Document and Entity Information
Document and Entity Information - USD ($) $ in Billions | 12 Months Ended | ||
Dec. 31, 2019 | Feb. 21, 2020 | Jun. 28, 2019 | |
Document And Entity Information [Line Items] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2019 | ||
Document Fiscal Year Focus | 2019 | ||
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 | 375,786,390 | ||
Entity Public Float | $ 17.4 | ||
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 $0.01 Per Share | ||
Security Exchange Name | NYSE | ||
Documents Incorporated by Reference | DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive proxy statement for the registrant’s 2020 annual meeting of stockholders (the “2020 Proxy Statement”), to be filed not later than 120 days after the end of the registrant’s fiscal year, are incorporated by reference into Part III of this Form 10-K. | ||
Other Address [Member] | |||
Document And Entity Information [Line Items] | |||
Entity Address, Address Line One | Yum China Building | ||
Entity Address, City or Town | Shanghai | ||
Entity Address, Postal Zip Code | 200030 | ||
Entity Address, Country | CN | ||
Entity Address, Address Line Two | 20 Tian Yao Qiao Road |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) shares in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||
Revenues | ||||
Total revenues | $ 8,776 | $ 8,415 | $ 7,769 | |
Costs and Expenses, Net | ||||
General and administrative expenses | 487 | 456 | 495 | |
Other operating costs and expenses | 37 | 29 | 28 | |
Closures and impairment expenses, net | 36 | 41 | 47 | |
Other income, net | (60) | (152) | (64) | |
Total costs and expenses, net | 7,875 | 7,474 | 6,991 | |
Operating Profit | 901 | 941 | 778 | |
Interest income, net | [1] | 39 | 36 | 25 |
Investment gain (loss) | [1] | 63 | (27) | |
Income Before Income Taxes | 1,003 | 950 | 803 | |
Income tax provision | (260) | (214) | (379) | |
Net income – including noncontrolling interests | 743 | 736 | 424 | |
Net income – noncontrolling interests | 30 | 28 | 26 | |
Net Income – Yum China Holdings, Inc. | $ 713 | $ 708 | $ 398 | |
Weighted-average common shares outstanding (in millions): | ||||
Basic | [2] | 377 | 384 | 387 |
Diluted | 388 | 395 | 398 | |
Basic Earnings Per Common Share | $ 1.89 | $ 1.84 | $ 1.03 | |
Diluted Earnings Per Common Share | $ 1.84 | $ 1.79 | $ 1 | |
Company Sales [Member] | ||||
Revenues | ||||
Revenues | $ 7,925 | $ 7,633 | $ 6,993 | |
Franchise [Member] | ||||
Revenues | ||||
Revenues | 148 | 141 | 141 | |
Costs and Expenses, Net | ||||
Cost of goods and services sold | 71 | 71 | 71 | |
Transactions With Franchisees and Unconsolidated Affiliates [Member] | ||||
Revenues | ||||
Revenues | 654 | 603 | 599 | |
Costs and Expenses, Net | ||||
Cost of goods and services sold | 645 | 595 | 592 | |
Other Revenues [Member] | ||||
Revenues | ||||
Revenues | 49 | 38 | 36 | |
Company Restaurant Expenses [Member] | ||||
Costs and Expenses, Net | ||||
Food and paper | 2,479 | 2,326 | 2,034 | |
Payroll and employee benefits | 1,807 | 1,714 | 1,543 | |
Occupancy and other operating expenses | 2,373 | 2,394 | 2,245 | |
Cost of goods and services sold | $ 6,659 | $ 6,434 | $ 5,822 | |
[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. |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Statement Of Income And Comprehensive Income [Abstract] | |||
Net income - including noncontrolling interests | $ 743 | $ 736 | $ 424 |
Other comprehensive (loss) income, net of tax of nil | |||
Foreign currency (loss) gain arising during the year | (32) | (160) | 142 |
Comprehensive income - including noncontrolling interests | 711 | 576 | 566 |
Comprehensive income - noncontrolling interests | 30 | 22 | 31 |
Comprehensive Income - Yum China Holdings, Inc. | $ 681 | $ 554 | $ 535 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||
Cash Flows – Operating Activities | ||||
Net income - including noncontrolling interests | $ 743 | $ 736 | $ 424 | |
Depreciation and amortization | 428 | 445 | 409 | |
Amortization of operating lease right-of-use assets | 339 | |||
Closures and impairment expenses | 36 | 41 | 47 | |
Gain from re-measurement of equity interest upon acquisition | [1] | (98) | ||
Investment (gain) loss | [2] | (63) | 27 | |
Equity income from investments in unconsolidated affiliates | (69) | (65) | (65) | |
Distributions of income received from unconsolidated affiliates | 73 | 63 | 45 | |
Deferred income taxes | 16 | 33 | 62 | |
Share-based compensation expense | 26 | 24 | 26 | |
Changes in accounts receivable | (9) | (13) | 1 | |
Changes in inventories | (77) | (23) | (11) | |
Changes in prepaid expenses and other current assets | (3) | (22) | (15) | |
Changes in accounts payable and other current liabilities | 171 | 254 | (56) | |
Changes in income taxes payable | (8) | 17 | 3 | |
Changes in non-current operating lease liabilities | (381) | |||
Other, net | (37) | (86) | 14 | |
Net Cash Provided by Operating Activities | 1,185 | 1,333 | 884 | |
Cash Flows – Investing Activities | ||||
Capital spending | (435) | (470) | (415) | |
Purchases of short-term investments | (1,024) | (604) | (596) | |
Maturities of short-term investments | 534 | 680 | 479 | |
Acquisition of business, net of cash acquired | (91) | (25) | ||
Investment in equity securities | (74) | |||
Other, net | 15 | 7 | ||
Net Cash Used in Investing Activities | (910) | (552) | (557) | |
Cash Flows – Financing Activities | ||||
Repurchase of shares of common stock | (265) | (307) | (128) | |
Cash dividends paid on common stock | (181) | (161) | (38) | |
Dividends paid to noncontrolling interests | (32) | (36) | (22) | |
Other, net | (2) | (14) | 3 | |
Net Cash Used in Financing Activities | (480) | (518) | (185) | |
Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash | (6) | (56) | 32 | |
Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash | (211) | 207 | 174 | |
Cash, Cash Equivalents and Restricted Cash - Beginning of Year | 1,266 | 1,059 | 885 | |
Cash, Cash Equivalents and Restricted Cash - End of Year | 1,055 | 1,266 | 1,059 | |
Supplemental Cash Flow Data | ||||
Cash paid for income tax | $ 255 | $ 208 | $ 232 | |
[1] | As a result of the acquisition of Wuxi KFC in the first quarter of 2018, as disclosed in Note 5, the Company recognized a gain of $98 million from the re-measurement of our previously held 47% equity interest at fair value, which was not allocated to any segment for performance reporting purposes. | |||
[2] | Amounts have not been allocated to any segment for performance reporting purposes. |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Current Assets | |||
Cash and cash equivalents | $ 1,046 | $ 1,266 | |
Short-term investments | 611 | 122 | |
Accounts receivable, net | 88 | 80 | |
Inventories, net | 380 | 307 | |
Prepaid expenses and other current assets | 134 | 177 | |
Total Current Assets | 2,259 | 1,952 | |
Property, plant and equipment, net | 1,594 | 1,615 | |
Operating lease right-of-use assets | 1,985 | ||
Goodwill | 254 | 266 | $ 108 |
Intangible assets, net | 94 | 116 | |
Deferred income taxes | 95 | 89 | |
Investments in unconsolidated affiliates | 89 | 81 | |
Other assets | 580 | 491 | |
Total Assets | 6,950 | 4,610 | |
Current Liabilities | |||
Accounts payable and other current liabilities | 1,691 | 1,199 | |
Income taxes payable | 45 | 54 | |
Total Current Liabilities | 1,736 | 1,253 | |
Non-current operating lease liabilities | 1,803 | ||
Non-current finance lease obligations | 26 | 25 | |
Other liabilities | 210 | 355 | |
Total Liabilities | 3,775 | 1,633 | |
Redeemable Noncontrolling Interest | 1 | ||
Equity | |||
Common stock, $0.01 par value; 1,000 million shares authorized; 395 million shares and 392 million shares issued at December 31, 2019 and 2018, respectively; 376 million shares and 379 million shares outstanding at December 31, 2019 and 2018, respectively | 4 | 4 | |
Treasury stock | (721) | (460) | |
Additional paid-in capital | 2,427 | 2,402 | |
Retained earnings | 1,416 | 944 | |
Accumulated other comprehensive loss | (49) | (17) | |
Total Yum China Holdings, Inc. Stockholders’ Equity | 3,077 | 2,873 | |
Noncontrolling interests | 98 | 103 | |
Total Equity | 3,175 | 2,976 | |
Total Liabilities, Redeemable Noncontrolling Interest and Equity | $ 6,950 | $ 4,610 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 | 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 | 395,000,000 | 392,000,000 | 363,758,219 |
Common stock, shares outstanding | 376,000,000 | 379,000,000 | 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] | Accumulated Other Comprehensive Income (Loss) [Member] | Noncontrolling Interests [Member] | Treasury Stock [Member] | Total equity Including Noncontrolling Interest [Member] | Redeemable Noncontrolling Interest [Member] |
Balance at Dec. 31, 2016 | $ 4 | $ 2,344 | $ 37 | $ 66 | $ (20) | $ 2,431 | |||
Balance (in shares) at Dec. 31, 2016 | 383 | (1) | |||||||
Net Income (loss) | $ 424 | 398 | 26 | 424 | |||||
Foreign currency translation adjustment | 142 | $ 137 | 5 | 142 | |||||
Comprehensive income - including noncontrolling interests | 566 | 566 | |||||||
Dividends declared | (22) | (22) | |||||||
Cash dividends declared | (38) | (38) | |||||||
Acquisition of business | 2 | 2 | $ 5 | ||||||
Repurchase of shares of common stock | $ (128) | $ (128) | (128) | ||||||
Repurchase of shares of common stock (in shares) | (3.4) | (3) | |||||||
Exercise and vesting of share-based awards | 5 | 5 | |||||||
Exercise and vesting of share-based awards (in shares) | 6 | ||||||||
Share-based compensation | 26 | 26 | |||||||
Balance at Dec. 31, 2017 | $ 4 | 2,375 | 397 | 137 | 77 | $ (148) | 2,842 | 5 | |
Balance (in shares) at Dec. 31, 2017 | 389 | (4) | |||||||
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) | |||||||
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 | $ 2,976 | $ 4 | 2,402 | 944 | (17) | 103 | $ (460) | 2,976 | 1 |
Balance (in shares) at Dec. 31, 2018 | 392 | (13) | |||||||
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) | |||||||
Exercise and vesting of share-based awards (in shares) | 3 | ||||||||
Share-based compensation | 26 | 26 | |||||||
Revaluation of redeemable noncontrolling interest | (1) | (1) | $ 1 | ||||||
Cumulative effect of accounting change | (60) | (3) | (63) | ||||||
Balance at Dec. 31, 2019 | $ 3,175 | $ 4 | $ 2,427 | $ 1,416 | $ (49) | $ 98 | $ (721) | $ 3,175 | |
Balance (in shares) at Dec. 31, 2019 | 395 | (19) |
Consolidated Statements of Eq_2
Consolidated Statements of Equity (Parenthetical) - $ / shares | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Statement Of Stockholders Equity [Abstract] | |||
Cash dividends declared, per common share | $ 0.48 | $ 0.42 | $ 0.10 |
Description of Business
Description of Business | 12 Months Ended |
Dec. 31, 2019 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Description of Business | Note 1 – Description of Business Yum China Holdings, Inc. (“Yum China” and, together with its subsidiaries, the “Company,” “we,” “us,” and “our”) was incorporated in Delaware on April 1, 2016. The Company owns, franchises or has ownership in entities that own and operate restaurants (also referred to as “stores” or “units”) under the KFC, Pizza Hut, Little Sheep, COFFii & JOY, East Dawning and Taco Bell concepts (collectively, the “concepts”). In connection with the separation of the Company in 2016 from its former parent company, Yum! Brands, Inc. (“YUM”), Yum! Restaurants Asia Pte. Ltd., a wholly-owned indirect subsidiary of YUM, and Yum Restaurants Consulting (Shanghai) Company Limited (“YCCL”), a wholly-owned indirect subsidiary of the Company, entered into a 50-year master license agreement with automatic renewals for additional consecutive renewal terms of 50 years each, subject only to YCCL being in “good standing” and unless YCCL gives notice of its intent not to renew, for the exclusive right to use and sublicense the use of intellectual property owned by YUM and its subsidiaries for the development and operation of the KFC, Pizza Hut and, subject to achieving certain agreed-upon milestones, Taco Bell brands and their related marks and other intellectual property rights for restaurant services in the People’s Republic of China (the “PRC” or “China”), excluding Hong Kong, Taiwan and Macau. In exchange, we pay a license fee to YUM equal to 3% of net system sales from both our Company and franchise restaurants. We own the intellectual property of Little Sheep, COFFii & JOY and East Dawning, and pay no license fee related to these concepts. In 1987, KFC was the first quick-service restaurant brand to enter China. As of December 31, 2019, there are over 6,500 KFCs 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 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. The acquisition was considered immaterial. We began consolidating Wuxi KFC upon the completion of acquisition. We have a 47% The first Pizza Hut in China opened in 1990. As of December 31, 2019, there are over 2,200 Pizza Hut restaurants in China. In 2017, the Company completed the acquisition of a controlling interest in the holding company of DAOJIA.com.cn (“Daojia”), an established online food delivery service provider. The Company agreed to pay cash consideration of $36.7 million to the sellers and made a concurrent capital contribution of $25.0 million to Daojia. As of the completion of the acquisition, the Company held 90% of Daojia’s outstanding shares of common stock, or 80% of its equity interests on a fully-diluted basis. Daojia became an operating segment of the Company. The acquisition was considered immaterial. The Company has two reportable segments: KFC and Pizza Hut. Our remaining operating segments, including the operations of Little Sheep, East Dawning, Taco Bell, Daojia, newly developed COFFii & JOY and our e-commerce business, with the latter two becoming operating segments starting from the first quarter of 2019, are combined and referred to as All Other Segments, as those operating segments are insignificant both individually and in the aggregate. 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. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
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, 2019, the Company had future lease payments due from franchisees, on a nominal basis, of approximately $47 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 and Wuxi where we have controlling interests of 58%, 70% and 83%, respectively. We report Net income attributable to noncontrolling interests, which includes the minority shareholders of the entities, separately on the face of our Consolidated Statements of Income. The portion of equity not attributable to the Company for these entities is reported within equity, separately from the Company’s stockholders’ equity on the Consolidated Balance Sheets. We have a noncontrolling 47% interest in each of the entities that operate the KFCs in Hangzhou and Suzhou. These entities are not VIEs and our lack of majority voting rights precludes us from controlling these affiliates. Thus, we do not consolidate these affiliates. Instead, we account for them under the equity method. Our share of the net income or loss of these unconsolidated affiliates is included in Other income, net in our Consolidated Statements of Income. 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. Effective at the beginning of fiscal 2018, the Company changed its fiscal calendar from two months in the first quarter, three months in the second and third quarters and four months in the fourth quarter, to four three-month quarters ending on March 31, June 30, September 30 and December 31 of each year. The change was made to align with how management measures performance internally and to facilitate the comparability of our results with peers using calendar quarters. 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. As of December 31, 2019, net cumulative translation adjustment loss of $49 million was recorded in Accumulated other comprehensive 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 $273 million, $263 million and $245 million during the years ended December 31, 2019, 2018 and 2017, 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. 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 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. 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 $344 million, $341 million and $333 million in 2019, 2018 and 2017, respectively, and were included in Occupancy and other operating expenses. In addition, the direct marketing costs incurred for franchisees and unconsolidated affiliates were $65 million, $62 million and $69 million in 2019, 2018 and 2017, 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 G&A expenses. Research and development expenses were $4 million, $4 million and $5 million in 2019, 2018 and 2017, 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. 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 primarily 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. 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 and money market funds. 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. Our provision for uncollectible receivable balances is based upon pre-defined aging criteria or upon the occurrence of other events that indicate 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. While we use the best information available in making our determination, the ultimate recovery of recorded receivables is also dependent upon future economic events and other conditions that may be beyond our control. Trade receivables that are ultimately deemed to be uncollectible, and for which collection efforts have been exhausted, are written off against the allowance for doubtful accounts. Receivables due from unconsolidated affiliates including trade receivables and dividend receivables were $58 million and $65 million as of December 31, 2019 and 2018, 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. An allowance for doubtful accounts is recorded in the period in which a loss is determined to be probable. Receivable balances are written off after all collection efforts have been exhausted. As of December 31, 2019 and 2018, no allowance for doubtful accounts was provided for such receivables. 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. 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. The Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (To |
