YUM CHINA(US:YUMC)2023-02-28 16:00Financial Performance - Yum China reported revenues of $9.6 billion in 2022, operating nearly 13,000 restaurants across over 1,800 cities in China[7]. - For the year ended December 31, 2022, the Company's China subsidiaries distributed approximately $453 million in dividends to the Company's Hong Kong-incorporated holding companies[56]. - Yum China paid cash dividends to stockholders totaling $202 million and repurchased $466 million of its common stock in 2022[57]. - Net cash provided by operating activities was $1,413 million in 2022, an increase from $1,131 million in 2021, primarily driven by VAT asset refunds[422]. - Net cash used in investing activities decreased to $522 million in 2022 from $855 million in 2021, mainly due to the prior year's acquisition impacts[422]. - Net cash used in financing activities increased to $844 million in 2022 from $313 million in 2021, attributed to resumed share repurchases and acquisition costs[422]. - The company generated $2.2 billion in net proceeds from its global offering in September 2020[423]. - The company anticipates that existing cash, net cash from operations, and credit facilities will be sufficient to fund operations for the next 12 months[425]. - The board of directors increased the share repurchase authorization by $1 billion to a total of $2.4 billion, with $466 million or 10.5 million shares repurchased in 2022[428]. - The company paid cash dividends of $0.12 per share for each quarter in 2021 and 2022, totaling $202 million in 2022 and $203 million in 2021[428]. Business Expansion and Strategy - The company aims to expand its restaurant network to 20,000 stores, currently tracking over 900 cities without a KFC or Pizza Hut[15]. - Yum China plans to open 1,000 Lavazza stores in the next few years, targeting the underserved coffee market in China[28]. - The company aims to expand the Taco Bell store network to at least 225 stores by the end of 2025, having satisfied the development milestones for the brand[85]. - The company expanded its restaurant count from 7,562 at the end of 2016 to 12,947 at the end of 2022, representing a compound annual growth rate (CAGR) of approximately 9%[33]. Digital Transformation - Digital orders exceeded $8 billion in 2022, accounting for approximately 89% of KFC and Pizza Hut Company sales[24]. - Digital orders accounted for approximately 89% of KFC and Pizza Hut Company sales in 2022, reflecting a strong shift towards digitalization[44]. - Digital payments accounted for 99% of Company sales in 2022, up from 33% in 2016, indicating a significant consumer preference for mobile payment options[45]. - Delivery services contributed approximately 39% of Company sales in 2022, highlighting significant growth potential in the delivery market[25]. - Delivery sales accounted for approximately 39% of total Company sales in 2022, up from 21% in 2019, driven by increased delivery orders during the COVID-19 pandemic[49]. Customer Engagement and Loyalty - The loyalty programs had over 380 million members as of December 31, 2022, enhancing guest loyalty and order frequency[24]. - As of December 31, 2022, KFC and Pizza Hut loyalty programs exceeded 410 million members combined, with member sales accounting for approximately 62% of system sales in 2022[47]. Innovation and Product Development - The company launched over 500 new and improved products across all restaurant brands in 2022, showcasing its commitment to menu innovation[42]. - Yum China is focused on food innovation and value propositions to enhance unit-level performance and drive sales growth[20]. - Approximately 73% of KFC restaurant units and 87% of Pizza Hut restaurant units were remodeled or built in the past five years, reflecting ongoing investment in restaurant format innovation[50]. Corporate Governance and Compliance - Yum China is classified as a Commission-Identified Issuer under the Holding Foreign Companies Accountable Act, requiring annual documentation to the SEC[81]. - The PCAOB's ability to inspect registered public accounting firms in mainland China and Hong Kong remains uncertain, impacting the potential delisting of Yum China's common stock from the New York Stock Exchange[83]. - The Company faces uncertainties regarding compliance with Chinese laws and regulations, which may adversely affect its business and financial condition[54]. - The ability to declare and pay dividends may be restricted by earnings available for distribution under applicable Chinese laws[60]. Environmental and Social Responsibility - The company has set a target to reduce absolute Scope 1 and 2 GHG emissions by 63% by 2035 from a 2020 base year[108]. - The company is committed to achieving a 10% reduction in food waste per restaurant by 2030 compared to a 2020 baseline[109]. - The company aims for 100% of customer-facing, plastic-based packaging to be recyclable and targets a 30% reduction in non-degradable plastic packaging weight by 2025 compared to a 2019 baseline[110]. - The company has opened 30 "Angel Restaurants" by the end of 2022, providing jobs for nearly 200 individuals with special needs[95]. - The company provided around 9 million total training hours in 2022 to enhance employee competencies[96]. Taxation and Financial Regulations - The Company is subject to a 10% withholding income tax on dividends paid by China subsidiaries, which can be reduced to 5% under certain conditions due to a tax arrangement with Hong Kong[56]. - The Company's China subsidiaries are regarded as China resident enterprises and are subject to a 25% enterprise income tax on their worldwide income[68]. - Gains from the sale of equity interests in a China resident enterprise are subject to a 10% withholding income tax, with a stamp duty of 0.05% on the transfer value[71]. - Indirect transfers of Chinese taxable assets may be treated as direct transfers, potentially subjecting gains to a 10% withholding income tax if deemed to lack reasonable commercial purpose[71]. - The estimated total temporary difference for which the company has not provided foreign withholding taxes is approximately $3 billion as of December 31, 2022[463]. Employee and Workforce Management - As of December 31, 2022, the company employed over 400,000 individuals, including approximately 145,000 full-time employees[90]. - By the end of 2022, female employees represented more than 50% of the total workforce, with women holding director and above positions making up 53% of senior management[95]. - The company has launched equity incentive schemes, granting RSUs valued at $3,000 to approximately 4,000 eligible RGMs starting in February 2021[101].