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Basis for Opinions
−Removed: The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting in the accompanying Item 9A.
+Added: The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.
Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.
80 unchanged sentences
Reclassification of (gains) losses into Net Income
+Added: ( 11 ) ( 81 ) 81
Tax (expense) benefit
2 unchanged sentences
Unrealized gains (losses) arising during the year
−Removed: 115 34 ( 99 )
Reclassification of (gains) losses into Net Income
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Capital spending ( 285 ) ( 279 ) ( 230 )
−Removed: Acquisition of The Habit Restaurants, Inc., net of cash acquired — — ( 408 )
−Removed: Proceeds from sale of investment in Grubhub, Inc.
−Removed: common stock — — 206
+Added: Proceeds from sale of KFC Russia
Proceeds from refranchising of restaurants 60 73 85
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Revolving credit facilities, three months or less, net ( 279 ) 279 —
−Removed: Short-term borrowings, by original maturity
−Removed: More than three months – proceeds — — 95
−Removed: More than three months – payments — — ( 100 )
−Removed: Three months or less, net — — —
Repurchase shares of Common Stock ( 50 ) ( 1,200 ) ( 1,591 )
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Pension and post-retirement benefit plans (net of tax impact of $ 19 million)
−Removed: Net loss on derivative instruments (net of tax impact of $ 23 million)
−Removed: ( 70 ) ( 70 )
+Added: Net gain on derivative instruments (net of tax impact of $ 14 million)
Comprehensive Income 1,661
3 unchanged sentences
Share-based compensation events 81 81
−Removed: Adoption of accounting standards ( 8 ) ( 8 )
Balance at December 31, 2021 289 $ — $ ( 8,048 ) $ ( 325 ) $ ( 8,373 )
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Pension and post-retirement benefit plans (net of tax impact of $ 21 million)
+Added: ( 60 ) ( 60 )
Net gain on derivative instruments (net of tax impact of $ 33 million)
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Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature 18 18
+Added: Reclassification of translation adjustments into income
Pension and post-retirement benefit plans (net of tax impact of $ 1 million)
( 10 ) ( 10 )
−Removed: Net gain on derivative instruments (net of tax impact of $ 33 million)
+Added: Net loss on derivative instruments (net of tax impact of $ 4 million)
+Added: ( 12 ) ( 12 )
Comprehensive Income 1,664
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Balance at December 31, 2023
+Added: 281 $ 60 $ ( 7,616 ) $ ( 302 ) $ ( 7,858 )
See accompanying Notes to Consolidated Financial Statements.
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We participate in various advertising cooperatives with our franchisees, typically within a country where we have both Company-owned restaurants and franchise restaurants, established to collect and administer funds contributed for use in advertising and promotional programs designed to increase sales and enhance the reputation of the Company and our Concepts.
−Removed: Contributions to the advertising cooperatives are required for both Company-owned, if any, and franchise restaurants and are generally based on a percentage of restaurant sales.
+Added: Contributions to the advertising cooperatives are required of both Company-owned, if any, and franchise restaurants and are generally based on a percentage of restaurant sales.
We maintain certain variable interests in these cooperatives.
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Therefore, these cooperatives are VIEs.
−Removed: As a result of our voting rights, we consolidate certain of these cooperatives for which we are the primary beneficiary.
+Added: We consolidate certain of these cooperatives for which we are the primary beneficiary due to our voting rights.
YUM’s fiscal year begins on January 1 and ends December 31 of each year, with each quarter comprised of three months.
The majority of our U.S.
−Removed: subsidiaries, including our Habit Burger Grill Division beginning in 2022, and certain international subsidiaries operate on a weekly periodic calendar where the first three quarters of each fiscal year consists of 12 weeks and the fourth quarter consists of 16 weeks in fiscal years with 52 weeks and 17 weeks in fiscal years with 53 weeks.
+Added: subsidiaries and certain international subsidiaries operate on a weekly periodic calendar where the first three quarters of each fiscal year consists of 12 weeks and the fourth quarter consists of 16 weeks in fiscal years with 52 weeks and 17 weeks in fiscal years with 53 weeks.
Our remaining international subsidiaries operate on a monthly calendar similar to that on which YUM operates.
−Removed: For fiscal year 2021 and prior, our Habit Burger Grill Division operated on a weekly periodic calendar where each quarter consisted of 13 weeks.
−Removed: The impact of this change in reporting calendar was not significant and accordingly, prior year amounts presented in these Consolidated Financial Statements have not been restated.
Our next fiscal year scheduled to include a 53rd week for our period calendar reporters is 2024.
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To the extent the advertising cooperatives we are required to consolidate are unable to collect amounts due from franchisees they incur bad debt expense.
−Removed: In 2022, we recorded a $ 6 million net provision and in 2021 and 2020, we recorded $ 6 million and $ 7 million in net recoveries, respectively.
+Added: In 2023 and 2022, we recorded $ 3 million and $ 6 million in net provisions, respectively, and in 2021, we recorded $ 6 million in net recoveries.
To the extent our consolidated advertising cooperatives have a provision or recovery for bad debt expense, the cooperative’s advertising spend obligation is adjusted such that there is no net impact within our Financial Statements.
Share-Based Employee Compensation.
−Removed: We recognize ongoing share-based payments to employees, including grants of employee stock options and stock appreciation rights (“SARs”), in the Consolidated Financial Statements as compensation cost over the service period based on their fair value on the date of grant.
+Added: We recognize ongoing share-based payments to employees, including grants of stock appreciation rights (“SARs”) and restricted stock units ("RSUs"), in the Consolidated Financial Statements as compensation cost over the service period based on their fair value on the date of grant.
This compensation cost is recognized over the service period on a straight-line basis, net of an assumed forfeiture rate, for awards that actually vest.
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For restaurant assets that are not deemed to be recoverable, we write-down an impaired restaurant to its estimated fair value, which becomes its new cost basis.
−Removed: Fair value is an estimate of the price a franchisee would pay for the restaurant and its related assets, including any right-of-use assets, and is determined by discounting the estimated future after-tax cash flows of the restaurant, which include a deduction for royalties we would receive under a franchise agreement with terms substantially at market.
−Removed: The after-tax cash flows incorporate reasonable assumptions we believe a franchisee would make such as sales growth and margin improvement.
−Removed: The discount rate used in the fair value calculation is our estimate of the required rate of return that a franchisee would expect to receive when purchasing a similar restaurant and the related long-lived assets.
−Removed: The discount rate incorporates rates of returns for historical refranchising market transactions and is commensurate with the risks and uncertainty inherent in the forecasted cash flows.
Individual restaurant-level impairment is recorded within Other (income) expense.
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Other costs incurred when closing a restaurant such as costs of disposing of the assets as well as other facility-related expenses from previously closed stores are generally expensed as incurred.
−Removed: Any costs recorded upon store closure as well as any changes in estimates of sublease income or subsequent adjustments to liabilities for remaining lease obligations as a result of lease termination are recorded in Other (income) expense.
+Added: Any costs related to a store closure as well as any changes in estimates of sublease income or subsequent adjustments to liabilities for remaining lease obligations as a result of lease termination are recorded in Other (income) expense.
To the extent we sell assets, primarily land, associated with a closed store, any gain or loss upon that sale is also recorded in Other (income) expense.
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Accordingly, actual results could vary significantly from our estimates.
−Removed: We recognize, at inception of a guarantee, a liability for the fair value of certain obligations undertaken.
−Removed: Additionally, effective January 1, 2020, we adopted the Financial Accounting Standards Board’s Accounting Standards Update No.
−Removed: 2016-13, Financial Instruments - Credit Losses (“Topic 326”) which required that we also recognize as a liability the expected credit losses over the life of such guarantees.
−Removed: As a result of the adoption of Topic 326, we recorded a cumulative adjustment to Accumulated deficit of $ 8 million to establish such expected credit loss liability for our outstanding guarantees.
+Added: We recognize, at inception of a guarantee, a liability for the fair value of certain obligations undertaken, in addition to a liability for the expected credit losses under the life of such guarantees.
The majority of our guarantees are issued as a result of assigning our interest in obligations under operating leases as a condition to the refranchising of certain Company restaurants.
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Expected credit losses for uncollectible franchisee receivable balances consider both current conditions and reasonable and supportable forecasts of future conditions.
−Removed: Current conditions we consider include pre-defined aging criteria as well as specified events that indicate we may not collect the balance due.
+Added: Current conditions we consider include pre-defined aging criteria as well as specified events that indicate we may not collect the balance due, including foreign currency control restrictions that may exist.
Reasonable and supportable forecasts used in determining the probability of future collection consider publicly available data regarding default probability.
−Removed: While we use the best information available in making our determination, the ultimate recovery of recorded receivables is dependent upon future
−Removed: economic events and other conditions that may be beyond our control.
+Added: While we use the best information available in making our determination, the ultimate recovery of recorded receivables is dependent upon future economic events and other conditions that may be beyond our control.
Receivables that are ultimately deemed to be uncollectible, and for which collection efforts have been exhausted, are written off against the allowance for doubtful accounts.
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Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.
−Removed: Subsequent amortization of the right-of-use asset and accretion of the lease liability for an operating lease is recognized as a single lease cost, on a straight-line basis, over the lease term.
+Added: Subsequent reductions in the right-of-use asset and accretion of the lease liability for an operating lease are recognized as a single lease cost, on a straight-line basis, over the lease term.
For finance leases, the right-of-use asset is depreciated on a straight-line basis over the lesser of the useful life of the leased asset or lease term.
Interest on each finance lease liability is determined as the amount that results in a constant periodic discount rate on the remaining balance of the liability.
−Removed: As most of our leases do not provide an implicit discount rate, we use our incremental secured borrowing rate based on the information available at commencement date, including the lease term and currency, in determining the present value of lease payments for both operating and finance leases.
+Added: As the discount rate implicit in most of our leases is not readily determinable, we use our group incremental secured borrowing rate based on the information available at commencement date, including the lease term and currency, in determining the present value of lease payments for both operating and finance leases.
Leases with an initial term of 12 months or less are not recorded in the Consolidated Balance Sheet;
we recognize rent expense for these leases on a straight-line basis over the lease term.
−Removed: Right-of-use assets are assessed for impairment in accordance with our long-lived asset impairment policy, which is performed annually for restaurant-level assets or whenever events or changes in circumstances indicate that the carrying amount of a
−Removed: restaurant may not be recoverable.
+Added: Right-of-use assets are assessed for impairment in accordance with our long-lived asset impairment policy, which is performed annually for restaurant-level assets or whenever events or changes in circumstances indicate that the carrying amount of a restaurant may not be recoverable.
We reassess lease classification and remeasure right-of-use assets and lease liabilities when a lease is modified and that modification is not accounted for as a separate new lease or upon certain other events that require reassessment.
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Our lessor and sublease portfolio primarily consists of stores that have been leased to franchisees subsequent to refranchising transactions.