Revenue
Revenue | 12 Months Ended |
Dec. 31, 2019 | |
Revenue From Contract With Customer [Abstract] | |
Revenue | Note 3 – Revenue The following table presents revenue disaggregated by types of arrangements and segments: 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. 2017 Revenues KFC Pizza Hut All Other Segments Corporate and Unallocated Combined Elimination Consolidated Company sales $ 4,863 $ 2,090 $ 40 $ — $ 6,993 $ — $ 6,993 Franchise fees and income 134 2 5 — 141 — 141 Revenues from transactions with franchisees and unconsolidated affiliates 69 1 25 504 599 — 599 Other revenues — — 36 — 36 — 36 Total revenues $ 5,066 $ 2,093 $ 106 $ 504 $ 7,769 $ — $ 7,769 Franchise Fees and Income 2019 2018 2017 Initial fees, including renewal fees $ 8 $ 7 $ 6 Continuing fees and rental income 140 134 135 Franchise fees and income $ 148 $ 141 $ 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 and $8 million at December 31, 2019 and 2018, respectively. Contract Liabilities Contract liabilities at December 31, 2019 and 2018 were as follows: 2019 2018 Contract liabilities - Deferred revenue related to prepaid stored-value products $ 86 $ 70 - Deferred revenue related to upfront franchise fees 39 37 - Deferred revenue related to customer loyalty programs 24 17 - Deferred revenue related to privilege membership programs 16 3 - Others 3 — Total $ 168 $ 127 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 $68 million and $46 million in 2019 and 2018, 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, 2019 | |
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): 2019 2018 2017 Net Income – Yum China Holdings, Inc. $ 713 $ 708 $ 398 Weighted-average common shares outstanding (for basic calculation) (a) 377 384 387 Effect of dilutive share-based awards (a) 8 9 10 Effect of dilutive warrants (b) 3 2 1 Weighted-average common and dilutive potential common shares outstanding (for diluted calculation) 388 395 398 Basic Earnings Per Share $ 1.89 $ 1.84 $ 1.03 Diluted Earnings Per Share $ 1.84 $ 1.79 $ 1.00 Share-based awards and warrants excluded from the diluted EPS computation (c) 2 6 10 (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. (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 options, stock appreciation rights, RSUs, PSUs and warrants were not included in the computation of diluted EPS because to do so would have been antidilutive for the years presented. |
Items Affecting Comparability o
Items Affecting Comparability of Net Income and Cash Flows | 12 Months Ended |
Dec. 31, 2019 | |
Items Affecting Comparability Of Net Income And Cash Flows [Abstract] | |
Items Affecting Comparability of Net Income and Cash Flows | Note 5 – Items Affecting Comparability of Net Income and Cash Flows Gain from re-measurement of equity interest upon acquisition In the first quarter of 2018, the Company completed the acquisition of Wuxi KFC. In connection with the acquisition, the Company also recognized a gain of $98 million from the re-measurement of our previously held 47% equity interest at fair value using discounted cash flow valuation approach and incorporating assumptions and estimates that are not observable in the market. Key assumptions used in estimating future cash flows included projected revenue growth and operating 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 not allocated to any segment for performance reporting purposes. Meituan Dianping (“Meituan”) investment The Company subscribed for 8 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. 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 related unrealized gain of $63 million and unrealized loss of $27 million was included in Investment gain or loss in our Consolidated Statements of Income for the years ended December 31, 2019 and 2018, respectively. 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. Income Taxes The Company recorded $164 million as an additional income tax expense in the fourth quarter of 2017, the period in which the Tax Act was enacted. It includes an estimated one-time transition tax of $130 million on the deemed repatriation of accumulated undistributed foreign earnings, $5 million primarily related to the re-measurement of certain deferred tax assets based on the rates at which they are expected to reverse in the future, and the valuation allowance of $30 million for certain deferred tax assets. 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, 2019 | |
Other Income And Expenses [Abstract] | |
Other Income, Net | Note 6 – Other Income, net 2019 2018 2017 Equity income from investments in unconsolidated affiliates $ 69 $ 65 $ 65 Gain from re-measurement of equity interest upon acquisition (a) — 98 — Foreign exchanges and other (9 ) (11 ) (1 ) Other income, net $ 60 $ 152 $ 64 (a) As a result of the acquisition of Wuxi KFC in the first quarter of 2018, as disclosed in Note 5, the Company recognized a gain of $98 million 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. |
Supplemental Balance Sheet Info
Supplemental Balance Sheet Information | 12 Months Ended |
Dec. 31, 2019 | |
Balance Sheet Related Disclosures [Abstract] | |
Supplemental Balance Sheet Information | Note 7 – Supplemental Balance Sheet Information Accounts Receivable, net 2019 2018 Accounts receivable, gross $ 89 $ 81 Allowance for doubtful accounts (1 ) (1 ) Accounts receivable, net $ 88 $ 80 Prepaid Expenses and Other Current Assets 2019 2018 Receivables from payment processors and aggregators $ 41 $ 49 Prepaid rent 2 42 Dividends receivable from unconsolidated affiliates 8 20 Other prepaid expenses and current assets 83 66 Prepaid expenses and other current assets $ 134 $ 177 Property, Plant and Equipment 2019 2018 Buildings and improvements $ 2,159 $ 2,121 Finance leases, primarily buildings 30 26 Machinery and equipment and construction in progress 1,282 1,201 Property, plant and equipment, gross 3,471 3,348 Accumulated depreciation (1,877 ) (1,733 ) Property, plant and equipment, net $ 1,594 $ 1,615 Depreciation and amortization expense related to property, plant and equipment was $408 million, $414 million and $391 million in 2019, 2018 and 2017, respectively. Other Assets 2019 2018 VAT assets $ 243 $ 226 Land use right 133 138 Investment in equity securities 110 47 Long-term deposits 71 64 Costs to obtain contracts 9 8 Restricted cash 9 — Others 5 8 Other Assets $ 580 $ 491 Amortization expense related to land use right was $4 million, $5 million and $4 million in 2019, 2018 and 2017, respectively. Accounts Payable and Other Current Liabilities 2019 2018 Accounts payable $ 623 $ 619 Operating leases liabilities 382 — Accrued compensation and benefits 223 200 Accrued capital expenditures 150 137 Contract liabilities 135 96 Accrued marketing expenses 64 32 Other current liabilities 114 115 Accounts payable and other current liabilities $ 1,691 $ 1,199 Other Liabilities 2019 2018 Accrued income tax payable $ 69 $ 71 Deferred income tax liabilities 67 65 Contract liabilities 33 31 Deferred rental accrual — 144 Other noncurrent liabilities 41 44 Other liabilities $ 210 $ 355 Reconciliation of Cash, Cash equivalents, and Restricted Cash for Consolidated Statements of Cash Flows 2019 2018 Cash and cash equivalents as presented in Consolidated Balance Sheets $ 1,046 $ 1,266 Restricted cash included in Other assets (a) 9 — Cash, Cash Equivalents and Restricted Cash as presented in Consolidated Statements of Cash Flows $ 1,055 $ 1,266 (a) Restricted cash included in Other assets within our Consolidated Balance Sheet represents amounts deposited into an escrow account pursuant to a definitive agreement entered in August 2019 to acquire a controlling interest in the Huang Ji Huang group, a leading Chinese-style casual dining franchise business. Subject to the satisfaction of closing conditions, the acquisition is expected to close in the first half of 2020. The acquisition is considered immaterial. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 12 Months Ended |
Dec. 31, 2019 | |
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, 2017 Goodwill, gross $ 490 $ 80 $ 19 $ 391 Accumulated impairment losses (a) (382 ) — — (382 ) Goodwill, net 108 80 19 9 Goodwill acquired (b) 175 175 — — Effect of currency translation adjustment and other (17 ) (17 ) — — 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 (c) (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 $ — ( a ) Accumulated impairment losses represent Little Sheep goodwill related impairment. ( b ) Goodwill acquired resulted from the acquisition of Wuxi KFC. (Note 1). (c) In 2019, we recorded an impairment charge of $9 million on goodwill attributable to the Daojia reporting unit (Note 5). Intangible assets, net as of December 31, 2019 and 2018 are as follows: 2019 2018 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 $ 148 $ (113 ) $ — $ 35 $ 150 $ (100 ) $ — $ 50 Daojia platform 16 (4 ) (12 ) — 16 (3 ) (10 ) 3 Customer-related assets 12 (8 ) (2 ) 2 12 (8 ) (2 ) 2 Others (c) 9 (4 ) — 5 17 (9 ) — 8 $ 185 $ (129 ) $ (14 ) $ 42 $ 195 $ (120 ) $ (12 ) $ 63 Indefinite-lived intangible assets Little Sheep trademark $ 52 $ — $ — $ 52 $ 53 $ — $ — $ 53 Total intangible assets $ 237 $ (129 ) $ (14 ) $ 94 $ 248 $ (120 ) $ (12 ) $ 116 (a) Changes in gross carrying amount include effect of currency translation adjustment. (b) In 2019 and 2018, we recorded impairment charges of $2 million and $12 million on intangible assets acquired from Daojia primarily attributable to the Daojia platform, respectively. See Note 5 for details. (c) Decrease in Others in 2019 is primarily due to the reclassification of favorable lease assets, with a gross value of $7 million and accumulated amortization of $5 million, to right-to-use assets upon adoption of ASC 842. Amortization expense for finite-lived intangible assets was $16 million in 2019, $26 million in 2018 and $14 million in 2017. Amortization expense for finite-lived intangible assets is expected to approximate $12 million in 2020, $12 million in 2021, $12 million in 2022, $2 million in 2023 and $1 million in 2024. |
Credit Facilities
Credit Facilities | 12 Months Ended |
Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |
Credit Facilities | Note 9 – Credit Facilities As of December 31, 2019, the Company had credit facilities of RMB2,893 million (approximately $415 million), comprised of onshore credit facilities of RMB1,500 million (approximately $215 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 three years as of December 31, 2019. 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, 2019, we had outstanding bank guarantees of RMB 85 million (approximately $12 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, 2019. |
Investment Agreements with Stra
Investment Agreements with Strategic Investors | 12 Months Ended |
Dec. 31, 2019 | |
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 US$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 US$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 US$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. In October and November 2019, Primavera entered into pre-paid forward sale transactions with several financial institutions (the "Dealers"), pursuant to which Primavera is obligated to deliver to the Dealers all of its second tranche of Warrants. |
Leases
Leases | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Leases | Note 11 – Leases As of December 31, 2019, we operated over 7,300 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 12/31/2019 Account Classification Assets Operating lease right-of-use assets $ 1,985 Operating lease right-of-use assets Finance lease right-of-use assets 18 Property, plant and equipment, net Total leased assets $ 2,003 Liabilities Current Operating lease liabilities $ 382 Accounts payable and other current liabilities Finance lease liabilities 2 Accounts payable and other current liabilities Non-current Operating lease liabilities 1,803 Non-current operating lease liabilities Finance lease liabilities 26 Non-current finance lease liabilities Total lease liabilities $ 2,213 Summary of Lease Cost Year Ended Account Classification 12/31/2019 Operating lease cost $ 472 Occupancy and other operating expenses, G&A or Franchise expenses Finance lease cost Amortization of leased assets 1 Occupancy and other operating expenses Interest on lease liabilities 2 Interest expense, net Variable lease cost 325 Occupancy and other operating expenses or Franchise expenses Short-term lease cost 10 Occupancy and other operating expenses or G&A Sub-lease income (27 ) Franchise fees and income or Other revenues Total lease cost $ 783 Supplemental Cash Flow Information Year Ended 12/31/2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 481 Operating cash flows from finance leases 1 Financing cash flows from finance leases 2 Right-of-use assets obtained in exchange for new lease liabilities (a) Operating leases $ 346 Finance leases 4 (a) 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 12/31/2019 Weighted-average remaining lease term (years) Operating leases 7.1 Finance leases 11.5 Weighted-average discount rate Operating leases 6.1 % Finance leases 5.9 % Summary of Future Lease Payments and Lease Liabilities Maturities of lease liabilities as of December 31, 2019 were as follows: Amount of Operating Leases Amount of Finance Leases Total 2020 $ 504 $ 4 $ 508 2021 448 4 452 2022 389 4 393 2023 325 3 328 2024 261 3 264 Thereafter 781 21 802 Total undiscounted lease payment 2,708 39 2,747 Less: imputed interest (b) 523 11 534 Present value of lease liabilities $ 2,185 $ 28 $ 2,213 (b) 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, 2019, we have additional lease agreements that have been signed but not yet commenced, with total undiscounted minimum lease payments of $84 million. These leases will commence between 2020 and 2023 with lease terms of 1 year to 20 years. Future minimum lease payments under non-cancellable leases as of December 31, 2018 were as follows: Commitments Amount of Operating Leases Amount of Finance Leases Total 2019 $ 466 $ 3 $ 469 2020 440 3 443 2021 394 3 397 2022 336 3 339 2023 275 3 278 Thereafter 864 22 886 $ 2,775 $ 37 $ 2,812 At December 31, 2018, the present value of minimum payments under finance leases was $27 million, after deducting imputed interest of $10 million. The current portion of finance lease obligations was $2 million as of December 31, 2018, and was classified in Accounts payable and other current liabilities. |
Fair Value Measurements and Dis
Fair Value Measurements and Disclosures | 12 Months Ended |
Dec. 31, 2019 | |
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, 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 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 2019 and 2018. 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 $ — Fair Value Measurement or Disclosure at December 31, 2018 Balance at December 31, 2018 Level 1 Level 2 Level 3 Cash equivalents: Time deposits $ 570 $ — $ 570 $ — Money market funds 226 226 Fixed income debt securities (a) 153 153 Total cash equivalents 949 379 570 — Short-term investments: Time deposits 122 122 Total short-term investments 122 — 122 — Other assets: Investment in equity securities 47 47 Total $ 1,118 $ 426 $ 692 $ — (a) Classified as held-to-maturity investments and measured at amortized cost. 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. 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, 2019, 2018 and 2017. These amounts exclude fair value measurements made for restaurants that were subsequently closed or refranchised prior to those respective year-end dates. 2019 2018 2017 Account Classification ROU impairment prior to the adoption of ASC 842 (a) $ 82 $ — $ — Retained Earnings Restaurant-level impairment (b) 28 27 41 Closure and impairment expenses, net Daojia impairment (c) 11 12 — Closure and impairment expenses, net Income from the reversal of contingent consideration (d) — — (3 ) Other income, net Total $ 121 $ 39 $ 38 ( a) 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. (b) 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. . (c) See Note 5 for further discussion. (d) During 2017, we recognized income of $3 million from the reversal of contingent consideration previously recorded for a business combination (Level 3), as the fair value of such contingent consideration is considered to be nil given the remote likelihood of the payment obligation. |
Retirement Plans
Retirement Plans | 12 Months Ended |
Dec. 31, 2019 | |
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 $4.8 million and $4.4 million attributable to our employees under the YCHLRP as of December 31, 2019 and 2018, 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, 2019, 2018 and 2017 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. The Company contributed $160 million, $174 million and $157 million to the government-sponsored plan for 2019, 2018 and 2017, respectively. |
Share-Based Compensation
Share-Based Compensation | 12 Months Ended |
Dec. 31, 2019 | |
