2024 Q3 Form 10-Q Financial Statement

#000095017024094324 Filed on August 09, 2024

View on sec.gov

Income Statement

Concept 2024 Q3 2024 Q2
Revenue $3.071B $2.679B
YoY Change 5.39% 0.94%
Cost Of Revenue $1.756B $1.555B
YoY Change 6.3% 2.17%
Gross Profit $1.315B $1.124B
YoY Change 4.2% -0.71%
Gross Profit Margin 42.82% 41.96%
Selling, General & Admin $894.0M $805.0M
YoY Change -0.67% -2.78%
% of Gross Profit 67.98% 71.62%
Research & Development
YoY Change
% of Gross Profit
Depreciation & Amortization $120.0M $118.0M
YoY Change 8.11% 5.36%
% of Gross Profit 9.13% 10.5%
Operating Expenses $936.0M $845.0M
YoY Change -0.32% -1.86%
Operating Profit $379.0M $266.0M
YoY Change 17.34% -1.85%
Interest Expense $65.00M $39.00M
YoY Change 54.76% 34.48%
% of Operating Profit 17.15% 14.66%
Other Income/Expense, Net
YoY Change
Pretax Income $436.0M $305.0M
YoY Change 19.45% 6.64%
Income Tax $119.0M $77.00M
% Of Pretax Income 27.29% 25.25%
Net Earnings $297.0M $212.0M
YoY Change 21.72% 7.61%
Net Earnings / Revenue 9.67% 7.91%
Basic Earnings Per Share $0.77 $0.55
Diluted Earnings Per Share $0.77 $0.55
COMMON SHARES
Basic Shares Outstanding 384.4M 389.9M
Diluted Shares Outstanding 385.0M 391.0M

Balance Sheet

Concept 2024 Q3 2024 Q2
SHORT-TERM ASSETS
Cash & Short-Term Investments $2.531B $2.477B
YoY Change -19.19% -16.06%
Cash & Equivalents $1.193B $1.043B
Short-Term Investments $1.338B $1.434B
Other Short-Term Assets $348.0M $125.0M
YoY Change 152.17% -55.52%
Inventory $359.0M $362.0M
Prepaid Expenses
Receivables $79.00M $74.00M
Other Receivables $0.00 $243.0M
Total Short-Term Assets $3.317B $3.281B
YoY Change -15.45% -11.01%
LONG-TERM ASSETS
Property, Plant & Equipment $4.646B $2.314B
YoY Change 119.46% -43.77%
Goodwill $1.955B $1.888B
YoY Change 4.04% -0.16%
Intangibles $150.0M $146.0M
YoY Change 2.04% -1.35%
Long-Term Investments $1.321B $1.490B
YoY Change -19.7% -0.8%
Other Assets $412.0M $262.0M
YoY Change 59.07% -21.08%
Total Long-Term Assets $8.484B $8.287B
YoY Change 4.14% 3.74%
TOTAL ASSETS
Total Short-Term Assets $3.317B $3.281B
Total Long-Term Assets $8.484B $8.287B
Total Assets $11.80B $11.57B
YoY Change -2.23% -0.92%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $2.103B $819.0M
YoY Change 177.44% -60.32%
Accrued Expenses $896.0M $854.0M
YoY Change -8.2% -8.37%
Deferred Revenue $183.0M $217.0M
YoY Change -1.61% 21.23%
Short-Term Debt $315.0M $416.0M
YoY Change 50.0%
Long-Term Debt Due $5.000M $5.000M
YoY Change 25.0% 0.0%
Total Short-Term Liabilities $2.578B $2.678B
YoY Change 4.29% 24.44%
LONG-TERM LIABILITIES
Long-Term Debt $51.00M $46.00M
YoY Change 24.39% 12.2%
Other Long-Term Liabilities $2.038B $149.0M
YoY Change 1286.39% -92.22%
Total Long-Term Liabilities $2.089B $149.0M
YoY Change 1321.09% -92.38%
TOTAL LIABILITIES
Total Short-Term Liabilities $2.578B $2.678B
Total Long-Term Liabilities $2.089B $149.0M
Total Liabilities $5.785B $5.086B
YoY Change 20.25% -0.78%
SHAREHOLDERS EQUITY
Retained Earnings $2.156B $2.048B
YoY Change -14.65% -16.92%
Common Stock $4.053B $4.103B
YoY Change -7.51% -6.67%
Preferred Stock
YoY Change
Treasury Stock (at cost) $18.00M $17.00M
YoY Change
Treasury Stock Shares
Shareholders Equity $6.016B $5.812B
YoY Change
Total Liabilities & Shareholders Equity $11.80B $11.57B
YoY Change -2.23% -0.92%

