or circumstances change that indicate impairment might exist. We have selected the beginning of our fourth quarter as the date on which to perform our ongoing annual impairment test for goodwill. We may elect to perform a qualitative assessment for our reporting units to determine whether it is more likely than not that the fair value of the reporting unit is greater than its carrying value. If a qualitative assessment is not performed, or if as a result of a qualitative assessment it is not more likely than not that the fair value of a reporting unit exceeds its carrying value, then the reporting unit’s fair value is compared to its carrying value. Fair value is the price a willing buyer would pay for a reporting unit, and is generally estimated using discounted expected future after-tax cash flows from the business operation of the reporting unit. The discount rate is our estimate of the required rate-of-return that a third-party buyer would expect to receive when purchasing a business from us that constitutes a reporting unit. We believe the discount rate is commensurate with the risks and uncertainty inherent in the forecasted cash flows. If the carrying value of a reporting unit exceeds its fair value, we will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. If we record goodwill upon acquisition of a restaurant(s) from a franchisee and such restaurant(s) is then sold within two years of acquisition, the goodwill associated with the acquired restaurant(s) is written off in its entirety. If the restaurant is refranchised two years or more subsequent to its acquisition, we include goodwill in the carrying amount of the restaurants disposed of based on the relative fair values of the portion of the reporting unit disposed of in the refranchising and the portion of the reporting unit that will be retained. We determine the useful life of intangible assets with consideration of factors including the expected use of the asset, the expected useful life of another asset or a group of assets to which the useful life of the intangible asset may relate, any legal, regulatory or contractual provisions that may limit the useful life, our historical experience in renewing or extending similar arrangements, the effects of obsolescence, demand, competition and other economic factors, and the level of maintenance expenditures required to obtain the expected future cash flows from the assets. We evaluate the remaining useful life of an intangible asset that is not being amortized each reporting period to determine whether events and circumstances continue to support an indefinite useful life. If an intangible asset that is not being amortized is subsequently determined to have a finite useful life, we amortize the intangible asset prospectively over its estimated remaining useful life. The Company’s indefinite-lived intangible asset represents Little Sheep and Huang Ji Huang trademarks as we consider their useful life to be indefinite since we intend to use Little Sheep and Huang Ji Huang trademarks indefinitely and there are no legal, regulatory or contractual provisions that may limit the useful life of the trademarks. Intangible assets that are deemed to have a finite life are generally amortized over their estimated useful lives on a straight-line basis to their residual value as follows: Reacquired franchise rights 2 to 10 years Huang Ji Huang franchise related assets 19 years Daojia platform 8 years Customer-related assets 2 to 15 years Others up to 20 years The useful life of reacquired franchise rights was determined based on the contractual term whereas both the contractual term and historical pattern of renewing franchise agreements were considered in assessing the useful life of Huang Ji Huang franchise related assets. Customer-related assets primarily represent the customer relationship and user base acquired and the estimate of the useful life was based on the historical pattern of extending similar arrangements and attrition rate of users. Others primarily represent Little Sheep’s secret recipe. The useful life of the Daojia platform and Little Sheep’s secret recipe was assessed based on our estimate of periods generating cash flows from utilizing such assets. We evaluate our indefinite-lived intangible assets for impairment on an annual basis or more often if an event occurs or circumstances change that indicate impairments might exist. We perform our annual test for impairment of our indefinite-lived intangible assets at the beginning of our fourth quarter. We may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is greater than its carrying value. If a qualitative assessment is not performed, or if as a result of a qualitative assessment it is not more likely than not that the fair value of an indefinite-lived intangible asset exceeds its carrying value, then the asset’s fair value is compared to its carrying value. Fair value is an estimate of the price a willing buyer would pay for the intangible asset and is generally estimated by discounting the expected future after-tax cash flows associated with the intangible asset. Our finite-lived intangible assets that are not allocated to an individual restaurant are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable. An intangible asset that is deemed not recoverable based on forecasted undiscounted future cash flow is written down to its estimated fair value, which is our estimate of the price a willing buyer would pay for the intangible asset based on discounted expected future after-tax cash flows. For purposes of our impairment analysis, we update the cash flows that were initially used to value the finite-lived intangible asset to reflect our current estimates and assumptions over the asset’s future remaining life. During the year ended December 31, 2019 and 2018, we recorded an impairment charge of $11 million and $12 million, respectively, on intangible assets and goodwill attributable to the Daojia business. See Note 5 for additional details. |
Equity Investments | Equity Investments. The Company’s equity investments include investments in unconsolidated affiliates and investments in equity securities with readily determinable fair value. The Company applies the equity method to account for the investments in unconsolidated affiliates over which it has significant influence but does not control. Equity method investments are included as Investments in unconsolidated affiliates on our Consolidated Balance Sheets. Our share of earnings or losses and share of changes in other comprehensive income or losses of equity method investees is included in net income and other comprehensive income or losses, respectively. We record impairment charges related to an investment in an unconsolidated affiliate whenever events or circumstances indicate that a decrease in the fair value of an investment has occurred which is other than temporary. In addition, we evaluate our investments in unconsolidated affiliates for impairment when they have experienced two consecutive years of operating losses. For our investments in equity securities with readily determinable fair value, over which the Company has neither significant influence nor control, they are measured at fair value with subsequent changes recognized in net income. |
Financial Instruments | Financial Instruments. We account for derivative instruments as either assets or liabilities in the Consolidated Balance Sheets. The financial instruments are recorded at their respective fair value as determined on the day of issuance and subsequently adjusted to the fair value at each reporting date. Changes in the fair value of financial instruments are recognized periodically in the Consolidated Statements of Income. The estimated fair values of derivative instruments are determined at discrete points in time using standard valuation techniques. |
Noncontrolling Interests | Noncontrolling Interests. We report Net income attributable to noncontrolling interests separately on the face of our Consolidated Statements of Income. The portion of equity attributable to noncontrolling interests is reported within equity, separately from the Company’s stockholders’ equity on the Consolidated Balance Sheets. When the noncontrolling interest is redeemable at the option of the noncontrolling shareholder, or contingently redeemable upon the occurrence of a conditional event that is not solely within the control of the Company, the noncontrolling interest is separately classified as mezzanine equity. In connection with the acquisition of Huang Ji Huang, a redeemable noncontrolling interest was initially recognized at fair value and classified outside of permanent equity on our Consolidated Balance Sheets due to redemption rights being held by the noncontrolling shareholder. Subsequent changes in the redemption value of the redeemable noncontrolling interest are immediately recognized as they occur and adjusted to the carrying amount of the redeemable noncontrolling interest. |
Guarantees | Guarantees. We account for guarantees in accordance with ASC Topic 460 (“ASC 460”), Guarantees . Accordingly, the Company evaluates its guarantees to determine whether (a) the guarantee is specifically excluded from the scope of ASC 460, (b) the guarantee is subject to ASC 460 disclosure requirements only, but not subject to the initial recognition and measurement provisions, or (c) the guarantee is required to be recorded in the financial statements at fair value. The Company provides: (i) indemnifications to certain investors and other parties for certain losses suffered or incurred by the indemnified party in connection with third-party claims; and (ii) indemnifications of officers and directors against third-party claims arising from the services they provide to the Company. To date, the Company has not incurred costs as a result of these obligations and does not expect to incur material costs in the future. Accordingly, the Company has not accrued any liabilities on the Consolidated Balance Sheets related to these indemnifications. |
Asset Retirement Obligations | Asset Retirement Obligations. We recognize an asset and a liability for the fair value of a required asset retirement obligation (“ARO”) when such an obligation is incurred. The Company’s AROs are primarily associated with leasehold improvements which, at the end of the lease, the Company is contractually obligated to remove in order to comply with the lease agreement. As such, we amortize the asset on a straight-line basis over the lease term and accrete the liability to its nominal value using the effective interest method over the lease term. |
Contingencies | Contingencies. The Company records accruals for certain of its outstanding legal proceedings or claims when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal proceedings or claims that could affect the amount of any accrual, as well as any developments that would make a loss contingency both probable and reasonably estimable. The Company discloses the amount of the accrual if it is material. |
Retirement Plans | Retirement Plans. Certain of the Company’s employees participate in noncontributory defined benefit plans and post-retirement medical plans sponsored by YUM prior to October 31, 2016. Subsequent to the separation, employees participating in YUM’s plans were enrolled in the Yum China Holdings, Inc. Leadership Retirement Plan (“YCHLRP”), an unfunded, unsecured account-based retirement plan which allocates a percentage of pay to an account payable to the executive following the executive’s separation of employment from the Company or attainment of age 55. The Company also offers other defined contribution plans to employees. The total contribution for such employee benefits was expensed as incurred. The Company has no additional legal obligation or liabilities for the benefits beyond the paid and accrued amounts. See Note 13 for additional information. |
PRC Value-Added Tax | PRC Value-Added Tax. The Company has been subject to VAT within the normal course of its restaurant business nationwide since May 1, 2016. Entities that are VAT general taxpayers are permitted to offset qualified input VAT paid to suppliers against their output VAT upon receipt of appropriate supplier VAT invoices on an entity-by-entity basis. When the output VAT exceeds the input VAT, the difference is remitted to tax authorities, usually on a monthly basis; whereas when the input VAT exceeds the output VAT, the difference is treated as an input VAT credit asset which can be carried forward indefinitely to offset future net VAT payables. VAT related to purchases and sales which have not been settled at the balance sheet date is disclosed separately as an asset and liability, respectively, on the Consolidated Balance Sheets. At each balance sheet date, the Company reviews the outstanding balance of any input VAT credit asset for recoverability, giving consideration to the indefinite life of the input VAT credit assets as well as its forecasted operating results and capital spending, which inherently includes significant assumptions that are subject to change. As of December 31, 2020 and 2019, an input VAT credit asset of $270 million and $243 million, were recorded in Other assets, respectively, and payable of $6 million and $5 million, were recorded in Accounts payable and other current liabilities, respectively, on the Consolidated Balance Sheets. The Company has not made an allowance for the recoverability of the input VAT credit asset, as the balance is expected to be utilized to offset against VAT payables more than one year from December 31, 2020. Any input VAT credit asset would be classified as Prepaid expenses and other current assets if the credit expected to be used within one year can be reasonably determined. |
Earnings Per Share | Earnings Per Share. Basic earnings per share represent net earnings to common stockholders divided by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares. See Note 4 for further information. |
Common Stock Repurchases | Common Stock Repurchases. We may repurchase shares of Yum China common stock under a program authorized by our board of directors from time to time in open market or privately negotiated transactions, including block trades, accelerated share repurchase transactions and the use of Rule 10b5-1 trading plans. Shares repurchased are included in treasury stock in the financial statements. See Note 15 for further information. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In June 2016, the FASB issued 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) entity from presenting consideration from a transaction in a collaborative arrangement as revenue if the counterparty is not a customer for that transaction. We adopted the standard on January 1, 2020, and such adoption did not have a material impact on our financial statements. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Summary of Estimated Useful Lives of Intangible Assets | Intangible assets that are deemed to have a finite life are generally amortized over their estimated useful lives on a straight-line basis to their residual value as follows: Reacquired franchise rights 2 to 10 years Huang Ji Huang franchise related assets 19 years Daojia platform 8 years Customer-related assets 2 to 15 years Others up to 20 years |