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 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: 2019 2018 2017 Risk-free interest rate 2.5 % 2.5 % 1.9 % Expected term (years) 6.50 6.50 6.75 Expected volatility 32.0 % 33.0 % 34.0 % Expected dividend yield 1.2 % 1.0 % 0.0 % 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. The Company initially had no plan to pay dividends at the time of the grant. 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. In 2019 and 2018, the dividend yield was estimated based on the Company’s dividend policy at the time of the grant. 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 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, 2019 and 2018, a total of 60,419 and 45,425 shares of Yum China common stock, respectively, were granted to non-employee directors and the grant-date fair value of $2.4 million and $1.8 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 2019 17,670 21.18 Granted 1,469 41.66 Exercised (4,234 ) 16.58 Forfeited or expired (532 ) 32.02 Outstanding at the end of 2019 14,373 (a) 24.22 5.11 342 Exercisable at the end of 2019 10,583 20.92 4.15 287 (a) Outstanding awards include 497,480 stock options and 13,875,168 SARs with weighted-average exercise prices of $18.50 and $24.42, 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 2019, 2018 and 2017 was $13.43, $13.52 and $10.19, respectively. The total intrinsic value of stock options and SARs exercised by the Company’s employees during the years ended December 31, 2019, 2018 and 2017 was $39 million, $31 million and $44 million, respectively. As of December 31, 2019, $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 1.70 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 2019, 2018 and 2017 was $14 million, $14 million and $11 million, respectively. RSUs and PSUs Shares (in thousands) Weighted- Average Grant Date Fair Value Unvested at the beginning of 2019 988 30.60 Granted 332 44.75 Vested (219 ) 24.11 Forfeited (130 ) 36.76 Unvested at the end of 2019 971 36.08 The weighted-average grant-date fair value of RSUs and PSUs granted in 2019, 2018 and 2017 was $44.75, $39.50 and $28.46, respectively. As of December 31, 2019, $16 million of unrecognized compensation cost related to 970,762 unvested RSUs and PSUs, which will be reduced by any forfeiture that occurs, is expected to be recognized over a remaining weighted-average vesting period of approximately 1.70 years. Impact on Net Income Share-based compensation expense was $26 million, $24 million and $26 million for 2019, 2018 and 2017, respectively. Deferred tax benefits of $1 million, $1 million, $3 million was recognized in 2019, 2018 and 2017, respectively. |
Equity
Equity | 12 Months Ended |
Dec. 31, 2019 | |
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, 2019, 395 million shares of Yum China common stock were issued and 376 million shares were outstanding. On October 27, 2016, a duly authorized committee of Yum China’s board of directors adopted a stockholder rights plan (the “Rights Plan”), pursuant to which the board declared a dividend, to Yum China’s sole stockholder of record as of October 27, 2016, of one preferred stock purchase right (a “Right”) for each of share of Yum China common stock. Before the Rights Plan expired on October 27, 2017, the Rights would trade with, and would be inseparable from, Yum China common stock. The original dividend of the Rights to the existing shareholder was recorded at fair value, which was insignificant given the contingent nature of the Rights. The embedded Rights were considered clearly and closely related to the underlying equity host and, therefore, did not require separate accounting. Share Repurchase Program The Company repurchased 6.2 million, 9.0 million and 3.4 million shares of common stock at a total cost of $261 million, $312 million and $128 million for the years ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019, $699 million remained available for repurchase under the current authorization. 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, 2019, 2018, and 2017 and AOCI balances as of December 31, 2019 and 2018 were comprised solely of foreign currency translation adjustments. Other comprehensive loss was $32 million and $160 million for the years ended December 31, 2019 and 2018, respectively, and other comprehensive gain was $142 million for the year ended December 31, 2017. The accumulated balances reported in AOCI in the Consolidated Balance Sheets for currency translation adjustments were net loss of $49 million and $17 million as of December 31, 2019 and 2018, respectively. 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 $625 million as of December 31, 2019. 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, 2019 | |
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: 2019 2018 2017 U.S. $ (7 ) $ (3 ) $ (13 ) Mainland China 941 979 806 Other Foreign $ 69 (26 ) 10 $ 1,003 $ 950 $ 803 The details of our income tax provision (benefit) are set forth below: 2019 2018 2017 Current: Federal $ 16 $ (33 ) $ 85 Foreign 228 214 232 $ 244 $ 181 $ 317 Deferred: Federal $ (1 ) $ — $ 77 Foreign 17 33 (15 ) $ 16 $ 33 $ 62 $ 260 $ 214 $ 379 The reconciliation of income taxes calculated at the U.S. federal statutory rate to our effective tax rate is set forth below: 2019 2018 2017 U.S. federal statutory rate $ 211 21.0 % $ 199 21.0 % $ 281 35.0 % Impact from the Tax Act 8 0.8 (36 ) (3.8 ) 164 20.4 Statutory rate differential attributable to foreign operations 53 5.3 56 5.8 (60 ) (7.5 ) Change in valuation allowances 2 0.2 (4 ) (0.4 ) 2 0.2 Impact from investment (gain) loss (10 ) (1.0 ) 4 0.5 — — Others, net (4 ) (0.4 ) (5 ) (0.5 ) (8 ) (0.9 ) Effective income tax rate $ 260 25.9 % $ 214 22.6 % $ 379 47.2 % 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 favorable impact in 2017 is primarily attributable to the statutory income tax rate of 25% in China, which is lower than the historical U.S. federal statutory rate of 35%. The negative impact in 2019 and 2018 is primarily due to the decrease of the U.S. federal statutory rate to 21%, which is lower than China’s statutory income tax rate. 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 change in valuation allowance as a result of the Tax Act in the amount of $29.6 million was included in ‘ . The impact of certain changes may offset items reflected in ‘ . Impact from investment (gain) loss. This item relates to the unrealized gain or loss on investment in equity securities of Meituan, which is non-taxable. Others. This item primarily includes the impact of permanent differences related to current year earnings, adjustments to reserves and prior years as well as U.S. tax credits and deductions. The details of 2019 and 2018 deferred tax assets (liabilities) are set forth below: 2019 2018 Operating losses and tax credit carryforwards $ 25 $ 28 Tax benefit from Little Sheep restructuring 18 18 Employee benefits 4 6 Share-based compensation 5 5 Leases 61 41 Other liabilities 13 12 Deferred income and other 58 50 Gross deferred tax assets 184 160 Deferred tax asset valuation allowances (47 ) (50 ) Net deferred tax assets $ 137 $ 110 Intangible assets (23 ) (28 ) Property, plant and equipment (59 ) (31 ) Gain from re-measurement of equity interest upon acquisition (22 ) (23 ) Others (5 ) (4 ) Gross deferred tax liabilities $ (109 ) $ (86 ) Net deferred tax assets $ 28 $ 24 Reported in Consolidated Balance Sheets as: Deferred income taxes 95 89 Other liabilities (67 ) (65 ) $ 28 $ 24 We have investments in our foreign subsidiaries where the carrying values for financial reporting exceed the tax basis. 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, 2019. 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, 2019, the Company had operating loss carryforwards of $94 million, primarily related to our Little Sheep and Daojia business, most of which will expire by 2024. 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 $255 million, $208 million and $232 million in 2019, 2018 and 2017, 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: 2019 2018 Beginning of Year $ 22 $ 28 Additions on tax positions 4 3 Reductions due to statute expiration (7 ) (9 ) End of Year $ 19 $ 22 In 2019 and 2018, our unrecognized tax benefits were increased by $4 million and $3 million, respectively. The unrecognized tax benefits balance of $19 million as of December 31, 2019 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 $19 million as of December 31, 2019, 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 2020 effective tax rate. The accrued interest and penalties related to income taxes at December 31, 2019 and 2018 are set forth below: 2019 2018 Accrued interest and penalties $ 5 $ 6 During 2019, 2018 and 2017, a net benefit of $1 million and $1 million and a net expense of $2 million, respectively, for interest and penalties was recognized in our Consolidated Statements of Income as components of our income tax provision. 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 taxing authorities with respect to income and non-income based taxes. Since 2016, we have been under a national audit on transfer pricing by the STA in China regarding our related party transactions for the period from 2006 to 2015. The information currently exchanged with tax authorities focuses on our franchise arrangement with YUM. We have submitted information 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 will depend upon further review of the information provided and 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. 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, 2019 | |
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 newly developed 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. Accordingly, our six non-reportable operating segments, Little Sheep, COFFii & JOY, East Dawning, Taco Bell, Daojia and our e-commerce business, are combined and referred to as All Other Segments, as these operating segments are insignificant both individually and in 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. 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 2017 KFC Pizza Hut All Other Segments Corporate and Unallocated (a) Combined Elimination Consolidated Revenues Revenue from external customers $ 5,066 $ 2,093 $ 106 $ 504 $ 7,769 $ — $ 7,769 Inter-segment revenue — — — — — — — Total $ 5,066 $ 2,093 $ 106 $ 504 $ 7,769 $ — $ 7,769 Operating Profit 2019 2018 2017 KFC (b) $ 949 $ 895 $ 802 Pizza Hut 114 97 157 All Other Segments (14 ) (12 ) (9 ) Unallocated revenues from transactions with franchisees and unconsolidated affiliates (c) 558 514 504 Unallocated Other revenues 4 3 — Unallocated expenses for transactions with franchisees and unconsolidated affiliates (c) (554 ) (512 ) (500 ) Unallocated Other operating costs and expenses (4 ) (2 ) — Unallocated and corporate G&A expenses (145 ) (128 ) (185 ) Unallocated Closures and impairment expense (d) (11 ) (12 ) — Unallocated Other income (e) 4 98 9 Operating Profit 901 941 778 Interest income, net (a) 39 36 25 Investment gain (loss) (a) 63 (27 ) — Income Before Income Taxes $ 1,003 $ 950 $ 803 Depreciation and Amortization 2019 2018 2017 KFC $ 290 $ 296 $ 265 Pizza Hut 120 129 126 All Other Segments 5 8 4 Corporate and Unallocated 13 12 14 $ 428 $ 445 $ 409 Impairment Charges 2019 2018 2017 KFC (f) $ 16 $ 14 $ 27 Pizza Hut (f) 20 26 31 All Other Segments (f) 2 — — Corporate and Unallocated (d) 11 12 — $ 49 $ 52 $ 58 Capital Spending 2019 2018 2017 KFC $ 264 $ 292 $ 227 Pizza Hut 71 77 93 All Other Segments 10 6 2 Corporate and Unallocated 90 95 93 $ 435 $ 470 $ 415 Total Assets 2019 2018 KFC (g) $ 3,160 $ 1,745 Pizza Hut 950 558 All Other Segments 166 132 Corporate and Unallocated (h) 2,674 2,175 $ 6,950 $ 4,610 (a) Amounts have not been allocated to any segment for performance reporting purposes. (b) Includes equity income from investments in unconsolidated affiliates of $69 million, $65 million and $65 million in 2019, 2018 and 2017, respectively. (c) Primarily includes revenues and associated expenses of transactions with franchisee and unconsolidated affiliates derived from the Company’s central procurement model whereby the Company centrally purchases all food and paper products from suppliers then sells and delivers to all 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 2018, the unallocated other income primarily includes gain from re-measurement of previously held equity interest in connection with the acquisition of Wuxi KFC. See Note 5. (f) Primarily includes store closure impairment charges, restaurant-level impairment charges resulting from our semi-annual impairment evaluation, and incremental restaurant-level impairment charges 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, inventories and investment in equity securities 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, 2019 | |
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, 2019, 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, 2019. 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, 2019 | |
Quarterly Financial Information Disclosure [Abstract] | |
Selected Quarterly Financial Data (Unaudited) | Note 19 – Selected Quarterly Financial Data (unaudited; in millions, except per share amounts) 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 2018 First Quarter Second Quarter Third Quarter Fourth Quarter Total Revenues: Company sales $ 2,016 $ 1,888 $ 2,008 $ 1,721 $ 7,633 Franchise fees and income 40 34 36 31 141 Revenues from transactions with franchisees and unconsolidated affiliates 161 141 159 142 603 Other revenues 4 5 9 20 38 Total revenues 2,221 2,068 2,212 1,914 8,415 Restaurant profit 361 286 353 199 1,199 Operating Profit 395 193 269 84 941 Net Income (Loss) – Yum China Holdings, Inc. 288 143 203 74 708 Basic earnings (loss) per common share $ 0.75 $ 0.37 $ 0.53 $ 0.19 $ 1.84 Diluted earnings (loss) per common share $ 0.72 $ 0.36 $ 0.51 $ 0.19 $ 1.79 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 20 – Subsequent Events Novel Coronavirus Outbreak Starting January 2020, the novel coronavirus outbreak originating in Wuhan, China has significantly impacted the Company’s operations, including the temporary closure of more than 30% of its restaurants in China during the Chinese New Year holiday, and a significant decline in sales for restaurants that remained open. Given the uncertainty of the situation, the duration of the business disruption, resulting reduced customer traffic and related financial impact cannot be reasonably estimated at this time but are expected to have a material adverse impact on the Company’s results of operations, cash flows and financial position for 2020. Cash Dividend On February 5, 2020, 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, 2020, to stockholders of record as of the close of business on March 4, 2020. Total estimated cash dividend payable is approximately $45 million. Share-Based Compensation In February 2020, the Company’s board of directors approved new grants of SARs, RSUs and PSUs to employees under the 2016 Plan with the estimated total grant-date fair value of $60 million. The awards will be earned based on their respective vesting terms, with PSUs also subject to market conditions or performance conditions. Certain PSU awards were granted to select employees who were deemed critical to the Company’s execution of its strategic operating plan. These PSU awards will only vest if threshold performance goals are achieved over a four-year |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
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, 2019, the Company had future lease payments due from franchisees, on a nominal basis, of approximately $47 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 and Wuxi where we have controlling interests of 58%, 70% and 83%, respectively. We report Net income attributable to noncontrolling interests, which includes the minority shareholders of the entities, separately on the face of our Consolidated Statements of Income. The portion of equity not attributable to the Company for these entities is reported within equity, separately from the Company’s stockholders’ equity on the Consolidated Balance Sheets. We have a noncontrolling 47% interest in each of the entities that operate the KFCs in Hangzhou and Suzhou. These entities are not VIEs and our lack of majority voting rights precludes us from controlling these affiliates. Thus, we do not consolidate these affiliates. Instead, we account for them under the equity method. Our share of the net income or loss of these unconsolidated affiliates is included in Other income, net in our Consolidated Statements of Income. |
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. Effective at the beginning of fiscal 2018, the Company changed its fiscal calendar from two months in the first quarter, three months in the second and third quarters and four months in the fourth quarter, to four three-month quarters ending on March 31, June 30, September 30 and December 31 of each year. The change was made to align with how management measures performance internally and to facilitate the comparability of our results with peers using calendar quarters. |