Cashflow Statement

Concept 2024 Q3 2024 Q2
OPERATING ACTIVITIES
Net Income $297.0M $212.0M
YoY Change 21.72% 7.61%
Depreciation, Depletion And Amortization $120.0M $118.0M
YoY Change 8.11% 5.36%
Cash From Operating Activities $409.0M $401.0M
YoY Change -0.24% -3.84%
INVESTING ACTIVITIES
Capital Expenditures $165.0M $169.0M
YoY Change -1.2% 10.46%
Acquisitions
YoY Change
Other Investing Activities $269.0M -$62.00M
YoY Change -193.73% 287.5%
Cash From Investing Activities $104.0M -$231.0M
YoY Change -122.91% 36.69%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -374.0M -9.000M
YoY Change 3640.0% -93.13%
NET CHANGE
Cash From Operating Activities 409.0M 401.0M
Cash From Investing Activities 104.0M -231.0M
Cash From Financing Activities -374.0M -9.000M
Net Change In Cash 139.0M 161.0M
YoY Change -357.41% 37.61%
FREE CASH FLOW
Cash From Operating Activities $409.0M $401.0M
Capital Expenditures $165.0M $169.0M
Free Cash Flow $244.0M $232.0M
YoY Change 0.41% -12.12%

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<p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:left;"><span style="color:#000000;white-space:pre-wrap;font-weight:bold;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">Note 1 – Description of Business</span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">Yum China Holdings, Inc. (“Yum China” and, together with its subsidiaries, the “Company,” “we,” “us,” and “our”) was incorporated in </span><span style="font-size:10pt;font-family:Times New Roman;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">Delaware</span></span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> on </span><span style="font-size:10pt;font-family:Times New Roman;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">April 1, 2016</span></span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">.</span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">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, Lavazza, Huang Ji Huang, Little Sheep 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”), a master license agreement was entered into between Yum Restaurants Consulting (Shanghai) Company Limited (“YCCL”), a wholly-owned indirect subsidiary of the Company and YUM, through YRI China Franchising LLC, a subsidiary of YUM, effective from January 1, 2020 and previously through Yum! Restaurants Asia Pte. Ltd., another subsidiary of YUM, from October 31, 2016 to December 31, 2019, 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, Macau and Taiwan. The term of the license is </span><span style="font-size:10pt;font-family:Times New Roman;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">50 years</span></span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> from October 31, 2016 for the KFC and Pizza Hut brands and, subject to achieving certain agreed-upon milestones, </span><span style="font-size:10pt;font-family:Times New Roman;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">50 years</span></span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> from April 15, 2022 for the Taco Bell brand, with automatic renewals for additional consecutive renewal terms of </span><span style="font-size:10pt;font-family:Times New Roman;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">50</span></span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> years each, subject only to us being in “good standing” and unless we give notice of our intent not to renew. In exchange, we pay a license fee to YUM equal to </span><span style="font-size:10pt;font-family:Times New Roman;color:#000000;white-space:pre-wrap;min-width:fit-content;">3</span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">% of net system sales from both our Company and franchise restaurants. We own the intellectual property of Huang Ji Huang and Little Sheep and pay no license fee related to these concepts.</span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">In 1987, KFC was the first major global restaurant brand to enter China. As of June 30, 2024, there were </span><span style="font-size:10pt;font-family:Times New Roman;color:#000000;white-space:pre-wrap;min-width:fit-content;">10,931</span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> KFC stores in China. We maintain a controlling interest of </span><span style="font-size:10pt;font-family:Times New Roman;color:#000000;white-space:pre-wrap;min-width:fit-content;">58</span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">%, </span><span style="font-size:10pt;font-family:Times New Roman;color:#000000;white-space:pre-wrap;min-width:fit-content;">70</span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">%, </span><span style="font-size:10pt;font-family:Times New Roman;color:#000000;white-space:pre-wrap;min-width:fit-content;">83</span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">%, </span><span style="font-size:10pt;font-family:Times New Roman;color:#000000;white-space:pre-wrap;min-width:fit-content;">92</span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">% and approximately </span><span style="font-size:10pt;font-family:Times New Roman;color:#000000;white-space:pre-wrap;min-width:fit-content;">60</span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">% in the entities that own and operate the KFCs in and around Shanghai, Beijing, Wuxi, Suzhou and Hangzhou, respectively.</span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="color:#000000;white-space:pre-wrap;font-size:9pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">The first Pizza Hut in China opened in 1990. As of June 30, 2024, there were </span><span style="font-size:10pt;font-family:Times New Roman;color:#000000;white-space:pre-wrap;min-width:fit-content;">3,504</span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> Pizza Hut restaurants in China.</span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">In the second quarter of 2020, the Company partnered with Luigi Lavazza S.p.A. (“Lavazza Group”), the world-renowned family-owned Italian coffee company, and established a joint venture (“Lavazza joint venture”), to explore and develop the Lavazza coffee concept in China. Lavazza joint venture operates both the coffee shop business and the retail business. We maintain a controlling interest of </span><span style="font-size:10pt;font-family:Times New Roman;color:#000000;white-space:pre-wrap;min-width:fit-content;">65</span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">% equity interest in the Lavazza joint venture.