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United States securities and exchange commission logo
September 21, 2022
Joey Wat
Chief Executive Officer
Yum China Holdings, Inc.
7100 Corporate Drive
Plano, Texas 75024
Re: Yum China Holdings,
Inc.
Form 10-K for the
Year Ended December 31, 2021
Filed February 28,
2022
File No. 1-37762
Dear Mr. Wat:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 10-K for the Year Ended December 31, 2021
Item 1. Business, page 3
1. Provide prominent
disclosure about the legal and operational risks associated with having
the majority of the
company s operations in China. Your disclosure should make clear
whether these risks
could result in a material change in your operations and/or the value of
your securities, or
could significantly limit or completely hinder your ability to offer
securities to investors
and cause the value of such securities to significantly decline or be
worthless. Your
disclosure should address how recent statements and regulatory actions
by China s
government, such as those related to the use of variable interest entities and
data security or
anti-monopoly concerns, have or may impact the company s ability to
conduct its business,
accept foreign investments, or list on a U.S. or other foreign
exchange.
2. Please disclose in this
section whether your auditor is subject to the determinations
announced by the PCAOB
on December 16, 2021 and whether and how the Holding
Joey Wat
FirstName
Yum ChinaLastNameJoey
Holdings, Inc. Wat
Comapany 21,
September NameYum
2022 China Holdings, Inc.
September
Page 2 21, 2022 Page 2
FirstName LastName
Foreign Companies Accountable Act, Accelerating HFCAA, and related
regulations will
affect your company. Disclose that trading in your securities may be
prohibited under the
HFCAA if the PCAOB determines that it cannot inspect or investigate
completely your
auditor, and that as a result an exchange may determine to delist your
securities. Discuss
the inspection time frames under both acts and include the
cross-reference to your related
risk factor disclosure. State prominently that you have been included
on the conclusive list
of issuers identified under the HFCAA on our website, and acknowledge
the ramifications
of such identification, including volatility in the trading price of
your common stock.
3. Provide a clear description of how cash is transferred through your
organization. Quantify
any cash flows and transfers of other assets by type that have
occurred between the
holding company and its subsidiaries, and direction of transfer.
Quantify any dividends or
distributions that a subsidiary has made to the holding company and
which entity made
such transfer, and their tax consequences. Similarly quantify
dividends or distributions
made to U.S. investors, the source, and their tax consequences. Your
disclosure should
make clear if no transfers, dividends, or distributions have been made
to date. Provide
cross-references to the consolidated financial statements. Describe
any restrictions on
foreign exchange and your ability to transfer cash between entities,
across borders, and to
U.S. investors, and move the description of restrictions and
limitations on your ability to
distribute dividends on page 18 to a more prominent place in this
section.
4. Please amend your disclosure here and in the summary risk factors and
risk factors
sections to state that, to the extent cash in the business is in the
PRC or a PRC entity, the
funds may not be available to fund operations or for other use outside
of the PRC due to
interventions in or the imposition of restrictions and limitations on
the ability of you or
your subsidiaries by the PRC government to transfer cash. Provide a
cross-reference to the
other discussions in this section.
5. Discuss whether there are limitations on your ability to transfer cash
between you, your
subsidiaries, or investors. Provide a cross-reference to your
discussion of this issue in your
summary risk factors and risk factors sections as well.
6. To the extent you have cash management policies that dictate how funds
are transferred
between you, your subsidiaries, or investors, summarize the policies
in this section, and
disclose the source of such policies (e.g., whether they are
contractual in nature, pursuant
to regulations, etc.); alternatively, state here that you have no such
cash management
policies that dictate how funds are transferred.
7. We note your disclosure on page 18 relating to government regulation.
Please include this
disclosure in a more prominent place in this section and revise to
disclose each permission
or approval that you or your subsidiaries are required to obtain from
Chinese authorities to
operate your business and to offer securities to foreign investors.
State whether you or
your subsidiaries are covered by permissions requirements from the
China Securities
Regulatory Commission (CSRC) or Cyberspace Administration of China
(CAC), and state
affirmatively whether you have received all requisite permissions or
approvals and
Joey Wat
Yum China Holdings, Inc.