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. As of December 31, 2019, net cumulative translation adjustment loss of $49 million was recorded in Accumulated other comprehensive 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 $273 million, $263 million and $245 million during the years ended December 31, 2019, 2018 and 2017, 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. 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 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. 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 $344 million, $341 million and $333 million in 2019, 2018 and 2017, respectively, and were included in Occupancy and other operating expenses. In addition, the direct marketing costs incurred for franchisees and unconsolidated affiliates were $65 million, $62 million and $69 million in 2019, 2018 and 2017, 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 G&A expenses. Research and development expenses were $4 million, $4 million and $5 million in 2019, 2018 and 2017, 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. 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 primarily 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. 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 and money market funds. 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. Our provision for uncollectible receivable balances is based upon pre-defined aging criteria or upon the occurrence of other events that indicate 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. While we use the best information available in making our determination, the ultimate recovery of recorded receivables is also dependent upon future economic events and other conditions that may be beyond our control. Trade receivables that are ultimately deemed to be uncollectible, and for which collection efforts have been exhausted, are written off against the allowance for doubtful accounts. Receivables due from unconsolidated affiliates including trade receivables and dividend receivables were $58 million and $65 million as of December 31, 2019 and 2018, 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. An allowance for doubtful accounts is recorded in the period in which a loss is determined to be probable. Receivable balances are written off after all collection efforts have been exhausted. As of December 31, 2019 and 2018, 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 right. 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 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. Intangible assets that are deemed to have a finite life are generally amortized on a straight-line basis to their residual value. 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 the earnings or losses of equity method investees are included within Other income, net on our Consolidated Statements of Income. 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 and liability-classified equity contracts (e.g., warrants) 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 and liability-classified equity contracts are determined at discrete points in time using standard valuation techniques. |
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, 2019 and 2018, an input VAT credit asset of $243 million and $226 million, were recorded in Other assets, respectively, and payable of $5 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, 2019. Any input VAT credit asset would be classified as Prepaid expenses and other current assets if the Company expected to use the credit within one year. |
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. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) Upon the adoption of ASC 842, the Company recognized ROU assets and lease liabilities of approximately $2.0 billion and $2.2 billion, respectively, for operating leases of the land and/or building of our restaurants and office spaces based on the present value of lease payments over the lease term. In addition, an impairment charge of $60 million (net of related impact on deferred taxes and noncontrolling interests) on ROU assets arising from existing operating leases as of January 1, 2019 was recorded as an adjustment to retained earnings, as the additional impairment charge would have been recorded before adoption had the operating lease ROU assets been recognized at the time of impairment. The following table summarizes the effect on the Consolidated Balance Sheets as a result of adopting ASC 842. December 31, 2018 Effect of adoption January 1, 2019 ASSETS Current Assets Cash and cash equivalents $ 1,266 $ 1,266 Short-term investments 122 122 Accounts receivable, net 80 80 Inventories, net 307 307 Prepaid expenses and other current assets 177 (39 ) (a) 138 Total Current Assets 1,952 (39 ) 1,913 Property, plant and equipment, net 1,615 (1 ) 1,614 Operating lease right-of-use assets — 1,997 (b) 1,997 Goodwill 266 266 Intangible assets, net 116 (2 ) (c) 114 Deferred income taxes 89 19 (d) 108 Investments in unconsolidated affiliates 81 (1 ) 80 Other assets 491 (4 ) (c) 487 Total Assets $ 4,610 $ 1,969 $ 6,579 LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY Current Liabilities Accounts payable and other current liabilities $ 1,199 $ 320 (e) $ 1,519 Income taxes payable 54 54 Total Current Liabilities 1,253 320 1,573 Non-current operating lease liabilities — 1,860 (f) 1,860 Non-current finance lease liabilities 25 — 25 Other liabilities 355 (148 ) (g) 207 Total Liabilities 1,633 2,032 3,665 Redeemable Noncontrolling Interest 1 1 Equity Common stock 4 4 Treasury stock (460 ) (460 ) Additional paid-in capital 2,402 2,402 Retained earnings 944 (60 ) (h) 884 Accumulated other comprehensive loss (17 ) (17 ) Total Yum China Holdings, Inc. Stockholders’ Equity 2,873 (60 ) 2,813 Noncontrolling interests 103 (3 ) (i) 100 Total Equity 2,976 (63 ) 2,913 Total Liabilities, Redeemable Noncontrolling Interest and Equity $ 4,610 $ 1,969 $ 6,579 (a) Represents the current portion of prepaid rent reclassified to operating lease ROU assets. (b) Represents the net result of capitalization of operating lease payments and reclassification of prepaid rent, initial direct cost, deferred rent accrual and lease incentives, and offset by impairment of operating lease ROU assets that existed prior to the date of adoption. (c) Represents initial direct cost, favorable lease and non-current prepaid rent reclassified to operating lease ROU assets. (d) Represents the deferred tax impact related to impairment of operating lease ROU assets. (e) Represents recognition of the current portion of operating lease liabilities, offset by the reclassification of accrued rental payments and the current portion of deferred rent accrual to operating lease ROU assets. (f) Represents recognition of the non-current operating lease liabilities. (g) Represents reclassification of the non-current portion of deferred rent accrual and lease incentives to operating lease ROU assets. (h) Represents an impairment charge on operating lease ROU assets arising from existing operating leases as of January 1, 2019, net of related impact on deferred taxes and noncontrolling interests, with a corresponding reduction to the carrying amount of operating lease ROU assets. The impairment charge was recorded for those restaurants under operating leases with full impairment on the long-lived assets before January 1, 2019, as the additional impairment charge would have been recorded before January 1, 2019 had the operating lease ROU assets been recognized at the time of impairment. (i) Represents impairment of operating lease ROU assets attributable to noncontrolling interests. In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718) Improvements to Nonemployee Share-Based Payment Accounting Revenue from Contracts with Customers |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Summary of Effect on Consolidated Balance Sheets as Result of Adopting ASU 2016-02 | The following table summarizes the effect on the Consolidated Balance Sheets as a result of adopting ASC 842. December 31, 2018 Effect of adoption January 1, 2019 ASSETS Current Assets Cash and cash equivalents $ 1,266 $ 1,266 Short-term investments 122 122 Accounts receivable, net 80 80 Inventories, net 307 307 Prepaid expenses and other current assets 177 (39 ) (a) 138 Total Current Assets 1,952 (39 ) 1,913 Property, plant and equipment, net 1,615 (1 ) 1,614 Operating lease right-of-use assets — 1,997 (b) 1,997 Goodwill 266 266 Intangible assets, net 116 (2 ) (c) 114 Deferred income taxes 89 19 (d) 108 Investments in unconsolidated affiliates 81 (1 ) 80 Other assets 491 (4 ) (c) 487 Total Assets $ 4,610 $ 1,969 $ 6,579 LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY Current Liabilities Accounts payable and other current liabilities $ 1,199 $ 320 (e) $ 1,519 Income taxes payable 54 54 Total Current Liabilities 1,253 320 1,573 Non-current operating lease liabilities — 1,860 (f) 1,860 Non-current finance lease liabilities 25 — 25 Other liabilities 355 (148 ) (g) 207 Total Liabilities 1,633 2,032 3,665 Redeemable Noncontrolling Interest 1 1 Equity Common stock 4 4 Treasury stock (460 ) (460 ) Additional paid-in capital 2,402 2,402 Retained earnings 944 (60 ) (h) 884 Accumulated other comprehensive loss (17 ) (17 ) Total Yum China Holdings, Inc. Stockholders’ Equity 2,873 (60 ) 2,813 Noncontrolling interests 103 (3 ) (i) 100 Total Equity 2,976 (63 ) 2,913 Total Liabilities, Redeemable Noncontrolling Interest and Equity $ 4,610 $ 1,969 $ 6,579 (a) Represents the current portion of prepaid rent reclassified to operating lease ROU assets. (b) Represents the net result of capitalization of operating lease payments and reclassification of prepaid rent, initial direct cost, deferred rent accrual and lease incentives, and offset by impairment of operating lease ROU assets that existed prior to the date of adoption. (c) Represents initial direct cost, favorable lease and non-current prepaid rent reclassified to operating lease ROU assets. (d) Represents the deferred tax impact related to impairment of operating lease ROU assets. (e) Represents recognition of the current portion of operating lease liabilities, offset by the reclassification of accrued rental payments and the current portion of deferred rent accrual to operating lease ROU assets. (f) Represents recognition of the non-current operating lease liabilities. (g) Represents reclassification of the non-current portion of deferred rent accrual and lease incentives to operating lease ROU assets. (h) Represents an impairment charge on operating lease ROU assets arising from existing operating leases as of January 1, 2019, net of related impact on deferred taxes and noncontrolling interests, with a corresponding reduction to the carrying amount of operating lease ROU assets. The impairment charge was recorded for those restaurants under operating leases with full impairment on the long-lived assets before January 1, 2019, as the additional impairment charge would have been recorded before January 1, 2019 had the operating lease ROU assets been recognized at the time of impairment. (i) Represents impairment of operating lease ROU assets attributable to noncontrolling interests. |
Revenue (Tables)
Revenue (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
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: 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. 2017 Revenues KFC Pizza Hut All Other Segments Corporate and Unallocated Combined Elimination Consolidated Company sales $ 4,863 $ 2,090 $ 40 $ — $ 6,993 $ — $ 6,993 Franchise fees and income 134 2 5 — 141 — 141 Revenues from transactions with franchisees and unconsolidated affiliates 69 1 25 504 599 — 599 Other revenues — — 36 — 36 — 36 Total revenues $ 5,066 $ 2,093 $ 106 $ 504 $ 7,769 $ — $ 7,769 Franchise Fees and Income 2019 2018 2017 Initial fees, including renewal fees $ 8 $ 7 $ 6 Continuing fees and rental income 140 134 135 Franchise fees and income $ 148 $ 141 $ 141 |
Contract Liabilities | Contract liabilities at December 31, 2019 and 2018 were as follows: 2019 2018 Contract liabilities - Deferred revenue related to prepaid stored-value products $ 86 $ 70 - Deferred revenue related to upfront franchise fees 39 37 - Deferred revenue related to customer loyalty programs 24 17 - Deferred revenue related to privilege membership programs 16 3 - Others 3 — Total $ 168 $ 127 |
Earnings Per Common Share ("E_2
Earnings Per Common Share ("EPS") (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
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): 2019 2018 2017 Net Income – Yum China Holdings, Inc. $ 713 $ 708 $ 398 Weighted-average common shares outstanding (for basic calculation) (a) 377 384 387 Effect of dilutive share-based awards (a) 8 9 10 Effect of dilutive warrants (b) 3 2 1 Weighted-average common and dilutive potential common shares outstanding (for diluted calculation) 388 395 398 Basic Earnings Per Share $ 1.89 $ 1.84 $ 1.03 Diluted Earnings Per Share $ 1.84 $ 1.79 $ 1.00 Share-based awards and warrants excluded from the diluted EPS computation (c) 2 6 10 (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. (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 options, stock appreciation rights, RSUs, PSUs and warrants were not included in the computation of diluted EPS because to do so would have been antidilutive for the years presented. |
Other Income, Net (Tables)
Other Income, Net (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Other Income And Expenses [Abstract] | |
Other Income, Net | 2019 2018 2017 Equity income from investments in unconsolidated affiliates $ 69 $ 65 $ 65 Gain from re-measurement of equity interest upon acquisition (a) — 98 — Foreign exchanges and other (9 ) (11 ) (1 ) Other income, net $ 60 $ 152 $ 64 (a) As a result of the acquisition of Wuxi KFC in the first quarter of 2018, as disclosed in Note 5, the Company recognized a gain of $98 million 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. |
Supplemental Balance Sheet In_2
Supplemental Balance Sheet Information (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Balance Sheet Related Disclosures [Abstract] | |
Accounts Receivable, Net | Accounts Receivable, net 2019 2018 Accounts receivable, gross $ 89 $ 81 Allowance for doubtful accounts (1 ) (1 ) Accounts receivable, net $ 88 $ 80 |
Prepaid Expenses and Other Current Assets | Prepaid Expenses and Other Current Assets 2019 2018 Receivables from payment processors and aggregators $ 41 $ 49 Prepaid rent 2 42 Dividends receivable from unconsolidated affiliates 8 20 Other prepaid expenses and current assets 83 66 Prepaid expenses and other current assets $ 134 $ 177 |
Property, Plant and Equipment | Property, Plant and Equipment 2019 2018 Buildings and improvements $ 2,159 $ 2,121 Finance leases, primarily buildings 30 26 Machinery and equipment and construction in progress 1,282 1,201 Property, plant and equipment, gross 3,471 3,348 Accumulated depreciation (1,877 ) (1,733 ) Property, plant and equipment, net $ 1,594 $ 1,615 |
Accounts Payable and Other Current Liabilities | Other Assets 2019 2018 VAT assets $ 243 $ 226 Land use right 133 138 Investment in equity securities 110 47 Long-term deposits 71 64 Costs to obtain contracts 9 8 Restricted cash 9 — Others 5 8 Other Assets $ 580 $ 491 Accounts Payable and Other Current Liabilities 2019 2018 Accounts payable $ 623 $ 619 Operating leases liabilities 382 — Accrued compensation and benefits 223 200 Accrued capital expenditures 150 137 Contract liabilities 135 96 Accrued marketing expenses 64 32 Other current liabilities 114 115 Accounts payable and other current liabilities $ 1,691 $ 1,199 |
Other Liabilities and Deferred Credits | Other Liabilities 2019 2018 Accrued income tax payable $ 69 $ 71 Deferred income tax liabilities 67 65 Contract liabilities 33 31 Deferred rental accrual — 144 Other noncurrent liabilities 41 44 Other liabilities $ 210 $ 355 |
Reconciliation of Cash, Cash Equivalents, and Restricted Cash | Reconciliation of Cash, Cash equivalents, and Restricted Cash for Consolidated Statements of Cash Flows 2019 2018 Cash and cash equivalents as presented in Consolidated Balance Sheets $ 1,046 $ 1,266 Restricted cash included in Other assets (a) 9 — Cash, Cash Equivalents and Restricted Cash as presented in Consolidated Statements of Cash Flows $ 1,055 $ 1,266 (a) Restricted cash included in Other assets within our Consolidated Balance Sheet represents amounts deposited into an escrow account pursuant to a definitive agreement entered in August 2019 to acquire a controlling interest in the Huang Ji Huang group, a leading Chinese-style casual dining franchise business. Subject to the satisfaction of closing conditions, the acquisition is expected to close in the first half of 2020. The acquisition is considered immaterial. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
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, 2017 Goodwill, gross $ 490 $ 80 $ 19 $ 391 Accumulated impairment losses (a) (382 ) — — (382 ) Goodwill, net 108 80 19 9 Goodwill acquired (b) 175 175 — — Effect of currency translation adjustment and other (17 ) (17 ) — — 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 (c) (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 $ — ( a ) Accumulated impairment losses represent Little Sheep goodwill related impairment. ( b ) Goodwill acquired resulted from the acquisition of Wuxi KFC. (Note 1). (c) In 2019, we recorded an impairment charge of $9 million on goodwill attributable to the Daojia reporting unit (Note 5). |
Schedule of Finite and Indefinite Lived Intangible Assets by Major Class | Intangible assets, net as of December 31, 2019 and 2018 are as follows: 2019 2018 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 $ 148 $ (113 ) $ — $ 35 $ 150 $ (100 ) $ — $ 50 Daojia platform 16 (4 ) (12 ) — 16 (3 ) (10 ) 3 Customer-related assets 12 (8 ) (2 ) 2 12 (8 ) (2 ) 2 Others (c) 9 (4 ) — 5 17 (9 ) — 8 $ 185 $ (129 ) $ (14 ) $ 42 $ 195 $ (120 ) $ (12 ) $ 63 Indefinite-lived intangible assets Little Sheep trademark $ 52 $ — $ — $ 52 $ 53 $ — $ — $ 53 Total intangible assets $ 237 $ (129 ) $ (14 ) $ 94 $ 248 $ (120 ) $ (12 ) $ 116 (a) Changes in gross carrying amount include effect of currency translation adjustment. (b) In 2019 and 2018, we recorded impairment charges of $2 million and $12 million on intangible assets acquired from Daojia primarily attributable to the Daojia platform, respectively. See Note 5 for details. (c) Decrease in Others in 2019 is primarily due to the reclassification of favorable lease assets, with a gross value of $7 million and accumulated amortization of $5 million, to right-to-use assets upon adoption of ASC 842. |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Summary of Supplemental Balance Sheet | As of December 31, 2019, we operated over 7,300 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 12/31/2019 Account Classification Assets Operating lease right-of-use assets $ 1,985 Operating lease right-of-use assets Finance lease right-of-use assets 18 Property, plant and equipment, net Total leased assets $ 2,003 Liabilities Current Operating lease liabilities $ 382 Accounts payable and other current liabilities Finance lease liabilities 2 Accounts payable and other current liabilities Non-current Operating lease liabilities 1,803 Non-current operating lease liabilities Finance lease liabilities 26 Non-current finance lease liabilities Total lease liabilities $ 2,213 |
