YUM CHINA(YUMC) - 2024 Q4 - Annual Report

Cash Flow and Capital Management - Net cash provided by operating activities decreased to $1,419 million in 2024 from$1,473 million in 2023, primarily due to working capital changes[440]. - Net cash used in investing activities significantly decreased to $178 million in 2024 from$743 million in 2023, mainly due to changes in short-term investments and long-term deposits[440]. - Net cash used in financing activities increased to $1,636 million in 2024 from$716 million in 2023, driven by increased share repurchases and repayment of short-term borrowings[441]. - The company repurchased 31.3 million shares for $1,242 million in 2024, compared to 12.4 million shares for$617 million in 2023[446]. - Total cash dividends paid increased to $248 million in 2024 from$216 million in 2023, with a quarterly dividend of $0.16 per share in 2024[447]. - The company plans to increase capital returns to shareholders from$3 billion to $4.5 billion between 2024 and 2026, representing a 50$700 million to $800 million[443]. - As of December 31, 2024, the company had unused credit facilities of approximately$1,041 million[451]. - Material cash requirements as of December 31, 2024, totaled $3,172 million, with significant obligations related to operating leases and finance leases[452]. - The company has entered into share repurchase agreements for approximately$360 million for the first half of 2025[448]. Intangible Assets and Impairment - The company evaluated indefinite-lived intangible assets, with a book value of $123 million and$127 million as of December 31, 2024 and 2023, respectively, related to the Little Sheep and Huang Ji Huang trademarks, concluding no impairment charges were necessary for 2024 and 2023[466][467]. - Goodwill amounted to $1,880 million as of December 31, 2024, associated with KFC, Pizza Hut, Huang Ji Huang, and Lavazza reporting units, with no impairment charges recorded for 2024 and 2023[472]. - The company performed qualitative impairment assessments for its trademarks and concluded that it was more likely than not that the assets were not impaired, resulting in no impairment charges recorded[467]. - The company continues to evaluate its long-lived assets for impairment semi-annually, based on forecasted undiscounted cash flows and market participant assumptions[463][464]. - The discount rate used in fair value calculations for goodwill and intangible assets reflects the required rate-of-return expected by a third-party buyer, which is influenced by the risks and uncertainties of forecasted cash flows[470][471]. - The company’s estimates of future cash flows for impairment assessments are highly subjective and can be significantly impacted by changes in business or economic conditions[471]. Tax and Regulatory Matters - The company had$19 million and $20 million of unrecognized tax benefits as of December 31, 2024 and 2023, respectively, related to uncertainties in the deductibility of certain business expenses[478]. - The total temporary difference for which the company has not provided foreign withholding taxes is approximately$3 billion as of December 31, 2024, with a foreign withholding tax rate of 5% or 10% depending on the repatriation method[480]. - The company has been under a national audit on transfer pricing by the STA in China since 2016, which may lead to significant developments in the next 12 months[479]. Share-Based Compensation - The fair value of share-based compensation is estimated using models that require subjective assumptions, which can materially affect the fair value estimate and, consequently, the company's operating profit and net income[474][477].