Revenue (Tables)
Revenue (Tables) | 12 Months Ended |
Dec. 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: 2020 Revenues KFC Pizza Hut All Other Segments Corporate and Unallocated Combined Elimination Consolidated Company sales $ 5,633 $ 1,721 $ 42 $ — $ 7,396 $ — $ 7,396 Franchise fees and income 125 5 18 — 148 — 148 Revenues from transactions with franchisees and unconsolidated affiliates 61 4 49 533 647 — 647 Other revenues 2 — 96 32 130 (58 ) 72 Total revenues $ 5,821 $ 1,730 $ 205 $ 565 $ 8,321 $ (58 ) $ 8,263 2019 Revenues KFC Pizza Hut All Other Segments Corporate and Unallocated Combined Elimination Consolidated Company sales $ 5,839 $ 2,045 $ 41 $ — $ 7,925 $ — $ 7,925 Franchise fees and income 136 4 8 — 148 — 148 Revenues from transactions with franchisees and unconsolidated affiliates 64 4 28 558 654 — 654 Other revenues 1 1 81 4 87 (38 ) 49 Total revenues $ 6,040 $ 2,054 $ 158 $ 562 $ 8,814 $ (38 ) $ 8,776 2018 Revenues KFC Pizza Hut All Other Segments Corporate and Unallocated (a) Combined Elimination Consolidated Company sales $ 5,495 $ 2,106 $ 32 $ — $ 7,633 $ — $ 7,633 Franchise fees and income 132 3 6 — 141 — 141 Revenues from transactions with franchisees and unconsolidated affiliates 61 2 26 514 603 — 603 Other revenues — — 51 3 54 (16 ) 38 Total revenues $ 5,688 $ 2,111 $ 115 $ 517 $ 8,431 $ (16 ) $ 8,415 (a) As COFFii & JOY and our e-commerce business became operating segments starting from the first quarter of 2019, revenue by segment information for 2018 has been recast to align with the change in segment reporting. Additional details on our reportable segments are included in Note 17. Franchise Fees and Income 2020 2019 2018 Initial fees, including renewal fees $ 8 $ 8 $ 7 Continuing fees and rental income 140 140 134 Franchise fees and income $ 148 $ 148 $ 141 |
Contract Liabilities | Contract liabilities at December 31, 2020 and 2019 were as follows: 2020 2019 Contract liabilities - Deferred revenue related to prepaid stored-value products $ 117 $ 86 - Deferred revenue related to upfront franchise fees 38 39 - Deferred revenue related to customer loyalty programs 23 24 - Deferred revenue related to privilege membership programs 27 16 - Others 1 3 Total $ 206 $ 168 |
Earnings Per Common Share ("E_2
Earnings Per Common Share ("EPS") (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Earnings Per Share [Abstract] | |
Earnings Per Common Share | The following table summarizes the components of basic and diluted earnings per share (in millions, except for per share data): 2020 2019 2018 Net Income – Yum China Holdings, Inc. $ 784 $ 713 $ 708 Weighted-average common shares outstanding (for basic calculation) (a) 390 377 384 Effect of dilutive share-based awards (a) 7 8 9 Effect of dilutive warrants (b) 5 3 2 Weighted-average common and dilutive potential common shares outstanding (for diluted calculation) 402 388 395 Basic Earnings Per Share $ 2.01 $ 1.89 $ 1.84 Diluted Earnings Per Share $ 1.95 $ 1.84 $ 1.79 Share-based awards and warrants excluded from the diluted EPS computation (c) 3 2 6 (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. See Note 14 for a further discussion of share-based compensation. In September 2020, 41,910,700 common shares were issued as a result of the Company’s global offering and secondary listing on the HKEX and they were included in the calculated weighted-average common shares outstanding. (b) Pursuant to the investment agreements dated September 1, 2016 (Note 10), 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 year exceeds the applicable exercise price of the warrants. (c) These outstanding employee stock appreciation rights, RSUs, PSUs and warrants were excluded from the computation of diluted EPS because to do so would have been antidilutive for the years presented, or because certain PSUs are contingently issuable based on the achievement of performance and market conditions, which have not been met as of December 31, 2020. |
Items Affecting Comparability_2
Items Affecting Comparability of Net Income (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Meituan Dianping [Member] | |
Schedule Of Trading Securities And Other Trading Assets [Line Items] | |
Summary of Pre-tax Gains or Losses in Investment in Equity Securities | A summary of pre-tax gains or losses in investment in equity securities recognized, which was included in Investment gain or loss in our Consolidated Statements of Income is as follows: 2020 2019 2018 Unrealized gains (losses) recorded on equity securities still held as of the end of the year $ 105 $ 63 $ (27 ) Losses recorded on equity securities sold during the year (1 ) — — Gains (losses) recorded on equity securities $ 104 $ 63 $ (27 ) |
Other Income, Net (Tables)
Other Income, Net (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Other Income And Expenses [Abstract] | |
Other Income, Net | 2020 2019 2018 Gain from re-measurement of equity interest upon acquisition (a) $ 239 $ — $ 98 Equity income from investments in unconsolidated affiliates 62 69 65 Derecognition of indemnification asset (b) (3 ) — — Foreign exchanges and other (13 ) (9 ) (11 ) Other income, net $ 285 $ 60 $ 152 (a) As a result of the acquisition of Suzhou KFC and Wuxi KFC, as disclosed in Note 5, the Company recognized a gain of $239 million and $98 million in 2020 and 2018, respectively, from the re-measurement of our previously held 47% equity interest at fair value, which was not allocated to any segment for performance reporting purposes. (b) In the second quarter of 2020, the Company derecognized a $3 million indemnification asset previously recorded for the Daojia acquisition as the indemnification right pursuant to the purchase agreement expired. The expense was included in Other income, net, but was not allocated to any segment for performance reporting purposes. |
Supplemental Balance Sheet In_2
Supplemental Balance Sheet Information (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Balance Sheet Related Disclosures [Abstract] | |
Accounts Receivable, Net | Accounts Receivables, net 2020 2019 Accounts receivables, gross $ 100 $ 89 Allowance for doubtful accounts (1 ) (1 ) Accounts receivables, net $ 99 $ 88 |
Prepaid Expenses and Other Current Assets | Prepaid Expenses and Other Current Assets 2020 2019 Receivables from payment processors and aggregators $ 47 $ 39 Dividends receivable from unconsolidated affiliates 10 8 Other prepaid expenses and current assets 119 87 Prepaid expenses and other current assets $ 176 $ 134 |
Property, Plant and Equipment | Property, Plant and Equipment 2020 2019 Buildings and improvements $ 2,367 $ 2,159 Finance leases, primarily buildings 36 30 Machinery and equipment and construction in progress 1,490 1,282 Property, plant and equipment, gross 3,893 3,471 Accumulated depreciation (2,128 ) (1,877 ) Property, plant and equipment, net $ 1,765 $ 1,594 |
Accounts Payable and Other Current Liabilities | Other Assets 2020 2019 VAT assets $ 270 $ 243 Investment in equity securities 160 110 Land use right (a) 140 133 Long-term deposits 83 71 Investment in long-term time deposits (b) 61 — Costs to obtain contracts 9 9 Restricted cash — 9 Others 26 5 Other Assets $ 749 $ 580 (a) Amortization expense related to land use right was $5 million, $4 million and $5 million in 2020, 2019 and 2018, respectively. (b) As of December 31, 2020, the Company had $61 million invested in long-term time deposits, bearing a fixed interest rate with original maturity of three years. The asset is restricted for use in order to secure the balance of prepaid stored-value cards issued by the Company pursuant to regulatory requirements. Accounts Payable and Other Current Liabilities 2020 2019 Accounts payable $ 708 $ 623 Operating leases liabilities 448 382 Accrued compensation and benefits 238 223 Accrued capital expenditures 203 150 Contract liabilities 175 135 Accrued marketing expenses 73 64 Other current liabilities 150 114 Accounts payable and other current liabilities $ 1,995 $ 1,691 |
Other Liabilities and Deferred Credits | Other Liabilities 2020 2019 Deferred income tax liabilities (c) $ 227 $ 67 Accrued income tax payable 66 69 Contract liabilities 31 33 Other noncurrent liabilities 70 41 Other liabilities $ 394 $ 210 (c) Increase in deferred income tax liabilities balances in 2020 primarily resulted from Suzhou KFC and Huang Ji Huang acquisitions. |
Reconciliation of Cash, Cash Equivalents, and Restricted Cash | Reconciliation of Cash, Cash equivalents, and Restricted Cash for Consolidated Statements of Cash Flows 2020 2019 Cash and cash equivalents as presented in Consolidated Balance Sheets $ 1,158 $ 1,046 Restricted cash included in Other assets (d) — 9 Cash, Cash Equivalents and Restricted Cash as presented in Consolidated Statements of Cash Flows $ 1,158 $ 1,055 (d) As of December 31, 2019, the $9 million of restricted cash 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. The Huang Ji Huang acquisition was completed on April 8, 2020. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 12 Months Ended |
Dec. 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, 2018 Goodwill, gross $ 648 $ 238 $ 19 $ 391 Accumulated impairment losses (a) (382 ) — — (382 ) Goodwill, net 266 238 19 9 Goodwill impairment (b) (9 ) — — (9 ) Effect of currency translation adjustment and other (3 ) (3 ) — — Balance as of December 31, 2019 Goodwill, gross 645 235 19 391 Accumulated impairment losses (391 ) — — (391 ) Goodwill, net 254 235 19 — Goodwill acquired (c) 524 465 59 Effect of currency translation adjustment and other 54 48 1 5 Balance as of December 31, 2020 Goodwill, gross 1,223 748 20 455 Accumulated impairment losses (391 ) — — (391 ) Goodwill, net $ 832 $ 748 $ 20 $ 64 ( a ) Accumulated impairment losses represent Little Sheep goodwill related impairment. ( b ) In 2019, we recorded an impairment charge of $9 million on goodwill attributable to the Daojia reporting unit (Note 5). (c) Goodwill acquired resulted from the acquisition of Suzhou KFC and Huang Ji Huang. (Note 1). |
Schedule of Finite and Indefinite Lived Intangible Assets by Major Class | Intangible assets, net as of December 31, 2020 and 2019 are as follows: 2020 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 (c) $ 223 $ (144 ) $ — $ 79 $ 148 $ (113 ) $ — $ 35 Huang Ji Huang franchise related assets (d) 23 (1 ) — 22 — — — — Daojia platform 16 (4 ) (12 ) — 16 (4 ) (12 ) — Customer-related assets 12 (8 ) (2 ) 2 12 (8 ) (2 ) 2 Other 9 (4 ) — 5 9 (4 ) — 5 $ 283 $ (161 ) $ (14 ) $ 108 $ 185 $ (129 ) $ (14 ) $ 42 Indefinite-lived intangible assets Little Sheep trademark $ 56 $ — $ — $ 56 $ 52 $ — $ — $ 52 Huang Ji Huang trademark (d) 82 — — 82 — — — — $ 138 $ — $ — $ 138 $ 52 $ — $ — $ 52 Total intangible assets $ 421 $ (161 ) $ (14 ) $ 246 $ 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. ( c ) Increase in gross carrying amount of reacquired franchise rights during the year ended December 31, 2020 primarily resulted from the acquisition of Suzhou KFC (Note 5). ( d ) Increase in gross carrying amount of finite-lived and indefinite-lived intangible assets primarily resulted from the acquisition of Huang Ji Huang group (Note 1). |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Leases [Abstract] | |
Summary of Supplemental Balance Sheet | Supplemental Balance Sheet 2020/12/31 2019/12/31 Account Classification Assets Operating lease right-of-use assets (a) $ 2,164 $ 1,985 Operating lease right-of-use assets Finance lease right-of-use assets 20 18 Property, plant and equipment, net Total leased assets $ 2,184 $ 2,003 Liabilities Current Operating lease liabilities (a) $ 448 $ 382 Accounts payable and other current liabilities Finance lease liabilities 2 2 Accounts payable and other current liabilities Non-current Operating lease liabilities (a) 1,915 1,803 Non-current operating lease liabilities Finance lease liabilities 28 26 Non-current finance lease liabilities Total lease liabilities $ 2,393 $ 2,213 (a) Increase in balances of operating lease right-of-use assets and liabilities mainly resulted from the acquisition of Suzhou KFC. |
Summary of Lease Cost | Summary of Lease Cost Account Classification 2020 2019 Operating lease cost $ 496 $ 472 Occupancy and other operating expenses, G&A or Franchise expenses Finance lease cost Amortization of leased assets 2 1 Occupancy and other operating expenses Interest on lease liabilities 2 2 Interest expense, net Variable lease cost (b) 262 325 Occupancy and other operating expenses or Franchise expenses Short-term lease cost 10 10 Occupancy and other operating expenses or G&A Sublease income (24 ) (27 ) Franchise fees and income or Other revenues Total lease cost $ 748 $ 783 (b) The Company was granted $36 million in lease concessions from landlords related to the effects of the COVID-19 pandemic for the year ended December 31, 2020. 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 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 493 $ 481 Operating cash flows from finance leases 2 1 Financing cash flows from finance leases 2 2 Right-of-use assets obtained in exchange for new lease liabilities (c) Operating leases $ 337 $ 346 Finance leases 2 4 (c) This supplemental non-cash disclosure for ROU obtained in exchange for new lease liabilities also includes noncash 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 | Lease Term and Discount Rate 2020 2019 Weighted-average remaining lease term (years) Operating leases 7.0 7.1 Finance leases 10.9 11.5 Weighted-average discount rate Operating leases 5.8 % 6.1 % Finance leases 5.8 % 5.9 % |
Summary of Maturities of Lease Liabilities | Maturities of lease liabilities as of December 31, 2020 were as follows: Amount of Operating Leases Amount of Finance Leases Total 2021 $ 568 $ 4 $ 572 2022 474 4 478 2023 410 4 414 2024 343 4 347 2025 279 4 283 Thereafter 818 21 839 Total undiscounted lease payment 2,892 41 2,933 Less: imputed interest (d) 529 11 540 Present value of lease liabilities $ 2,363 $ 30 $ 2,393 (d) As the rate implicit in the lease cannot be readily determined, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the imputed interest and present value of lease payments. We used the incremental borrowing rate on January 1, 2019 for operating leases that commenced prior to that date. |
Fair Value Measurements and D_2
Fair Value Measurements and Disclosures (Tables) | 12 Months Ended |