September 21, 2022
Page 3
whether any permissions or approvals have been denied. Please also
describe the
consequences to you and your investors if you or your subsidiaries:
(i) do not receive or
maintain such permissions or approvals, (ii) inadvertently conclude
that such permissions
or approvals are not required, or (iii) applicable laws, regulations,
or interpretations
change and you are required to obtain such permissions or approvals in
the future.
Item 1A. Risk Factors
Summary of Risk Factors, page 22
8. In your summary of risk factors, disclose the risks that your
corporate structure and having
the majority of the company s operations in China poses to
investors. In particular,
describe the significant regulatory, liquidity, and enforcement risks
with cross-references
to the more detailed discussion of these risks in the filing. For
example, specifically
discuss risks arising from the legal system in China, including risks
and uncertainties
regarding the enforcement of laws and that rules and regulations in
China can change
quickly with little advance notice; and the risk that the Chinese
government may intervene
or influence your operations at any time, or may exert more control
over offerings
conducted overseas and/or foreign investment in China-based issuers,
which could result
in a material change in your operations and/or the value of your
securities. Acknowledge
any risks that any actions by the Chinese government to exert more
oversight and control
over offerings that are conducted overseas and/or foreign investment
in China-based
issuers could significantly limit or completely hinder your ability to
offer securities to
investors and cause the value of such securities to significantly
decline or be worthless.
Include a cross-reference to each relevant individual detailed risk
factor.
Risks Related to Doing Business in China, page 43
9. Given the Chinese government s significant oversight and discretion
over the conduct of
your business, please revise to highlight separately the risk that the
Chinese government
may intervene or influence your operations at any time, which could
result in a material
change in your operations and/or the value of the securities. Also,
given recent statements
by the Chinese government indicating an intent to exert more oversight
and control over
offerings that are conducted overseas and/or foreign investment in
China-based issuers,
acknowledge the risk that any such action could significantly limit or
completely hinder
your ability to offer securities to investors and cause the value of
such securities to
significantly decline or be worthless.
10. In light of recent events indicating greater oversight by the Cyberspace
Administration of
China (CAC) over data security, particularly for companies seeking to
list on a foreign
FirstName LastNameJoey Wat
exchange, please revise your disclosure to explain how this oversight
impacts your
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business Chinaextent
and to what Holdings, Inc. that you are compliant with the
regulations or
you believe
policies
September that have
21, 2022 Pagebeen
3 issued by the CAC to date.
FirstName LastName
Joey Wat
FirstName
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Holdings, Inc. Wat
Comapany 21,
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2022 China Holdings, Inc.
September
Page 4 21, 2022 Page 4
FirstName LastName
The audit report included in this annual report on Form 10-K..., page 44
11. Please revise your references to the Senate Proposed Act Amendment and
the House
Proposed Act Amendment to instead refer to the Accelerating Holding
Foreign
Companies Accountable Act.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations, page 71
12. We note you present restaurant profit and restaurant profit margin as
performance
measures in multiple sections throughout results of operations. We
note restaurant profit
does not appear to be calculated in accordance with GAAP since the
measure excludes
normal reoccurring operating expense such as corporate, general and
administrative
expenses. Please tell us your consideration of presenting these
measures as non-GAAP
financial measures as defined in Item 10(e)(2) of Regulation S-K and
providing the
disclosures required in Item 10(e)(1)(i) of Regulation S-K.
General
13. We note you exclude Hong Kong, Macau and Taiwan from your definition
of "China" on
page 103. Please revise to clarify that the legal and operational
risks associated with
operating in China also apply to any operations in Hong Kong and
Macau.
14. If one or more directors, officers or members of senior management are
located in the
PRC or Hong Kong, revise to disclose as much and identify the relevant
individuals in a
separate Enforceability section. Also, enhance your risk factor
disclosure on page 51 to
address the challenges of bringing actions and enforcing
judgments/liabilities against such
individuals.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Nasreen Mohammed at 202-551-3773 or Joel Parker at
202-551-3651 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Taylor Beech at 202-551-4515 or Mara Ransom at 202-551-3264 with any
other
questions.
Sincerely,
Division of
Corporation Finance
Office of Trade &
Services
cc: Lindsey Smith, Esq.