What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-08 · 98 added, 82 removed, 438 unchanged (29% of the section changed)

47 unchanged sentences

however, any resulting franchise and license fees we receive are included in the Company's revenues.

We believe System sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates our primary revenue drivers, Company and franchise same-store sales as well as net unit growth.

In addition to the results provided in accordance with Generally Accepted Accounting Principles in the United States of America ( “ GAAP ” ), the Company provides the following non-GAAP measurements:

25 unchanged sentences

Taco Bell Division +5 +4 +2 +11 +11

Pizza Hut Division Even (3) +3 +4 +6

Pizza Hut Division (1) (4) +2 (6) (5)

YUM +1 (2) +5 +1 +3

6 unchanged sentences

Additionally:

• Foreign currency translation unfavorably impacted Divisional Operating Profit by $12 million and $23 million for the quarter and year to date ended June 30, 2024, respectively.

Second Quarter

• Foreign currency translation unfavorably impacted Divisional Operating Profit by $3 million and $26 million for the quarter and year to date ended September 30, 2024, respectively.

Third Quarter

2024 2023 % Change 2024 2023 % Change

3 unchanged sentences

EPS Excluding Special Items $1.37 $1.44 (5) $3.87 $3.91 (1)

• On a year-over-year basis, our diluted EPS, excluding Special Items, reflects a $0.20 and $0.19 negative impact for the quarter and year to date ended June 30, 2024, respectively, from a higher current year tax rate and unfavorability in after-tax investment gains and losses.

Foreign currency translation negatively impacted our diluted EPS, excluding Special Items, by approximately $0.03 and $0.06 for the quarter and year to date ended June 30, 2024, respectively.

• On a year-over-year basis, our diluted EPS, excluding Special Items, reflects a $0.14 and $0.32 negative impact for the quarter and year to date ended September 30, 2024, respectively, from a higher current year tax rate and unfavorability in after-tax investment gains and losses.

Foreign currency translation negatively impacted our diluted EPS, excluding Special Items, by approximately $0.01 and $0.07 for the quarter and year to date ended September 30, 2024, respectively.

• Gross unit openings for the quarter were 1,029 units resulting in 547 net new units.

4 unchanged sentences

Franchise and property revenues 804 796 1 2,350 2,351 Even

Franchise contributions for advertising and other services 402 391 3 769 792 (3)

Franchise contributions for advertising and other services 401 402 Even 1,170 1,194 (2)

Total revenues 1,826 1,708 7 5,187 5,040 3

2 unchanged sentences

Franchise and property expenses 36 27 (41) 90 95 5

Franchise advertising and other services expense 401 388 (3) 768 783 2

Franchise advertising and other services expense 401 400 Even 1,169 1,183 1

Refranchising (gain) loss (12) (19) NM (31) (40) NM

Other (income) expense (4) (1) NM (10) 14 NM

Total costs and expenses, net 1,156 1,114 (4) 2,234 2,236 Even

Total costs and expenses, net 1,207 1,095 (10) 3,441 3,331 (3)

Operating Profit 619 613 1 1,746 1,709 2

43 unchanged sentences

Negative (Positive) Foreign Currency Impact (b)

(1) N/A (1) N/A

System sales, excluding FX $ 4,007 $ 3,804 $ 11,621 $ 11,028

33 unchanged sentences

(Gain) loss associated with market-wide refranchisings (a)

(1) (2) 3 (7)

Operating (profit) loss impact from decision to exit Russia (b)

2 unchanged sentences

Special Items Expense - Operating Profit

Negative Foreign Currency Impact on Operating Profit

12 N/A 23 N/A

Negative Foreign Currency Impact on Division Operating Profit

Core Operating Profit $ 633 $ 614 $ 1,833 $ 1,728

9 unchanged sentences

Negative (Positive) Foreign Currency Impact

10 N/A 20 N/A

Core Operating Profit $ 340 $ 344 $ 1,007 $ 975

8 unchanged sentences

Habit Burger & Grill Division

GAAP Operating Loss $ 2 $ 3 $ (3) $ (2)

GAAP Operating Profit (Loss)

$ 1 $ (2) $ (2) $ (4)

Negative (Positive) Foreign Currency Impact

15 unchanged sentences

(a) Due to their size and volatility, we have reflected as Special Items those refranchising gains and losses that were recorded in connection with market-wide refranchisings.