Dec. 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, long-term time deposits, 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. Fair Value Measurement or Disclosure at December 31, 2020 Balance at December 31, 2020 Level 1 Level 2 Level 3 Cash equivalents: Time deposits $ 601 $ 601 Fixed income debt securities (a) 207 207 Total cash equivalents 808 207 601 — Short-term investments: Time deposits 2,165 2,165 Fixed income debt securities (a) 784 104 680 Variable return investments 156 156 Total short-term investments 3,105 260 2,845 — Other assets: Equity securities 160 160 Time deposits 61 61 Total $ 4,134 $ 627 $ 3,507 $ — (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 years ended December 31, 2020, 2019 and 2018. These amounts exclude fair value measurements made for restaurants that were subsequently closed or refranchised prior to those respective year-end dates. 2020 2019 2018 Account Classification Restaurant-level impairment (a) 52 28 27 Closure and impairment expenses, net ROU impairment prior to the adoption of ASC 842 (b) — 82 — Retained Earnings Daojia impairment (c) — 11 12 Closure and impairment expenses, net Total $ 52 $ 121 $ 39 ( a ) Restaurant-level impairment charges are recorded in Closures and impairment expenses, net and resulted primarily from our semi-annual impairment evaluation of long-lived assets of individual restaurants that were being operated at the time of impairment and had not been offered for refranchising. We performed an additional impairment evaluation in the first quarter of 2020, considering the adverse effects of the COVID-19 pandemic as an impairment indicator. A trend of continuing operating losses for certain restaurants due to the COVID-19 pandemic resulted in higher impairment during 2020. . ( 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. (c) See Note 5 for further discussion. |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Compensation Related Costs [Abstract] | |
Assumptions Used in the BS Model | The Company estimated the fair value of each stock option and SAR award granted to the Company’s employees as of the date of grant, using the BS model with the following assumptions: 2020 2019 2018 Risk-free interest rate 1.5 % 2.5 % 2.5 % Expected term (years) 6.50 6.50 6.50 Expected volatility 33.2 % 32.0 % 33.0 % Expected dividend yield 1.1 % 1.2 % 1.0 % |
Summary of award activity | Shares (in Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (years) Aggregate Value Outstanding at the beginning of 2020 14,373 24.22 Granted 1,314 42.71 Exercised (3,585 ) 19.19 Forfeited or expired (252 ) 38.22 Outstanding at the end of 2020 11,850 (a) 27.49 5.12 351 Exercisable at the end of 2020 8,841 23.32 4.11 299 (a) Outstanding awards include 348,407 stock options and 11,501,517 SARs with weighted-average exercise prices of $19.91 and $27.72, respectively. Outstanding awards represent Yum China awards held by employees of both the Company and YUM. |
Summary of Restricted Stock Units and Performance Share Units | Shares (in thousands) Weighted- Average Grant Date Fair Value Unvested at the beginning of 2020 971 36.08 Granted 1,214 40.49 Vested (448 ) 30.76 Forfeited or expired (37 ) 41.25 Unvested at the end of 2020 1,700 40.52 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income (Loss) Before Income Taxes | U.S. and foreign income (loss) before taxes are set forth below: 2020 2019 2018 U.S. $ (10 ) $ (7 ) $ (3 ) Mainland China 1,014 941 979 Other Foreign $ 104 69 (26 ) $ 1,108 $ 1,003 $ 950 |
Details of Income Tax Provision (Benefit) | The details of our income tax provision (benefit) are set forth below: 2020 2019 2018 Current: Federal $ 1 $ 16 $ (33 ) Foreign 183 228 214 $ 184 $ 244 $ 181 Deferred: Federal $ 26 $ (1 ) $ — Foreign 85 17 33 $ 111 $ 16 $ 33 $ 295 $ 260 $ 214 |
Effective Income Tax and Tax Rate Reconciliation | The reconciliation of income taxes calculated at the U.S. federal statutory rate to our effective tax rate is set forth below: 2020 2019 2018 U.S. federal statutory rate $ 233 21.0 % $ 211 21.0 % $ 199 21.0 % Impact from the Tax Act — — 8 0.8 (36 ) (3.8 ) Statutory rate differential attributable to foreign operations 63 5.7 53 5.3 56 5.8 Adjustments to reserves and prior years (6 ) (0.6 ) (2 ) (0.2 ) (4 ) (0.4 ) Change in valuation allowances 1 0.1 2 0.2 (4 ) (0.4 ) Impact from investment (gain) loss 7 0.7 (10 ) (1.0 ) 4 0.5 Other, net (3 ) (0.3 ) (2 ) (0.2 ) (1 ) (0.1 ) Effective income tax rate $ 295 26.6 % $ 260 25.9 % $ 214 22.6 % |
Details of Deferred Tax Assets (Liabilities) | The details of 2020 and 2019 deferred tax assets (liabilities) are set forth below: 2020 2019 Operating losses and tax credit carryforwards $ 24 $ 25 Tax benefit from Little Sheep restructuring 17 18 Employee benefits 3 4 Share-based compensation 5 5 Lease 62 61 Other liabilities 13 13 Deferred income and other 75 58 Gross deferred tax assets 199 184 Deferred tax asset valuation allowances (42 ) (47 ) Net deferred tax assets $ 157 $ 137 Intangible assets (61 ) (23 ) Property, plant and equipment (85 ) (59 ) Gain from re-measurement of equity interest upon acquisition (87 ) (22 ) Unrealized gains from equity securities (26 ) — Withholding tax on distributable earnings (27 ) (5 ) Gross deferred tax liabilities $ (286 ) $ (109 ) Net deferred tax assets (liabilities) $ (129 ) $ 28 Reported in Consolidated Balance Sheets as: Deferred income taxes 98 95 Other liabilities (227 ) (67 ) $ (129 ) $ 28 |
Unrecognized Tax Benefits Reconciliation | A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: 2020 2019 Beginning of Year $ 19 $ 22 Additions on tax positions 8 4 Reductions due to statute expiration (6 ) (7 ) End of Year $ 21 $ 19 |
Summary of Income Tax Examinations | 2020 2019 Accrued interest and penalties $ 5 $ 5 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information, by Segment | 2020 KFC Pizza Hut All Other Segments Corporate and Unallocated (a) Combined Elimination Consolidated Revenues Revenue from external customers $ 5,821 $ 1,730 $ 173 $ 539 $ 8,263 $ — $ 8,263 Inter-segment revenue — — 32 26 58 (58 ) — Total $ 5,821 $ 1,730 $ 205 $ 565 $ 8,321 $ (58 ) $ 8,263 2019 KFC Pizza Hut All Other Segments Corporate and Unallocated (a) Combined Elimination Consolidated Revenues Revenue from external customers $ 6,039 $ 2,054 $ 121 $ 562 $ 8,776 $ — $ 8,776 Inter-segment revenue 1 — 37 — 38 (38 ) — Total $ 6,040 $ 2,054 $ 158 $ 562 $ 8,814 $ (38 ) $ 8,776 2018 KFC Pizza Hut All Other Segments Corporate and Unallocated (a) Combined Elimination Consolidated Revenues Revenue from external customers $ 5,688 $ 2,111 $ 99 $ 517 $ 8,415 $ — $ 8,415 Inter-segment revenue — — 16 — 16 (16 ) — Total $ 5,688 $ 2,111 $ 115 $ 517 $ 8,431 $ (16 ) $ 8,415 Operating Profit 2020 2019 2018 KFC (b) $ 801 $ 949 $ 895 Pizza Hut 62 114 97 All Other Segments (7 ) (14 ) (12 ) Unallocated revenues from transactions with franchisees and unconsolidated affiliates (c) 533 558 514 Unallocated Other revenues 32 4 3 Unallocated expenses for transactions with franchisees and unconsolidated affiliates (c) (531 ) (554 ) (512 ) Unallocated Other operating costs and expenses (30 ) (4 ) (2 ) Unallocated and corporate G&A expenses (144 ) (145 ) (128 ) Unallocated Closures and impairment expense (d) — (11 ) (12 ) Unallocated Other income (e) 245 4 98 Operating Profit 961 901 941 Interest income, net (a) 43 39 36 Investment gain (loss) (a) 104 63 (27 ) Income Before Income Taxes $ 1,108 $ 1,003 $ 950 Depreciation and Amortization 2020 2019 2018 KFC $ 315 $ 290 $ 296 Pizza Hut 113 120 129 All Other Segments 8 5 8 Corporate and Unallocated 14 13 12 $ 450 $ 428 $ 445 Impairment Charges 2020 2019 2018 KFC (f) $ 32 $ 16 $ 14 Pizza Hut (f) 29 20 26 All Other Segments (f) 5 2 — Corporate and Unallocated (d) — 11 12 $ 66 $ 49 $ 52 Capital Spending 2020 2019 2018 KFC $ 257 $ 264 $ 292 Pizza Hut 61 71 77 All Other Segments 5 10 6 Corporate and Unallocated 96 90 95 $ 419 $ 435 $ 470 Total Assets 2020 2019 KFC (g) $ 4,084 $ 3,160 Pizza Hut 906 950 All Other Segments 378 166 Corporate and Unallocated (h) 5,507 2,674 $ 10,875 $ 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 $63 million, $69 million and $65 million in 2020, 2019 and 2018, respectively. (c) Primarily includes revenues and associated expenses of transactions with franchisees and unconsolidated affiliates derived from the Company’s central procurement model whereby the Company centrally purchases substantially all food and paper products from suppliers then sells and delivers to KFC and Pizza Hut restaurants, including franchisees 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) Includes impairment charges on intangible assets and goodwill attributable to the Daojia business in 2019 and 2018, respectively. See Note 5. ( e ) In 2020 and 2018, the unallocated other income primarily includes gain from re-measurement of previously held equity interest in connection with the acquisition of Suzhou KFC and Wuxi KFC, respectively. See Note 5. (f) Primarily includes store closure impairment charges, restaurant-level impairment charges resulting from our semi-annual impairment evaluation as well as our additional impairment evaluation performed in the first quarter of 2020 in response to adverse impact from the COVID-19 pandemic, and incremental restaurant-level impairment charges in the first quarter of 2019 as a result of adopting ASC 842. (See Note 12). ( g ) Includes investments in unconsolidated affiliates. ( h ) Primarily includes cash and cash equivalents, short-term investments, investment in equity securities, long-term time deposits and inventories that are centrally managed. |
Selected Quarterly Financial _2
Selected Quarterly Financial Data (Unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Quarterly Financial Information Disclosure [Abstract] | |
Schedule of Quarterly Financial Information | 2020 First Quarter Second Quarter Third Quarter Fourth Quarter Total Revenues: Company sales $ 1,548 $ 1,692 $ 2,118 $ 2,038 $ 7,396 Franchise fees and income 35 37 40 36 148 Revenues from transactions with franchisees and unconsolidated affiliates 161 157 170 159 647 Other revenues 10 16 20 26 72 Total revenues 1,754 1,902 2,348 2,259 8,263 Restaurant profit 165 231 394 308 1,098 Operating Profit 97 128 556 180 961 Net Income – Yum China Holdings, Inc. 62 132 439 151 784 Basic earnings per common share $ 0.16 $ 0.35 $ 1.13 $ 0.36 $ 2.01 Diluted earnings per common share $ 0.16 $ 0.34 $ 1.10 $ 0.35 $ 1.95 2019 First Quarter Second Quarter Third Quarter Fourth Quarter Total Revenues: Company sales $ 2,089 $ 1,926 $ 2,097 $ 1,813 $ 7,925 Franchise fees and income 39 36 38 35 148 Revenues from transactions with franchisees and unconsolidated affiliates 170 154 172 158 654 Other revenues 6 8 12 23 49 Total revenues 2,304 2,124 2,319 2,029 8,776 Restaurant profit 386 283 372 225 1,266 Operating Profit 303 204 300 94 901 Net Income – Yum China Holdings, Inc. 222 178 223 90 713 Basic earnings per common share $ 0.59 $ 0.47 $ 0.59 $ 0.24 $ 1.89 Diluted earnings per common share $ 0.57 $ 0.46 $ 0.58 $ 0.23 $ 1.84 |
Description of Business - Narra
Description of Business - Narrative (Details) $ / shares in Units, $ in Millions | Sep. 10, 2020USD ($)$ / sharesshares | Apr. 08, 2020USD ($) | Sep. 30, 2020USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2020RestaurantSegment | Sep. 10, 2020$ / shares |
Segment Reporting Information [Line Items] | ||||||
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% | |||||
Number of restaurants | Restaurant | 8,100 | |||||
Number of reportable segments | Segment | 2 | |||||
Global Offering [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Global offering shares of common stock | shares | 41,910,700 | |||||
Net proceeds from global offering | $ 2,200 | |||||
Public Offering [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Public offering price per share | (per share) | $ 53.16 | $ 412 | ||||
Wuxi KFC [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Percentage of additional equity interest acquired | 36.00% | |||||
Cash consideration paid to acquire interest | $ 98 | |||||
Equity interest in acquiree, including subsequent acquisition, percentage | 83.00% | |||||
Suzhou KFC [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Percentage of additional equity interest acquired | 25.00% | |||||
Cash consideration paid to acquire interest | $ 149 | |||||
Equity interest in acquiree, including subsequent acquisition, percentage | 72.00% | |||||
Huang Ji Huang Group [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Percentage of additional equity interest acquired | 93.30% | |||||
Cash consideration paid to acquire interest | $ 185 | |||||
KFC [Member] | Minimum [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Number of restaurants | Restaurant | 7,000 | |||||
KFC [Member] | Shanghai [Member] | Owner and Operator of KFC [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Controlling ownership percentage maintained | 58.00% | |||||
KFC [Member] | Beijing [Member] | Owner and Operator of KFC [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Controlling ownership percentage maintained | 70.00% | |||||
KFC [Member] | Hangzhou [Member] | Owner and Operator of KFC [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Non-controlling equity ownership interest owned | 47.00% | |||||
KFC [Member] | Unconsolidated affiliates [Member] | Hangzhou [Member] | Owner and Operator of KFC [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Non-controlling equity ownership interest owned | 47.00% | |||||
Pizza Hut [Member] | Minimum [Member] | ||||||
Segment Reporting Information [Line Items] | ||||||
Number of restaurants | Restaurant | 2,300 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Summary Of Significant Accounting Policies [Line Items] | ||
Future lease payments due from franchisees on a nominal basis | $ 41 | |
Prepaid gift cards expiration period | 36 months | |
Product vouchers maximum expiration period | 12 months | |
Points expiration period | 18 months | |
Other Assets [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Input VAT credit asset | $ 270 | $ 243 |
Accounts Payable and Other Current Liabilities [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
VAT payable | $ 6 | $ 5 |
Huang Ji Huang Group [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Acquisition date | Apr. 8, 2020 | |
Suzhou KFC [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Acquisition date | Aug. 3, 2020 | |
KFC [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Franchisee agreement term | 10 years | |
Pizza Hut [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Franchisee agreement term | 10 years | |
Little Sheep [Member] | Minimum [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Franchisee agreement term | 5 years | |
Little Sheep [Member] | Maximum [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Franchisee agreement term | 10 years | |