−Removed: Our most significant leases with lease and non-lease components are leases with our franchisees that include both the right to use a restaurant as well as a license of the intellectual property associated with our Concepts’ brands.
+Added: Our most significant leases with lease and non-lease components are leases with our franchisees that include both the right to use a restaurant as well as a license of
+Added: the intellectual property associated with our Concepts’ brands.
For these leases, which are primarily classified as operating leases, we account for the lease and non-lease components separately.
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If a qualitative assessment is not performed, or if as a result of a qualitative assessment it is not more likely than not that the fair value of a reporting unit exceeds its carrying value, then the reporting unit’s fair value is compared to its carrying value.
−Removed: Fair value is the price a willing buyer would pay for a reporting unit, and is generally estimated using discounted expected future after-tax cash flows from Company-owned restaurant operations, if any, and franchise royalties.
−Removed: The discount rate is our estimate of the required rate of return that a third-party buyer would expect to receive when purchasing a business from us that constitutes a reporting unit.
−Removed: We believe the discount rate is commensurate with the risks and uncertainty inherent in the forecasted cash flows.
An impairment charge is recognized based on the excess of a reporting unit’s carrying amount over its fair value.
If we record goodwill upon acquisition of a restaurant(s) from a franchisee and such restaurant(s) is then sold within two years of acquisition, the goodwill associated with the acquired restaurant(s) is written off in its entirety.
−Removed: If the restaurant is refranchised two years or more subsequent to its acquisition, we include goodwill in the carrying amount of the restaurants disposed of based on the relative fair values of the portion of the reporting unit disposed of in the refranchising and the portion of the reporting unit that will be retained.
−Removed: The fair value of the portion of the reporting unit disposed of in a refranchising is determined by reference to the discounted value of the future cash flows expected to be generated by the restaurant and retained by the franchisee, which includes a deduction for the anticipated, future royalties the franchisee will pay us associated with the franchise agreement entered into simultaneously with the refranchising transition.
−Removed: The fair value of the reporting unit retained is based on the price a willing buyer would pay for the reporting unit and includes the value of franchise agreements.
−Removed: Appropriate adjustments are made if a franchise agreement includes terms that are determined to not be at prevailing market rates.
−Removed: As such, the fair value of the reporting unit retained can include expected future cash flows from royalties from those restaurants currently being refranchised, royalties from existing franchise businesses and company restaurant operations.
−Removed: As a result, the percentage of a reporting unit’s goodwill that will be written off in a refranchising transaction will be less than the percentage of the reporting unit’s Company-owned restaurants that are refranchised in that transaction and goodwill can be allocated to a reporting unit with only franchise restaurants.
+Added: When we refranchise restaurants, or if a previously acquired restaurant is refranchised two years or more subsequent to its acquisition, we include goodwill in the carrying amount of the restaurants disposed of based on the relative fair values of the portion of the reporting unit disposed of in the refranchising and the portion of the reporting unit that will be retained.
We evaluate the remaining useful life of an intangible asset that is not being amortized each reporting period to determine whether events and circumstances continue to support an indefinite useful life.
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We may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is greater than its carrying value.
−Removed: If a qualitative assessment is not performed, or if as a result of a qualitative assessment it is not more likely than not that the fair
−Removed: value of an indefinite-lived intangible asset exceeds its carrying value, then the asset’s fair value is compared to its carrying value.
−Removed: Fair value is an estimate of the price a willing buyer would pay for the intangible asset and is estimated by discounting the expected future after-tax cash flows associated with the intangible asset.
−Removed: Our finite-lived intangible assets that are not allocated to an individual restaurant are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable.
−Removed: An intangible asset that is deemed not recoverable on an undiscounted basis is written down to its estimated fair value, which is our estimate of the price a willing buyer would pay for the intangible asset based on discounted expected future after-tax cash flows.
+Added: If a qualitative assessment is not performed, or if as a result of a qualitative assessment it is not more likely than not that the fair value of an indefinite-lived intangible asset exceeds its carrying value, then the asset’s fair value is compared to its carrying value.
+Added: Our finite-lived intangible assets, including capitalized software, that are not allocated to an individual restaurant are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable.
+Added: An intangible asset that is deemed not recoverable on an undiscounted basis is written down to its estimated fair value.
+Added: Once these assets are fully amortized and it is determined that we are no longer deriving economic benefit from ownership of the asset, the cost basis and accumulated amortization are written off.
Capitalized Software.
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In such instances, on a period basis, we record the cost of any further share repurchases or other deductions to Common Stock as an addition to Accumulated deficit.
−Removed: Due to the large number of share repurchases of our stock over the past several years, our Common Stock balance is frequently zero at the end of any period.
+Added: Due to the large number of share repurchases of our stock in certain years, our Common Stock balance can be zero at the end of any period.
Accordingly, $ 26 million, $ 1,131 million and $ 1,549 million in share repurchases in 2023, 2022 and 2021, respectively, were recorded as an addition to Accumulated deficit.
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The net periodic benefit costs associated with the Company’s defined benefit pension and post-retirement medical plans are determined using assumptions regarding the projected benefit obligation and, for funded plans, the market-related value of plan assets as of the beginning of each year, or remeasurement period if applicable.
−Removed: We record the service cost component of net periodic benefit costs in G&A.
+Added: The service cost component of net periodic benefit costs is primarily recorded in G&A.
Non-service cost components are recorded in Other pension (income) expense.
We have elected to use a market-related value of plan assets to calculate the expected return on assets, net of administrative and investment fees paid from plan assets, in net periodic benefit costs.
−Removed: For each individual plan we amortize into pension expense the net amounts in AOCI, as adjusted for the difference between the fair value and market-related value of plan assets, to the
−Removed: extent that such amounts exceed 10% of the greater of a plan’s projected benefit obligation or market-related value of assets, over the remaining service period of active participants in the plan or, for plans with no active participants, over the expected average life expectancy of the inactive participants in the plan.
+Added: For each individual plan we amortize into pension expense the net amounts in AOCI, as adjusted for the difference between the fair value and market-related value of plan assets, to the extent that such amounts exceed 10% of the greater of a plan’s projected benefit obligation or market-related value of assets, over the remaining service period of active participants in the plan or, for plans with no active participants, over the expected average life expectancy of the inactive participants in the plan.
The market-related value of plan assets is the fair value of plan assets as of the beginning of each year adjusted for variances between actual returns and expected returns.
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We recognize settlement gains or losses only when we have determined that the cost of all settlements in a year will exceed the sum of the service and interest costs within an individual plan.
−Removed: Recent Accounting Pronouncements.
−Removed: In March 2020, the Financial Accounting Standards Board issued guidance related to reference rate reform.
−Removed: This guidance was updated in December 2022.
−Removed: The guidance provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from LIBOR and other interbank offered rates to alternative reference rates.
−Removed: The guidance was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2024.
−Removed: We adopted this guidance during fiscal year 2022.
−Removed: The adoption of the new guidance did not have a material impact to our Consolidated Financial Statements.
Note 3 - Divestitures and Acquisitions
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Further, we pledged to redirect any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts.
−Removed: During the second quarter, we completed the transfer of ownership of the Pizza Hut Russia business to a local operator who has initiated the process of re-branding locations to a non-YUM concept.
−Removed: In October 2022, we announced that we entered into a sale and purchase agreement to transfer ownership of our KFC Russia restaurants, operating system and master franchise rights, including the network of KFC Russia franchised restaurants, to Smart Service Ltd., a business operated by one of our existing KFC franchisees in Russia.
−Removed: Under the agreement, the buyer will be responsible for re-branding locations to a non-YUM concept and retaining the Company’s employees in Russia.
−Removed: Completion of the transaction is subject to regulatory and governmental approvals, as well as other conditions agreed to by the parties.
−Removed: Following the completion of the transaction, we will have ceased our corporate presence in Russia.
−Removed: Total KFC Russia assets held for sale of $ 185 million and total KFC Russia liabilities held for sale of $ 65 million are included in Prepaid expenses and other current assets and Accounts payable and other current liabilities, respectively, in our Consolidated Balance Sheet at December 31, 2022.
−Removed: At December 31, 2022, we determined the carrying value of the KFC Russia asset group was recoverable based on expected sale proceeds.
−Removed: Our GAAP operating results presented herein reflect revenues from and expenses to support the Russian operations for Pizza Hut, prior to the date of transfer, and KFC, for the entirety of the year ended December 31, 2022, within their historical financial statement line items and operating segments.
−Removed: However, given our decision to exit Russia and our pledge to direct any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts, we reclassed such resulting net profits from the Division segment results in which they were earned to Unallocated Other income.
−Removed: Dragontail Systems Acquisition
−Removed: On September 7, 2021, we completed the acquisition of Dragontail Systems Limited (“Dragontail”).
−Removed: The Dragontail acquisition advances our digital capabilities and its AI-based integrated kitchen order management and delivery technologies are intended to strengthen store operations, enhance the customer experience and make it easier for team members to run a restaurant.
−Removed: Total cash consideration paid in connection with the acquisition was $ 66 million, net of cash acquired of $ 3 million.
−Removed: This net consideration was classified within Other, net cash flows from investing activities within our Consolidated Statements of Cash Flows.
−Removed: The acquisition was accounted for as a business combination using the acquisition method of accounting.
−Removed: The primary assets recorded as a result of the preliminary purchase price allocation were goodwill of $ 57 million and amortizable intangible assets of $ 11 million.
−Removed: The amortizable intangible assets, which consist of software, have an estimated weighted average useful life of 7 years.
−Removed: The goodwill recorded resulted from synergies expected to be achieved through leveraging our scale and resources to enhance these technologies and deploy them globally to our brands and franchisees over time.
−Removed: Goodwill recognized from the Dragontail acquisition is non-deductible for tax purposes and has been allocated to our reporting units within the Pizza Hut Division operating segment that are expected to most benefit from the Dragontail acquisition.
−Removed: The financial results of Dragontail have been included in our Consolidated Financial Statements since the date of the acquisition but did not significantly impact our results for the years ended December 31, 2022 and 2021.
−Removed: The pro forma impact on our results of operations if the acquisition had been completed as of the beginning of 2020 would not have been significant.
−Removed: The direct transaction costs associated with the acquisition were also not material and were expensed as incurred.
−Removed: Habit Burger Grill Acquisition
−Removed: On March 18, 2020, we completed the acquisition of all of the issued and outstanding common shares of The Habit Restaurants, Inc.
−Removed: As of the date of acquisition, The Habit Restaurants, Inc.
−Removed: operated 245 company-owned and 31 franchised Habit Burger Grill restaurants across the U.S.
−Removed: and in China, offering a flavor-forward variety of made-to-order items chargrilled over an open flame.
−Removed: We expect Habit Burger Grill to benefit from the global scale and resources of YUM and that the acquisition will accelerate and diversify YUM’s growth.