During the quarters ended June 30, 2024 and 2023, we recorded net refranchising losses of $1 million and net refranchising gains of $2 million, respectively, that have been reflected as Special Items.

During the years to date ended June 30, 2024 and 2023, we recorded net refranchising losses of $4 million and net refranchising gains of $5 million, respectively, that have been reflected as Special Items.

Additionally, we recorded net refranchising gains of $15 million during both quarters ended June 30, 2024 and 2023 that have not been reflected as Special Items.

During the years to date ended June 30, 2024 and 2023, we recorded net refranchising gains of $23 million and $16 million, respectively, that have not been reflected as Special Items.

During the quarters ended September 30, 2024 and 2023, we recorded net refranchising gains of $1 million and $2 million, respectively, that have been reflected as Special Items.

During the years to date ended September 30, 2024 and 2023, we recorded net refranchising losses of $3 million and net refranchising gains of $7 million, respectively, that have been reflected as Special Items.

Additionally, we recorded net refranchising gains of $11 million and $17 million during quarters ended September 30, 2024 and 2023, respectively, that have not been reflected as Special Items.

During the years to date ended September 30, 2024 and 2023, we recorded net refranchising gains of $34 million and $33 million, respectively, that have not been reflected as Special Items.

These net refranchising gains relate to refranchising of restaurants unrelated to market-wide refranchisings that we believe are indicative of our expected ongoing refranchising activity.

(b) In April 2023, we completed our exit from the Russia market by selling the KFC business in Russia to Smart Service Ltd.

Our GAAP operating results presented herein reflect revenues from and expenses to support the Russian operations for KFC prior to the date of sale, within their historical financial statement line items and operating segments.

Our GAAP operating results presented herein for the quarter and year to date ended June 30, 2023, reflect revenues from and expenses to support the Russian operations for KFC prior to the date of sale, within their historical financial statement line items and operating segments.

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 operating profits or losses from the KFC Division segment results to Unallocated Other income (expense).

Additionally, we incurred certain expenses related to the dispositions of the businesses and other one-time costs related to our exit from Russia which we recorded within Corporate and unallocated G&A and Unallocated Franchise and property expenses.

The resulting net Operating Loss of $9 million and $12 million for the quarter and year to date ended June 30, 2023, respectively, has been reflected as a Special Item.

(c) We recorded charges of $25 million and $46 million during the quarter and year to date ended June 30, 2024, respectively, and $8 million and $10 million during the quarter and year to date ended June 30, 2023, respectively, to General and administrative expenses related to a resource optimization program.

The resulting net Operating Profit of $2 million and net Operating Loss of $10 million for the quarter and year to date ended September 30, 2023, respectively, have been reflected as a Special Items.

(c) We recorded charges of $11 million and $57 million during the quarter and year to date ended September 30, 2024, respectively, and $3 million and $13 million during the quarter and year to date ended September 30, 2023, respectively, to General and administrative expenses and charges of $1 million during both the quarter and year to date ended September 30, 2024 to Other (income) expense related to a resource optimization program.

This program 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.

We recently expanded 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.

Costs incurred to date related to the program include severance associated with positions that have been eliminated or relocated and consultant fees.

Costs incurred to date related to the program primarily include severance associated with positions that have been eliminated or relocated and consultant fees.

Due to their scope and size, these charges have been reflected as Special Items.

6 unchanged sentences

Tax Benefit - Other Income tax impacts recorded as Special

— (22) (4) (22)

Special Items Tax Benefit

1 unchanged sentence

Tax Benefit on Special Items Operating Profit was determined by assessing the tax impact of each individual component within Special Items based upon the nature of the item and jurisdictional tax law.

Other Income Tax impacts recorded as Special in the year to date ended June 30, 2024 and the quarter and year to date ended June 30, 2023 include benefits related to the reversal of reserves due to the favorable resolutions of tax audits in foreign jurisdictions.

Other Income Tax impacts recorded as Special in the years to date ended September 30, 2024 and 2023 include benefits related to the reversal of reserves due to the favorable resolution of tax audits in foreign jurisdictions.