Huang Ji Huang [Member] | Minimum [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Franchisee agreement term | 3 years | |
Huang Ji Huang [Member] | Maximum [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Franchisee agreement term | 10 years | |
Owner and Operator of KFC [Member] | Shanghai [Member] | KFC [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Controlling ownership percentage maintained | 58.00% | |
Owner and Operator of KFC [Member] | Beijing [Member] | KFC [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Controlling ownership percentage maintained | 70.00% | |
Owner and Operator of KFC [Member] | Wuxi [Member] | KFC [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Controlling ownership percentage maintained | 83.00% | |
Owner and Operator of KFC [Member] | Suzhou [Member] | KFC [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Controlling ownership percentage maintained | 72.00% | |
Owner and Operator of KFC [Member] | Hangzhou [Member] | KFC [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Non-controlling equity ownership interest owned | 47.00% |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Narrative (Details 1) - USD ($) | 3 Months Ended | 12 Months Ended | ||||
Mar. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Foreign Currency [Abstract] | ||||||
License fee percentage | 3.00% | |||||
Total license fees paid | $ 256,000,000 | $ 273,000,000 | $ 263,000,000 | |||
Direct Marketing Costs [Abstract] | ||||||
Direct marketing expenses | 307,000,000 | 344,000,000 | 341,000,000 | |||
Research and Development Expenses [Abstract] | ||||||
Research and development expenses | $ 3,000,000 | 4,000,000 | 4,000,000 | |||
Impairment or Disposal of Long-Lived Assets [Abstract] | ||||||
Number of consecutive years of operating losses used as primary indicator of potential impairment for our semi-annual impairment testing of restaurant assets | 2 years | |||||
Income Taxes [Abstract] | ||||||
Transaction tax | $ 8,000,000 | $ (36,000,000) | $ 164,000,000 | 8,000,000 | (36,000,000) | |
Percentage threshold that the positions taken or expected to be taken is more likely than not sustained upon examination by tax authorities (in hundredths) | 50.00% | |||||
Receivables [Abstract] | ||||||
Number of days from the period in which the corresponding sales occur that trade receivables are generally due | 30 days | |||||
Provision for accounts receivable | $ 1,000,000 | 1,000,000 | ||||
Receivables due from unconsolidated affiliates including accounts receivables and dividend receivables | $ 50,000,000 | 58,000,000 | ||||
Goodwill and Intangible Assets [Abstract] | ||||||
Goodwill Written Off Related To Sale Of Business Unit Years From Acquisition | 2 years | |||||
Fair Value Goodwill Written Off Related To Sale Of Business Unit Minimum Years Refranchised | 2 years | |||||
Daojia platform [Member] | ||||||
Goodwill and Intangible Assets [Abstract] | ||||||
Intangible asset and goodwill Impairment charge | 11,000,000 | 12,000,000 | ||||
Buildings [Member] | Minimum [Member] | ||||||
Property, Plant and Equipment [Abstract] | ||||||
Estimated useful life used in the calculation of the depreciation and amortization on a straight-line basis (in years) | 20 years | |||||
Buildings [Member] | Maximum [Member] | ||||||
Property, Plant and Equipment [Abstract] | ||||||
Estimated useful life used in the calculation of the depreciation and amortization on a straight-line basis (in years) | 50 years | |||||
Leasehold Improvements [Member] | Minimum [Member] | ||||||
Property, Plant and Equipment [Abstract] | ||||||
Estimated useful life used in the calculation of the depreciation and amortization on a straight-line basis (in years) | 5 years | |||||
Leasehold Improvements [Member] | Maximum [Member] | ||||||
Property, Plant and Equipment [Abstract] | ||||||
Estimated useful life used in the calculation of the depreciation and amortization on a straight-line basis (in years) | 10 years | |||||
Machinery and Equipment [Member] | Minimum [Member] | ||||||
Property, Plant and Equipment [Abstract] | ||||||
Estimated useful life used in the calculation of the depreciation and amortization on a straight-line basis (in years) | 3 years | |||||
Machinery and Equipment [Member] | Maximum [Member] | ||||||
Property, Plant and Equipment [Abstract] | ||||||
Estimated useful life used in the calculation of the depreciation and amortization on a straight-line basis (in years) | 10 years | |||||
Capitalized Software Costs [Member] | Minimum [Member] | ||||||
Property, Plant and Equipment [Abstract] | ||||||
Estimated useful life used in the calculation of the depreciation and amortization on a straight-line basis (in years) | 3 years | |||||
Capitalized Software Costs [Member] | Maximum [Member] | ||||||
Property, Plant and Equipment [Abstract] | ||||||
Estimated useful life used in the calculation of the depreciation and amortization on a straight-line basis (in years) | 5 years | |||||
Payment Processors and Aggregators [Member] | ||||||
Receivables [Abstract] | ||||||
Allowance for doubtful accounts | $ 0 | 0 | ||||
Chinese Local Tax Authority [Member] | ||||||
Income Taxes [Abstract] | ||||||
PRC withholding tax on dividends | 10.00% | |||||
Percentage of withholding tax on dividends by Hong Kong | 5.00% | |||||
Minimum percentage of equity interest in a PRC-resident enterprise to be held by Hong Kong resident enterprise | 25.00% | |||||
Tax withholding reduction percentage | 5.00% | |||||
Transactions With Franchisees and Unconsolidated Affiliates [Member] | ||||||
Direct Marketing Costs [Abstract] | ||||||
Direct marketing expenses | $ 60,000,000 | $ 65,000,000 | $ 62,000,000 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Summary of Estimated Useful Lives of Intangible Assets (Details) | 12 Months Ended |
Dec. 31, 2020 | |
Reacquired Franchise Rights [Member] | Minimum [Member] | |
Finite Lived Intangible Assets [Line Items] | |
Estimated useful lives | 2 years |
Reacquired Franchise Rights [Member] | Maximum [Member] | |
Finite Lived Intangible Assets [Line Items] | |
Estimated useful lives | 10 years |
Huang Ji Huang Group [Member] | |
Finite Lived Intangible Assets [Line Items] | |
Estimated useful lives | 19 years |
Daojia platform [Member] | |
Finite Lived Intangible Assets [Line Items] | |
Estimated useful lives | 8 years |
Customer-related Assets [Member] | Minimum [Member] | |
Finite Lived Intangible Assets [Line Items] | |
Estimated useful lives | 2 years |
Customer-related Assets [Member] | Maximum [Member] | |
Finite Lived Intangible Assets [Line Items] | |
Estimated useful lives | 15 years |
Others [Member] | Maximum [Member] | |
Finite Lived Intangible Assets [Line Items] | |
Estimated useful lives | 20 years |
Revenue - Schedule of Disaggreg
Revenue - Schedule of Disaggregation of Revenue by Types of Arrangements and Segments (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||||
Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | $ 2,259 | $ 2,348 | $ 1,902 | $ 1,754 | $ 2,029 | $ 2,319 | $ 2,124 | $ 2,304 | $ 8,263 | $ 8,776 | $ 8,415 | ||
Corporate and Unallocated [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | [1] | 565 | 562 | 517 | [2] | ||||||||
Combined [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | 8,321 | 8,814 | 8,431 | ||||||||||
Elimination [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | (58) | (38) | (16) | ||||||||||
Elimination [Member] | KFC [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | 1 | ||||||||||||
Elimination [Member] | All Other Segments [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | 32 | 37 | 16 | ||||||||||
Operating Segments [Member] | KFC [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | 5,821 | 6,040 | 5,688 | ||||||||||
Operating Segments [Member] | Pizza Hut [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | 1,730 | 2,054 | 2,111 | ||||||||||
Operating Segments [Member] | All Other Segments [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | 205 | 158 | 115 | ||||||||||
Company Sales [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 2,038 | 2,118 | 1,692 | 1,548 | 1,813 | 2,097 | 1,926 | 2,089 | 7,396 | 7,925 | 7,633 | ||
Company Sales [Member] | KFC [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 5,633 | 5,839 | 5,495 | ||||||||||
Company Sales [Member] | Pizza Hut [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 1,721 | 2,045 | 2,106 | ||||||||||
Company Sales [Member] | All Other Segments [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 42 | 41 | 32 | ||||||||||
Company Sales [Member] | Combined [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 7,396 | 7,925 | 7,633 | ||||||||||
Franchise [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 36 | 40 | 37 | 35 | 35 | 38 | 36 | 39 | 148 | 148 | 141 | ||
Franchise [Member] | KFC [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 125 | 136 | 132 | ||||||||||
Franchise [Member] | Pizza Hut [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 5 | 4 | 3 | ||||||||||
Franchise [Member] | All Other Segments [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 18 | 8 | 6 | ||||||||||
Franchise [Member] | Combined [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 148 | 148 | 141 | ||||||||||
Transactions With Franchisees and Unconsolidated Affiliates [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 159 | 170 | 157 | 161 | 158 | 172 | 154 | 170 | 647 | 654 | 603 | ||
Transactions With Franchisees and Unconsolidated Affiliates [Member] | KFC [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 61 | 64 | 61 | ||||||||||
Transactions With Franchisees and Unconsolidated Affiliates [Member] | Pizza Hut [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 4 | 4 | 2 | ||||||||||
Transactions With Franchisees and Unconsolidated Affiliates [Member] | All Other Segments [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 49 | 28 | 26 | ||||||||||
Transactions With Franchisees and Unconsolidated Affiliates [Member] | Corporate and Unallocated [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 533 | 558 | 514 | [2] | |||||||||
Transactions With Franchisees and Unconsolidated Affiliates [Member] | Combined [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 647 | 654 | 603 | ||||||||||
Other Revenues [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | $ 26 | $ 20 | $ 16 | $ 10 | $ 23 | $ 12 | $ 8 | $ 6 | 72 | 49 | 38 | ||
Other Revenues [Member] | KFC [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 2 | 1 | |||||||||||
Other Revenues [Member] | Pizza Hut [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 1 | ||||||||||||
Other Revenues [Member] | All Other Segments [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 96 | 81 | 51 | ||||||||||
Other Revenues [Member] | Corporate and Unallocated [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 32 | 4 | 3 | [2] | |||||||||
Other Revenues [Member] | Combined [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 130 | 87 | 54 | ||||||||||
Other Revenues [Member] | Elimination [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | $ (58) | $ (38) | $ (16) | ||||||||||
[1] | Amounts have not been allocated to any segment for performance reporting purposes. | ||||||||||||
[2] | As COFFii & JOY and our e-commerce business became operating segments starting from the first quarter of 2019, revenue by segment information for 2018 has been recast to align with the change in segment reporting. Additional details on our reportable segments are included in Note 17. |
Revenue - Schedule of Franchise
Revenue - Schedule of Franchise Fees and Income (Details) - Franchise [Member] - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Revenue From Contract With Customer [Line Items] | |||||||||||
Franchise fees and income | $ 36 | $ 40 | $ 37 | $ 35 | $ 35 | $ 38 | $ 36 | $ 39 | $ 148 | $ 148 | $ 141 |
Transferred at Point in Time [Member] | |||||||||||
Revenue From Contract With Customer [Line Items] | |||||||||||
Franchise fees and income | 8 | 8 | 7 | ||||||||
Transferred over Time [Member] | |||||||||||
Revenue From Contract With Customer [Line Items] | |||||||||||
Franchise fees and income | $ 140 | $ 140 | $ 134 |
Revenue - Narrative (Details)
Revenue - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Revenue From Contract With Customer [Abstract] | ||
Impairment losses related to costs to obtain contracts | $ 0 | $ 0 |
Costs to obtain contracts | 9 | 9 |
Revenue recognized | $ 95 | $ 68 |
Revenue - Contract Liabilities
Revenue - Contract Liabilities (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Contract liabilities | ||
Contract liabilities | $ 206 | $ 168 |
Deferred Revenue Related To Prepaid Stored Value Products [Member] | ||
Contract liabilities | ||
Contract liabilities | 117 | 86 |
Deferred Revenue Related To Upfront Franchise Fees [Member] | ||
Contract liabilities | ||
Contract liabilities | 38 | 39 |
Deferred Revenue Related To Customer Loyalty Programs [Member] | ||
Contract liabilities | ||
Contract liabilities | 23 | 24 |
Deferred Revenue Related To Privilege Membership Programs [Member] | ||
Contract liabilities | ||
Contract liabilities | 27 | 16 |
Others [Member] | ||
Contract liabilities | ||
Contract liabilities | $ 1 | $ 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 | 12 Months Ended | ||||||||||
Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Earnings Per Share [Abstract] | ||||||||||||
Net Income – Yum China Holdings, Inc. | $ 151 | $ 439 | $ 132 | $ 62 | $ 90 | $ 223 | $ 178 | $ 222 | $ 784 | $ 713 | $ 708 | |
Weighted-average common shares outstanding (for basic calculation) | [1] | 390 | 377 | 384 | ||||||||
Effect of dilutive share-based awards | [1] | 7 | 8 | 9 | ||||||||
Effect of dilutive warrants | [2] | 5 | 3 | 2 | ||||||||
Weighted-average common and dilutive potential common shares outstanding (for diluted calculation) | 402 | 388 | 395 | |||||||||
Basic Earnings Per Share | $ 0.36 | $ 1.13 | $ 0.35 | $ 0.16 | $ 0.24 | $ 0.59 | $ 0.47 | $ 0.59 | $ 2.01 | $ 1.89 | $ 1.84 | |
Diluted Earnings Per Share | $ 0.35 | $ 1.10 | $ 0.34 | $ 0.16 | $ 0.23 | $ 0.58 | $ 0.46 | $ 0.57 | $ 1.95 | $ 1.84 | $ 1.79 | |
Share-based awards and warrants excluded from the diluted EPS computation | [3] | 3 | 2 | 6 | ||||||||
[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. See Note 14 for a further discussion of share-based compensation. In September 2020, 41,910,700 common shares were issued as a result of the Company’s global offering and secondary listing on the HKEX and they were included in the calculated weighted-average common shares outstanding. | |||||||||||
[2] | Pursuant to the investment agreements dated September 1, 2016 (Note 10), 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 $39.25 per share, respectively, subject to customary anti-dilution adjustments. The warrants may be exercised at any time through October 31, 2021. The incremental shares arising from outstanding warrants are included in the computation of diluted EPS, if there is dilutive effect when the average market price of Yum China common stock for the year exceeds the applicable exercise price of the warrants. | |||||||||||