Summary of Lease Cost | Summary of Lease Cost Year Ended Account Classification 12/31/2019 Operating lease cost $ 472 Occupancy and other operating expenses, G&A or Franchise expenses Finance lease cost Amortization of leased assets 1 Occupancy and other operating expenses Interest on lease liabilities 2 Interest expense, net Variable lease cost 325 Occupancy and other operating expenses or Franchise expenses Short-term lease cost 10 Occupancy and other operating expenses or G&A Sub-lease income (27 ) Franchise fees and income or Other revenues Total lease cost $ 783 |
Schedule of Supplemental Cash Flow Information | Supplemental Cash Flow Information Year Ended 12/31/2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 481 Operating cash flows from finance leases 1 Financing cash flows from finance leases 2 Right-of-use assets obtained in exchange for new lease liabilities (a) Operating leases $ 346 Finance leases 4 (a) 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 12/31/2019 Weighted-average remaining lease term (years) Operating leases 7.1 Finance leases 11.5 Weighted-average discount rate Operating leases 6.1 % Finance leases 5.9 % |
Summary of Maturities of Lease Liabilities | Maturities of lease liabilities as of December 31, 2019 were as follows: Amount of Operating Leases Amount of Finance Leases Total 2020 $ 504 $ 4 $ 508 2021 448 4 452 2022 389 4 393 2023 325 3 328 2024 261 3 264 Thereafter 781 21 802 Total undiscounted lease payment 2,708 39 2,747 Less: imputed interest (b) 523 11 534 Present value of lease liabilities $ 2,185 $ 28 $ 2,213 (b) 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. |
Summary of Future Minimum Lease Payments under Non-Cancellable Leases | Future minimum lease payments under non-cancellable leases as of December 31, 2018 were as follows: Commitments Amount of Operating Leases Amount of Finance Leases Total 2019 $ 466 $ 3 $ 469 2020 440 3 443 2021 394 3 397 2022 336 3 339 2023 275 3 278 Thereafter 864 22 886 $ 2,775 $ 37 $ 2,812 |
Fair Value Measurements and D_2
Fair Value Measurements and Disclosures (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Assets Measured on Recurring Basis or Disclosed at Fair Value | The following table is a summary of our financial assets measured on a recurring basis or disclosed at fair value and the level within the fair value hierarchy in which the measurement falls. The Company classifies its cash equivalents, short-term investments and investment in equity securities within Level 1 or Level 2 in the fair value hierarchy because it uses quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine their fair value, respectively. 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 $ — Fair Value Measurement or Disclosure at December 31, 2018 Balance at December 31, 2018 Level 1 Level 2 Level 3 Cash equivalents: Time deposits $ 570 $ — $ 570 $ — Money market funds 226 226 Fixed income debt securities (a) 153 153 Total cash equivalents 949 379 570 — Short-term investments: Time deposits 122 122 Total short-term investments 122 — 122 — Other assets: Investment in equity securities 47 47 Total $ 1,118 $ 426 $ 692 $ — (a) Classified as held-to-maturity investments and measured at amortized cost. |
Schedule of Amounts Recognized From Non-recurring Fair Value Measurements | The following table presents amounts recognized from all non-recurring fair value measurements based on unobservable inputs (Level 3) during the years ended December 31, 2019, 2018 and 2017. These amounts exclude fair value measurements made for restaurants that were subsequently closed or refranchised prior to those respective year-end dates. 2019 2018 2017 Account Classification ROU impairment prior to the adoption of ASC 842 (a) $ 82 $ — $ — Retained Earnings Restaurant-level impairment (b) 28 27 41 Closure and impairment expenses, net Daojia impairment (c) 11 12 — Closure and impairment expenses, net Income from the reversal of contingent consideration (d) — — (3 ) Other income, net Total $ 121 $ 39 $ 38 ( a) 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. (b) 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. . (c) See Note 5 for further discussion. (d) During 2017, we recognized income of $3 million from the reversal of contingent consideration previously recorded for a business combination (Level 3), as the fair value of such contingent consideration is considered to be nil given the remote likelihood of the payment obligation. |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
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: 2019 2018 2017 Risk-free interest rate 2.5 % 2.5 % 1.9 % Expected term (years) 6.50 6.50 6.75 Expected volatility 32.0 % 33.0 % 34.0 % Expected dividend yield 1.2 % 1.0 % 0.0 % |
Summary of award activity | Shares (in Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (years) Aggregate Value Outstanding at the beginning of 2019 17,670 21.18 Granted 1,469 41.66 Exercised (4,234 ) 16.58 Forfeited or expired (532 ) 32.02 Outstanding at the end of 2019 14,373 (a) 24.22 5.11 342 Exercisable at the end of 2019 10,583 20.92 4.15 287 |
Summary of Restricted Stock Units and Performance Share Units | Shares (in thousands) Weighted- Average Grant Date Fair Value Unvested at the beginning of 2019 988 30.60 Granted 332 44.75 Vested (219 ) 24.11 Forfeited (130 ) 36.76 Unvested at the end of 2019 971 36.08 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income (Loss) Before Income Taxes | U.S. and foreign income (loss) before taxes are set forth below: 2019 2018 2017 U.S. $ (7 ) $ (3 ) $ (13 ) Mainland China 941 979 806 Other Foreign $ 69 (26 ) 10 $ 1,003 $ 950 $ 803 |
Details of Income Tax Provision (Benefit) | The details of our income tax provision (benefit) are set forth below: 2019 2018 2017 Current: Federal $ 16 $ (33 ) $ 85 Foreign 228 214 232 $ 244 $ 181 $ 317 Deferred: Federal $ (1 ) $ — $ 77 Foreign 17 33 (15 ) $ 16 $ 33 $ 62 $ 260 $ 214 $ 379 |
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: 2019 2018 2017 U.S. federal statutory rate $ 211 21.0 % $ 199 21.0 % $ 281 35.0 % Impact from the Tax Act 8 0.8 (36 ) (3.8 ) 164 20.4 Statutory rate differential attributable to foreign operations 53 5.3 56 5.8 (60 ) (7.5 ) Change in valuation allowances 2 0.2 (4 ) (0.4 ) 2 0.2 Impact from investment (gain) loss (10 ) (1.0 ) 4 0.5 — — Others, net (4 ) (0.4 ) (5 ) (0.5 ) (8 ) (0.9 ) Effective income tax rate $ 260 25.9 % $ 214 22.6 % $ 379 47.2 % |
Details of Deferred Tax Assets (Liabilities) | The details of 2019 and 2018 deferred tax assets (liabilities) are set forth below: 2019 2018 Operating losses and tax credit carryforwards $ 25 $ 28 Tax benefit from Little Sheep restructuring 18 18 Employee benefits 4 6 Share-based compensation 5 5 Leases 61 41 Other liabilities 13 12 Deferred income and other 58 50 Gross deferred tax assets 184 160 Deferred tax asset valuation allowances (47 ) (50 ) Net deferred tax assets $ 137 $ 110 Intangible assets (23 ) (28 ) Property, plant and equipment (59 ) (31 ) Gain from re-measurement of equity interest upon acquisition (22 ) (23 ) Others (5 ) (4 ) Gross deferred tax liabilities $ (109 ) $ (86 ) Net deferred tax assets $ 28 $ 24 Reported in Consolidated Balance Sheets as: Deferred income taxes 95 89 Other liabilities (67 ) (65 ) $ 28 $ 24 |
Unrecognized Tax Benefits Reconciliation | A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: 2019 2018 Beginning of Year $ 22 $ 28 Additions on tax positions 4 3 Reductions due to statute expiration (7 ) (9 ) End of Year $ 19 $ 22 |
Summary of Income Tax Examinations | 2019 2018 Accrued interest and penalties $ 5 $ 6 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information, by Segment | 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 2017 KFC Pizza Hut All Other Segments Corporate and Unallocated (a) Combined Elimination Consolidated Revenues Revenue from external customers $ 5,066 $ 2,093 $ 106 $ 504 $ 7,769 $ — $ 7,769 Inter-segment revenue — — — — — — — Total $ 5,066 $ 2,093 $ 106 $ 504 $ 7,769 $ — $ 7,769 Operating Profit 2019 2018 2017 KFC (b) $ 949 $ 895 $ 802 Pizza Hut 114 97 157 All Other Segments (14 ) (12 ) (9 ) Unallocated revenues from transactions with franchisees and unconsolidated affiliates (c) 558 514 504 Unallocated Other revenues 4 3 — Unallocated expenses for transactions with franchisees and unconsolidated affiliates (c) (554 ) (512 ) (500 ) Unallocated Other operating costs and expenses (4 ) (2 ) — Unallocated and corporate G&A expenses (145 ) (128 ) (185 ) Unallocated Closures and impairment expense (d) (11 ) (12 ) — Unallocated Other income (e) 4 98 9 Operating Profit 901 941 778 Interest income, net (a) 39 36 25 Investment gain (loss) (a) 63 (27 ) — Income Before Income Taxes $ 1,003 $ 950 $ 803 Depreciation and Amortization 2019 2018 2017 KFC $ 290 $ 296 $ 265 Pizza Hut 120 129 126 All Other Segments 5 8 4 Corporate and Unallocated 13 12 14 $ 428 $ 445 $ 409 Impairment Charges 2019 2018 2017 KFC (f) $ 16 $ 14 $ 27 Pizza Hut (f) 20 26 31 All Other Segments (f) 2 — — Corporate and Unallocated (d) 11 12 — $ 49 $ 52 $ 58 Capital Spending 2019 2018 2017 KFC $ 264 $ 292 $ 227 Pizza Hut 71 77 93 All Other Segments 10 6 2 Corporate and Unallocated 90 95 93 $ 435 $ 470 $ 415 Total Assets 2019 2018 KFC (g) $ 3,160 $ 1,745 Pizza Hut 950 558 All Other Segments 166 132 Corporate and Unallocated (h) 2,674 2,175 $ 6,950 $ 4,610 (a) Amounts have not been allocated to any segment for performance reporting purposes. (b) Includes equity income from investments in unconsolidated affiliates of $69 million, $65 million and $65 million in 2019, 2018 and 2017, respectively. (c) Primarily includes revenues and associated expenses of transactions with franchisee and unconsolidated affiliates derived from the Company’s central procurement model whereby the Company centrally purchases all food and paper products from suppliers then sells and delivers to all 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 2018, the unallocated other income primarily includes gain from re-measurement of previously held equity interest in connection with the acquisition of Wuxi KFC. See Note 5. (f) Primarily includes store closure impairment charges, restaurant-level impairment charges resulting from our semi-annual impairment evaluation, and incremental restaurant-level impairment charges 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, inventories and investment in equity securities that are centrally managed. |
Selected Quarterly Financial _2
Selected Quarterly Financial Data (Unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Quarterly Financial Information Disclosure [Abstract] | |
Schedule of Quarterly Financial Information | 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 2018 First Quarter Second Quarter Third Quarter Fourth Quarter Total Revenues: Company sales $ 2,016 $ 1,888 $ 2,008 $ 1,721 $ 7,633 Franchise fees and income 40 34 36 31 141 Revenues from transactions with franchisees and unconsolidated affiliates 161 141 159 142 603 Other revenues 4 5 9 20 38 Total revenues 2,221 2,068 2,212 1,914 8,415 Restaurant profit 361 286 353 199 1,199 Operating Profit 395 193 269 84 941 Net Income (Loss) – Yum China Holdings, Inc. 288 143 203 74 708 Basic earnings (loss) per common share $ 0.75 $ 0.37 $ 0.53 $ 0.19 $ 1.84 Diluted earnings (loss) per common share $ 0.72 $ 0.36 $ 0.51 $ 0.19 $ 1.79 |
Description of Business - Narra
Description of Business - Narrative (Details) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2019Segment | Mar. 31, 2018USD ($) | Dec. 31, 2019RestaurantSegment | Dec. 31, 2017USD ($) | |
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 | 7,300 | |||
Number of reportable segments | Segment | 2 | 2 | ||
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% | |||
Amount of cash consideration paid for the acquisition | $ 98 | |||
Daojia [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Percentage of additional equity interest acquired | 90.00% | |||
Cash consideration paid to acquire interest | $ 36.7 | |||
Amount of cash consideration paid for the acquisition | $ 36.7 | |||
Percentage of equity interest acquired on a fully-diluted basis | 80.00% | |||
Additional capital | $ 25 | |||
KFC [Member] | Minimum [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Number of restaurants | Restaurant | 6,500 | |||
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] | Suzhou [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% | |||
KFC [Member] | Unconsolidated affiliates [Member] | Suzhou [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 | 2,200 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Millions | Jan. 01, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Summary Of Significant Accounting Policies [Line Items] | ||||
Future lease payments due from franchisees on a nominal basis | $ 47 | |||
Prepaid gift cards expiration period | 36 months | |||
Product vouchers maximum expiration period | 12 months | |||
Points expiration period | 18 months | |||
Operating lease right-of-use assets | $ 1,985 | |||
Operating lease liabilities | 2,185 | |||
ASU 2016-02 [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Operating lease right-of-use assets | $ 2,000 | $ 1,997 | [1] | |
Operating lease liabilities | 2,200 | |||
Asset impairment charge net of related impact on deferred taxes and noncontrolling interests | $ 60 | |||
Other Assets [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Input VAT credit asset | 243 | 226 | ||
Accounts Payable and Other Current Liabilities [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
VAT payable | $ 5 | $ 5 | ||
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 | |||
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] | Hangzhou [Member] | KFC [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Non-controlling equity ownership interest owned | 47.00% | |||
Owner and Operator of KFC [Member] | Suzhou [Member] | KFC [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Non-controlling equity ownership interest owned | 47.00% | |||
[1] | Represents the net result of capitalization of operating lease payments and reclassification of prepaid rent, initial direct cost, deferred rent accrual and lease incentives, and offset by impairment of operating lease ROU assets that existed prior to the date of adoption. |
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, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Foreign Currency [Abstract] | ||||||
Foreign currency translation adjustment | $ (49,000,000) | |||||
License fee percentage | 3.00% | |||||
Total license fees paid | $ 273,000,000 | $ 263,000,000 | $ 245,000,000 | |||
Direct Marketing Costs [Abstract] | ||||||
Direct marketing expenses | 344,000,000 | 341,000,000 | 333,000,000 | |||
Research and Development Expenses [Abstract] | ||||||
Research and development expenses | $ 4,000,000 | 4,000,000 | 5,000,000 | |||
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) | 164,000,000 |
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% | 50.00% | ||||
Receivables [Abstract] | ||||||
Number of days from the period in which the corresponding sales occur that trade receivables are generally due | 30 days | |||||
Receivables due from unconsolidated affiliates including trade receivables and dividend receivables | 65,000,000 | $ 58,000,000 | $ 65,000,000 | |||
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 | 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 | $ 65,000,000 | $ 62,000,000 | $ 69,000,000 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Summary of Effect on Consolidated Balance Sheets as Result of Adopting ASU 2016-02 (Details) - USD ($) $ in Millions | Dec. 31, 2019 | Jan. 01, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||
Current Assets | ||||||
Cash and cash equivalents | $ 1,046 | $ 1,266 | ||||
Short-term investments | 611 | 122 | ||||
Accounts receivable, net | 88 | 80 | ||||
Inventories, net | 380 | 307 | ||||
Prepaid expenses and other current assets | 134 | 177 | ||||
Total Current Assets | 2,259 | 1,952 | ||||
Property, plant and equipment, net | 1,594 | 1,615 | ||||
Operating lease right-of-use assets | 1,985 | |||||
Goodwill | 254 | 266 | $ 108 | |||
Intangible assets, net | 94 | 116 | ||||
Deferred income taxes | 95 | 89 | ||||
Investments in unconsolidated affiliates | 89 | 81 | ||||
Other assets | 580 | 491 | ||||
Total Assets | 6,950 | 4,610 | ||||
Current Liabilities | ||||||
Accounts payable and other current liabilities | 1,691 | 1,199 | ||||
Income taxes payable | 45 | 54 | ||||
Total Current Liabilities | 1,736 | 1,253 | ||||
Non-current operating lease liabilities | 1,803 | |||||
Non-current finance lease liabilities | 26 | 25 | ||||
Other liabilities | 210 | 355 | ||||
Total Liabilities | 3,775 | 1,633 | ||||
Redeemable Noncontrolling Interest | 1 | |||||
Equity | ||||||
Common stock | 4 | 4 | ||||
Treasury stock | (721) | (460) | ||||
Additional paid-in capital | 2,427 | 2,402 | ||||
Retained earnings | 1,416 | 944 | ||||
Accumulated other comprehensive loss | (49) | (17) | ||||
Total Yum China Holdings, Inc. Stockholders’ Equity | 3,077 | 2,873 | ||||
Noncontrolling interests | 98 | 103 | ||||
Total Equity | 3,175 | 2,976 | ||||
Total Liabilities, Redeemable Noncontrolling Interest and Equity | $ 6,950 | 4,610 | ||||
As Adjusted [Member] | ||||||
Current Assets | ||||||
Cash and cash equivalents | $ 1,266 | |||||