−Removed: Total cash consideration paid in connection with the acquisition was $ 408 million, net of acquired cash of $ 20 million.
−Removed: The acquisition was accounted for as a business combination using the acquisition method of accounting.
−Removed: Goodwill of $ 204 million was recorded as a result of the acquisition.
−Removed: See Note 5 for discussion of a subsequent Habit Burger Grill goodwill impairment.
−Removed: The pro forma impact on our results of operations if the acquisition had been completed as of the beginning of 2019 would not have been significant.
+Added: During the second quarter of 2022, we completed the transfer of ownership of the Pizza Hut Russia business to a local operator.
+Added: In April 2023, we completed our exit from the Russian market by selling the KFC business in Russia to Smart Service Ltd., including all Russian company owned KFC restaurants, operating system, and master franchise rights as well as the trademark
+Added: for the Rostik's brand.
+Added: Under the sale and purchase agreement, the buyer agreed to lead the process to rebrand KFC restaurants in Russia to Rostik's and to retain the Company's employees in Russia.
+Added: We recorded a charge of $ 3 million to Other income (expense) during the year ended December 31, 2023 as the write-off of our net investment in KFC Russia, including the related cumulative foreign currency translation losses of $ 60 million, exceeded the consideration received from the sale which primarily included cash proceeds of $ 121 million.
+Added: Our operating results presented herein reflect revenues from and expenses to support the Russian operations for KFC and Pizza Hut prior to the dates of sale or transfer, within their historical financial statement line items and operating segments.
+Added: However, given our decision to exit Russia and our pledge to direct any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts, we reclassed the resulting net profits or losses subsequent to that date from the Division segment results in which they were earned to Unallocated Other income (expense).
Note 4 – Earnings Per Common Share (“EPS”)
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Diluted EPS $ 5.59 $ 4.57 $ 5.21
−Removed: Unexercised employee stock options and stock appreciation rights (in millions) excluded from the diluted EPS computation (a)
−Removed: (a) These unexercised employee stock options and stock appreciation rights were not included in the computation of diluted EPS because to do so would have been antidilutive for the periods presented.
+Added: Unexercised employee SARs, RSUs, PSUs and stock options (in millions) excluded from the diluted EPS computation (a)
+Added: (a) These unexercised employee SARs, RSUs, performance share units ("PSUs") and stock options were not included in the computation of diluted EPS because to do so would have been antidilutive for the periods presented.
Note 5 – Items Affecting Comparability of Net Income and Cash Flows
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We received $ 60 million, $ 73 million and $ 85 million in pre-tax cash refranchising proceeds in 2023, 2022 and 2021, respectively, as a result of the sales of these restaurants and restaurant assets.
−Removed: In 2020, we also received as refranchising proceeds minority interests in Devyani International Limited (“Devyani”), as discussed further below.
−Removed: At the time of the refranchisings, these minority interests had fair values estimated to be $ 31 million.
A summary of Refranchising (gain) loss is as follows:
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Resource Optimization
−Removed: During the year ended December 31, 2022, we recorded charges of $ 10 million to General and administrative expenses and $ 1 million to Other (income) expense related to a resource optimization program initiated in the third quarter of 2020.
−Removed: During the year ended December 31, 2021, we recorded charges of $ 7 million to General and administrative expenses and $ 2 million to Other (income) expense and we recorded a credit of $ 1 million to Other pension (income) expense related to this resource optimization program.
−Removed: During the year ended December 31, 2020, we recorded charges of $ 36 million to General and administrative expenses and $ 2 million to Other pension (income) expense related to this resource optimization program.
−Removed: This program is part of our efforts to optimize our resources, reallocating them toward critical areas of the business that will drive future growth.
−Removed: These critical areas include accelerating our digital, technology and innovation capabilities to deliver a modern, world-class team member and customer experience and improve unit economics.
−Removed: The charges incurred as a result of this program have primarily resulted from severance associated with positions that have been eliminated or relocated and, in 2020, a voluntary retirement program offered to our U.S.
−Removed: based employees.
+Added: During the third quarter of 2020, we initiated a resource optimization program that has allowed us to reallocate significant resources to accelerate our digital, technology and innovation capabilities to deliver a modern, world-class team member and customer experience and improve unit economics.
+Added: We are currently exploring expanding the program to identify further opportunities to optimize the company’s spending and identify additional, critical areas in which to potentially reallocate resources, both with a goal to enable the acceleration of the Company’s growth rate.
+Added: Costs incurred to date related to the program primarily include severance associated with positions that have been eliminated or relocated and consultant fees.
+Added: As a result of this program, we recorded charges of $ 21 million, $ 11 million and $ 8 million in the years ended 2023, 2022 and 2021, respectively.
+Added: These charges were primarily recorded as General and administrative expenses.
Due to their scope and size, these costs were not allocated to any of our segment operating results for performance reporting purposes.
2 unchanged sentences
The minority interest was received in lieu of cash proceeds upon the refranchising of approximately 60 KFC restaurants in India.
−Removed: At the time of the refranchisings, the fair value of this minority interest was estimated to be approximately $ 31 million.
On August 16, 2021, Devyani executed an initial public offering and subsequently the fair value of this investment became readily determinable.
−Removed: As a result, concurrent with the initial public offering we began recording changes in fair value in Investment (income) expense, net in our Consolidated Statements of Income and recognized pre-tax investment income of $ 11 million and $ 87 million, in the years ended December 31, 2022 and 2021, respectively (see Note 14).
+Added: As a result, concurrent with the initial public offering we began recording changes in fair value in Investment (income) expense, net in our Consolidated Statements of Income and recognized pre-tax investment income of $ 8 million, $ 11 million and $ 87 million in the years ended December 31, 2023, 2022 and 2021, respectively (see Note 14).
Long-term Debt Redemptions
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We recognized the call premium and the write-off of $ 6 million of unamortized debt issuance costs associated with the notes within Interest expense, net.
−Removed: On September 9, 2020, certain subsidiaries of the Company issued a notice of redemption for $ 1,050 million aggregate principal amount of 5.00 % Subsidiary Senior Unsecured Notes due in 2024.
−Removed: The redemption amount included a $ 26 million call premium plus accrued and unpaid interest to the date of redemption of October 9, 2020.
−Removed: We recorded the call premium, $ 6 million of unamortized debt issuance costs associated with the notes and $ 2 million of accrued and unpaid interest associated with the period of time from prepayment of the notes with the trustee on September 25, 2020, to their redemption date within Interest expense, net.
See Note 11 for further discussion of the YUM and Subsidiary Senior Unsecured Notes.
Income Tax Matters
−Removed: On July 22, 2020, the United Kingdom (“UK”) Finance Act 2020 was enacted resulting in an increase in the UK corporate tax rate from 17 % to 19 %.
−Removed: As a result, in the year ended December 31, 2020, we remeasured the related deferred tax assets originally recorded as part of a 2019 intercompany restructuring of certain intellectual property (“IP”) rights into the UK.
−Removed: Those deferred tax assets originally arose as a result of a step-up in amortizable tax basis of those IP rights to current fair value under applicable UK law and we recognized a $ 25 million deferred tax benefit upon remeasurement.
−Removed: On June 10, 2021, the UK Finance Act 2021 was enacted resulting in an increase in the UK corporate income tax rate from 19 % to 25 %.
−Removed: As a result, in the year ended December 31, 2021, we remeasured the related deferred tax assets originally recorded as described above and recognized an additional $ 64 million deferred tax benefit.
−Removed: In July 2021, we concentrated management responsibility for European (excluding the UK) KFC franchise development, support operations and management oversight in Switzerland (the “KFC Europe Reorganization”).
−Removed: Concurrent with this change in management responsibility, we completed intra-entity transfers of certain KFC IP rights from subsidiaries in the UK to subsidiaries in Switzerland.
−Removed: With the transfers of these rights, we received a step-up in amortizable tax basis of those IP rights to current fair value under applicable Swiss tax law.
−Removed: As a result of this transfer, we recorded a net one-time deferred tax benefit of $ 152 million in the year ended December 31, 2021.
−Removed: In December 2021, we continued our KFC Europe Reorganization and completed intra-entity transfers of additional European KFC IP rights from subsidiaries in the U.S.
−Removed: to subsidiaries in Switzerland.
−Removed: With the transfers of these additional IP rights, we received a step-up in amortizable tax basis to current fair value of those IP rights under applicable Swiss tax law.
−Removed: As a result of this transfer, we recorded a net one-time deferred tax benefit of $ 35 million in the year ended December 31, 2021.
−Removed: The above referenced matters contributed to effective tax rates of 5.9 % and 11.4 % for the years ended December 31, 2021 and 2020, respectively.
−Removed: Unlocking Opportunity Initiative
−Removed: On June 24, 2020, the Yum!
−Removed: Board of Directors approved the establishment of the Company’s new global “Unlocking Opportunity Initiative” including a $ 100 million investment over the following five years to fight inequality by unlocking opportunities for employees, restaurant team members and communities.
−Removed: The Company contributed $ 50 million in the second quarter of 2020 to Yum!
−Removed: Brands Foundation, Inc.
−Removed: (a stand-alone, not-for-profit organization that is not consolidated in the Company’s results) as part of these efforts and investment.
−Removed: As a result of the size and specific nature of this contribution the associated General and administrative expense was not allocated to any of our segment operating results for performance reporting purposes.
−Removed: Habit Burger Grill Impairment
−Removed: During the first quarter of 2020, the operations of substantially all Habit Burger Grill restaurants were impacted by COVID-19.
−Removed: As a result, we performed an interim impairment test of the Habit Burger Grill reporting unit goodwill as of March 31, 2020.
−Removed: This test of impairment included comparing the estimated fair value of the Habit Burger Grill reporting unit to its carrying value, including goodwill, as originally determined through our preliminary purchase price allocation.
−Removed: The fair value estimate of the Habit Burger Grill reporting unit was based on the estimated price a willing buyer would pay for the reporting unit and was determined using an income approach through a discounted cash flow analysis using unobservable inputs (Level 3).
−Removed: The most impactful of these inputs included future average unit volumes of Habit Burger Grill restaurants as well as restaurant unit counts.
−Removed: The fair value was determined based upon a probability-weighted average of three scenarios, which included assumed recovery of Habit Burger Grill average unit volumes to a pre—COVID-19 level over periods ranging from the beginning of
−Removed: 2021 to the end of 2022.
−Removed: Factors impacting restaurant unit counts were near-term unit closures as the result of COVID-19 as well as the pace of expected new unit development.
−Removed: Unit counts assumed were correlated with the expected recoveries in average unit volumes.
−Removed: Based upon this fair value estimate, we determined that the carrying value of our Habit Burger Grill reporting unit exceeded its fair value.
−Removed: As a result, during 2020 we recorded a goodwill impairment charge of $ 144 million to Other (income) expense and a corresponding income tax benefit of $ 33 million.