[3] | These outstanding employee stock appreciation rights, RSUs, PSUs and warrants were excluded from the computation of diluted EPS because to do so would have been antidilutive for the years presented, or because certain PSUs are contingently issuable based on the achievement of performance and market conditions, which have not been met as of December 31, 2020. |
Earnings Per Common Share ("E_4
Earnings Per Common Share ("EPS") (Parenthetical) (Details) | Jan. 09, 2017Tranche$ / sharesshares | Sep. 30, 2020shares | Dec. 31, 2020Tranche |
Class Of Warrant Or Right [Line Items] | |||
Number of tranches of warrants | Tranche | 2 | 2 | |
Tranche One Warrants [Member] | |||
Class Of Warrant Or Right [Line Items] | |||
Warrants to purchase shares of common stock | 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 | 8,200,405 | ||
Exercise price of warrants | $ / shares | $ 39.25 | ||
Secondary Listing [Member] | |||
Class Of Warrant Or Right [Line Items] | |||
Global offering shares of common stock | 41,910,700 |
Items Affecting Comparability_3
Items Affecting Comparability of Net Income - Narrative (Details) - USD ($) shares in Millions, $ in Millions | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||||||||||||||
Feb. 29, 2020 | Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | ||
Operating profit | $ 180 | $ 556 | $ 128 | $ 97 | $ 94 | $ 300 | $ 204 | $ 303 | $ 961 | $ 901 | $ 941 | ||||||
Gain from re-measurement of previously held equity interest | [1] | 239 | 98 | ||||||||||||||
Impairment charge | 66 | 49 | 52 | ||||||||||||||
Goodwill impairment | [2] | 9 | |||||||||||||||
Tax benefit | 295 | 260 | 214 | ||||||||||||||
Compensation expense recognized | 36 | 26 | 24 | ||||||||||||||
Estimated additional income tax expense (benefit) | $ 8 | $ (36) | $ 164 | 8 | (36) | ||||||||||||
Employees [Member] | Partner PSU Awards[Member] | |||||||||||||||||
Performance period | 4 years | ||||||||||||||||
Compensation expense recognized | 7 | ||||||||||||||||
Minimum [Member] | Employees [Member] | Partner PSU Awards[Member] | |||||||||||||||||
Stock-based compensation PSU award percentage | 0.00% | ||||||||||||||||
Maximum [Member] | Employees [Member] | Partner PSU Awards[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 | ||||||||||||||||
Number of ordinary shares sold | 4.2 | ||||||||||||||||
Proceeds from disposal of equity security | $ 54 | ||||||||||||||||
Pre-tax gain from disposal of equity security | $ 17 | ||||||||||||||||
U.S. tax recorded | 29 | ||||||||||||||||
Daojia Platform and Customer-related Assets [Member] | |||||||||||||||||
Impairment charge | 2 | 12 | |||||||||||||||
Goodwill impairment | 9 | ||||||||||||||||
Tax benefit | (1) | (3) | |||||||||||||||
Impairment charge allocated to noncontrolling interests | 2 | 1 | |||||||||||||||
Impairment charge allocated to parent | 8 | 8 | |||||||||||||||
Daojia Platform and Customer-related Assets [Member] | Closures And Impairment Expenses [Member] | |||||||||||||||||
Impairment charge | 11 | 12 | |||||||||||||||
Suzhou KFC [Member] | |||||||||||||||||
Gain from re-measurement of previously held equity interest | $ 239 | 239 | |||||||||||||||
Percentage of additional equity interest acquired | 25.00% | ||||||||||||||||
Cash consideration paid to acquire interest | $ 149 | ||||||||||||||||
Equity interest in acquiree, including subsequent acquisition, percentage | 72.00% | ||||||||||||||||
Ownership interest previously held | 47.00% | ||||||||||||||||
Suzhou KFC [Member] | Reacquired Franchise Rights [Member] | |||||||||||||||||
Purchase price allocated to intangible assets | $ 61 | ||||||||||||||||
Remaining franchise contract period | 2 years 4 months 24 days | ||||||||||||||||
Wuxi KFC [Member] | |||||||||||||||||
Gain from re-measurement of previously held equity interest | $ 98 | ||||||||||||||||
Percentage of additional equity interest acquired | 36.00% | ||||||||||||||||
Cash consideration paid to acquire interest | $ 98 | ||||||||||||||||
Equity interest in acquiree, including subsequent acquisition, percentage | 83.00% | ||||||||||||||||
Ownership interest previously held | 47.00% | ||||||||||||||||
Remaining franchise contract period | 5 years | ||||||||||||||||
Wuxi KFC [Member] | Reacquired Franchise Rights [Member] | |||||||||||||||||
Purchase price allocated to intangible assets | $ 61 | ||||||||||||||||
COVID-19 [Member] | |||||||||||||||||
One-time concessions on rent | 36 | ||||||||||||||||
One-time government relief | 59 | ||||||||||||||||
Operating profit | 961 | 901 | |||||||||||||||
Impairment of long lived asset | $ 66 | $ 38 | $ 40 | ||||||||||||||
[1] | As a result of the acquisition of Suzhou KFC and Wuxi KFC, as disclosed in Note 5, the Company recognized a gain of $239 million and $98 million in 2020 and 2018, respectively, from the re-measurement of our previously held 47% equity interest at fair value, which was not allocated to any segment for performance reporting purposes. | ||||||||||||||||
[2] | In 2019, we recorded an impairment charge of $9 million on goodwill attributable to the Daojia reporting unit (Note 5). |
Items Affecting Comparability_4
Items Affecting Comparability of Net Income - Summary of Pre-tax Gains or Losses in Investment in Equity Securities (Details) - Meituan Dianping [Member] - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Schedule Of Trading Securities And Other Trading Assets [Line Items] | |||
Unrealized gains (losses) recorded on equity securities still held as of the end of the year | $ 105 | $ 63 | $ (27) |
Losses recorded on equity securities sold during the year | (1) | ||
Gains (losses) recorded on equity securities | $ 104 | $ 63 | $ (27) |
Other Income, Net (Details)
Other Income, Net (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||||
Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |||
Other Income And Expenses [Line Items] | ||||||
Gain from re-measurement of equity interest upon acquisition | [1] | $ 239 | $ 98 | |||
Equity income from investments in unconsolidated affiliates | 62 | $ 69 | 65 | |||
Foreign exchanges and other | (13) | (9) | (11) | |||
Other income, net | 285 | $ 60 | $ 152 | |||
Daojia platform [Member] | ||||||
Other Income And Expenses [Line Items] | ||||||
Derecognition of indemnification asset | $ (3) | $ (3) | [2] | |||
[1] | As a result of the acquisition of Suzhou KFC and Wuxi KFC, as disclosed in Note 5, the Company recognized a gain of $239 million and $98 million in 2020 and 2018, respectively, from the re-measurement of our previously held 47% equity interest at fair value, which was not allocated to any segment for performance reporting purposes. | |||||
[2] | In the second quarter of 2020, the Company derecognized a $3 million indemnification asset previously recorded for the Daojia acquisition as the indemnification right pursuant to the purchase agreement expired. The expense was included in Other income, net, but was not allocated to any segment for performance reporting purposes. |
Other Income, Net (Parenthetica
Other Income, Net (Parenthetical) (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2018 | Dec. 31, 2020 | Dec. 31, 2018 | |||
Other Operating Income (Expense), Net | |||||||
Gain from re-measurement of previously held ownership interest at fair value | [1] | $ 239 | $ 98 | ||||
Daojia platform [Member] | |||||||
Other Operating Income (Expense), Net | |||||||
Derecognition of indemnification assets related to Daojia | $ 3 | $ 3 | [2] | ||||
Suzhou KFC and Wuxi KFC [Member] | |||||||
Other Operating Income (Expense), Net | |||||||
Gain from re-measurement of previously held ownership interest at fair value | $ 239 | $ 98 | |||||
Ownership interest previously held | 47.00% | 47.00% | |||||
[1] | As a result of the acquisition of Suzhou KFC and Wuxi KFC, as disclosed in Note 5, the Company recognized a gain of $239 million and $98 million in 2020 and 2018, respectively, from the re-measurement of our previously held 47% equity interest at fair value, which was not allocated to any segment for performance reporting purposes. | ||||||
[2] | In the second quarter of 2020, the Company derecognized a $3 million indemnification asset previously recorded for the Daojia acquisition as the indemnification right pursuant to the purchase agreement expired. The expense was included in Other income, net, but was not allocated to any segment for performance reporting purposes. |
Supplemental Balance Sheet In_3
Supplemental Balance Sheet Information (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Accounts Receivables, net | |||||
Accounts receivables, gross | $ 100 | $ 89 | |||
Allowance for doubtful accounts | (1) | (1) | |||
Accounts receivables, net | 99 | 88 | |||
Prepaid Expenses and Other Current Assets | |||||
Receivables from payment processors and aggregators | 47 | 39 | |||
Dividends receivable from unconsolidated affiliates | 10 | 8 | |||
Other prepaid expenses and current assets | 119 | 87 | |||
Prepaid expenses and other current assets | 176 | 134 | |||
Other Assets | |||||
VAT assets | 270 | 243 | |||
Investment in equity securities | 160 | 110 | |||
Land use right | [1] | 140 | 133 | ||
Long-term deposits | 83 | 71 | |||
Investment in long-term time deposits | [2] | 61 | |||
Costs to obtain contracts | 9 | 9 | |||
Restricted cash | [3] | 9 | |||
Others | 26 | 5 | |||
Other Assets | 749 | 580 | |||
Accounts Payable and Other Current Liabilities | |||||
Accounts payable | 708 | 623 | |||
Operating leases liabilities | 448 | 382 | |||
Accrued compensation and benefits | 238 | 223 | |||
Accrued capital expenditures | 203 | 150 | |||
Contract liabilities | 175 | 135 | |||
Accrued marketing expenses | 73 | 64 | |||
Other current liabilities | 150 | 114 | |||
Accounts payable and other current liabilities | 1,995 | 1,691 | |||
Other Liabilities | |||||
Deferred income tax liabilities | [4] | 227 | 67 | ||
Accrued income tax payable | 66 | 69 | |||
Contract liabilities | 31 | 33 | |||
Other noncurrent liabilities | 70 | 41 | |||
Other liabilities | 394 | 210 | |||
Cash and cash equivalents | 1,158 | 1,046 | |||
Restricted cash included in Other assets | [3] | 9 | |||
Cash, Cash Equivalents and Restricted Cash as presented in Consolidated Statements of Cash Flows | $ 1,158 | $ 1,055 | $ 1,266 | $ 1,059 | |
[1] | Amortization expense related to land use right was $5 million, $4 million and $5 million in 2020, 2019 and 2018, respectively. | ||||
[2] | As of December 31, 2020, the Company had $61 million invested in long-term time deposits, bearing a fixed interest rate with original maturity of three years. The asset is restricted for use in order to secure the balance of prepaid stored-value cards issued by the Company pursuant to regulatory requirements. | ||||
[3] | As of December 31, 2019, the $9 million of restricted cash represents amounts deposited into an escrow account pursuant to a definitive agreement entered into in August 2019 to acquire a controlling interest in the Huang Ji Huang group. The Huang Ji Huang acquisition was completed on April 8, 2020. | ||||
[4] | Increase in deferred income tax liabilities balances in 2020 primarily resulted from Suzhou KFC and Huang Ji Huang acquisitions |
Supplemental Balance Sheet In_4
Supplemental Balance Sheet Information (Details 1) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 3,893 | $ 3,471 |
Accumulated depreciation | (2,128) | (1,877) |
Property, plant and equipment, net | 1,765 | 1,594 |
Buildings and Improvements [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | 2,367 | 2,159 |
Finance Leases, Primarily Buildings [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | 36 | 30 |
Machinery and Equipment and Construction in Progress [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 1,490 | $ 1,282 |
Supplemental Balance Sheet In_5
Supplemental Balance Sheet Information - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Supplemental Balance Sheet Information Disclosure [Abstract] | |||
Depreciation and amortization expense related to property, plant and equipment | $ 421 | $ 408 | $ 414 |
Supplemental Balance Sheet In_6
Supplemental Balance Sheet Information (Parenthetical) (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Supplemental Balance Sheet Information Disclosure [Abstract] | ||||
Amortization expense related to land use right | $ 5 | $ 4 | $ 5 | |
Investment in long-term time deposits | [1] | $ 61 | ||
Investment in long-term time deposits, maturity term | 3 years | |||
Restricted cash included in Other assets | [2] | $ 9 | ||
[1] | As of December 31, 2020, the Company had $61 million invested in long-term time deposits, bearing a fixed interest rate with original maturity of three years. The asset is restricted for use in order to secure the balance of prepaid stored-value cards issued by the Company pursuant to regulatory requirements. | |||
[2] | As of December 31, 2019, the $9 million of restricted cash represents amounts deposited into an escrow account pursuant to a definitive agreement entered into in August 2019 to acquire a controlling interest in the Huang Ji Huang group. The Huang Ji Huang acquisition was completed on April 8, 2020. |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets (Details) - USD ($) $ in Millions | 12 Months Ended | ||||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |||
Goodwill [Line Items] | |||||
Goodwill, gross | $ 1,223 | $ 645 | $ 648 | ||
Accumulated impairment losses | (391) | (391) | (382) | [1] | |
Goodwill, net | 832 | 254 | 266 | ||
Goodwill impairment | [2] | (9) | |||
Goodwill acquired | [3] | 524 | |||
Effect of currency translation adjustment and other | 54 | (3) | |||
KFC [Member] | |||||
Goodwill [Line Items] | |||||
Goodwill, gross | 748 | 235 | 238 | ||
Goodwill, net | 748 | 235 | 238 | ||
Goodwill acquired | [3] | 465 | |||
Effect of currency translation adjustment and other | 48 | (3) | |||
Pizza Hut [Member] | |||||
Goodwill [Line Items] | |||||
Goodwill, gross | 20 | 19 | 19 | ||
Goodwill, net | 20 | 19 | 19 | ||
Effect of currency translation adjustment and other | 1 | ||||
All Other Segments [Member] | |||||
Goodwill [Line Items] | |||||
Goodwill, gross | 455 | 391 | 391 | ||
Accumulated impairment losses | (391) | (391) | (382) | [1] | |
Goodwill, net | 64 | $ 9 | |||
Goodwill impairment | [2] | $ (9) | |||
Goodwill acquired | [3] | 59 | |||
Effect of currency translation adjustment and other | $ 5 | ||||
[1] | Accumulated impairment losses represent Little Sheep goodwill related impairment. | ||||
[2] | In 2019, we recorded an impairment charge of $9 million on goodwill attributable to the Daojia reporting unit (Note 5). | ||||