</span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">In 2017, the Company acquired a controlling interest in the holding company of DAOJIA.com.cn (“Daojia”), an online food delivery service provider in China. This business was extended to also include a team managing the delivery services for restaurants, including restaurants in our system, with their results reported under our delivery operating segment.</span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">We operate our own retail brand, Shaofaner, which sells packaged foods through online and offline channels. The operating results of Shaofaner are included in our e-commerce business operating segment.</span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">The Company has </span><span style="font-size:10pt;font-family:Times New Roman;color:#000000;white-space:pre-wrap;min-width:fit-content;">two</span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> reportable segments: KFC and Pizza Hut. Our non-reportable operating segments, including the operations of Lavazza, Huang Ji Huang, Little Sheep and Taco Bell, our delivery operating segment 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. Additional details on our segment reporting are included in Note 13.</span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">The Company’s common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “YUMC.” On September 10, 2020, the Company completed a secondary listing of its common stock on the Main Board of the Hong Kong Stock Exchange (“HKEX”) under the stock code “9987,” in connection with a global offering of </span><span style="font-size:10pt;font-family:Times New Roman;color:#000000;white-space:pre-wrap;min-width:fit-content;">41,910,700</span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> shares of its common stock. Net proceeds raised by the Company from the global offering after deducting underwriting fees and the offering expenses amounted to $</span><span style="font-size:10pt;font-family:Times New Roman;color:#000000;white-space:pre-wrap;min-width:fit-content;">2.2</span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> billion. On October 24, 2022, the Company’s voluntary conversion of its secondary listing status to a primary listing status on the HKEX became effective (“Primary Conversion”) and the Company became a dual primary listed company on the NYSE and HKEX. On the same day, the Company’s shares of common stock traded on the HKEX were included in the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect. The Company’s common stock listed on the NYSE and HKEX continue to be fully fungible.</span></p>
dei Entity Incorporation State Country Code
EntityIncorporationStateCountryCode
DE
dei Entity Incorporation Date Of Incorporation
EntityIncorporationDateOfIncorporation
2016-04-01
yumc Additional Consecutive Renewal Terms Of License Agreement
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P50Y
yumc Percentage Of License Fees On Net Sales
PercentageOfLicenseFeesOnNetSales
0.03
us-gaap Number Of Reportable Segments
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us-gaap Basis Of Accounting
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<p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="color:#000000;white-space:pre-wrap;font-weight:bold;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">Note 2 – Basis of Presentation</span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">Our preparation of the accompanying Condensed 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.</span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">We have prepared the Condensed Consolidated Financial Statements in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The Condensed Consolidated Financial Statements include all normal and recurring adjustments considered necessary to present fairly our financial position as of June 30, 2024, and our results of operations, comprehensive income, statements of equity for the quarters and years to date ended June 30, 2024 and 2023 and cash flows for the years to date ended June 30, 2024 and 2023. Our results of operations, comprehensive income and cash flows for these interim periods are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K as filed with the SEC on February 29, 2024.</span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">Through the acquisition of Daojia, the Company also acquired a variable interest entity (“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. The acquired VIE and its subsidiaries were considered immaterial, both individually and in the aggregate. The results of Daojia’s operations have been included in the Company’s Condensed Consolidated Financial Statements since the acquisition date.</span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><div style="font-size:10pt;font-family:Times New Roman;"><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="color:#000000;white-space:pre-wrap;text-decoration:underline;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">Recently Adopted Accounting Pronouncements</span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:left;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;"> </span></p><p style="font-size:10pt;margin-top:0;font-family:Times New Roman;margin-bottom:0;text-align:justify;"><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">In March 2023, the FASB issued ASU 2023-01, </span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;font-style:italic;min-width:fit-content;">Leases (Topic 842) — Common Control Arrangements </span><span style="color:#000000;white-space:pre-wrap;font-size:10pt;font-family:Times New Roman;min-width:fit-content;">(“ASU 2023-01”). It requires all lessees, including public business entities, to amortize leasehold improvements associated with common control leases over their useful life to the common control group and account for them as a transfer of assets between entities under common control through an adjustment to equity when the lessee no longer controls the use of the underlying asset. ASU 2023-01 is effective for the Company from January 1, 2024, with early adoption permitted. We adopted this standard on January 1, 2024, and such adoption did not have a material impact on our financial statements.</span></p></div>
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