−Removed: As a result of its size and nature, this impairment charge was not allocated to any of our segment operating results for performance reporting purposes and was recorded to Unallocated Other expense.
−Removed: COVID-19 Relief
−Removed: During the year ended December 31, 2020, we recorded a charge of $ 25 million related to a contribution made to Yum!
−Removed: Brands Foundation, Inc.
−Removed: expected to fund past and anticipated payments for COVID-19 relief provided to restaurant-level employees within the YUM system diagnosed with COVID-19 or acting as the primary caregiver for someone diagnosed with COVID-19.
−Removed: As a result of the size and specific nature of this contribution the associated General and administrative expense was not allocated to any of our segment operating results for performance reporting purposes.
−Removed: Investment in Grubhub, Inc.
−Removed: In April of 2018 we purchased 2.8 million shares of Grubhub common stock for $ 200 million.
−Removed: In the quarter ended September 30, 2020, we sold our entire investment in Grubhub and received proceeds of $ 206 million.
−Removed: While we held our investment in Grubhub common stock we recognized changes in the fair value in our investment in our Consolidated Statements of Income.
−Removed: For the year ended December 31, 2020, we recognized pre-tax investment income of $ 69 million.
+Added: Our effective tax rates in the years ended 2023, 2022 and 2021 have been significantly impacted by upfront recognition of and subsequent adjustments to amounts associated with recently completed intra-entity transfers of intellectual property ("IP") rights, as well as adjustments related to prior years.
+Added: As a result, our effective tax rates have fluctuated significantly and were 12.1 %, 20.3 % and 5.9 % for the years ended December 31, 2023, 2022 and 2021, respectively.
Note 6 – Revenue Recognition
42 unchanged sentences
Increase for upfront fees associated with contracts that became effective during the period, net of amounts recognized as revenue during the period 112
+Added: Deferred franchise fees related to KFC Russia reclassified to liabilities held for sale (see Note 9)
Balance at December 31, 2022
1 unchanged sentence
Increase for upfront fees associated with contracts that became effective during the period, net of amounts recognized as revenue during the period 101
−Removed: Deferred franchise fees related to KFC Russia reclassified to liabilities held for sale (see Note 3)
Balance at December 31, 2023
−Removed: (a) Includes impact of foreign currency translation, as well as, in 2021, the recognition of deferred franchise fees into Refranchising (gain) loss upon the modification of existing franchise agreements when entering into master franchise agreements.
+Added: (a) Includes impact of foreign currency translation, as well as, in 2023, the recognition of deferred franchise fees into Refranchising (gain) loss upon the termination of existing franchise agreements when entering into master franchise agreements.
We expect to recognize contract liabilities as revenue over the remaining term of the associated franchise agreement as follows:
11 unchanged sentences
Income taxes 432 371 308
−Removed: Significant Non-Cash Investing and Financing Activities:
−Removed: Non-cash refranchising proceeds (b)
Reconciliation of Cash and cash equivalents to Consolidated Statements of Cash Flows:
Cash and cash equivalents as presented in Consolidated Balance Sheets $ 512 $ 367 $ 486
−Removed: Restricted cash included in Prepaid expenses and other current assets (c)
−Removed: Restricted cash and restricted cash equivalents included in Other assets (d)
+Added: Restricted cash included in Prepaid expenses and other current assets (b)
+Added: Restricted cash and restricted cash equivalents included in Other assets (c)
Cash and restricted cash related to KFC Russia included in assets held for sale (see Note 3)
Cash, Cash Equivalents and Restricted Cash as presented in Consolidated Statements of Cash Flows $ 724 $ 647 $ 771
−Removed: (a) Amounts exclude payments of $ 23 million in 2022 and $ 28 million in both 2021 and 2020 classified as Interest expense in our Consolidated Statements of Income which are included in Repayments of long-term debt within financing activities in our Consolidated Statements of Cash Flows (see Note 11).
−Removed: (b) In 2020 we received as refranchising consideration a minority interest in an entity (Devyani) that owns our KFC India and Pizza Hut India master franchisee rights (see Note 5).
−Removed: (c) Restricted cash within Prepaid expenses and other current assets reflects the cash related to advertising cooperatives which we consolidate that can only be used to settle obligations of the respective cooperatives and cash held in reserve for Taco Bell Securitization interest payments (see Note 11).
−Removed: (d) Primarily trust accounts related to our self-insurance program.
+Added: (a) Amounts exclude payments of $ 23 million in 2022 and $ 28 million in 2021 classified as Interest expense in our Consolidated Statements of Income which are included in Repayments of long-term debt within financing activities in our Consolidated Statements of Cash Flows (see Note 11).
+Added: (b) Restricted cash within Prepaid expenses and other current assets reflects the cash related to advertising cooperatives which we consolidate that can only be used to settle obligations of the respective cooperatives and cash held in reserve for Taco Bell Securitization interest payments (see Note 11).
+Added: (c) Primarily trust accounts related to our self-insurance program.
Note 8 – Other (Income) Expense
1 unchanged sentence
Foreign exchange net (gain) loss $ 5 $ ( 9 ) $ 8
−Removed: Impairment and closure expense (a)
+Added: Impairment and closure expense
Other ( 3 ) 8 ( 22 )
Other (income) expense $ 14 $ 7 $ 2
−Removed: (a) The year ended December 31, 2020, includes a charge of $ 144 million related to the impairment of Habit Burger Grill goodwill (see Note 5).
Note 9 – Supplemental Balance Sheet Information
26 unchanged sentences
Accrued interest 82 83
+Added: Gift card liability
Liabilities held for sale (a)
1 unchanged sentence
Accounts payable and other current liabilities $ 1,169 $ 1,251
−Removed: (a) Assets and liabilities held for sale reflect the carrying value of restaurants we have offered for sale to franchisees, excess properties that we do not intend to use for restaurant operations in the future and, at December 31, 2022, the assets and liabilities of KFC Russia (see Note 3).
+Added: (a) Assets and liabilities held for sale reflect the carrying value of restaurants we have offered for sale to franchisees, excess properties that we do not intend to use for restaurant operations in the future and, at December 31, 2022, the assets and liabilities of KFC Russia.
KFC Russia assets held for sale accounted for $ 185 million, including property, plant and equipment of $ 59 million, of the $ 190 million, while KFC Russia liabilities held for sale accounted for all of the $ 65 million as of December 31, 2022.
4 unchanged sentences
$ 232 $ 98 $ 257 $ 70 $ 657
−Removed: Acquisitions — — — 10 10
Disposals and other, net (b)
( 7 ) — ( 8 ) ( 4 ) ( 19 )
−Removed: Dragontail Systems acquisition (See Note 3)
Goodwill, net as of December 31, 2022 (a)
1 unchanged sentence
Disposals and other, net (b)
−Removed: ( 7 ) — ( 8 ) ( 4 ) ( 19 )
Goodwill, net as of December 31, 2023 (a)
14 unchanged sentences
Amortization expense for all finite-lived intangible assets was $ 74 million in 2023, $ 68 million in 2022 and $ 76 million in 2021.
−Removed: Amortization expense for finite-lived intangible assets is expected to approximate $ 83 million in 2023, $ 63 million in 2024, $ 48 million in 2025, $ 18 million in 2026 and $ 8 million in 2027.
−Removed: At December 31, 2022, KFC Russia finite-lived intangible assets of $ 23 million have been classified as held for sale and are included in Prepaid expenses and other current assets in our Consolidated Balance Sheet (see Note 3) and thus are not included in the table above.
+Added: Amortization expense for finite-lived intangible assets, based on existing intangible assets as of December 31, 2023, is expected to approximate $ 79 million in 2024, $ 63 million in 2025, $ 48 million in 2026, $ 26 million in 2027 and $ 10 million in 2028.
+Added: At December 31, 2022, KFC Russia finite-lived intangible assets of $ 23 million were classified as held for sale and are included in Prepaid expenses and other current assets in our Consolidated Balance Sheet (see Note 9) and thus are not included in the table above.
Note 11 – Short-term Borrowings and Long-term Debt
37 unchanged sentences
Taco Bell assets that were excluded from the transfers to the Securitization Entities continue to be held by Taco Bell of America, LLC (“TBA”) and TBC.
−Removed: The Securitization Notes are not guaranteed by the remaining U.S.
+Added: The Securitization Notes are not guaranteed by these remaining U.S.
Taco Bell assets, the Company, or any other subsidiary of the Company.
3 unchanged sentences
In general, no amortization of principal of the Securitization Notes is required prior to their anticipated repayment dates unless as of any quarterly measurement date the consolidated leverage ratio (the ratio of total debt to Net Cash Flow (as defined in the related indenture)) for the preceding four fiscal quarters of either the Company and its subsidiaries or the Issuer and its subsidiaries exceeds 5.0:1, in which case amortization payments of 1% per year of the outstanding principal as of the closing of the Securitization Notes are required.
−Removed: As of the most recent quarterly measurement date the consolidated leverage ratio for the Issuer and its subsidiaries exceeded 5.0:1 and, as a result, amortization payments are required.
+Added: As of the most recent quarterly measurement date the consolidated leverage ratio for the Issuer and its subsidiaries did not exceed 5.0:1 and, as a result, amortization payments are not required.
The Securitization Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Issuer maintains specified reserve accounts to be available to make required interest payments in respect of the Securitization Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the Securitization Notes under certain circumstances, (iii) certain indemnification payments relating to taxes, enforcement costs and other customary items and (iv) covenants relating to recordkeeping, access to information and similar matters.
5 unchanged sentences
The indenture requires a certain amount of securitization cash flow collections to be allocated on a weekly basis and maintained in a cash reserve account.
−Removed: As of December 31, 2022, the Company had restricted cash of $ 85 million primarily related to required interest reserves included in Prepaid expenses and other current assets on the
−Removed: Consolidated Balance Sheets.
−Removed: Once the required obligations are satisfied, there are no further restrictions, including payment of dividends, on the cash flows of the Securitization Entities.
+Added: As of December 31, 2023, the Company had restricted cash of $ 76 million primarily related to required interest reserves included in Prepaid expenses and other current assets on the Consolidated Balance Sheets.
+Added: Once the required reserve obligations are satisfied, there are no further restrictions, including payment of dividends, on the cash flows of the Securitization Entities.
Additional cash reserves are required if any of the rapid amortization events occur, as noted above, or in the event that as of any quarterly measurement date the Securitization Entities fail to maintain a debt service coverage ratio (or the ratio of Net Cash Flow to all debt service payments for the preceding four fiscal quarters) of at least 1.75:1 .
5 unchanged sentences
Additionally, the Borrowers through a series of transactions have issued Subsidiary Senior Unsecured Notes (collectively referred to as the “Subsidiary Senior Unsecured Notes”).
−Removed: The following table summarizes borrowings outstanding under the Credit Agreement, excluding the Revolving Facility, as well as our Subsidiary Senior Unsecured Notes as of December 31, 2022.