[3] | Goodwill acquired resulted from the acquisition of Suzhou KFC and Huang Ji Huang. (Note 1). |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Parenthetical (Details) $ in Millions | 12 Months Ended | |
Dec. 31, 2019USD ($) | ||
Schedule Of Finite And Indefinite Lived Intangible Assets By Major Class [Line Items] | ||
Goodwill impairment | $ 9 | [1] |
Daojia platform [Member] | ||
Schedule Of Finite And Indefinite Lived Intangible Assets By Major Class [Line Items] | ||
Goodwill impairment | $ 9 | |
[1] | In 2019, we recorded an impairment charge of $9 million on goodwill attributable to the Daojia reporting unit (Note 5). |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets (Details 1) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 | ||
Finite-lived intangible assets | ||||
Gross Carrying Amount | $ 283 | [1] | $ 185 | |
Accumulated Amortization | (161) | (129) | ||
Accumulated Impairment Losses | [2] | (14) | (14) | |
Net Carrying Amount | 108 | 42 | ||
Indefinite-lived intangible assets | ||||
Net Carrying Amount | 138 | 52 | ||
Total intangible assets | ||||
Gross Carrying Amount | 421 | [1] | 237 | |
Intangible assets, net | 246 | 94 | ||
Reacquired franchise rights [Member] | ||||
Finite-lived intangible assets | ||||
Gross Carrying Amount | [3] | 223 | [1] | 148 |
Accumulated Amortization | [3] | (144) | (113) | |
Net Carrying Amount | [3] | 79 | 35 | |
Huang Ji Huang Group [Member] | ||||
Finite-lived intangible assets | ||||
Gross Carrying Amount | [1],[4] | 23 | ||
Accumulated Amortization | [4] | (1) | ||
Net Carrying Amount | [4] | 22 | ||
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 | (8) | (8) | ||
Accumulated Impairment Losses | [2] | (2) | (2) | |
Net Carrying Amount | 2 | 2 | ||
Other [Member] | ||||
Finite-lived intangible assets | ||||
Gross Carrying Amount | 9 | [1] | 9 | |
Accumulated Amortization | (4) | (4) | ||
Net Carrying Amount | 5 | 5 | ||
Trademark [Member] | Huang Ji Huang Group [Member] | ||||
Indefinite-lived intangible assets | ||||
Net Carrying Amount | [4] | 82 | ||
Trademark [Member] | Little Sheep [Member] | ||||
Indefinite-lived intangible assets | ||||
Net Carrying Amount | $ 56 | $ 52 | ||
[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. | |||
[3] | Increase in gross carrying amount of reacquired franchise rights during the year ended December 31, 2020 primarily resulted from the acquisition of Suzhou KFC (Note 5). | |||
[4] | Increase in gross carrying amount of finite-lived and indefinite-lived intangible assets primarily resulted from the acquisition of Huang Ji Huang group (Note 1). |
Goodwill and Intangible Asset_5
Goodwill and Intangible Assets - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Finite-lived intangible assets | |||
Finite-lived intangible assets, amortization expense | $ 24 | $ 16 | $ 26 |
Approximate amortization expense for finite-lived intangible assets - 2021 | 40 | ||
Approximate amortization expense for finite-lived intangible assets - 2022 | 40 | ||
Approximate amortization expense for finite-lived intangible assets - 2023 | 5 | ||
Approximate amortization expense for finite-lived intangible assets - 2024 | 2 | ||
Approximate amortization expense for finite-lived intangible assets - 2025 | $ 2 |
Credit Facilities - Narrative (
Credit Facilities - Narrative (Details) - 12 months ended Dec. 31, 2020 ¥ in Millions | USD ($) | CNY (¥) |
Line Of Credit Facility [Line Items] | ||
Credit facility maximum borrowing amount | $ 506,000,000 | ¥ 3,305 |
Onshore Credit Facility [Member] | ||
Line Of Credit Facility [Line Items] | ||
Credit facility maximum borrowing amount | 306,000,000 | 2,000 |
Bank guarantees outstanding | 18,000,000 | ¥ 114 |
Borrowings outstanding | 0 | |
Offshore Credit Facility [Member] | ||
Line Of Credit Facility [Line Items] | ||
Credit facility maximum borrowing amount | $ 200,000,000 | |
Revolving Credit Facility [Member] | ||
Line Of Credit Facility [Line Items] | ||
Credit facility terms | The credit facilities had remaining terms ranging from less than one year to two years as of December 31, 2020. Each credit facility bears interest based on the prevailing rate stipulated by the People’s Bank of China, Loan Prime Rate (“LPR”) published by the National Interbank Funding Centre of the PRC or London Interbank Offered Rate (“LIBOR”) administered by the ICE Benchmark Administration. Each credit facility contains a cross-default provision whereby our failure to make any payment on a principal amount from any credit facility will constitute a default on other credit facilities. Some of the credit facilities contain covenants limiting, among other things, certain additional indebtedness and liens, and certain other transactions specified in the respective agreement. Interest on any outstanding borrowings is due at least monthly. | |
Credit facility expiration start period | less than one year | |
Revolving Credit Facility [Member] | Maximum [Member] | ||
Line Of Credit Facility [Line Items] | ||
Credit facility expiration period | 2 years |
Investment Agreements with St_2
Investment Agreements with Strategic Investors - Narrative (Details) $ / shares in Units, $ in Millions | Jan. 09, 2017Tranche$ / sharesshares | Nov. 01, 2016USD ($)Tranche$ / sharesshares | Dec. 31, 2020USD ($)Tranche$ / sharesshares | Dec. 31, 2019$ / sharesshares | Dec. 31, 2018shares | Dec. 30, 2016$ / shares | Oct. 31, 2016$ / sharesshares |
Subsidiary Sale Of Stock [Line Items] | |||||||
Investment agreements, consideration received | $ | $ 460 | ||||||
Number of tranches of warrants | Tranche | 2 | 2 | |||||
Common stock, shares issued | 440,000,000 | 395,000,000 | 363,758,219 | ||||
Common stock, shares outstanding | 420,000,000 | 376,000,000 | 363,758,219 | ||||
Common stock, par value | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | ||||
Discount percentage on volume weighted average trading price per share | 8.00% | ||||||
Shares repurchased from investors | 200,000 | 6,200,000 | 9,000,000 | ||||
Warrants exercisable period | Oct. 31, 2021 | ||||||
Residual amounts allocated to common stock | $ | 364 | $ 2,195 | |||||
Warrants First Tranche [Member] | |||||||
Subsidiary Sale Of Stock [Line Items] | |||||||
Amount on which initial exercise price of warrants based | $ | 12,000 | ||||||
Warrants Second Tranche [Member] | |||||||
Subsidiary Sale Of Stock [Line Items] | |||||||
Amount on which initial exercise price of warrants based | $ | $ 15,000 | ||||||
Minimum [Member] | |||||||
Subsidiary Sale Of Stock [Line Items] | |||||||
VWAP measurement period | Dec. 1, 2016 | ||||||
Maximum [Member] | |||||||
Subsidiary Sale Of Stock [Line Items] | |||||||
VWAP measurement period | Dec. 30, 2016 | ||||||
Primavera [Member] | |||||||
Subsidiary Sale Of Stock [Line Items] | |||||||
Investment agreements, consideration received | $ | $ 410 | ||||||
Shares issued subject to post-closing adjustment | 17,064,172.74 | ||||||
Shares repurchased from investors | 699,394.74 | ||||||
Primavera [Member] | Warrants First Tranche [Member] | |||||||
Subsidiary Sale Of Stock [Line Items] | |||||||
Warrants to purchase common stock | 7,309,057 | ||||||
Primavera [Member] | Warrants Second Tranche [Member] | |||||||
Subsidiary Sale Of Stock [Line Items] | |||||||
Warrants to purchase common stock | 7,309,057 | ||||||
Ant Financial [Member] | |||||||
Subsidiary Sale Of Stock [Line Items] | |||||||
Investment agreements, consideration received | $ | $ 50 | ||||||
Shares issued subject to post-closing adjustment | 2,080,996.68 | ||||||
Shares repurchased from investors | 85,291.68 | ||||||
Ant Financial [Member] | Warrants First Tranche [Member] | |||||||
Subsidiary Sale Of Stock [Line Items] | |||||||
Warrants to purchase common stock | 891,348 | ||||||
Ant Financial [Member] | Warrants Second Tranche [Member] | |||||||
Subsidiary Sale Of Stock [Line Items] | |||||||
Warrants to purchase common stock | 891,348 | ||||||
Primavera & Ant Financial [Member] | |||||||
Subsidiary Sale Of Stock [Line Items] | |||||||
Ownership percentage of new common stock issued, subject to potential adjustment | 5.00% | ||||||
Number of tranches of warrants | Tranche | 2 | ||||||
Warrants additional ownership percentage exercisable by investors | 4.00% | ||||||
Common stock, par value | $ / shares | $ 0.01 | ||||||
Common stock, price per share | $ / shares | $ 24.03 | ||||||
Shares repurchased price per share | $ / shares | $ 25.05 | ||||||
Outstanding shares of common stock owned | 4.80% | ||||||
Outstanding shares of common stock owned, subject to post-closing adjustment | 8.70% | ||||||
Primavera & Ant Financial [Member] | Warrants First Tranche [Member] | |||||||
Subsidiary Sale Of Stock [Line Items] | |||||||
Warrant exercise price | $ / shares | $ 31.40 | ||||||
Primavera & Ant Financial [Member] | Warrants Second Tranche [Member] | |||||||
Subsidiary Sale Of Stock [Line Items] | |||||||
Warrant exercise price | $ / shares | $ 39.25 | ||||||
Primavera & Ant Financial [Member] | Minimum [Member] | |||||||
Subsidiary Sale Of Stock [Line Items] | |||||||
Expected ownership percentage of new common stock issued, final | 4.30% | ||||||
Primavera & Ant Financial [Member] | Maximum [Member] | |||||||
Subsidiary Sale Of Stock [Line Items] | |||||||
Expected ownership percentage of new common stock issued, final | 5.90% |
Leases - Narrative (Details)
Leases - Narrative (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2020USD ($)Restaurant | |
Schedule Of Lease Assets And Liabilities [Line Items] | |
Number of restaurants operated | Restaurant | 8,100 |
Additional lease signed but not commenced with total undiscounted minimum lease payments | $ | $ 141 |
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 | Dec. 31, 2020 | Dec. 31, 2019 |
Schedule Of Lease Assets And Liabilities [Abstract] | ||
Operating lease right-of-use assets | $ 2,164 | $ 1,985 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | yumc:OperatingLeaseRightOfUseAsset1Member | yumc:OperatingLeaseRightOfUseAsset1Member |
Finance lease right-of-use assets | $ 20 | $ 18 |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | us-gaap:PropertyPlantAndEquipmentMember | us-gaap:PropertyPlantAndEquipmentMember |
Total leased assets | $ 2,184 | $ 2,003 |
Operating leases liabilities | 448 | 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 | $ 1,915 | $ 1,803 |
Non-current finance lease liabilities | $ 28 | $ 26 |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | yumc:NonCurrentOperatingLeasesLiabilities1Member | yumc:NonCurrentOperatingLeasesLiabilities1Member |
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | yumc:NonCurrentFinancingLeasesLiabilities1Member | yumc:NonCurrentFinancingLeasesLiabilities1Member |
Total lease liabilities | $ 2,393 | $ 2,213 |
Leases - Summary of Lease Cost
Leases - Summary of Lease Cost (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Lease Cost [Abstract] | ||
Operating lease cost | $ 496 | $ 472 |
Finance lease cost | ||
Amortization of leased assets | 2 | 1 |
Interest on lease liabilities | 2 | 2 |
Variable lease cost | 262 | 325 |
Short-term lease cost | 10 | 10 |
Sublease income | (24) | (27) |
Total lease cost | $ 748 | $ 783 |
Leases - Summary of Lease Cos_2
Leases - Summary of Lease Cost (Parenthetical) (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Lease Cost [Abstract] | |
Lease concessions from landlords related to the effects of COVID-19 | $ 36 |
Leases - Schedule of Supplement
Leases - Schedule of Supplemental Cash Flow Information (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows from operating leases | $ 493 | $ 481 |
Operating cash flows from finance leases | 2 | 1 |
Financing cash flows from finance leases | 2 | 2 |
Right-of-use assets obtained in exchange for new lease liabilities: | ||
Operating leases | 337 | 346 |
Finance leases | $ 2 | $ 4 |
Leases - Schedule of Lease Term
Leases - Schedule of Lease Term and Discount Rate (Details) | Dec. 31, 2020 | Dec. 31, 2019 |
Weighted-average remaining lease term (years) | ||
Operating leases | 7 years | 7 years 1 month 6 days |
Finance leases | 10 years 10 months 24 days | 11 years 6 months |
Weighted-average discount rate | ||
Operating leases | 5.80% | 6.10% |
Finance leases | 5.80% | 5.90% |
Leases - Summary of Maturities
Leases - Summary of Maturities of Lease Liabilities (Details) $ in Millions | Dec. 31, 2020USD ($) |
Amount of Operating Leases | |
2021 | $ 568 |
2022 | 474 |
2023 | 410 |
2024 | 343 |
2025 | 279 |
Thereafter | 818 |
Total undiscounted lease payment | 2,892 |
Present value of lease liabilities | 2,363 |
Less: imputed interest | 529 |
Amount of Finance Leases | |
2021 | 4 |
2022 | 4 |
2023 | 4 |
2024 | 4 |
2025 | 4 |
Thereafter | 21 |
Total undiscounted lease payment | 41 |
Present value of lease liabilities | 30 |
Less: imputed interest | 11 |
Amount of Operating And Finance Leases, Total | |
2021 | 572 |
2022 | 478 |
2023 | 414 |
2024 | 347 |
2025 | 283 |
Thereafter | 839 |
Total undiscounted lease payment | 2,933 |
Present value of lease liabilities | 2,393 |
Less: imputed interest | $ 540 |
Fair Value Measurements and D_3
Fair Value Measurements and Disclosures - Narrative (Details) - USD ($) | Dec. 31, 2020 | Dec. 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 | Dec. 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 | $ 808 | $ 738 | |
Short-term investments, Fair Value Measurement or Disclosure | 3,105 | 611 | |
Total assets, Fair Value Measurement or Disclosure | 4,134 | 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 | 207 | 331 | |
Short-term investments, Fair Value Measurement or Disclosure | 260 | ||
Total assets, Fair Value Measurement or Disclosure | 627 | 441 | |
Level 2 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | 601 | 407 | |
Short-term investments, Fair Value Measurement or Disclosure | 2,845 | 611 | |
Total assets, Fair Value Measurement or Disclosure | 3,507 | 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 | 601 | 407 | |
Short-term investments, Fair Value Measurement or Disclosure | 2,165 | 611 | |
Other assets, Fair Value Measurement or Disclosure | 61 | ||
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 | 601 | 407 | |
Short-term investments, Fair Value Measurement or Disclosure | 2,165 | 611 | |
Other assets, Fair Value Measurement or Disclosure | 61 | ||
Fixed Income Debt Securities [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | [1] | 207 | |
Short-term investments, Fair Value Measurement or Disclosure | [1] | 784 | |
Fixed Income Debt Securities [Member] | Level 1 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | [1] | 207 | |
Short-term investments, Fair Value Measurement or Disclosure | [1] | 104 | |
Fixed Income 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] | 680 | |
Variable Return Investments [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Short-term investments, Fair Value Measurement or Disclosure | 156 | ||