Short-term investments | 122 | |||||
Accounts receivable, net | 80 | |||||
Inventories, net | 307 | |||||
Prepaid expenses and other current assets | 138 | |||||
Total Current Assets | 1,913 | |||||
Property, plant and equipment, net | 1,614 | |||||
Operating lease right-of-use assets | 1,997 | |||||
Goodwill | 266 | |||||
Intangible assets, net | 114 | |||||
Deferred income taxes | 108 | |||||
Investments in unconsolidated affiliates | 80 | |||||
Other assets | 487 | |||||
Total Assets | 6,579 | |||||
Current Liabilities | ||||||
Accounts payable and other current liabilities | 1,519 | |||||
Income taxes payable | 54 | |||||
Total Current Liabilities | 1,573 | |||||
Non-current operating lease liabilities | 1,860 | |||||
Non-current finance lease liabilities | 25 | |||||
Other liabilities | 207 | |||||
Total Liabilities | 3,665 | |||||
Redeemable Noncontrolling Interest | 1 | |||||
Equity | ||||||
Common stock | 4 | |||||
Treasury stock | (460) | |||||
Additional paid-in capital | 2,402 | |||||
Retained earnings | 884 | |||||
Accumulated other comprehensive loss | (17) | |||||
Total Yum China Holdings, Inc. Stockholders’ Equity | 2,813 | |||||
Noncontrolling interests | 100 | |||||
Total Equity | 2,913 | |||||
Total Liabilities, Redeemable Noncontrolling Interest and Equity | 6,579 | |||||
Effect of Adoption [Member] | ||||||
Current Assets | ||||||
Prepaid expenses and other current assets | [1] | (39) | ||||
Total Current Assets | (39) | |||||
Property, plant and equipment, net | (1) | |||||
Operating lease right-of-use assets | $ 2,000 | 1,997 | [2] | |||
Intangible assets, net | [3] | (2) | ||||
Deferred income taxes | [4] | 19 | ||||
Investments in unconsolidated affiliates | (1) | |||||
Other assets | [3] | (4) | ||||
Total Assets | 1,969 | |||||
Current Liabilities | ||||||
Accounts payable and other current liabilities | [5] | 320 | ||||
Total Current Liabilities | 320 | |||||
Non-current operating lease liabilities | [6] | 1,860 | ||||
Other liabilities | [7] | (148) | ||||
Total Liabilities | 2,032 | |||||
Equity | ||||||
Retained earnings | [8] | (60) | ||||
Total Yum China Holdings, Inc. Stockholders’ Equity | (60) | |||||
Noncontrolling interests | [9] | (3) | ||||
Total Equity | (63) | |||||
Total Liabilities, Redeemable Noncontrolling Interest and Equity | $ 1,969 | |||||
[1] | Represents the current portion of prepaid rent reclassified to operating lease ROU assets. | |||||
[2] | Represents the net result of capitalization of operating lease payments and reclassification of prepaid rent, initial direct cost, deferred rent accrual and lease incentives, and offset by impairment of operating lease ROU assets that existed prior to the date of adoption. | |||||
[3] | Represents initial direct cost, favorable lease and non-current prepaid rent reclassified to operating lease ROU assets. | |||||
[4] | Represents the deferred tax impact related to impairment of operating lease ROU assets. | |||||
[5] | Represents recognition of the current portion of operating lease liabilities, offset by the reclassification of accrued rental payments and the current portion of deferred rent accrual to operating lease ROU assets. | |||||
[6] | Represents recognition of the non-current operating lease liabilities. | |||||
[7] | Represents reclassification of the non-current portion of deferred rent accrual and lease incentives to operating lease ROU assets. | |||||
[8] | Represents an impairment charge on operating lease ROU assets arising from existing operating leases as of January 1, 2019, net of related impact on deferred taxes and noncontrolling interests, with a corresponding reduction to the carrying amount of operating lease ROU assets. The impairment charge was recorded for those restaurants under operating leases with full impairment on the long-lived assets before January 1, 2019, as the additional impairment charge would have been recorded before January 1, 2019 had the operating lease ROU assets been recognized at the time of impairment. | |||||
[9] | Represents impairment of operating lease ROU assets attributable to noncontrolling interests. |
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, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | $ 2,029 | $ 2,319 | $ 2,124 | $ 2,304 | $ 1,914 | $ 2,212 | $ 2,068 | $ 2,221 | $ 8,776 | $ 8,415 | $ 7,769 | ||
KFC [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | 6,039 | 5,688 | 5,066 | ||||||||||
Pizza Hut [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | 2,054 | 2,111 | 2,093 | ||||||||||
All Other Segments [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | 121 | 99 | 106 | ||||||||||
Corporate and Unallocated [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | [1] | 562 | 517 | [2] | 504 | ||||||||
Combined [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | 8,814 | 8,431 | 7,769 | ||||||||||
Elimination [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | (38) | (16) | |||||||||||
Elimination [Member] | All Other Segments [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | 37 | ||||||||||||
Operating Segments [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | 8,776 | 8,415 | 7,769 | ||||||||||
Operating Segments [Member] | KFC [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | 6,040 | 5,688 | 5,066 | ||||||||||
Operating Segments [Member] | Pizza Hut [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | 2,054 | 2,111 | 2,093 | ||||||||||
Operating Segments [Member] | All Other Segments [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Total revenues | 158 | 115 | 106 | ||||||||||
Company Sales [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 1,813 | 2,097 | 1,926 | 2,089 | 1,721 | 2,008 | 1,888 | 2,016 | 7,925 | 7,633 | 6,993 | ||
Company Sales [Member] | KFC [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 5,839 | 5,495 | 4,863 | ||||||||||
Company Sales [Member] | Pizza Hut [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 2,045 | 2,106 | 2,090 | ||||||||||
Company Sales [Member] | All Other Segments [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 41 | 32 | 40 | ||||||||||
Company Sales [Member] | Combined [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 7,925 | 7,633 | 6,993 | ||||||||||
Franchise [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 35 | 38 | 36 | 39 | 31 | 36 | 34 | 40 | 148 | 141 | 141 | ||
Franchise [Member] | KFC [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 136 | 132 | 134 | ||||||||||
Franchise [Member] | Pizza Hut [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 4 | 3 | 2 | ||||||||||
Franchise [Member] | All Other Segments [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 8 | 6 | 5 | ||||||||||
Franchise [Member] | Combined [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 148 | 141 | 141 | ||||||||||
Transactions With Franchisees and Unconsolidated Affiliates [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 158 | 172 | 154 | 170 | 142 | 159 | 141 | 161 | 654 | 603 | 599 | ||
Transactions With Franchisees and Unconsolidated Affiliates [Member] | KFC [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 64 | 61 | 69 | ||||||||||
Transactions With Franchisees and Unconsolidated Affiliates [Member] | Pizza Hut [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 4 | 2 | 1 | ||||||||||
Transactions With Franchisees and Unconsolidated Affiliates [Member] | All Other Segments [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 28 | 26 | 25 | ||||||||||
Transactions With Franchisees and Unconsolidated Affiliates [Member] | Corporate and Unallocated [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 558 | 514 | [2] | 504 | |||||||||
Transactions With Franchisees and Unconsolidated Affiliates [Member] | Combined [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 654 | 603 | 599 | ||||||||||
Other Revenues [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | $ 23 | $ 12 | $ 8 | $ 6 | $ 20 | $ 9 | $ 5 | $ 4 | 49 | 38 | 36 | ||
Other Revenues [Member] | KFC [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 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 | 81 | 51 | 36 | ||||||||||
Other Revenues [Member] | Corporate and Unallocated [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 4 | 3 | [2] | ||||||||||
Other Revenues [Member] | Combined [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | 87 | 54 | $ 36 | ||||||||||
Other Revenues [Member] | Elimination [Member] | |||||||||||||
Disaggregation Of Revenue [Line Items] | |||||||||||||
Revenues | $ (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, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Revenue From Contract With Customer [Line Items] | |||||||||||
Franchise fees and income | $ 35 | $ 38 | $ 36 | $ 39 | $ 31 | $ 36 | $ 34 | $ 40 | $ 148 | $ 141 | $ 141 |
Transferred at Point in Time [Member] | |||||||||||
Revenue From Contract With Customer [Line Items] | |||||||||||
Franchise fees and income | 8 | 7 | 6 | ||||||||
Transferred over Time [Member] | |||||||||||
Revenue From Contract With Customer [Line Items] | |||||||||||
Franchise fees and income | $ 140 | $ 134 | $ 135 |
Revenue - Narrative (Details)
Revenue - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Revenue From Contract With Customer [Abstract] | ||
Impairment losses related to costs to obtain contracts | $ 0 | $ 0 |
Costs to obtain contracts | 9 | 8 |
Revenue recognized | $ 68 | $ 46 |
Revenue - Contract Liabilities
Revenue - Contract Liabilities (Details) - USD ($) $ in Millions | Dec. 31, 2019 | Dec. 31, 2018 |
Contract liabilities | ||
Contract liabilities | $ 168 | $ 127 |
Deferred Revenue Related To Prepaid Stored Value Products [Member] | ||
Contract liabilities | ||
Contract liabilities | 86 | 70 |
Deferred Revenue Related To Upfront Franchise Fees [Member] | ||
Contract liabilities | ||
Contract liabilities | 39 | 37 |
Deferred Revenue Related To Customer Loyalty Programs [Member] | ||
Contract liabilities | ||
Contract liabilities | 24 | 17 |
Deferred Revenue Related To Privilege Membership Programs [Member] | ||
Contract liabilities | ||
Contract liabilities | 16 | $ 3 |
Others [Member] | ||
Contract liabilities | ||
Contract liabilities | $ 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, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||
Earnings Per Share [Abstract] | ||||||||||||
Net Income – Yum China Holdings, Inc. | $ 90 | $ 223 | $ 178 | $ 222 | $ 74 | $ 203 | $ 143 | $ 288 | $ 713 | $ 708 | $ 398 | |
Weighted-average common shares outstanding (for basic calculation) | [1] | 377 | 384 | 387 | ||||||||
Effect of dilutive share-based awards | [1] | 8 | 9 | 10 | ||||||||
Effect of dilutive warrants | [2] | 3 | 2 | 1 | ||||||||
Weighted-average common and dilutive potential common shares outstanding (for diluted calculation) | 388 | 395 | 398 | |||||||||
Basic Earnings Per Share | $ 0.24 | $ 0.59 | $ 0.47 | $ 0.59 | $ 0.19 | $ 0.53 | $ 0.37 | $ 0.75 | $ 1.89 | $ 1.84 | $ 1.03 | |
Diluted Earnings Per Share | $ 0.23 | $ 0.58 | $ 0.46 | $ 0.57 | $ 0.19 | $ 0.51 | $ 0.36 | $ 0.72 | $ 1.84 | $ 1.79 | $ 1 | |
Share-based awards and warrants excluded from the diluted EPS computation | [3] | 2 | 6 | 10 | ||||||||
[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. | |||||||||||
[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 $39.25 per share, respectively, subject to customary anti-dilution adjustments. The warrants may be exercised at any time through October 31, 2021. The incremental shares arising from outstanding warrants are included in the computation of diluted EPS, if there is dilutive effect when the average market price of Yum China common stock for the year exceeds the applicable exercise price of the warrants | |||||||||||
[3] | These outstanding employee stock options, stock appreciation rights, RSUs, PSUs and warrants were not included in the computation of diluted EPS because to do so would have been antidilutive for the years presented. |
Earnings Per Common Share ("E_4
Earnings Per Common Share ("EPS") (Parenthetical) (Details) | Jan. 09, 2017Tranche$ / sharesshares | Dec. 31, 2019Tranche |
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 | shares | 8,200,405 | |
Exercise price of warrants | $ / shares | $ 31.40 | |
Tranche Two Warrants [Member] | ||
Class Of Warrant Or Right [Line Items] | ||
Warrants to purchase shares of common stock | shares | 8,200,405 | |
Exercise price of warrants | $ / shares | $ 39.25 |
Items Affecting Comparability_2
Items Affecting Comparability of Net Income and Cash Flows - Narrative (Details) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 12 Months Ended | |||||||
Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | ||
Gain from re-measurement of previously held ownership interest at fair value | [1] | $ 98 | |||||||
Unrealized investment gain (loss) | [2] | $ 63 | (27) | ||||||
Impairment charge | 49 | 52 | $ 58 | ||||||
Goodwill impairment | [3] | 9 | |||||||
Tax benefit | 260 | 214 | 379 | ||||||
Estimated additional income tax expense (benefit) | $ 8 | $ (36) | $ 164 | 8 | (36) | $ 164 | |||
One-time transition tax on deemed repatriation of accumulated undistributed foreign earnings | 130 | ||||||||
Re-measurement of deferred tax assets | 5 | ||||||||
Deferred tax assets valuation allowance | $ 30 | ||||||||
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 | |||||||
Meituan Dianping [Member] | |||||||||
Number of ordinary shares subscribed | 8 | ||||||||
Maximum percentage of ordinary shares subscribed | 1.00% | ||||||||
Fair value of Investment in Meituan's ordinary shares | $ 74 | ||||||||
Unrealized investment gain (loss) | $ 63 | $ (27) | |||||||
Wuxi KFC [Member] | |||||||||
Gain from re-measurement of previously held ownership interest at fair value | $ 98 | ||||||||
Ownership interest previously held | 47.00% | ||||||||
[1] | As a result of the acquisition of Wuxi KFC in the first quarter of 2018, as disclosed in Note 5, the Company recognized a gain of $98 million 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. | ||||||||
[3] | In 2019, we recorded an impairment charge of $9 million on goodwill attributable to the Daojia reporting unit (Note 5). |
Other Income, Net (Details)
Other Income, Net (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||
Other Income And Expenses [Abstract] | ||||
Equity income from investments in unconsolidated affiliates | $ 69 | $ 65 | $ 65 | |
Gain from re-measurement of equity interest upon acquisition | [1] | 98 | ||
Foreign exchanges and other | (9) | (11) | (1) | |
Other income, net | $ 60 | $ 152 | $ 64 | |
[1] | As a result of the acquisition of Wuxi KFC in the first quarter of 2018, as disclosed in Note 5, the Company recognized a gain of $98 million from the re-measurement of our previously held 47% equity interest at fair value, which was not allocated to any segment for performance reporting purposes. |
Other Income, Net (Parenthetica
Other Income, Net (Parenthetical) (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2018 | ||
Other Operating Income (Expense), Net | |||
Gain from re-measurement of previously held ownership interest at fair value | [1] | $ 98 | |
Wuxi KFC [Member] | |||
Other Operating Income (Expense), Net | |||
Gain from re-measurement of previously held ownership interest at fair value | $ 98 | ||
Ownership interest previously held | 47.00% | ||
[1] | As a result of the acquisition of Wuxi KFC in the first quarter of 2018, as disclosed in Note 5, the Company recognized a gain of $98 million from the re-measurement of our previously held 47% equity interest at fair value, which was not allocated to any segment for performance reporting purposes. |
Supplemental Balance Sheet In_3
Supplemental Balance Sheet Information (Details) - USD ($) $ in Millions | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Accounts Receivable, net | |||||
Accounts receivable, gross | $ 89 | $ 81 | |||
Allowance for doubtful accounts | (1) | (1) | |||
Accounts receivable, net | 88 | 80 | |||
Prepaid Expenses and Other Current Assets | |||||
Receivables from payment processors and aggregators | 41 | 49 | |||
Prepaid rent | 2 | 42 | |||
Dividends receivable from unconsolidated affiliates | 8 | 20 | |||
Other prepaid expenses and current assets | 83 | 66 | |||
Prepaid expenses and other current assets | 134 | 177 | |||
Other Assets | |||||
VAT assets | 243 | 226 | |||
Land use right | 133 | 138 | |||
Investment in equity securities | 110 | 47 | |||
Long-term deposits | 71 | 64 | |||
Costs to obtain contracts | 9 | 8 | |||
Restricted cash | [1] | 9 | |||
Others | 5 | 8 | |||
Other Assets | 580 | 491 | |||
Accounts Payable and Other Current Liabilities | |||||
Accounts payable | 623 | 619 | |||
Operating leases liabilities | 382 | ||||
Accrued compensation and benefits | 223 | 200 | |||
Accrued capital expenditures | 150 | 137 | |||
Contract liabilities | 135 | 96 | |||
Accrued marketing expenses | 64 | 32 | |||
Other current liabilities | 114 | 115 | |||
Accounts payable and other current liabilities | 1,691 | 1,199 | |||
Other Liabilities | |||||
Accrued income tax payable | 69 | 71 | |||
Deferred income tax liabilities | 67 | 65 | |||
Contract liabilities | 33 | 31 | |||
Deferred rental accrual | 144 | ||||
Other noncurrent liabilities | 41 | 44 | |||
Other liabilities | 210 | 355 | |||
Cash and cash equivalents | 1,046 | 1,266 | |||
Restricted cash included in Other assets | [1] | 9 | |||
Cash, Cash Equivalents and Restricted Cash as presented in Consolidated Statements of Cash Flows | $ 1,055 | $ 1,266 | $ 1,059 | $ 885 | |
[1] | Restricted cash included in Other assets within our Consolidated Balance Sheet represents amounts deposited into an escrow account pursuant to a definitive agreement entered in August 2019 to acquire a controlling interest in the Huang Ji Huang group, a leading Chinese-style casual dining franchise business. Subject to the satisfaction of closing conditions, the acquisition is expected to close in the first half of 2020. The acquisition is considered immaterial. |