−Removed: There were $ 279 million in outstanding borrowings under the Revolving Facility and $ 2 million of letters of credit outstanding as of December 31, 2022.
+Added: The following table summarizes borrowings outstanding under the Credit Agreement, as well as our Subsidiary Senior Unsecured Notes as of December 31, 2023.
+Added: There were no outstanding borrowings under the Revolving Facility and $ 2 million of letters of credit outstanding as of December 31, 2023.
Interest Rate
4 unchanged sentences
Subsidiary Senior Unsecured Notes June 2017 June 2027 $ 750 4.75 % 4.90 %
−Removed: (a) The interest rates applicable to the Term Loan A Facility as well as the Revolving Facility range from 0.75 % to 1.50 % plus LIBOR or from 0.00 % to 0.50 % plus the Base Rate (as defined in the Credit Agreement), at the Borrowers’ election, based upon the total leverage ratio (as defined in the Credit Agreement).
−Removed: As of December 31, 2022, the interest rate spreads on the LIBOR and Base Rate applicable to our Term Loan A Facility were 1.00 % and 0.00 %, respectively.
−Removed: The interest rates applicable to the Term Loan B Facility are 1.75 % plus LIBOR or 0.75 % plus the Base Rate, at the Borrowers’ election.
+Added: (a) The interest rates applicable to the Term Loan A Facility as well as the Revolving Facility range from 0.75 % to 1.50 % plus Secured Overnight Financing Rate ("SOFR") or from 0.00 % to 0.50 % plus the Base Rate (as defined in the Credit Agreement), at the Borrowers’ election, based upon the total leverage ratio (as defined in the Credit Agreement).
+Added: As of December 31, 2023, the interest rate spreads on the SOFR and Base Rate applicable to our Term Loan A Facility were 0.75 % and 0.00 %, respectively.
+Added: The interest rates applicable to the Term Loan B Facility are 1.75 % plus SOFR or 0.75 % plus the Base Rate, at the Borrowers’ election.
+Added: We transitioned to SOFR as the benchmark reference rate under the Credit Agreement during 2023 following the cease of publication of remaining LIBOR tenors on June 30, 2023.
(b) Includes the effects of the amortization of any discount and debt issuance costs as well as the impact of the interest rate swaps on the Term Loan A and Term Loan B Facilities (see Note 13).
−Removed: The effective rates related to our Term Loan A and B Facilities are based on LIBOR-based interest rates at December 31, 2022.
+Added: The effective rates related to our Term Loan A and B Facilities are based on SOFR-based interest rates at December 31, 2023.
The Term Loan A Facility is subject to quarterly amortization payments in an amount equal to 0.625 % of the principal amount of the facility as of the issuance date of $ 750 million.
3 unchanged sentences
The Credit Agreement is also secured by first priority liens on substantially all assets of the Borrowers and each subsidiary guarantor, excluding the stock of certain subsidiaries and certain real property, and subject to other customary exceptions.
−Removed: The Credit Agreement is subject to certain mandatory prepayments, including an amount equal to 50% of excess cash flow (as defined in the Credit Agreement) on an annual basis and the proceeds of certain asset sales, casualty events and issuances of indebtedness, subject to customary exceptions and reinvestment rights .
−Removed: The Credit Agreement includes two financial maintenance covenants which require the Borrowers to maintain a total leverage ratio (defined as the ratio of Consolidated Total Debt to Consolidated EBITDA (as these terms are defined in the Credit Agreement)) of 5.0:1 or less and a fixed charge coverage ratio (defined as the ratio of EBITDA minus capital expenditures to fixed charges (inclusive of rental expense and scheduled amortization)) of at least 1.5:1 , each as of the last day of each fiscal quarter.
+Added: The Credit Agreement is subject to certain mandatory prepayments in the event certain covenants are not met, including an amount equal to 50% of excess cash flow (as defined in the Credit Agreement) on an annual basis and the proceeds of certain asset sales, casualty events and issuances of indebtedness, subject to customary exceptions and reinvestment rights .
+Added: The Credit Agreement's covenants include two financial maintenance covenants which require the Borrowers to maintain a total leverage ratio (defined as the ratio of Consolidated Total Debt to Consolidated EBITDA (as these terms are defined in the Credit Agreement)) of 5.0:1 or less and a fixed charge coverage ratio (defined as the ratio of EBITDA minus capital expenditures to fixed charges (inclusive of rental expense and scheduled amortization)) of at least 1.5:1 , each as of the last day of each fiscal quarter.
The Credit Agreement includes other affirmative and negative covenants and events of default that are customary for facilities of this type.
11 unchanged sentences
October 2013 November 2043 $ 275 5.35 % 5.42 %
−Removed: October 2013 November 2043 $ 275 5.35 % 5.42 %
September 2019 January 2030 $ 800 4.75 % 4.90 %
5 unchanged sentences
and (3) gain or loss upon settlement of related treasury locks and forward starting interest rate swaps utilized to hedge the interest rate risk prior to debt issuance.
−Removed: On February 23, 2022, Yum!
−Removed: issued a notice of redemption for $ 600 million aggregate principal amount of 7.75 % YUM Senior Unsecured Notes due April 1, 2025 (the “2025 Notes”).
−Removed: The 2025 Notes were redeemed on April 1, 2022, at an amount equal to 103.875 % of the aggregate principal amount of the 2025 Notes, reflecting a $ 23 million call premium, plus accrued and unpaid interest to the date of redemption.
−Removed: We recognized the call premium and the write-off of $ 5 million of unamortized debt issuance costs associated with the 2025 Notes within Interest expense, net in the quarter ended June 30, 2022.
−Removed: Also on April 1, 2022, Yum!
−Removed: issued $ 1 billion aggregate principal amount of 5.375 % YUM Senior Unsecured Notes due April 1, 2032 (the “April 2032 Notes”).
−Removed: Interest on the April 2032 Notes is payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2022.
−Removed: The indenture governing the April 2032 Notes contains covenants and events of default that are customary for debt securities of this type, including cross-default provisions whereby the acceleration of the maturity of any of our indebtedness in a principal amount of $100 million or more or the failure to pay the principal of such indebtedness at its stated maturity will constitute an event of default under the April 2032 Notes unless such indebtedness is discharged, or the acceleration of the maturity of that indebtedness is annulled, within 30 days after notice .
−Removed: The Company paid debt issuance costs of $ 12 million in connection with the April 2032 Notes.
−Removed: The debt issuance costs will be amortized to Interest expense, net over the life of the April 2032 Notes using the effective interest method.
−Removed: We used the net proceeds from the April 2032 Notes to fund the redemption of the 2025 Notes discussed above and for general corporate purposes.
The YUM Senior Unsecured Notes represent senior, unsecured obligations and rank equally in right of payment with all of our existing and future unsecured unsubordinated indebtedness.
3 unchanged sentences
Total $ 11,219
−Removed: Interest expense on Short-term borrowings and Long-term debt was $ 558 million, $ 551 million and $ 558 million in 2022, 2021 and 2020, respectively.
+Added: Interest expense on Short-term borrowings, Long-term debt and gross interest on cash pooling arrangements was $ 602 million, $ 558 million and $ 551 million in 2023, 2022 and 2021, respectively.
Note 12 – Lease Accounting
14 unchanged sentences
Right-of-use assets obtained in exchange for lease obligations
−Removed: Operating leases (a)
+Added: Operating leases
Finance leases 6 10 5
1 unchanged sentence
Finance lease and other debt obligations transferred through refranchising ( 5 ) — ( 2 )
−Removed: (a) The year ended December 31, 2020, includes right-of-use assets acquired as part of the acquisition of Habit Burger Grill of $ 196 million.
Supplemental Balance Sheet Information
17 unchanged sentences
and the Habit Burger Grill including leases related to Company-operated restaurants, leases related to franchise-operated restaurants we sublease and the Taco Bell and Habit Burger Grill restaurant support center.
−Removed: At December 31, 2022, KFC Russia operating and finance lease right-of-use assets of $ 25 million and $ 3 million , respectively, have been classified as held for sale and are included in Prepaid expenses and other current assets in our Consolidated Balance Sheet (see Note 3).
−Removed: The associated KFC Russia operating and finance lease liabilities of $ 25 million and $ 3 million , respectively, have also been classified as held for sale and are included in Accounts payable and other current liabilities in our Consolidated Balance Sheet.
−Removed: Such amounts are not reflected in the Supplemental Balance Sheet Information above.
Maturity of Lease Payments and Receivables
18 unchanged sentences
We have entered into interest rate swaps with the objective of reducing our exposure to interest rate risk for a portion of our variable-rate debt interest payments.
−Removed: On May 14, 2018, we entered into forward-starting interest rate swaps to fix the interest rate on $ 1.5 billion of combined borrowings under our Term Loan A and Term Loan B Facilities from July 2021 through March 2025.
−Removed: These interest rate swaps result in fixed rates of 4.06 % and 4.81 % on the swapped portion of the Term Loan A and Term Loan B Facilities, respectively.
+Added: On May 14, 2018, we entered into forward-starting interest rate swaps to fix the interest rate on $ 1.5 billion of borrowings, primarily under our Term Loan B Facility from July 2021 through March 2025.
+Added: These interest rate swaps result in a fixed rate of 4.87 % on the swapped portion of the Term Loan B Facility.
These interest rate swaps are designated cash flow hedges as the changes in the future cash flows of the swaps are expected to offset changes in expected future interest payments on the related variable-rate debt.
6 unchanged sentences
Income tax benefit/(expense) ( 4 ) ( 30 ) ( 8 ) 8 ( 4 ) ( 6 )
−Removed: As of December 31, 2022, the estimated net gain included in AOCI related to our interest rate swaps that will be reclassified into earnings in the next 12 months is $ 26 million, based on current LIBOR interest rates.
+Added: As of December 31, 2023, the estimated net gain included in AOCI related to our interest rate swaps that will be reclassified into earnings in the next 12 months is $ 24 million, based on current SOFR interest rates.
Total Return Swaps
−Removed: Beginning in 2021, we have entered into total return swap derivative contracts, with the objective of reducing our exposure to market-driven changes in certain of the liabilities associated with compensation deferrals into our EID plan.
+Added: We have entered into total return swap derivative contracts, with the objective of reducing our exposure to market-driven changes in certain of the liabilities associated with compensation deferrals into our EID plan.
While these total return swaps represent economic hedges, we have not designated them as hedges for accounting purposes.
−Removed: As a result, the changes in the fair value of these derivatives are recognized immediately in earnings within General and administrative
−Removed: expenses in our Consolidated Statements of Income largely offsetting the changes in the associated EID liabilities.
−Removed: We historically used investments in mutual funds to offset fluctuations for a portion of our EID liabilities and whose fair values were determined based on the closing market prices of the respective mutual funds.
