2026-02-27 21:31Cash Flow and Financing Activities - Net cash provided by operating activities increased to $1,466 million in 2025 from $1,419 million in 2024, driven by higher operating profit and working capital changes [444]. - Net cash used in investing activities decreased significantly to $5 million in 2025 from $178 million in 2024, primarily due to reduced capital spending [445]. - Net cash used in financing activities rose to $1,689 million in 2025 compared to $1,636 million in 2024, mainly due to increased cash dividends paid [446]. - The company plans to return $1.5 billion to shareholders in 2026, matching the amount returned in 2025 and 2024 [453]. - The cash dividend per share increased by 21% to $0.29 for 2026, up from $0.24 in 2025 [453]. - Capital expenditures for fiscal year 2026 are expected to be in the range of approximately $600 million to $700 million [448]. - As of December 31, 2025, the company had unused credit facilities of approximately $1,378 million [457]. - The company repurchased 24.7 million shares for $1,136 million in 2025, compared to 31.3 million shares for $1,242 million in 2024 [451]. - The company had credit facilities totaling approximately $1,502 million as of December 31, 2025, with terms ranging from less than one year to three years [456]. Revenue Recognition and Liabilities - The estimated value of loyalty program points earned is recorded as a reduction of revenue, with a corresponding deferred revenue liability included in Accounts payable, based on projected redemption rates [468]. - Breakage revenue from prepaid stored-value products is recognized when redeemed, with estimates reviewed annually based on redemption patterns [469]. Goodwill and Intangible Assets - Goodwill amounted to $1,963 million as of December 31, 2025, related to KFC, Pizza Hut, Huang Ji Huang, and Lavazza reporting units, with no impairment charges recorded in 2025 and 2024 [479]. - Indefinite-lived intangible assets had a book value of $128 million and $123 million as of December 31, 2025 and 2024, respectively, with no impairment charges recorded for Little Sheep and Huang Ji Huang trademarks [474][475]. Tax and Compliance - The total temporary difference for which the company has not provided foreign withholding taxes is approximately $3 billion as of December 31, 2025, with a foreign withholding tax rate of 5% or 10% depending on repatriation methods [486]. - Unrecognized tax benefits related to uncertain tax positions were $20 million and $19 million as of December 31, 2025 and 2024, respectively [483]. - The company has been under a national audit on transfer pricing by the STA in China regarding related party transactions from 2006 to 2015, with potential significant developments expected within the next 12 months [484]. Asset Impairment and Estimates - The company reviews long-lived assets for impairment semi-annually, evaluating recoverability based on forecasted undiscounted cash flows [470]. - The company estimates future cash flows and discount rates for impairment assessments, which are highly subjective and influenced by economic conditions [478]. Share-Based Compensation - Share-based compensation costs are recognized over the requisite service period, with fair value estimated using the Black-Scholes and Monte-Carlo Simulation models [480][481].