Variable Return Investments [Member] | Level 1 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Short-term investments, Fair Value Measurement or Disclosure | 156 | ||
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 | 160 | 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 | $ 160 | 110 | |
Money Market Funds [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | 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 | $ 331 | ||
[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) - Fair Value, Measurements, Nonrecurring [Member] - Level 3 [Member] - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||||
Total expense recognized from non-recurring fair value measurements | $ 52 | $ 121 | $ 39 | |
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 | ||
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] | $ 52 | 28 | 27 |
Daojia Impairment [Member] | ||||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||||
Total expense recognized from non-recurring fair value measurements | [3] | $ 11 | $ 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 $60 million to retained earnings in accordance with the transition guidance for the new lease standard. For those restaurants under operating leases with full impairment on their long-lived assets (primarily property, plant and equipment) before January 1, 2019, an additional impairment charge would have been recorded before January 1, 2019 had the operating lease ROU assets been recognized at the time of impairment. | |||
[2] | Restaurant-level impairment charges are recorded in Closures and impairment expenses, net and resulted primarily from our semi-annual impairment evaluation of long-lived assets of individual restaurants that were being operated at the time of impairment and had not been offered for refranchising. We performed an additional impairment evaluation in the first quarter of 2020, considering the adverse effects of the COVID-19 pandemic as an impairment indicator. A trend of continuing operating losses for certain restaurants due to the COVID-19 pandemic resulted in higher impairment during 2020. . | |||
[3] | See Note 5 for further discussion. |
Fair Value Measurements and D_6
Fair Value Measurements and Disclosures - Schedule of Amounts Recognized From Non-recurring Fair Value Measurements (Parenthetical) (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Cumulative adjustment to retained earnings | $ 2,105 | $ 1,416 |
Restaurant-level impairment [Member] | Fair Value, Measurements, Nonrecurring [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 157 | |
ASU 2016-02 [Member] | Cumulative Effect of Accounting Change [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 |
Retirement Plans - Narrative (D
Retirement Plans - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Defined Benefit Plan Disclosure [Line Items] | |||
Defined contribution plan, vesting interest percentage | 30.00% | ||
Deferred compensation arrangement with individual, minimum service period | 3 years | ||
Defined contribution plan, additional annual vesting interest percentage | 10.00% | ||
Government-Sponsored Plan [Member] | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Defined benefit plan, contributed by company | $ 167 | $ 160 | $ 174 |
Minimum [Member] | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Defined benefit plan, contributed by company, in percentage | 5.00% | ||
Minimum [Member] | Local Social Security Bureau [Member] | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Defined benefit plan, contributed by company, in percentage | 12.00% | ||
Maximum [Member] | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Defined benefit plan, contributed by company, in percentage | 10.00% | ||
Defined contribution plan, additional annual vesting interest percentage | 100.00% | ||
Maximum [Member] | Local Social Security Bureau [Member] | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Defined benefit plan, contributed by company, in percentage | 20.00% | ||
Account Payable [Member] | Yum China Holdings, Inc. Leadership Retirement Plan [Member] | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Liabilities attributable to employees | $ 0.2 | $ 4.8 |
Share-Based Compensation - Narr
Share-Based Compensation - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions | 1 Months Ended | 12 Months Ended | |||
Feb. 29, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Oct. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Share based compensation, vesting terms | Certain awards are subject to specific retirement conditions, which allow the awards to fully vest as long as the employee is actively employed for at least one year following the grant date, provides at least six months notification of intention to retire, and signs non-solicitation and non-compete agreements. Under such circumstances, the grant-date fair value of the award is recognized as expense on a straight-line basis over the one-year service period from the grant date. | ||||
Share-based compensation expense | $ 36 | $ 26 | $ 24 | ||
Deferred tax benefit recognized | $ 1 | $ 1 | $ 1 | ||
Non-Employee Directors [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of common stock granted | 54,757 | 60,419 | |||
Grant date fair value | $ 2.6 | $ 2.4 | |||
Stock Options and Stock Appreciation Rights [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting period (in years) | 4 years | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period | 10 years | ||||
Vesting schedule of grants under stock award plans | 25.00% | ||||
Expected term (years) | 6 years 6 months | 6 years 6 months | 6 years 6 months | ||
Risk-free interest rate | 1.50% | 2.50% | 2.50% | ||
Expected volatility | 33.20% | 32.00% | 33.00% | ||
Expected dividend yield | 1.10% | 1.20% | 1.00% | ||
Total intrinsic value of stock options and SARs exercised | $ 75 | $ 39 | $ 31 | ||
Unrecognized compensation cost | $ 25 | ||||
Remaining weighted-average vesting period | 1 year 8 months 8 days | ||||
Total fair value at grant date or modification date of awards vested | $ 15 | $ 14 | $ 14 | ||
RSUs [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting period (in years) | 3 years | ||||
Unrecognized compensation cost | $ 10 | ||||
Unvested shares | 551,642 | ||||
RSUs [Member] | Third Grant Anniversary [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting schedule of grants under stock award plans | 100.00% | ||||
Annual PSU Awards [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Performance period | 3 years | 3 years | 3 years | ||
Risk-free interest rate | 1.40% | ||||
Expected dividend yield | 33.40% | ||||
PSUs [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Model to fair value share-based payment awards | Monte-Carlo Simulation model (the “MCS model”) | ||||
Unrecognized compensation cost | $ 29 | ||||
Remaining weighted-average vesting period | 2 years 9 months 25 days | ||||
Unvested shares | 1,148,042 | ||||
Partner PSU Awards[Member] | Employees [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Performance period | 4 years | ||||
Model to fair value share-based payment awards | MCS model | ||||
Share-based compensation expense | $ 7 | ||||
Risk-free interest rate | 1.40% | ||||
Expected volatility | 1.10% | ||||
Expected dividend yield | 33.40% | ||||
Stock Appreciation Rights [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Weighted-average grant-date fair value of awards granted (in dollars per share) | $ 13.36 | $ 13.43 | $ 13.52 | ||
RSUs and PSUs [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Weighted-average grant-date fair value of awards granted (in dollars per share) | $ 40.49 | $ 44.75 | $ 39.50 | ||
Remaining weighted-average vesting period | 1 year 6 months | ||||
Total fair value at grant date or modification date of awards vested | $ 14 | $ 4 | $ 4 | ||
Unvested shares | 1,700,000 | 971,000 | |||
Minimum [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting period (in years) | 1 year | ||||
Minimum [Member] | Partner PSU Awards[Member] | Employees [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Stock-based compensation PSU award percentage | 0.00% | ||||
Maximum [Member] | Partner PSU Awards[Member] | Employees [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Stock-based compensation PSU award percentage | 200.00% | ||||
Long Term Incentive Plan (the "2016" Plan) [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Common stock reserved for future issuance | 45,000,000 | ||||
Long Term Incentive Plan (the "2016" Plan) [Member] | Minimum [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting period (in years) | 3 years | ||||
Long Term Incentive Plan (the "2016" Plan) [Member] | Maximum [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting period (in years) | 5 years |
Share-Based Compensation (Detai
Share-Based Compensation (Details) - Stock Options and Stock Appreciation Rights [Member] | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Award Valuation | |||
Risk-free interest rate | 1.50% | 2.50% | 2.50% |
Expected term (years) | 6 years 6 months | 6 years 6 months | 6 years 6 months |
Expected volatility | 33.20% | 32.00% | 33.00% |
Expected dividend yield | 1.10% | 1.20% | 1.00% |
Share-Based Compensation (Det_2
Share-Based Compensation (Details 1) - Stock Options and Stock Appreciation Rights [Member] $ / shares in Units, shares in Thousands, $ in Millions | 12 Months Ended | |
Dec. 31, 2020USD ($)$ / sharesshares | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Outstanding at the beginning of 2020 (in shares) | shares | 14,373 | |
Granted (in shares) | shares | 1,314 | |
Exercised (in shares) | shares | (3,585) | |
Forfeited or expired (in shares) | shares | (252) | |
Outstanding at the end of 2020 (in shares) | shares | 11,850 | [1] |
Exercisable at the end of 2020 (in shares) | shares | 8,841 | |
Outstanding at the beginning 2020, Weighted-average exercise price (in dollars per share) | $ / shares | $ 24.22 | |
Granted, Weighted-average exercise price (in dollars per share) | $ / shares | 42.71 | |
Exercised, Weighted-average exercise price (in dollars per share) | $ / shares | 19.19 | |
Forfeited or expired, Weighted-average exercise price (in dollars per share) | $ / shares | 38.22 | |
Outstanding at the end of 2020, Weighted-average exercise price (in dollars per share) | $ / shares | 27.49 | |
Exercisable at the end of 2020, Weighted-average exercise price (in dollars per share) | $ / shares | $ 23.32 | |
Outstanding at the end of 2020, Weighted-average remaining contractual term (in years) | 5 years 1 month 13 days | |
Exercisable at the end of 2020, Weighted-average remaining contractual term (in years) | 4 years 1 month 9 days | |
Outstanding at the end of 2020, Aggregate intrinsic value (in dollars) | $ | $ 351 | |
Exercisable at the end of 2020, Aggregate intrinsic value (in dollars) | $ | $ 299 | |
[1] | Outstanding awards include 348,407 stock options and 11,501,517 SARs with weighted-average exercise prices of $19.91 and $27.72, respectively. Outstanding awards represent Yum China awards held by employees of both the Company and YUM. |
Share-Based Compensation (Paren
Share-Based Compensation (Parenthetical) (Details 1) | Dec. 31, 2020$ / sharesshares |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Stock options outstanding at the end of 2020 (in shares) | shares | 348,407 |
SARs outstanding at the end of 2020 (in shares) | shares | 11,501,517 |
Stock options outstanding at the end of 2020, Weighted-average exercise price (in dollars per share) | $ / shares | $ 19.91 |
SARs outstanding at the end of 2020, Weighted-average exercise price (in dollars per share) | $ / shares | $ 27.72 |
Share-Based Compensation (Det_3
Share-Based Compensation (Details 2) - RSUs and PSUs [Member] - $ / shares shares in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Unvested at the beginning of 2020 (in shares) | 971 | ||
Granted (in shares) | 1,214 | ||
Vested (in shares) | (448) | ||
Forfeited or expired (in shares) | (37) | ||
Unvested at the end of 2020 (in shares) | 1,700 | 971 | |
Unvested at the beginning of 2020 | $ 36.08 | ||
Granted | 40.49 | $ 44.75 | $ 39.50 |
Vested | 30.76 | ||
Forfeited or expired | 41.25 | ||
Unvested at the end of 2020 | $ 40.52 | $ 36.08 |
Equity - Narrative (Details)
Equity - Narrative (Details) - USD ($) | Oct. 04, 2017 | Dec. 31, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Oct. 31, 2016 |
Equity [Abstract] | ||||||||||||||||
Common stock, shares authorized | 1,000,000,000 | 1,000,000,000 | 1,000,000,000 | 1,000,000,000 | 1,000,000,000 | |||||||||||
Common stock, par value | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 | |||||||||||
Common stock, shares issued | 440,000,000 | 395,000,000 | 440,000,000 | 395,000,000 | 363,758,219 | |||||||||||
Common stock, shares outstanding | 420,000,000 | 376,000,000 | 420,000,000 | 376,000,000 | 363,758,219 | |||||||||||
Treasury stock repurchased, shares | 200,000 | 6,200,000 | 9,000,000 | |||||||||||||
Treasury stock repurchased, value | $ 7,000,000 | $ 261,000,000 | $ 312,000,000 | |||||||||||||
Stock repurchase program, remaining authorized repurchase amount | $ 692,000,000 | 692,000,000 | ||||||||||||||
Dividends declared date | Oct. 4, 2017 | |||||||||||||||
Dividends payable, amount per share | $ 0.10 | |||||||||||||||
Total cash dividend paid | 95,000,000 | 181,000,000 | 161,000,000 | $ 38,000,000 | ||||||||||||
Cash dividend paid date | 2017-12 | |||||||||||||||
Cash dividends paid, amount per share | $ 0.12 | $ 0.12 | $ 0.12 | $ 0.12 | $ 0.12 | $ 0.12 | $ 0.12 | $ 0.10 | $ 0.10 | $ 0.10 | ||||||
Other comprehensive Income (loss) | 230,000,000 | (32,000,000) | (160,000,000) | |||||||||||||
Accumulated other comprehensive Income (loss) | $ 167,000,000 | $ (49,000,000) | 167,000,000 | (49,000,000) | ||||||||||||
Tax effect related to components of other comprehensive income | $ 0 | $ 0 | $ 0 | |||||||||||||
Percentage of annual after tax profit required to be allocated to general reserve | 10.00% | 10.00% | ||||||||||||||
Maximum percentage of annual after tax profit to be allocated to general reserve based on registered capital | 50.00% | 50.00% | ||||||||||||||
Restricted net assets | $ 855,000,000 | $ 855,000,000 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||
Mar. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2021 | |
Income Taxes Disclosure [Line Items] | |||||||
U.S. federal statutory rate, percent | 21.00% | 21.00% | 21.00% | ||||
Estimated additional income tax expense (benefit) | $ 8 | $ (36) | $ 164 | $ 8 | $ (36) | ||
Estimated transition tax on deemed repatriation of accumulated undistributed foreign earnings | 130 | ||||||
Estimated re-measurement of deferred tax assets based on revising rate | 4 | ||||||
Estimated valuation allowance for deferred assets as a result of Tax Act | 30 | ||||||
One time transition tax payable | $ 83 | ||||||
Effective income tax rate | 26.60% | 25.90% | 22.60% | ||||