−Removed: Upon entering into the total return swaps, we sold these investments in mutual funds and received cash proceeds of $ 44 million.
−Removed: These proceeds have been classified within Other, net cash flows from investing activities within our Consolidated Statements of Cash Flows.
+Added: As a result, the changes in the fair value of these derivatives are recognized immediately in earnings within General and administrative expenses in our Consolidated Statements of Income largely offsetting the changes in the associated EID liabilities.
The fair value associated with the total return swaps as of both December 31, 2023 and 2022, was not significant.
5 unchanged sentences
Note 14 – Fair Value Disclosures
−Removed: As of December 31, 2022, the carrying values of cash and cash equivalents, restricted cash, short-term investments, accounts receivable, short-term borrowings, accounts payable and borrowings under our Revolving Facility approximated their fair values because of the short-term nature of these instruments.
+Added: As of December 31, 2023, the carrying values of cash and cash equivalents, restricted cash, short-term investments, accounts receivable, short-term borrowings and accounts payable approximated their fair values because of the short-term nature of these
The fair value of notes receivable net of allowances and lease guarantees less subsequent amortization approximates their carrying value.
22 unchanged sentences
Interest Rate Swaps Other assets 2 2 16
−Removed: Interest Rate Swaps
−Removed: Accounts Payable and other current liabilities 2 — 38
−Removed: Interest Rate Swaps Other liabilities and deferred credits 2 — 54
The fair value of the Company’s interest rate swaps were determined based on the present value of expected future cash flows considering the risks involved, including nonperformance risk, and using discount rates appropriate for the duration based on observable inputs.
−Removed: Investments as of December 31, 2022 and 2021, primarily include our approximate 5 % minority interest in Devyani with a fair value of $ 116 million and $ 118 million, respectively.
−Removed: On August 16, 2021, Devyani executed an initial public offering and subsequently the fair value of these equity securities became readily determinable (see Note 5).
−Removed: Prior to the initial public offering the fair value of these equity securities was not readily determinable and we applied the measurement alternative in accordance with ASC Topic 321, Investments - Equity Securities.
+Added: Investments as of December 31, 2023 and 2022, primarily include our approximate 5 % minority interest in Devyani, a publically-traded entity, with a fair value of $ 124 million and $ 116 million, respectively.
Non-Recurring Fair Value Measurements
4 unchanged sentences
The remaining net book value of restaurant assets measured at fair value during the years ended December 31, 2023 and 2022, was $ 21 million and $ 20 million, respectively.
−Removed: During the year ended December 31, 2020, we also recognized impairment charges related to our Habit Burger Grill reporting unit.
During the year ended December 31, 2021, we recognized non-recurring fair value measurements of $ 6 million related to refranchising related impairment.
−Removed: Refranchising related impairment results from writing down the assets of restaurants or restaurant groups offered for refranchising, including certain instances where a decision has been made to refranchise restaurants that are deemed to be impaired.
+Added: Refranchising related impairment results from writing down the assets of restaurants or restaurant groups offered for refranchising, including certain instances where a decision has been made to refranchise
+Added: restaurants that are deemed to be impaired.
The fair value measurements used in our impairment evaluation were based on actual bids received from potential buyers (Level 2).
−Removed: The remaining net book value of these restaurants at December 31, 2021, was approximately $ 6 million.
Note 15 – Pension, Retiree Medical and Retiree Savings Plans
2 unchanged sentences
The qualified plan meets the requirements of certain sections of the Internal Revenue Code and provides benefits to a broad group of employees with restrictions on discriminating in favor of highly compensated employees with regard to coverage, benefits and contributions.
−Removed: The supplemental plans provides additional benefits to certain employees.
+Added: The supplemental plans provide additional benefits to certain employees.
We fund our supplemental plans as benefits are paid.
3 unchanged sentences
We do not expect to make any significant contributions to the Plan in 2024.
−Removed: two significant U.S.
+Added: Our two significant U.S.
plans, including the Plan and a supplemental plan, were previously amended such that any salaried employee hired or rehired by YUM after September 30, 2001, is not eligible to participate in those plans.
10 unchanged sentences
Interest cost 41 31
−Removed: Plan amendments
Benefits paid ( 34 ) ( 29 )
2 unchanged sentences
Benefit obligation at end of year $ 778 $ 755
+Added: A significant component of the overall increase in the Company's benefit obligation for the year ended December 31, 2023, was due to interest cost on the benefit obligation partially offset by benefits paid during the year.
A significant component of the overall decrease in the Company’s benefit obligation for the year ended December 31, 2022, was due to an actuarial gain, which was primarily due to an increase in the discount rate used to measure our benefit obligation from 3.00 % at December 31, 2021 to 5.60 % at December 31, 2022.
−Removed: A significant component of the overall decrease in the Company’s benefit obligation for the year ended December 31, 2021, was due to settlement payments, which were primarily related to a resource optimization program initiated in the third quarter of 2020 (see Note 5).
Change in plan assets:
23 unchanged sentences
Expected return on plan assets ( 50 ) ( 46 ) ( 43 )
−Removed: Amortization of net loss 11 14 14
−Removed: Net periodic benefit cost $ 9 $ 17 $ 19
+Added: Amortization of net loss (gain)
+Added: Net periodic benefit cost (income)
+Added: $ ( 4 ) $ 9 $ 17
Additional (gain) loss recognized due to:
Settlement charges (b)
−Removed: Special termination benefits
(a) Prior service costs are amortized on a straight-line basis over the average remaining service period of employees expected to receive benefits.
4 unchanged sentences
Net actuarial gain (loss) ( 13 ) ( 54 )
−Removed: Amortization of net loss 11 14
+Added: Amortization of net (gain) loss
Amortization of prior service cost 1 6
−Removed: Prior service cost — ( 1 )
Settlement charges — 6
13 unchanged sentences
The fair values of our pension plan assets at December 31, 2023 and 2022 by asset category and level within the fair value hierarchy are as follows:
−Removed: Cash $ 1 $ 237
Cash Equivalents (a)
1 unchanged sentence
Corporate (b)
+Added: Equity Securities (b)
Fixed Income Securities - U.S.
6 unchanged sentences
Fixed Income 132 146
−Removed: Equity Securities 179 456
Real Assets 149 192
Total fair value of plan assets (f)
−Removed: $ 713 $ 1,068
(a) Short-term investments in money market funds.
12 unchanged sentences
Real assets 19 %
−Removed: In addition to allocation differences between target percentages and actual plan assets at December 31, 2022, allocations to each asset class may vary from target allocations due to periodic investment strategy changes, market value fluctuations, the length of time it takes to fully implement investment allocation positions and the timing of benefit payments and contributions.
+Added: Actual allocations to each asset class may vary from target allocations due to periodic investment strategy changes, market value fluctuations, the length of time it takes to fully implement investment allocation positions and the timing of benefit payments and contributions.
Fixed income securities at December 31, 2023, primarily consist of a diversified portfolio of long duration instruments that are intended to mitigate interest rate risk or reduce the interest rate duration mismatch between the assets and liabilities of the Plan.
−Removed: A smaller allocation (constituting 40 % of the fixed income target allocation) is to diversified credit investments in a range of public and credit securities, including below investment grade rated bonds and loans, securitized credit and emerging market debt.
+Added: A smaller allocation (constituting 40 % of the fixed income target allocation) is to diversified credit investments in a range of
+Added: public and credit securities, including below investment grade rated bonds and loans, securitized credit and emerging market debt.
Equity securities at December 31, 2023, consist primarily of investments in publicly traded common stocks and other equity-type securities issued by companies throughout the world, including convertible securities, preferred stock, rights and warrants.
1 unchanged sentence
These may take the form of debt or equity securities in public or private funds.
−Removed: A mutual fund held as an investment by the Plan includes shares of Common Stock valued at $ 0.1 million and $ 0.2 million at December 31, 2022 and 2021, respectively, (less than 1 % of total plan assets in each instance).
+Added: A mutual fund held as an investment by the Plan includes shares of Common Stock valued at $ 0.1 million at both December 31, 2023 and 2022, (less than 1 % of total plan assets in each instance).
Benefit Payments
8 unchanged sentences
These plans were both in a net overfunded position at the end of 2023 and 2022.
−Removed: Total actuarial pre-tax losses related to the UK plans of $ 64 million and $ 5 million were recognized in AOCI at the end of 2022 and 2021, respectively.
−Removed: The total net periodic benefit income recorded was $ 2 million in 2022 and was less than $ 1 million in both 2021 and 2020.
+Added: Total actuarial pre-tax losses related to the UK plans of $ 63 million and $ 64 million were recognized in AOCI at the end of both 2023 and 2022, respectively.
+Added: The total net periodic cost or benefit recorded was $ 2 million of cost in 2023, and net periodic benefit income of $ 2 million in 2022 and less than $ 1 million in 2021.
The funding rules for our pension plans outside of the U.S.
9 unchanged sentences
Actuarial pre-tax gains of $ 15 million and $ 16 million were recognized in AOCI at the end of 2023 and 2022, respectively.
−Removed: The net periodic benefit cost recorded was $ 1 million in each of 2022, 2021 and 2020, the majority of which is interest cost on the accumulated post-retirement benefit obligation.
+Added: The net periodic benefit cost or benefit recorded was less than $ 1 million of benefit in 2023, and $ 1 million of cost in 2022 and 2021.
The weighted-average assumptions used to determine benefit obligations and net periodic benefit cost for the post-retirement medical plan are identical to those as shown for the U.S.
11 unchanged sentences
Long-Term Incentive Plan (the “LTIP”).
−Removed: Potential awards to employees and non-employee directors under the LTIP include stock options, incentive stock options, SARs, restricted stock, restricted stock units (“RSUs”), performance restricted stock units, performance share units (“PSUs”) and performance units.
+Added: Potential awards to employees and non-employee directors under the LTIP include stock options, incentive stock options, SARs, restricted stock, RSUs, performance restricted stock units, PSUs and performance units.
We have issued only stock options, SARs, RSUs and PSUs under the LTIP.
11 unchanged sentences
Our EID plan also allows certain participants to defer incentive compensation to purchase phantom shares of our Common Stock and receive a 33 % Company match on the amount deferred.
−Removed: Deferrals receiving a match are similar to an RSU award in that participants will generally forfeit both the match and incentive compensation amounts deferred if they voluntarily separate from employment during a vesting period that
−Removed: is two years from the date of deferral.
+Added: Deferrals receiving a match are similar to an RSU award in that participants will generally forfeit both the match and incentive compensation amounts deferred if they voluntarily separate from employment during a vesting period that is two years from the date of deferral.
We expense the intrinsic value of the match and the incentive compensation amount over the requisite service period which includes the vesting period.
3 unchanged sentences
Depending on the tax laws of the country of employment, awards were modified using either the shareholder method or the employer method.
−Removed: Share-based compensation as recorded in Net Income is based on the amortization of the fair value for both YUM and Yum China awards held by YUM employees.