Supplemental Balance Sheet In_4
Supplemental Balance Sheet Information (Details 1) - USD ($) $ in Millions | Dec. 31, 2019 | Dec. 31, 2018 |
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 3,471 | $ 3,348 |
Accumulated depreciation | (1,877) | (1,733) |
Property, plant and equipment, net | 1,594 | 1,615 |
Buildings and Improvements [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | 2,159 | 2,121 |
Finance Leases, Primarily Buildings [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | 30 | 26 |
Machinery and Equipment and Construction in Progress [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 1,282 | $ 1,201 |
Supplemental Balance Sheet In_5
Supplemental Balance Sheet Information - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Supplemental Balance Sheet Information Disclosure [Abstract] | |||
Depreciation and amortization expense related to property, plant and equipment | $ 408 | $ 414 | $ 391 |
Amortization expense related to land use right | $ 4 | $ 5 | $ 4 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets (Details) - USD ($) $ in Millions | 12 Months Ended | |||||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||||
Goodwill [Line Items] | ||||||
Goodwill, gross | $ 645 | $ 648 | $ 490 | |||
Accumulated impairment losses | (391) | (382) | [1] | (382) | [1] | |
Goodwill, net | 254 | 266 | 108 | |||
Goodwill acquired | [2] | 175 | ||||
Goodwill impairment | [3] | (9) | ||||
Effect of currency translation adjustment and other | (3) | (17) | ||||
KFC [Member] | ||||||
Goodwill [Line Items] | ||||||
Goodwill, gross | 235 | 238 | 80 | |||
Goodwill, net | 235 | 238 | 80 | |||
Goodwill acquired | [2] | 175 | ||||
Effect of currency translation adjustment and other | (3) | (17) | ||||
Pizza Hut [Member] | ||||||
Goodwill [Line Items] | ||||||
Goodwill, gross | 19 | 19 | 19 | |||
Goodwill, net | 19 | 19 | 19 | |||
All Other Segments [Member] | ||||||
Goodwill [Line Items] | ||||||
Goodwill, gross | 391 | 391 | 391 | |||
Accumulated impairment losses | (391) | (382) | [1] | (382) | [1] | |
Goodwill, net | $ 9 | $ 9 | ||||
Goodwill impairment | [3] | $ (9) | ||||
[1] | Accumulated impairment losses represent Little Sheep goodwill related impairment. | |||||
[2] | Goodwill acquired resulted from the acquisition of Wuxi KFC. (Note 1). | |||||
[3] | In 2019, we recorded an impairment charge of $9 million on goodwill attributable to the Daojia reporting unit (Note 5). |
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, 2019 | Dec. 31, 2018 | ||
Definite-lived intangible assets | ||||
Gross Carrying Amount | $ 185 | [1] | $ 195 | |
Accumulated Amortization | (129) | (120) | ||
Accumulated impairment losses | [2] | (14) | (12) | |
Net Carrying Amount | 42 | 63 | ||
Total intangible assets | ||||
Gross Carrying Amount | 237 | [1] | 248 | |
Intangible assets, net | 94 | 116 | ||
Little Sheep [Member] | Trademark [Member] | ||||
Indefinite-lived intangible assets | ||||
Net Carrying Amount | 52 | 53 | ||
Reacquired franchise rights [Member] | ||||
Definite-lived intangible assets | ||||
Gross Carrying Amount | 148 | [1] | 150 | |
Accumulated Amortization | (113) | (100) | ||
Net Carrying Amount | 35 | 50 | ||
Daojia platform [Member] | ||||
Definite-lived intangible assets | ||||
Gross Carrying Amount | 16 | [1] | 16 | |
Accumulated Amortization | (4) | (3) | ||
Accumulated impairment losses | [2] | (12) | (10) | |
Net Carrying Amount | 3 | |||
Customer-related assets [Member] | ||||
Definite-lived intangible assets | ||||
Gross Carrying Amount | 12 | [1] | 12 | |
Accumulated Amortization | (8) | (8) | ||
Accumulated impairment losses | [2] | (2) | (2) | |
Net Carrying Amount | 2 | 2 | ||
Others [Member] | ||||
Definite-lived intangible assets | ||||
Gross Carrying Amount | [3] | 9 | [1] | 17 |
Accumulated Amortization | [3] | (4) | (9) | |
Net Carrying Amount | [3] | $ 5 | $ 8 | |
[1] | Changes in gross carrying amount include effect of currency translation adjustment. | |||
[2] | In 2019 and 2018, we recorded impairment charges of $2 million and $12 million on intangible assets acquired from Daojia primarily attributable to the Daojia platform, respectively. See Note 5 for details. | |||
[3] | Decrease in Others in 2019 is primarily due to the reclassification of favorable lease assets, with a gross value of $7 million and accumulated amortization of $5 million, to right-to-use assets upon adoption of ASC 842. |
Goodwill and Intangible Asset_5
Goodwill and Intangible Assets - Parenthetical (Details 1) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Schedule Of Finite And Indefinite Lived Intangible Assets By Major Class [Line Items] | |||
Impairment charge | $ 49 | $ 52 | $ 58 |
Reclassification of favorable lease assets gross carrying amount to right of use assets upon adoption of ASU842 | 7 | ||
Reclassification of accumulative amortization of favorable lease assets to right of use assets upon adoption of ASU842 | 5 | ||
Daojia platform [Member] | |||
Schedule Of Finite And Indefinite Lived Intangible Assets By Major Class [Line Items] | |||
Impairment charge | $ 2 | $ 12 |
Goodwill and Intangible Asset_6
Goodwill and Intangible Assets - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Definite-lived intangible assets | |||
Finite-lived intangible assets, amortization expense | $ 16 | $ 26 | $ 14 |
Approximate amortization expense for finite-lived intangible assets - 2020 | 12 | ||
Approximate amortization expense for finite-lived intangible assets - 2021 | 12 | ||
Approximate amortization expense for finite-lived intangible assets - 2022 | 12 | ||
Approximate amortization expense for finite-lived intangible assets - 2023 | 2 | ||
Approximate amortization expense for finite-lived intangible assets - 2024 | $ 1 |
Credit Facilities - Narrative (
Credit Facilities - Narrative (Details) - 12 months ended Dec. 31, 2019 ¥ in Millions | USD ($) | CNY (¥) |
Line Of Credit Facility [Line Items] | ||
Credit facility maximum borrowing amount | $ 415,000,000 | ¥ 2,893 |
Onshore Credit Facility [Member] | ||
Line Of Credit Facility [Line Items] | ||
Credit facility maximum borrowing amount | 215,000,000 | 1,500 |
Bank guarantees outstanding | 12,000,000 | ¥ 85 |
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 three years as of December 31, 2019. 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 | 3 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, 2019USD ($)Tranche$ / sharesshares | Dec. 31, 2018$ / sharesshares | Dec. 31, 2017shares | 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 | 395,000,000 | 392,000,000 | 363,758,219 | ||||
Common stock, shares outstanding | 376,000,000 | 379,000,000 | 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 | 6,200,000 | 9,000,000 | 3,400,000 | ||||
Warrants exercisable period | Oct. 31, 2021 | ||||||
Residual amounts allocated to common stock | $ | 364 | ||||||
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, 2019USD ($)Restaurant | Dec. 31, 2018USD ($) | |
Schedule Of Lease Assets And Liabilities [Line Items] | ||
Number of restaurants | Restaurant | 7,300 | |
Additional lease signed but not commenced with total undiscounted minimum lease payments | $ 84 | |
Present value of lease liabilities | 28 | $ 27 |
Finance lease imputed interest | 11 | 10 |
Finance lease liabilities, Current | $ 2 | |
Accounts Payable and Other Current Liabilities [Member] | ||
Schedule Of Lease Assets And Liabilities [Line Items] | ||
Finance lease liabilities, Current | $ 2 | |
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, 2019 | Dec. 31, 2018 |
Schedule Of Lease Assets And Liabilities [Abstract] | ||
Operating lease right-of-use assets | $ 1,985 | |
Finance lease right-of-use assets | $ 18 | |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | us-gaap:PropertyPlantAndEquipmentMember | |
Total leased assets | $ 2,003 | |
Operating leases liabilities | 382 | |
Finance lease liabilities, Current | $ 2 | |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | us-gaap:AccountsPayableAndAccruedLiabilitiesCurrent | |
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List] | us-gaap:AccountsPayableAndAccruedLiabilitiesCurrent | |
Non-current operating lease liabilities | $ 1,803 | |
Non-current finance lease obligations | 26 | $ 25 |
Total lease liabilities | $ 2,213 |
Leases - Summary of Lease Cost
Leases - Summary of Lease Cost (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Lease Cost [Abstract] | |
Operating lease cost | $ 472 |
Finance lease cost | |
Amortization of leased assets | 1 |
Interest on lease liabilities | 2 |
Variable lease cost | 325 |
Short-term lease cost | 10 |
Sub-lease income | (27) |
Total lease cost | $ 783 |
Leases - Schedule of Supplement
Leases - Schedule of Supplemental Cash Flow Information (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows from operating leases | $ 481 |
Operating cash flows from finance leases | 1 |
Financing cash flows from finance leases | 2 |
Right-of-use assets obtained in exchange for new lease liabilities: | |
Operating leases | 346 |
Finance leases | $ 4 |
Leases - Schedule of Lease Term
Leases - Schedule of Lease Term and Discount Rate (Details) | Dec. 31, 2019 |
Weighted-average remaining lease term (years) | |
Operating leases | 7 years 1 month 6 days |
Finance leases | 11 years 6 months |
Weighted-average discount rate | |
Operating leases | 6.10% |
Finance leases | 5.90% |
Leases - Summary of Maturities
Leases - Summary of Maturities of Lease Liabilities (Details) - USD ($) $ in Millions | Dec. 31, 2019 | Dec. 31, 2018 |
Amount of Operating Leases | ||
2020 | $ 504 | |
2021 | 448 | |
2022 | 389 | |
2023 | 325 | |
2024 | 261 | |
Thereafter | 781 | |
Total undiscounted lease payment | 2,708 | |
Less: imputed interest | 523 | |
Present value of lease liabilities | 2,185 | |
Amount of Finance Leases | ||
2020 | 4 | |
2021 | 4 | |
2022 | 4 | |
2023 | 3 | |
2024 | 3 | |
Thereafter | 21 | |
Total undiscounted lease payment | 39 | |
Less: imputed interest | 11 | $ 10 |
Present value of lease liabilities | 28 | $ 27 |
Amount of Operating And Finance Leases, Total | ||
2020 | 508 | |
2021 | 452 | |
2022 | 393 | |
2023 | 328 | |
2024 | 264 | |
Thereafter | 802 | |
Total undiscounted lease payment | 2,747 | |
Less: imputed interest | 534 | |
Present value of lease liabilities | $ 2,213 |
Leases - Summary of Future Mini
Leases - Summary of Future Minimum Lease Payments under Non-Cancellable Leases (Details) $ in Millions | Dec. 31, 2018USD ($) |
Operating leases, future minimum commitments [Abstract] | |
2019 | $ 466 |
2020 | 440 |
2021 | 394 |
2022 | 336 |
2023 | 275 |
Thereafter | 864 |
Operating leases, future minimum payments due | 2,775 |
Finance leases, future minimum commitments [Abstract] | |
2019 | 3 |
2020 | 3 |
2021 | 3 |
2022 | 3 |
2023 | 3 |
Thereafter | 22 |
Finance leases, total future minimum commitments | 37 |
Operating and Finance leases, future minimum commitments [Abstract] | |
2019 | 469 |
2020 | 443 |
2021 | 397 |
2022 | 339 |
2023 | 278 |
Thereafter | 886 |
Operating and finance leases, future minimum commitments | $ 2,812 |
Fair Value Measurements and D_3
Fair Value Measurements and Disclosures - Narrative (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
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, 2019 | Dec. 31, 2018 | |
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | $ 738 | $ 949 | |
Short-term investments, Fair Value Measurement or Disclosure | 611 | 122 | |
Total assets, Fair Value Measurement or Disclosure | 1,459 | 1,118 | |
Level 1 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | 331 | 379 | |
Total assets, Fair Value Measurement or Disclosure | 441 | 426 | |
Level 2 [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | 407 | 570 | |
Short-term investments, Fair Value Measurement or Disclosure | 611 | 122 | |
Total assets, Fair Value Measurement or Disclosure | 1,018 | 692 | |
Time Deposits [Member] | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Cash equivalents, Fair Value Measurement or Disclosure | 407 | 570 | |
Short-term investments, Fair Value Measurement or Disclosure | 611 | 122 | |
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 | 407 | 570 | |
Short-term investments, Fair Value Measurement or Disclosure | 611 | 122 | |
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 | 226 | |
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 | 226 | |
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] | 153 | |
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] | 153 | |
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 | 110 | 47 | |
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 | $ 110 | $ 47 | |
[1] | Classified as held-to-maturity investments and measured at amortized cost. |
Fair Value Measurements and D_5
Fair Value Measurements and Disclosures (Details) - Fair Value, Measurements, Nonrecurring [Member] - Fair Value, Inputs, Level 3 [Member] - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||||
Total expense recognized from non-recurring fair value measurements | $ 121 | $ 39 | $ 38 | |
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] | 28 | 27 | 41 |
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 | |
Income from Reversal of Contingent Consideration [Member] | ||||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||||
Total expense recognized from non-recurring fair value measurements | [4] | $ (3) | ||
[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. . | |||
[3] | See Note 5 for further discussion. | |||
[4] | During 2017, we recognized income of $3 million from the reversal of contingent consideration previously recorded for a business combination (Level 3), as the fair value of such contingent consideration is considered to be nil given the remote likelihood of the payment obligation. |
Fair Value Measurements and D_6
Fair Value Measurements and Disclosures (Parenthetical) (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2017 | |
Fair Value, Inputs, Level 3 [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Income recognized from reversal of contingent consideration | $ 3 | |
ASU 2016-02 [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Cumulative adjustment to retained earnings | $ 60 | |
ASU 2016-02 [Member] | Cumulative Adjustment to Deferred Income Tax Expenses Due to Adoption of New Accounting Pronouncement [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Cumulative adjustment to opening retained earnings due to adoption of new accounting pronouncement | 19 | |
ASU 2016-02 [Member] | Cumulative Adjustment to Net Income (Loss) Attributable to Noncontrolling Interest Due to Adoption of New Accounting Pronouncement [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Cumulative adjustment to opening retained earnings due to adoption of new accounting pronouncement | $ 3 |
Retirement Plans - Narrative (D
Retirement Plans - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
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 | $ 160 | $ 174 | $ 157 |
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 | $ 4.8 | $ 4.4 |
Share-Based Compensation - Narr
Share-Based Compensation - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions | Oct. 04, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | 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. | ||||
Expected term (years) | 6 years 6 months | 6 years 6 months | 6 years 9 months | ||
Dividends approved date | Oct. 4, 2017 | ||||
Dividends payable, amount per share | $ 0.10 | ||||
Share-based compensation expense | $ 26 | $ 24 | $ 26 | ||
Deferred tax benefit recognized | $ 1 | $ 1 | 3 | ||
Non-Employee Directors [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of common stock granted | 60,419 | 45,425 | |||
Grant date fair value | $ 2.4 | $ 1.8 | |||
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 | ||||
Total intrinsic value of stock options and SARs exercised | $ 39 | 31 | 44 | ||
Unrecognized compensation cost | $ 25 | ||||
Remaining weighted-average vesting period | 1 year 8 months 12 days | ||||
Total fair value at grant date or modification date of awards vested | $ 14 | $ 14 | $ 11 | ||
RSUs [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting period (in years) | 3 years | ||||
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% | ||||
PSUs [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting period (in years) | 3 years | 3 years | |||
Expected term (years) | 3 years | 3 years | |||
Model to fair value share-based payment awards | Monte-Carlo Simulation model (the “MCS model”) | ||||
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) | $ 13.43 | $ 13.52 | $ 10.19 | ||
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) | $ 44.75 | $ 39.50 | $ 28.46 | ||
Unrecognized compensation cost | $ 16 | ||||
Remaining weighted-average vesting period | 1 year 8 months 12 days | ||||
Unvested RSUs | 970,762 | 988,000 | |||
Minimum [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting period (in years) | 1 year | ||||
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) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Award Valuation | |||
Risk-free interest rate | 2.50% | 2.50% | 1.90% |
Expected term (years) | 6 years 6 months | 6 years 6 months | 6 years 9 months |
Expected volatility | 32.00% | 33.00% | 34.00% |
Expected dividend yield | 1.20% | 1.00% | 0.00% |
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, 2019USD ($)$ / sharesshares | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Outstanding at the beginning of 2019 (in shares) | shares | 17,670 | |
Granted (in shares) | shares | 1,469 | |
Exercised (in shares) | shares | (4,234) | |
Forfeited or expired (in shares) | shares | (532) | |
Outstanding at the end of 2019 (in shares) | shares | 14,373 | [1] |
Exercisable at the end of 2019 (in shares) | shares | 10,583 | |