Tax related to gains on investment in equity securities | $ (7) | $ 10 | $ (4) | ||||
Foreign withholding taxes not recognized, cumulative amount of temporary differences | 2,000 | ||||||
Cash payments for tax liabilities on income tax returns | $ 170 | 255 | 208 | ||||
Percentage threshold that the positions taken or expected to be taken is more likely than not sustained upon examination by tax authorities (in hundredths) | 50.00% | ||||||
Increase (decrease) in unrecognized tax benefits | $ 8 | 4 | |||||
Amount of unrecognized tax benefits balance | $ 22 | 21 | 19 | 22 | |||
Total interest and penalties recorded during the period | $ (1) | $ (1) | |||||
Scenario Forecast [Member] | |||||||
Income Taxes Disclosure [Line Items] | |||||||
Increase (decrease) in unrecognized tax benefits in the next 12 months | $ (6) | ||||||
Other Liabilities [Member] | |||||||
Income Taxes Disclosure [Line Items] | |||||||
Amount of unrecognized tax benefits balance | 21 | ||||||
Little Sheep Group Limited and Daojia [Member] | |||||||
Income Taxes Disclosure [Line Items] | |||||||
Operating loss carryforwards | $ 111 | ||||||
Operating loss carryforwards expiration year | 2025 | ||||||
Minimum [Member] | |||||||
Income Taxes Disclosure [Line Items] | |||||||
Effective Income Tax Rate Foreign Tax Withholding | 5.00% | ||||||
Maximum [Member] | |||||||
Income Taxes Disclosure [Line Items] | |||||||
Effective Income Tax Rate Foreign Tax Withholding | 10.00% | ||||||
Meituan Dianping [Member] | |||||||
Income Taxes Disclosure [Line Items] | |||||||
U.S. tax recorded | $ 29 | ||||||
Tax related to gains on investment in equity securities | $ 22 | $ 7 | |||||
China [Member] | |||||||
Income Taxes Disclosure [Line Items] | |||||||
Effective income tax rate | 25.00% |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
U.S. and foreign income (loss) before income taxes [Abstract] | |||
U.S. | $ (10) | $ (7) | $ (3) |
Mainland China | 1,014 | 941 | 979 |
Other Foreign | 104 | 69 | (26) |
Income Before Income Taxes | $ 1,108 | $ 1,003 | $ 950 |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Details of income tax provision (benefit) [Abstract] | |||
Current: Federal | $ 1 | $ 16 | $ (33) |
Current: Foreign | 183 | 228 | 214 |
Total current income tax provision (benefit) | 184 | 244 | 181 |
Deferred: Federal | 26 | (1) | |
Deferred: Foreign | 85 | 17 | 33 |
Total deferred income tax provision (benefit) | 111 | 16 | 33 |
Effective income tax rate | $ 295 | $ 260 | $ 214 |
Income Taxes (Details 2)
Income Taxes (Details 2) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||||
Mar. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Expense (Benefit), Continuing Operations, Income Tax Reconciliation [Abstract] | ||||||
U.S. federal statutory rate | $ 233 | $ 211 | $ 199 | |||
Transaction tax | $ 8 | $ (36) | $ 164 | 8 | (36) | |
Statutory rate differential attributable to foreign operations | 63 | 53 | 56 | |||
Adjustments to reserves and prior years | (6) | (2) | (4) | |||
Change in valuation allowances | 1 | 2 | (4) | |||
Impact from investment (gain) loss | 7 | (10) | 4 | |||
Other, net | (3) | (2) | (1) | |||
Effective income tax rate | $ 295 | $ 260 | $ 214 | |||
Effective income tax rate reconciliation [Abstract] | ||||||
U.S. federal statutory rate, percent | 21.00% | 21.00% | 21.00% | |||
Impact from the Tax Act, percent | 0.80% | (3.80%) | ||||
Statutory rate differential attributable to foreign operations, percent | 5.70% | 5.30% | 5.80% | |||
Adjustments to reserves and prior years | (0.60%) | (0.20%) | (0.40%) | |||
Change in valuation allowances, percent | 0.10% | 0.20% | (0.40%) | |||
Impact on investment gain loss | 0.70% | (1.00%) | 0.50% | |||
Other, net, percent | (0.30%) | (0.20%) | (0.10%) | |||
Effective income tax rate, percent | 26.60% | 25.90% | 22.60% |
Income Taxes (Details 3)
Income Taxes (Details 3) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 | |
Net deferred tax assets (liabilities) [Abstract] | |||
Operating losses and tax credit carryforwards | $ 24 | $ 25 | |
Employee benefits | 3 | 4 | |
Share-based compensation | 5 | 5 | |
Lease | 62 | 61 | |
Other liabilities | 13 | 13 | |
Deferred income and other | 75 | 58 | |
Gross deferred tax assets | 199 | 184 | |
Deferred tax asset valuation allowances | (42) | (47) | |
Net deferred tax assets | 157 | 137 | |
Intangible assets | (61) | (23) | |
Property, plant and equipment | (85) | (59) | |
Gain from re-measurement of equity interest upon acquisition | (87) | (22) | |
Unrealized gains from equity securities | (26) | ||
Withholding tax on distributable earnings | (27) | (5) | |
Gross deferred tax liabilities | (286) | (109) | |
Net deferred tax liabilities | (129) | ||
Net deferred tax assets | 28 | ||
Reported in Consolidated Balance Sheets as: | |||
Deferred income taxes | 98 | 95 | |
Other liabilities | [1] | (227) | (67) |
Net deferred tax liabilities | (129) | ||
Net deferred tax assets | 28 | ||
Little Sheep Group Limited [Member] | |||
Net deferred tax assets (liabilities) [Abstract] | |||
Tax benefit from Little Sheep restructuring | $ 17 | $ 18 | |
[1] | Increase in deferred income tax liabilities balances in 2020 primarily resulted from Suzhou KFC and Huang Ji Huang acquisitions |
Income Taxes (Details 4)
Income Taxes (Details 4) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Beginning of Year | $ 19 | $ 22 |
Additions for tax positions of prior years | 8 | 4 |
Reductions due to statute expiration | (6) | (7) |
End of Year | $ 21 | $ 19 |
Income Taxes (Details 5)
Income Taxes (Details 5) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Income Tax Disclosure [Abstract] | ||
Accrued interest and penalties | $ 5 | $ 5 |
Segment Reporting - Narrative (
Segment Reporting - Narrative (Details) | 12 Months Ended |
Dec. 31, 2020Segment | |
Segment Reporting [Abstract] | |
Number of reportable segments | 2 |
Segment Reporting (Details)
Segment Reporting (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||||
Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | $ 2,259 | $ 2,348 | $ 1,902 | $ 1,754 | $ 2,029 | $ 2,319 | $ 2,124 | $ 2,304 | $ 8,263 | $ 8,776 | $ 8,415 | ||
Operating Profit | 180 | $ 556 | $ 128 | $ 97 | 94 | $ 300 | $ 204 | $ 303 | 961 | 901 | 941 | ||
Interest income, net | [1] | 43 | 39 | 36 | |||||||||
Investment gain (loss) | [1] | 104 | 63 | (27) | |||||||||
Income Before Income Taxes | 1,108 | 1,003 | 950 | ||||||||||
Depreciation and amortization | 450 | 428 | 445 | ||||||||||
Impairment Charges | 66 | 49 | 52 | ||||||||||
Capital Spending | 419 | 435 | 470 | ||||||||||
Total Assets | 10,875 | 6,950 | 10,875 | 6,950 | |||||||||
Combined Elimination [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 58 | 38 | 16 | ||||||||||
Revenue From External Customers [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 8,263 | 8,776 | 8,415 | ||||||||||
Revenue From External Customers [Member] | KFC [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 5,821 | 6,039 | 5,688 | ||||||||||
Revenue From External Customers [Member] | Pizza Hut [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 1,730 | 2,054 | 2,111 | ||||||||||
Revenue From External Customers [Member] | All Other Segments [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 173 | 121 | 99 | ||||||||||
Corporate and Unallocated [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | [1] | 565 | 562 | 517 | [2] | ||||||||
Unallocated revenues from transactions with franchisees and unconsolidated affiliates | [3] | 533 | 558 | 514 | |||||||||
Unallocated Other revenues | 32 | 4 | 3 | ||||||||||
Unallocated expenses for transactions with franchisees and unconsolidated affiliates | [3] | (531) | (554) | (512) | |||||||||
Unallocated Other operating costs and expenses | (30) | (4) | (2) | ||||||||||
Unallocated and corporate G&A expenses | (144) | (145) | (128) | ||||||||||
Unallocated Closures and impairment expense | [4] | (11) | (12) | ||||||||||
Unallocated Other income | [5] | 245 | 4 | 98 | |||||||||
Depreciation and amortization | 14 | 13 | 12 | ||||||||||
Impairment Charges | [4] | 11 | 12 | ||||||||||
Capital Spending | 96 | 90 | 95 | ||||||||||
Total Assets | [6] | 5,507 | 2,674 | 5,507 | 2,674 | ||||||||
Corporate and Unallocated [Member] | Revenue From External Customers [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | [1] | 539 | 562 | 517 | |||||||||
Operating Segments [Member] | KFC [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 5,821 | 6,040 | 5,688 | ||||||||||
Operating Profit | [7] | 801 | 949 | 895 | |||||||||
Depreciation and amortization | 315 | 290 | 296 | ||||||||||
Impairment Charges | [8] | 32 | 16 | 14 | |||||||||
Capital Spending | 257 | 264 | 292 | ||||||||||
Total Assets | [9] | 4,084 | 3,160 | 4,084 | 3,160 | ||||||||
Operating Segments [Member] | Pizza Hut [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 1,730 | 2,054 | 2,111 | ||||||||||
Operating Profit | 62 | 114 | 97 | ||||||||||
Depreciation and amortization | 113 | 120 | 129 | ||||||||||
Impairment Charges | [8] | 29 | 20 | 26 | |||||||||
Capital Spending | 61 | 71 | 77 | ||||||||||
Total Assets | 906 | 950 | 906 | 950 | |||||||||
Operating Segments [Member] | All Other Segments [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 205 | 158 | 115 | ||||||||||
Operating Profit | (7) | (14) | (12) | ||||||||||
Depreciation and amortization | 8 | 5 | 8 | ||||||||||
Impairment Charges | [8] | 5 | 2 | ||||||||||
Capital Spending | 5 | 10 | 6 | ||||||||||
Total Assets | $ 378 | $ 166 | 378 | 166 | |||||||||
Operating Segments [Member] | Revenue From External Customers [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 8,263 | 8,776 | 8,415 | ||||||||||
Elimination [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | (58) | (38) | (16) | ||||||||||
Elimination [Member] | KFC [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 1 | ||||||||||||
Elimination [Member] | All Other Segments [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 32 | 37 | 16 | ||||||||||
Elimination [Member] | Corporate and Unallocated [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | [1] | 26 | |||||||||||
Combined [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | $ 8,321 | $ 8,814 | $ 8,431 | ||||||||||
[1] | Amounts have not been allocated to any segment for performance reporting purposes. | ||||||||||||
[2] | As COFFii & JOY and our e-commerce business became operating segments starting from the first quarter of 2019, revenue by segment information for 2018 has been recast to align with the change in segment reporting. Additional details on our reportable segments are included in Note 17. | ||||||||||||
[3] | Primarily includes revenues and associated expenses of transactions with franchisees and unconsolidated affiliates derived from the Company’s central procurement model whereby the Company centrally purchases substantially all food and paper products from suppliers then sells and delivers to KFC and Pizza Hut restaurants, including franchisees 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. | ||||||||||||
[4] | Includes impairment charges on intangible assets and goodwill attributable to the Daojia business in 2019 and 2018, respectively. See Note 5. | ||||||||||||
[5] | In 2020 and 2018, the unallocated other income primarily includes gain from re-measurement of previously held equity interest in connection with the acquisition of Suzhou KFC and Wuxi KFC, respectively. See Note 5. | ||||||||||||
[6] | Primarily includes cash and cash equivalents, short-term investments, investment in equity securities, long-term time deposits and inventories that are centrally managed. | ||||||||||||
[7] | Includes equity income from investments in unconsolidated affiliates of $63 million, $69 million and $65 million in 2020, 2019 and 2018, respectively. | ||||||||||||
[8] | Primarily includes store closure impairment charges, restaurant-level impairment charges resulting from our semi-annual impairment evaluation as well as our additional impairment evaluation performed in the first quarter of 2020 in response to adverse impact from the COVID-19 pandemic, and incremental restaurant-level impairment charges in the first quarter of 2019 as a result of adopting ASC 842. (See Note 12). | ||||||||||||
[9] | Includes investments in unconsolidated affiliates. |
Segment Reporting (Parenthetica
Segment Reporting (Parenthetical) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Segment Reporting Information [Line Items] | |||
Equity income from investments in unconsolidated affiliates | $ 62 | $ 69 | $ 65 |
KFC [Member] | |||
Segment Reporting Information [Line Items] | |||
Equity income from investments in unconsolidated affiliates | $ 63 | $ 69 | $ 65 |
Contingencies - Narrative (Deta
Contingencies - Narrative (Details) - USD ($) | 1 Months Ended | |
Feb. 28, 2015 | Dec. 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 | |
Fair value obligations related to indemnifications | $ 0 |
Selected Quarterly Financial _3
Selected Quarterly Financial Data (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Revenues | |||||||||||
Total revenues | $ 2,259 | $ 2,348 | $ 1,902 | $ 1,754 | $ 2,029 | $ 2,319 | $ 2,124 | $ 2,304 | $ 8,263 | $ 8,776 | $ 8,415 |
Restaurant profit | 308 | 394 | 231 | 165 | 225 | 372 | 283 | 386 | 1,098 | 1,266 | |
Operating Profit | 180 | 556 | 128 | 97 | 94 | 300 | 204 | 303 | 961 | 901 | 941 |
Net Income – Yum China Holdings, Inc. | $ 151 | $ 439 | $ 132 | $ 62 | $ 90 | $ 223 | $ 178 | $ 222 | $ 784 | $ 713 | $ 708 |
Basic earnings per common share | $ 0.36 | $ 1.13 | $ 0.35 | $ 0.16 | $ 0.24 | $ 0.59 | $ 0.47 | $ 0.59 | $ 2.01 | $ 1.89 | $ 1.84 |
Diluted earnings per common share | $ 0.35 | $ 1.10 | $ 0.34 | $ 0.16 | $ 0.23 | $ 0.58 | $ 0.46 | $ 0.57 | $ 1.95 | $ 1.84 | $ 1.79 |
Company Sales [Member] | |||||||||||
Revenues | |||||||||||
Revenues | $ 2,038 | $ 2,118 | $ 1,692 | $ 1,548 | $ 1,813 | $ 2,097 | $ 1,926 | $ 2,089 | $ 7,396 | $ 7,925 | $ 7,633 |
Franchise [Member] | |||||||||||
Revenues | |||||||||||
Revenues | 36 | 40 | 37 | 35 | 35 | 38 | 36 | 39 | 148 | 148 | 141 |
Transactions With Franchisees and Unconsolidated Affiliates [Member] | |||||||||||
Revenues | |||||||||||
Revenues | 159 | 170 | 157 | 161 | 158 | 172 | 154 | 170 | 647 | 654 | 603 |
Other Revenues [Member] | |||||||||||
Revenues | |||||||||||
Revenues | $ 26 | $ 20 | $ 16 | $ 10 | $ 23 | $ 12 | $ 8 | $ 6 | $ 72 | $ 49 | $ 38 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Millions | Feb. 03, 2021 | Oct. 04, 2017 |
Subsequent Event [Line Items] | ||
Dividends declared date | Oct. 4, 2017 | |
Dividends payable, amount per share | $ 0.10 | |
Subsequent Event [Member] | ||
Subsequent Event [Line Items] | ||
Dividends declared date | Feb. 3, 2021 | |
Dividends payable, amount per share | $ 0.12 | |
Dividends payable date | Mar. 25, 2021 | |
Dividends payable, date of record | Mar. 3, 2021 | |
Estimated cash dividend payable | $ 50 |