−Removed: The fair value of Yum China awards held by YUM employees became fully amortized in the year ended December 31, 2020.
+Added: Share-based compensation as recorded in Net Income was based on the amortization of the fair value for both YUM and Yum China awards held by YUM employees.
+Added: The fair value of Yum China awards held by YUM employees became fully amortized to expense in the year ended December 31, 2020.
Share issuances for Yum China awards held by YUM employees will be satisfied by Yum China.
30 unchanged sentences
As of December 31, 2023, $ 35 million of unrecognized compensation cost related to unvested stock options and SARs, which will be reduced by any forfeitures that occur, is expected to be recognized over a remaining weighted-average period of approximately 1.7 years.
−Removed: The total fair value at grant date of awards held by YUM employees that vested during 2022, 2021 and 2020 (including Yum China awards that became fully vested in 2020) was $ 31 million, $ 35 million and $ 70 million, respectively.
+Added: The total fair value at grant date of awards held by YUM employees that vested during 2023, 2022 and 2021 was $ 31 million, $ 31 million and $ 35 million, respectively.
RSUs and PSUs
22 unchanged sentences
$ 50 $ 1,200 $ 1,580 (a)
−Removed: (a) 2021 amount excludes and 2020 amount includes the effect of $ 11 million in share repurchases ( 0.1 million shares) with trade dates on, or prior to, December 31, 2020, but settlement dates subsequent to December 31, 2020.
+Added: (a) 2021 amount excludes the effect of $ 11 million in share repurchases ( 0.1 million shares) with trade dates on, or prior to, December 31, 2020, but settlement dates subsequent to December 31, 2020.
In September 2022, our Board of Directors authorized share repurchases of up to $ 2 billion (excluding applicable transaction fees) of our outstanding Common Stock through June 30, 2024.
15 unchanged sentences
Balance at December 31, 2023, net of tax
−Removed: (a) Amounts reclassified from AOCI for pension and post-retirement benefit plans losses during 2022 include amortization of net losses of $ 22 million , amortization of prior service cost of $ 5 million, settlement charges of $ 7 million and related income tax benefit of $ 6 million.
−Removed: Amounts reclassified from AOCI for pension and post-retirement benefit plans losses during 2021 include amortization of net losses of $ 12 million , amortization of prior service cost of $ 5 million and related income tax benefit of $ 4 million.
+Added: $ ( 201 ) $ ( 104 ) $ 3 $ ( 302 )
+Added: (a) Amounts reclassified from AOCI for pension and post-retirement benefit plans losses during 2023 include amortization of prior service cost of $ 1 million.
+Added: Amounts reclassified from AOCI for pension and post-retirement benefit plans losses during 2022 include amortization of net losses of $ 22 million , amortization of prior service cost of $ 5 million, settlement charges of $ 7 million and related income tax benefit of $ 6 million.
(b) See Note 13 for details on amounts reclassified from AOCI.
34 unchanged sentences
foreign tax credits.
−Removed: In 2022, this item was favorably impacted by the ongoing effects of the KFC Europe Reorganization (as described below).
−Removed: In 2021, this item was favorably impacted by the ongoing effects of the KFC Europe Reorganization (as described below) partially offset by the unfavorable impact of recording deferred tax liabilities associated with unremitted foreign earnings.
+Added: In 2023, this item was unfavorably impacted by a statutory tax rate increase in Switzerland.
Adjustments to reserves and prior years.
2 unchanged sentences
and (2) the effects of reconciling income tax amounts recorded in our Consolidated Statements of Income to amounts reflected on our tax returns, including any adjustments to the Consolidated Balance Sheets.
−Removed: In 2022, this item was unfavorably impacted by $ 17 million of
−Removed: adjustments made to current and deferred tax accounts in various jurisdictions to align with balances supported by 2021 and prior tax filings.
+Added: In 2023, this item was unfavorably impacted by $ 41 million of newly established reserves associated with a correction in the timing of capital loss utilization related to historical refranchising gains to tax years with a lower statutory tax rate, partially offset by $ 18 million of reserve releases associated with prior year
+Added: filing positions in various jurisdictions.
+Added: In 2022, this item was unfavorably impacted by $ 17 million of adjustments made to current and deferred tax accounts in various jurisdictions to align with balances supported by 2021 and prior tax filings.
Additionally, in 2022 this item was unfavorably impacted by $ 9 million of reserves established associated with prior year filing positions in various jurisdictions.
In 2021, this item was unfavorably impacted by a $ 22 million reserve established due to a challenge of a prior year filing position in a foreign jurisdiction.
−Removed: In 2020, this item was favorably impacted by $ 11 million of adjustments made to current and deferred tax accounts in various jurisdictions to align with balances supported by 2019 and prior tax filings .
−Removed: Additionally, in 2020 this item was favorably impacted by a $ 6 million tax benefit associated with a state settlement.
Change in valuation allowances.
This item relates to changes for deferred tax assets generated or utilized during the current year and changes in our judgment regarding the likelihood of using deferred tax assets that existed at the beginning of the year.
−Removed: In 2022, this item was favorably impacted by $ 13 million of tax benefit associated with a valuation allowance release in a foreign jurisdiction resulting from a change in management’s judgement as to realizability of deferred tax assets in that jurisdiction.
+Added: In 2022, this item was favorably impacted by $ 13 million of tax benefit associated with a valuation allowance release in a foreign jurisdiction resulting from a change in management’s judgement as to the realizability of deferred tax assets in that jurisdiction.
In 2021, this item was favorably impacted by $ 15 million of tax benefit associated with a valuation allowance release resulting from a change in management’s judgment as to the realizability of foreign tax credit carryforwards in the U.S.
−Removed: In 2020, this item was favorably impacted by $ 22 million of tax benefit associated with a valuation allowance release in a foreign jurisdiction resulting from a change in management’s judgement as to realizability of indefinite lived tax loss carryforwards in that jurisdiction.
Impact of Russia Exit.
−Removed: Our decision to exit the Russia market resulted in a reduction in the tax basis of KFC IP rights held in Switzerland due to the expected loss of the Russia royalty income associated with such rights going forward.
+Added: Our decision to exit the Russia market resulted in a $ 7 million tax benefit recorded in 2023 to account for the global tax ramification of current and future payments required to be made to the Russia IP rights holder in Switzerland.
+Added: In 2022, this item was unfavorably impacted by $ 72 million of tax expense primarily associated with a reduction in the tax basis of KFC IP rights held in Switzerland due to the expected loss of the Russia royalty income associated with such rights going forward.
As a result, we remeasured and reassessed the need for a valuation allowance on the associated deferred tax assets.
−Removed: In addition, we reassessed certain deferred tax liabilities associated with the Russia business given the expectation that the existing basis difference will now reverse by way of sale.
−Removed: Primarily as a result of these items, we recorded a net tax expense of $ 72 million in 2022.
+Added: In addition, we reassessed certain deferred tax liabilities associated with the Russia business given the expectation that the basis difference would reverse by way of sale.
Intercompany Restructuring and Valuations of Intellectual Property.
1 unchanged sentence
Concurrent with this change in management responsibility, we completed intra-entity transfers of certain KFC IP rights from subsidiaries in the UK to subsidiaries in Switzerland.
−Removed: With the transfers of these rights, we received a step-up in amortizable tax basis to current fair value under applicable Swiss tax law.
−Removed: As a result of this transfer, we recorded a one-time net deferred tax benefit of $ 152 million in 2021.
In December 2021, we continued our KFC Europe Reorganization and completed intra-entity transfers of additional European KFC IP rights from subsidiaries in the U.S.
to subsidiaries in Switzerland.
−Removed: With the transfers of these additional rights, we received a step-up in amortizable tax basis to current fair value under applicable Swiss tax law.
−Removed: As a result of this transfer, we recorded a net one-time tax benefit of $ 35 million in 2021.
−Removed: In the quarter ended December 31, 2022, we performed an annual valuation under Swiss laws of these Swiss IP rights, incorporating current assumptions around the expected future cash flows attributable to the IP.
+Added: With the transfers of these rights, we received a step-up in amortizable tax basis of those IP rights to current fair value under applicable Swiss tax law.
+Added: As a result of these transfers, we recorded a net one-time tax benefit of $ 187 million in 2021.
+Added: In the year ended December 31, 2022, we performed an annual valuation under Swiss laws of these Swiss IP rights, incorporating current assumptions around the expected future cash flows attributable to the IP.
This valuation supported an increase to tax basis of Swiss IP rights associated with parts of our business that will continue to use these IP rights due to expected royalty growth assumptions in those parts of the business that largely offset the loss of Russia royalty income described above.
Based on the valuation as well as future forecasting of taxable income, we remeasured and reassessed the need for a valuation allowance on the deferred tax assets in Switzerland.
−Removed: As a result, we recorded a net tax benefit of $ 75 million in the quarter ended December 31, 2022.
+Added: As a result, we recorded a net tax benefit of $ 75 million in 2022.
+Added: Consistent with the objectives of the IP restructuring transactions discussed above, in December 2023, we completed intra-entity transfers of certain Asia region IP rights to Singapore.
+Added: In addition, certain remaining Asian IP rights were transferred to the U.S.
+Added: As a result of these transfers, we recorded a net tax benefit of $ 30 million comprised of $ 14 million of current tax expense and a one-time deferred tax benefit of $ 44 million primarily associated with establishing deferred tax assets on amortizable tax basis in the U.S.
+Added: Also in 2023, we agreed to receive a tax credit in exchange for an increase in our prospective statutory tax rate in Switzerland.
+Added: Based on the agreement, we were granted a $ 38 million tax credit expiring in 2031 and our statutory tax rate was increased to approximately 15 % from the previous rate of approximately 10 %.
+Added: As a result of the tax rate increase, we were also required to remeasure our deferred tax assets associated with previously transferred IP rights in Switzerland, which resulted in a one-time deferred tax benefit of $ 99 million.
+Added: We also recorded a $ 29 million deferred tax benefit associated with tax credit which represents the portion of the $ 38 million tax credit that we anticipate utilizing against income tax before expiration.
Nondeductible Interest.
6 unchanged sentences
Although the disallowed interest can be carried forward indefinitely, in management’s judgment interest carried forward will not be realizable in the future.
−Removed: In 2021, the Company recorded $ 23 million of tax expense while in 2020 and 2022, the Company did not record any tax expense associated with disallowed U.S.
+Added: In 2021, the Company recorded $ 23 million of related tax expense while in 2023 and 2022, the Company did not record any tax expense associated with disallowed U.S.
interest expense.
1 unchanged sentence
UK Tax Rate Change – On June 10, 2021, the UK Finance Act 2021 was enacted resulting in an increase in the UK corporate tax rate from 19 % to 25 %.
−Removed: As such, the Company recognized a $ 64 million tax benefit in the quarter ended June 30, 2021, associated with remeasuring its deferred tax assets in the UK from 19 % to 25 %.