Outstanding at the beginning 2019, Weighted-average exercise price (in dollars per share) | $ / shares | $ 21.18 | |
Granted, Weighted-average exercise price (in dollars per share) | $ / shares | 41.66 | |
Exercised, Weighted-average exercise price (in dollars per share) | $ / shares | 16.58 | |
Forfeited or expired, Weighted-average exercise price (in dollars per share) | $ / shares | 32.02 | |
Outstanding at the end of 2019, Weighted-average exercise price (in dollars per share) | $ / shares | 24.22 | |
Exercisable at the end of 2019, Weighted-average exercise price (in dollars per share) | $ / shares | $ 20.92 | |
Outstanding at the end of 2019, Weighted-average remaining contractual term (in years) | 5 years 1 month 9 days | |
Exercisable at the end of 2019, Weighted-average remaining contractual term (in years) | 4 years 1 month 24 days | |
Outstanding at the end of 2019, Aggregate intrinsic value (in dollars) | $ | $ 342 | |
Exercisable at the end of 2019, Aggregate intrinsic value (in dollars) | $ | $ 287 | |
[1] | Outstanding awards include 497,480 stock options and 13,875,168 SARs with weighted-average exercise prices of $18.50 and $24.42, respectively. Outstanding awards represent Yum China awards held by employees of both the Company and YUM. |
Share-Based Compensation (Paren
Share-Based Compensation (Parenthetical) (Details 1) | Dec. 31, 2019$ / sharesshares |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Stock options outstanding at the end of 2019 (in shares) | shares | 497,480 |
SARs outstanding at the end of 2019 (in shares) | shares | 13,875,168 |
Stock options outstanding at the end of 2019, Weighted-average exercise price (in dollars per share) | $ / shares | $ 18.50 |
SARs outstanding at the end of 2019, Weighted-average exercise price (in dollars per share) | $ / shares | $ 24.42 |
Share-Based Compensation (Det_3
Share-Based Compensation (Details 2) - RSUs and PSUs [Member] - $ / shares | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Unvested at the beginning of 2019 (in shares) | 988,000 | ||
Granted (in shares) | 332,000 | ||
Vested (in shares) | (219,000) | ||
Forfeited (in shares) | (130,000) | ||
Unvested at the end of 2019 (in shares) | 970,762 | 988,000 | |
Unvested at the beginning of 2019 | $ 30.60 | ||
Granted | 44.75 | $ 39.50 | $ 28.46 |
Vested | 24.11 | ||
Forfeited | 36.76 | ||
Unvested at the end of 2019 | $ 36.08 | $ 30.60 |
Equity - Narrative (Details)
Equity - Narrative (Details) - USD ($) | Oct. 04, 2017 | 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, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Oct. 31, 2016 | Oct. 27, 2016 |
Class Of Stock [Line Items] | ||||||||||||||
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 | 395,000,000 | 392,000,000 | 395,000,000 | 392,000,000 | 363,758,219 | |||||||||
Common stock, shares outstanding | 376,000,000 | 379,000,000 | 376,000,000 | 379,000,000 | 363,758,219 | |||||||||
Treasury stock repurchased, shares | 6,200,000 | 9,000,000 | 3,400,000 | |||||||||||
Treasury stock repurchased, value | $ 261,000,000 | $ 312,000,000 | $ 128,000,000 | |||||||||||
Stock repurchase program, remaining authorized repurchase amount | $ 699,000,000 | 699,000,000 | ||||||||||||
Dividends declared date | Oct. 4, 2017 | |||||||||||||
Dividends payable, amount per share | $ 0.10 | |||||||||||||
Total cash dividend paid | 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 | $ 0.10 | $ 0.10 | $ 0.10 | ||||||
Other comprehensive Income (loss) | (32,000,000) | (160,000,000) | 142,000,000 | |||||||||||
Accumulated other comprehensive Income (loss) | $ (49,000,000) | $ (17,000,000) | (49,000,000) | (17,000,000) | ||||||||||
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 | $ 625,000,000 | $ 625,000,000 | ||||||||||||
Rights Plan [Member] | ||||||||||||||
Class Of Stock [Line Items] | ||||||||||||||
Percentage of preferred stock purchase of share | 100.00% | |||||||||||||
Dividend record date | Oct. 27, 2016 | |||||||||||||
Rights plan expiration date | Oct. 27, 2017 |
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, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2020 | |
Income Taxes Disclosure [Line Items] | |||||||
U.S. federal statutory rate, percent | 21.00% | 21.00% | 35.00% | ||||
Estimated additional income tax expense (benefit) | $ 8 | $ (36) | $ 164 | $ 8 | $ (36) | $ 164 | |
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 | $ 29.6 | |||||
One time transition tax payable | 83 | 83 | |||||
Transition tax included in income tax payable | 7 | 7 | |||||
Transition tax included in other liabilities | 76 | $ 76 | |||||
Effective income tax rate | 25.90% | 22.60% | 47.20% | ||||
Foreign withholding taxes not recognized, cumulative amount of temporary differences | $ 2,000 | ||||||
Cash payments for tax liabilities on income tax returns | $ 255 | $ 208 | $ 232 | ||||
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% | 50.00% | |||||
Increase (decrease) in unrecognized tax benefits | $ 4 | $ 3 | |||||
Amount of unrecognized tax benefits balance | $ 22 | $ 28 | 19 | 22 | 28 | ||
Total interest and penalties recorded during the period | (1) | $ (1) | $ 2 | ||||
Other Liabilities [Member] | |||||||
Income Taxes Disclosure [Line Items] | |||||||
Amount of unrecognized tax benefits balance | 19 | ||||||
Scenario Forecast [Member] | |||||||
Income Taxes Disclosure [Line Items] | |||||||
Increase (decrease) in unrecognized tax benefits in the next 12 months | $ (6) | ||||||
Little Sheep Group Limited and Daojia [Member] | |||||||
Income Taxes Disclosure [Line Items] | |||||||
Operating loss carryforwards | $ 94 | ||||||
Operating loss carryforwards expiration year | 2024 | ||||||
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% | ||||||
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, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
U.S. and foreign income (loss) before income taxes [Abstract] | |||
U.S. | $ (7) | $ (3) | $ (13) |
Mainland China | 941 | 979 | 806 |
Other Foreign | 69 | (26) | 10 |
Income Before Income Taxes | $ 1,003 | $ 950 | $ 803 |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Details of income tax provision (benefit) [Abstract] | |||
Current: Federal | $ 16 | $ (33) | $ 85 |
Current: Foreign | 228 | 214 | 232 |
Total current income tax provision (benefit) | 244 | 181 | 317 |
Deferred: Federal | (1) | 77 | |
Deferred: Foreign | 17 | 33 | (15) |
Total deferred income tax provision (benefit) | 16 | 33 | 62 |
Effective income tax rate | $ 260 | $ 214 | $ 379 |
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, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Expense (Benefit), Continuing Operations, Income Tax Reconciliation [Abstract] | ||||||
U.S. federal statutory rate | $ 211 | $ 199 | $ 281 | |||
Transaction tax | $ 8 | $ (36) | $ 164 | 8 | (36) | 164 |
Statutory rate differential attributable to foreign operations | 53 | 56 | (60) | |||
Change in valuation allowances | 2 | (4) | 2 | |||
Impact from investment (gain) loss | (10) | 4 | ||||
Others, net | (4) | (5) | (8) | |||
Effective income tax rate | $ 260 | $ 214 | $ 379 | |||
Effective income tax rate reconciliation [Abstract] | ||||||
U.S. federal statutory rate, percent | 21.00% | 21.00% | 35.00% | |||
Impact from the Tax Act, percent | 0.80% | (3.80%) | 20.40% | |||
Statutory rate differential attributable to foreign operations, percent | 5.30% | 5.80% | (7.50%) | |||
Change in valuation allowances, percent | 0.20% | (0.40%) | 0.20% | |||
Impact from investment (gain) loss, percent | (1.00%) | 0.50% | ||||
Other, net, percent | (0.40%) | (0.50%) | (0.90%) | |||
Effective income tax rate, percent | 25.90% | 22.60% | 47.20% |
Income Taxes (Details 3)
Income Taxes (Details 3) - USD ($) $ in Millions | Dec. 31, 2019 | Dec. 31, 2018 |
Net deferred tax assets (liabilities) [Abstract] | ||
Operating losses and tax credit carryforwards | $ 25 | $ 28 |
Employee benefits | 4 | 6 |
Share-based compensation | 5 | 5 |
Leases | 61 | 41 |
Other liabilities | 13 | 12 |
Deferred income and other | 58 | 50 |
Gross deferred tax assets | 184 | 160 |
Deferred tax asset valuation allowances | (47) | (50) |
Net deferred tax assets | 137 | 110 |
Intangible assets | (23) | (28) |
Property, plant and equipment | (59) | (31) |
Gain from re-measurement of equity interest upon acquisition | (22) | (23) |
Others | (5) | (4) |
Gross deferred tax liabilities | (109) | (86) |
Net deferred tax assets | 28 | 24 |
Reported in Consolidated Balance Sheets as: | ||
Deferred income taxes | 95 | 89 |
Other liabilities | (67) | (65) |
Net deferred tax assets | 28 | 24 |
Little Sheep Group Limited [Member] | ||
Net deferred tax assets (liabilities) [Abstract] | ||
Tax benefit from Little Sheep restructuring | $ 18 | $ 18 |
Income Taxes (Details 4)
Income Taxes (Details 4) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Beginning of Year | $ 22 | $ 28 |
Additions for tax positions of prior years | 4 | 3 |
Reductions due to statute expiration | (7) | (9) |
End of Year | $ 19 | $ 22 |
Income Taxes (Details 5)
Income Taxes (Details 5) - USD ($) $ in Millions | Dec. 31, 2019 | Dec. 31, 2018 |
Income Tax Disclosure [Abstract] | ||
Accrued interest and penalties | $ 5 | $ 6 |
Segment Reporting - Narrative (
Segment Reporting - Narrative (Details) - Segment | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2019 | |
Segment Reporting [Abstract] | ||
Number of reportable segments | 2 | 2 |
Number of non-reportable operating segments | 6 |
Segment Reporting (Details)
Segment Reporting (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||||
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, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | $ 2,029 | $ 2,319 | $ 2,124 | $ 2,304 | $ 1,914 | $ 2,212 | $ 2,068 | $ 2,221 | $ 8,776 | $ 8,415 | $ 7,769 | ||
Operating Profit | 94 | $ 300 | $ 204 | $ 303 | 84 | $ 269 | $ 193 | $ 395 | 901 | 941 | 778 | ||
Interest income, net | [1] | 39 | 36 | 25 | |||||||||
Investment gain (loss) | [1] | 63 | (27) | ||||||||||
Income Before Income Taxes | 1,003 | 950 | 803 | ||||||||||
Depreciation and amortization | 428 | 445 | 409 | ||||||||||
Impairment Charges | 49 | 52 | 58 | ||||||||||
Capital Spending | 435 | 470 | 415 | ||||||||||
Total Assets | 6,950 | 4,610 | 6,950 | 4,610 | |||||||||
KFC [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 6,039 | 5,688 | 5,066 | ||||||||||
Total Assets | [2] | 3,160 | 1,745 | 3,160 | 1,745 | ||||||||
Pizza Hut [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 2,054 | 2,111 | 2,093 | ||||||||||
All Other Segments [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 121 | 99 | 106 | ||||||||||
Corporate and Unallocated [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | [1] | 562 | 517 | [3] | 504 | ||||||||
Unallocated revenues from transactions with franchisees and unconsolidated affiliates | [4] | 558 | 514 | 504 | |||||||||
Unallocated Other revenues | 4 | 3 | |||||||||||
Unallocated expenses for transactions with franchisees and unconsolidated affiliates | [4] | (554) | (512) | (500) | |||||||||
Unallocated Other operating costs and expenses | (4) | (2) | |||||||||||
Unallocated and corporate G&A expenses | (145) | (128) | (185) | ||||||||||
Unallocated Closures and impairment expense | [5] | (11) | (12) | ||||||||||
Unallocated Other income | [6] | 4 | 98 | 9 | |||||||||
Depreciation and amortization | 13 | 12 | 14 | ||||||||||
Impairment Charges | [5] | 11 | 12 | ||||||||||
Capital Spending | 90 | 95 | 93 | ||||||||||
Total Assets | [7] | 2,674 | 2,175 | 2,674 | 2,175 | ||||||||
Operating Segments [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 8,776 | 8,415 | 7,769 | ||||||||||
Operating Segments [Member] | KFC [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 6,040 | 5,688 | 5,066 | ||||||||||
Operating Profit | [8] | 949 | 895 | 802 | |||||||||
Depreciation and amortization | 290 | 296 | 265 | ||||||||||
Impairment Charges | [9] | 16 | 14 | 27 | |||||||||
Capital Spending | 264 | 292 | 227 | ||||||||||
Operating Segments [Member] | Pizza Hut [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 2,054 | 2,111 | 2,093 | ||||||||||
Operating Profit | 114 | 97 | 157 | ||||||||||
Depreciation and amortization | 120 | 129 | 126 | ||||||||||
Impairment Charges | [9] | 20 | 26 | 31 | |||||||||
Capital Spending | 71 | 77 | 93 | ||||||||||
Total Assets | 950 | 558 | 950 | 558 | |||||||||
Operating Segments [Member] | All Other Segments [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 158 | 115 | 106 | ||||||||||
Operating Profit | (14) | (12) | (9) | ||||||||||
Depreciation and amortization | 5 | 8 | 4 | ||||||||||
Impairment Charges | [9] | 2 | |||||||||||
Capital Spending | 10 | 6 | 2 | ||||||||||
Total Assets | $ 166 | $ 132 | 166 | 132 | |||||||||
Elimination [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | (38) | (16) | |||||||||||
Elimination [Member] | All Other Segments [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | 37 | ||||||||||||
Combined [Member] | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Revenues | $ 8,814 | $ 8,431 | $ 7,769 | ||||||||||
[1] | Amounts have not been allocated to any segment for performance reporting purposes. | ||||||||||||
[2] | Includes investments in unconsolidated affiliates. | ||||||||||||
[3] | 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. | ||||||||||||
[4] | Primarily includes revenues and associated expenses of transactions with franchisee and unconsolidated affiliates derived from the Company’s central procurement model whereby the Company centrally purchases all food and paper products from suppliers then sells and delivers to all 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. | ||||||||||||
[5] | Includes impairment charges on intangible assets and goodwill attributable to the Daojia business in 2019 and 2018, respectively. See Note 5. | ||||||||||||
[6] | In 2018, the unallocated other income primarily includes gain from re-measurement of previously held equity interest in connection with the acquisition of Wuxi KFC. See Note 5. | ||||||||||||
[7] | Primarily includes cash and cash equivalents, short-term investments, inventories and investment in equity securities that are centrally managed. | ||||||||||||
[8] | Includes equity income from investments in unconsolidated affiliates of $69 million, $65 million and $65 million in 2019, 2018 and 2017, respectively. | ||||||||||||
[9] | Primarily includes store closure impairment charges, restaurant-level impairment charges resulting from our semi-annual impairment evaluation, and incremental restaurant-level impairment charges as a result of adopting ASC 842. (See Note 12). |
Segment Reporting (Parenthetica
Segment Reporting (Parenthetical) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Segment Reporting [Abstract] | |||
Equity income from investments in unconsolidated affiliates | $ 69 | $ 65 | $ 65 |
Contingencies - Narrative (Deta
Contingencies - Narrative (Details) - USD ($) | 1 Months Ended | |
Feb. 28, 2015 | Dec. 31, 2019 | |
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, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Revenues | |||||||||||
Total revenues | $ 2,029 | $ 2,319 | $ 2,124 | $ 2,304 | $ 1,914 | $ 2,212 | $ 2,068 | $ 2,221 | $ 8,776 | $ 8,415 | $ 7,769 |
Restaurant profit | 225 | 372 | 283 | 386 | 199 | 353 | 286 | 361 | 1,266 | 1,199 | |
Operating Profit | 94 | 300 | 204 | 303 | 84 | 269 | 193 | 395 | 901 | 941 | 778 |
Net Income (Loss) – Yum China Holdings, Inc. | $ 90 | $ 223 | $ 178 | $ 222 | $ 74 | $ 203 | $ 143 | $ 288 | $ 713 | $ 708 | $ 398 |
Basic earnings (loss) per common share | $ 0.24 | $ 0.59 | $ 0.47 | $ 0.59 | $ 0.19 | $ 0.53 | $ 0.37 | $ 0.75 | $ 1.89 | $ 1.84 | $ 1.03 |
Diluted earnings (loss) per common share | $ 0.23 | $ 0.58 | $ 0.46 | $ 0.57 | $ 0.19 | $ 0.51 | $ 0.36 | $ 0.72 | $ 1.84 | $ 1.79 | $ 1 |
Company Sales [Member] | |||||||||||
Revenues | |||||||||||
Revenues | $ 1,813 | $ 2,097 | $ 1,926 | $ 2,089 | $ 1,721 | $ 2,008 | $ 1,888 | $ 2,016 | $ 7,925 | $ 7,633 | $ 6,993 |
Franchise [Member] | |||||||||||
Revenues | |||||||||||
Revenues | 35 | 38 | 36 | 39 | 31 | 36 | 34 | 40 | 148 | 141 | 141 |
Transactions With Franchisees and Unconsolidated Affiliates [Member] | |||||||||||
Revenues | |||||||||||
Revenues | 158 | 172 | 154 | 170 | 142 | 159 | 141 | 161 | 654 | 603 | 599 |
Other Revenues [Member] | |||||||||||
Revenues | |||||||||||
Revenues | $ 23 | $ 12 | $ 8 | $ 6 | $ 20 | $ 9 | $ 5 | $ 4 | $ 49 | $ 38 | $ 36 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Millions | Feb. 08, 2020 | Feb. 05, 2020 | Oct. 04, 2017 | Feb. 26, 2020 |
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. 5, 2020 | |||
Dividends payable, amount per share | $ 0.12 | |||
Dividends payable date | Mar. 25, 2020 | |||
Dividends payable, date of record | Mar. 4, 2020 | |||
Estimated cash dividend payable | $ 45 | |||
Subsequent Event [Member] | Long Term Incentive Plan (the "2016" Plan) [Member] | Employees [Member] | ||||
Subsequent Event [Line Items] | ||||
Estimated total grant-date fair value | $ 60 | |||
Subsequent Event [Member] | Long Term Incentive Plan (the "2016" Plan) [Member] | Employees [Member] | PSUs [Member] | ||||
Subsequent Event [Line Items] | ||||
Estimated total grant-date fair value | $ 35 | |||
Performance period | 4 years | |||
Subsequent Event [Member] | Minimum [Member] | Long Term Incentive Plan (the "2016" Plan) [Member] | Employees [Member] | PSUs [Member] | ||||
Subsequent Event [Line Items] | ||||
Stock-based compensation PSU award percentage | 0.00% | |||
Subsequent Event [Member] | Minimum [Member] | Novel Coronavirus Outbreak [Member] | China [Member] | ||||
Subsequent Event [Line Items] | ||||
Percentage of temporary closure of restaurants | 30.00% | |||
Subsequent Event [Member] | Maximum [Member] | Long Term Incentive Plan (the "2016" Plan) [Member] | Employees [Member] | PSUs [Member] | ||||
Subsequent Event [Line Items] | ||||
Stock-based compensation PSU award percentage | 200.00% |