−Removed: On July 22, 2020, the UK Finance Act 2020 was enacted resulting in an increase in the UK corporate tax rate from 17 % to 19 %.
−Removed: As such, the Company recognized a $ 25 million tax benefit in 2020 associated with remeasuring its deferred tax assets in the UK from 17 % to 19 %.
+Added: As such, the Company recognized a $ 64 million tax benefit in the quarter ended June 30, 2021, associated with remeasuring its deferred tax assets in the UK, which primarily related to amortizable tax basis that arose as a result of previous IP transfers to the UK.
Companies subject to the Global Intangible Low-Taxed Income provision (GILTI) have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for outside basis temporary differences expected to reverse as GILTI.
31 unchanged sentences
Other liabilities and deferred credits ( 1 ) ( 1 )
+Added: $ 1,044 $ 749
As of December 31, 2023, we had approximately $ 4.3 billion of unremitted foreign retained earnings.
2 unchanged sentences
Repatriation of earnings generated after December 31, 2017, will generally be eligible for the 100 % dividends received deduction or considered a distribution of previously taxed income and, therefore, exempt from U.S.
−Removed: Undistributed foreign earnings may still
−Removed: be subject to certain state and foreign income and withholding taxes upon repatriation.
+Added: Undistributed foreign earnings may still be subject to certain state and foreign income and withholding taxes upon repatriation.
Subject to limited exceptions, we do not intend to indefinitely reinvest our unremitted earnings outside the U.S.
5 unchanged sentences
Gross Amount Deferred Tax Asset Valuation Allowance Expiration
−Removed: Federal net operating losses $ 9 $ 2 $ — 2036-2037
Federal net operating losses - Indefinite $ 60 $ 13 $ — None
3 unchanged sentences
Foreign capital loss carryforward - Indefinite 281 71 ( 71 ) None
−Removed: Foreign tax credits 200 200 ( 182 ) 2026-2032
−Removed: State tax credits 6 6 ( 6 ) 2023
−Removed: Federal interest deduction carryforward - Indefinite 30 6 — None
+Added: Foreign tax credits (US Tax Return)
+Added: 150 150 ( 117 ) 2026-2032
+Added: Foreign country tax credits
+Added: 38 38 ( 9 ) 2031
State interest deduction carryforward - Indefinite 681 33 ( 32 ) None
11 unchanged sentences
The Company believes it is reasonably possible that its unrecognized tax benefits as of December 31, 2023, may decrease by approximately $ 23 million in the next 12 months due to settlements or statute of limitations expirations.
−Removed: During 2022, 2021, and 2020 the Company recognized less than $ 1 million, $ 4 million, and $ 2 million of net expense, respectively, for interest and penalties in our Consolidated Statements of Income as components of its Income tax provision.
−Removed: At both December 31, 2022, and 2021, the Company has recorded $ 3 million of net tax receivables, associated with interest and penalties.
+Added: During 2023, 2022, and 2021 the Company recognized $ 20 million, less than $ 1 million, and $ 4 million of net expense, respectively, for interest and penalties in our Consolidated Statements of Income as components of its Income tax provision.
+Added: The Company has recorded $ 16 million of net tax payables and $ 3 million of net tax receivables, as of December 31, 2023 and 2022, respectively, associated with interest and penalties.
The Company’s income tax returns are subject to examination in the U.S.
21 unchanged sentences
Habit Burger Grill Division ( 14 ) ( 24 ) 2
−Removed: Corporate and unallocated G&A expenses (b)(c)(d)
+Added: Corporate and unallocated G&A expenses (b)(c)
( 326 ) ( 297 ) ( 260 )
2 unchanged sentences
Unallocated Refranchising gain (loss) (b)
−Removed: Unallocated Other income (expense) (b)(c)(e)
+Added: Unallocated Other income (expense) (b)(c)
( 9 ) 52 ( 14 )
22 unchanged sentences
$ 285 $ 279 $ 230
−Removed: Identifiable Assets (g)
+Added: Identifiable Assets (e)
KFC Division $ 2,281 $ 2,227
2 unchanged sentences
Habit Burger Grill Division 630 591
−Removed: Corporate (f)
+Added: Corporate (d)
$ 6,231 $ 5,846
−Removed: Long-Lived Assets (h)
+Added: Long-Lived Assets (f)
KFC Division $ 891 $ 893
6 unchanged sentences
(b) Amounts have not been allocated to any segment for performance reporting purposes.
−Removed: (c) Our operating results reflect revenues from and expenses to support the Russian operations for Pizza Hut, prior to the date of transfer, and KFC, for the entirety of the year ended December 31, 2022 (see Note 3) within their historical financial statement line items and operating segments.
−Removed: However, given our decision to exit Russia and our pledge to direct any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts, we have reclassed such net operating profits from the Division segment results in which they were earned to Unallocated Other income (expense).
−Removed: As a result, we reclassed net operating profits of $ 44 million from KFC and Pizza Hut Division Other income (expense) to Unallocated Other income (expense) during the year ended December 31, 2022.
−Removed: Also, included in Unallocated Other income (expense) were $ 13 million in foreign exchange gains attributable to fluctuations in the value of the Russian ruble.
−Removed: Additionally, we recorded charges of $ 7 million to Corporate and unallocated G&A expenses and $ 6 million to Unallocated Franchise and property expenses during the year ended December 31, 2022 for certain expenses related to the transfer of the businesses and other one-time costs related to our exit from Russia.
−Removed: (d) Amounts in 2020 include charitable contributions to Yum!
−Removed: Brands Foundation, Inc.
−Removed: of $ 50 million and $ 25 million related to our Unlocking Opportunity Initiative and COVID-19 employee relief, respectively.
−Removed: Additionally, 2020 includes $ 36 million for charges associated with resource optimization (see Note 5).
−Removed: (e) Unallocated Other income (expense) in 2020 includes a charge of $ 144 million related to the impairment of Habit Burger Grill goodwill (see Note 5).
−Removed: (f) Primarily includes cash and deferred tax assets.
+Added: (c) Our operating results presented herein reflect revenues from and expenses to support the Russian operations for KFC and Pizza Hut prior to the dates of sale or transfer (see Note 3), within their historical financial statement line items and operating segments.
+Added: However, given our decision to exit Russia and our pledge to direct any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts, we reclassed such net profits and losses subsequent to that date from the Division segment results in which they were earned to Unallocated Other income (expense).
+Added: As a result, we reclassed net operating losses of $ 1 million from KFC Division Other income (expense) to Unallocated Other income (expense) during the year ended December 31, 2023, and net operating profit of $ 44 million from Divisional Other income (expense) to Unallocated Other income (expense) during the year ended December 31, 2022, respectively.
+Added: Additionally, we recorded a charge of $ 3 million to Unallocated Other income (expense) during the year ended December 31, 2023 from the sale of our KFC Russia business.
+Added: Also included in Unallocated Other income (expense) were $ 1 million in foreign exchange losses and $ 13 million in foreign exchange gains attributable to fluctuations in the value of the Russian Ruble during the years ended December 31, 2023 and 2022, respectively.
+Added: Additionally, we recorded charges of $ 5 million to Corporate and unallocated G&A expenses and $ 1 million to Unallocated Franchise and property expenses during the year ended December 31, 2023, for certain expenses related to the disposition of the businesses and other costs related to our exit from Russia.
+Added: We recorded similar charges of $ 7 million to Corporate and Unallocated G&A expenses and $ 6 million to Unallocated Franchise and property expenses during the year ended December 31, 2022.
+Added: (d) Primarily includes cash and deferred tax assets.
identifiable assets included in the combined Corporate and KFC, Taco Bell, Pizza Hut, and Habit Burger Grill Divisions totaled $ 2.8 billion at both 2023 and 2022.
−Removed: (h) Includes PP&E, net, goodwill, intangible assets, net and Operating lease right-of-use assets.
−Removed: Excludes KFC Russia long-lived assets of $ 108 million as of December 31, 2022 which are classified as held for sale and are included in Prepaid expenses and other current assets in our Consolidated Balance Sheet (see Note3).
+Added: (f) Includes PP&E, net, goodwill, intangible assets, net and Operating lease right-of-use assets.
+Added: Excludes KFC Russia long-lived assets of $ 108 million as of December 31, 2022 which were classified as held for sale and are included in Prepaid expenses and other current assets in our Consolidated Balance Sheet (see Note 9).
Note 20 – Contingencies
1 unchanged sentence
As a result of an audit by the Internal Revenue Service (“IRS”) for fiscal years 2013 through 2015, in August 2022, we received a Revenue Agent’s Report (“RAR”) from the IRS asserting an underpayment of tax of $2.1 billion plus $418 million in penalties for the 2014 fiscal year.
−Removed: Additionally, interest on the underpayment is estimated to be approximately $780 million through December 31, 2022.
+Added: Additionally, interest on the underpayment is estimated to be approximately $1.1 billion through December 31, 2023.
The proposed underpayment relates primarily to a series of reorganizations we undertook during that year in connection with the business realignment of our corporate and management reporting structure along brand lines.
2 unchanged sentences
In September 2022, we filed a Protest with the IRS Examination Division disputing on multiple grounds the proposed underpayment of tax and penalties.
−Removed: We are awaiting the IRS Examination Division’s Rebuttal to our Protest.
−Removed: When that Rebuttal is filed, we intend to pursue independent review by the IRS Office of Appeals.
+Added: We have received the IRS Examination Division’s Rebuttal to our Protest and the case has been accepted by the IRS Office of Appeals.
The Company does not expect resolution of this matter within twelve months and cannot predict with certainty the timing of such resolution.
20 unchanged sentences
2023 Activity
+Added: $ 50 35 ( 37 ) $ 48
2022 Activity $ 48 28 ( 26 ) $ 50
19 unchanged sentences
In November 2022, YRIPL was notified that an administrative tribunal bench had been constituted to hear an appeal by DOE of certain findings of the January 2020 order, including claims that certain charges had been wrongly dropped and that an insufficient amount of penalty had been imposed.
−Removed: A hearing has been scheduled with the administrative tribunal on March 14, 2023.
−Removed: The stay order remains in effect, and the next hearing in the Delhi High Court is scheduled for May 16, 2023 .
+Added: A hearing with the administrative tribunal that had been scheduled for December 4, 2023 has been rescheduled to March 4, 2024.
+Added: The stay order remains in effect and the next hearing in the Delhi High Court that had been scheduled for December 14, 2023 has been rescheduled to March 21, 2024.
We deny liability and intend to continue vigorously defending this matter.
We do not consider the risk of any significant loss arising from this order to be probable.
−Removed: Yum China License Fee Dispute
−Removed: In December 2022, the Company resolved the previously disclosed dispute regarding license fees due on certain amounts of gross revenue under the terms of the Master License Agreement between the Company and Yum China.
Other Matters
3 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.