Such reserves were established in prior years related to income tax liabilities and deferred tax assets originally recorded as Special Items as part of intercompany restructurings of intellectual property.

Other Income Tax impacts recorded as Special in the quarter and year to date ended June 30, 2023 also include the release of valuation allowances associated with a jurisdiction in which a market-wide refranchising event occurred.

Other Income Tax impacts recorded as Special in the year to date ended September 30, 2023 also include the release of valuation allowances associated with a jurisdiction in which a marketwide refranchising event occurred.

Reconciliation of GAAP Operating Profit to Company Restaurant Profit

Quarter ended 9/30/2024

KFC Division Taco Bell Division Pizza Hut Division Habit Burger Grill Division Corporate and Unallocated Consolidated

KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division

Corporate and Unallocated Consolidated

GAAP Operating Profit (Loss) $ 339 $ 251 $ 91 $ 1 $ (63) $ 619

6 unchanged sentences

Other (income) expense — — (3) 1 (2) (4)

Company restaurant profit $ 19 $ 69 $ — $ 15 $ (1) $ 102

Company restaurant profit (loss)

$ 28 $ 62 $ — $ 11 $ (3) $ 98

Company sales $ 220 $ 267 $ 1 $ 133 $ — $ 621

1 unchanged sentence

Quarter ended 9/30/2023

KFC Division Taco Bell Division Pizza Hut Division Habit Burger Grill Division Corporate and Unallocated Consolidated

KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division

Corporate and Unallocated Consolidated

GAAP Operating Profit (Loss) $ 344 $ 226 $ 97 $ (2) $ (52) $ 613

10 unchanged sentences

Year to date 9/30/2024

KFC Division Taco Bell Division Pizza Hut Division Habit Burger Grill Division Corporate and Unallocated Consolidated

KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division

Corporate and Unallocated Consolidated

GAAP Operating Profit (Loss) $ 986 $ 709 $ 278 $ (2) $ (225) $ 1,746

6 unchanged sentences

Other (income) expense (3) (1) (10) 1 3 (10)

Company restaurant profit $ 32 $ 123 $ — $ 22 $ (1) $ 176

Company restaurant profit (loss)

$ 60 $ 185 $ — $ 33 $ (4) $ 274

Company sales $ 488 $ 775 $ 5 $ 399 $ — $ 1,667

1 unchanged sentence

Year to date 9/30/2023

KFC Division Taco Bell Division Pizza Hut Division Habit Burger Grill Division Corporate and Unallocated Consolidated

KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division

Corporate and Unallocated Consolidated

GAAP Operating Profit (Loss) $ 975 $ 658 $ 292 $ (4) $ (212) $ 1,709

14 unchanged sentences

During the fourth quarter of 2023, certain of our markets, principally in our KFC and Pizza Hut Divisions, began being impacted by a military conflict in the Middle East region.

Our sales continue to be impacted significantly in markets across the Middle East, Malaysia and Indonesia, and the recovery trajectory we observed in these markets in the quarter ended March 31, 2024 flattened during the quarter ended June 30, 2024.

The impact in the Middle East, Malaysia and Indonesia represented a low single-digit headwind to YUM's overall same-store sales growth in both the quarter and year to date ended June 30, 2024.

Our sales continue to be impacted significantly in markets across the Middle East, Malaysia and Indonesia.

The impact in these markets represented a low single-digit headwind to YUM's overall same-store sales growth in both the quarter and year to date ended September 30, 2024.

Additionally, we believe we have experienced conflict-related impacts in a broader set of markets, though such amounts are difficult to precisely quantify.

The Middle East conflict is ongoing, and its dynamic nature makes it difficult to forecast any impacts on the Company’s balance of year 2024 revenues, operating profit and unit count with any certainty.

In a few isolated cases, the scale and duration of these sales’ impacts are affecting the financial health of our less scaled or less well-capitalized franchisees, particularly those whose restaurants have been most heavily impacted.

We have experienced an increase in restaurant closures in those markets most heavily impacted by the Middle East conflict during the first three quarters of 2024.

We have approximately 275 restaurants in these markets that are currently temporarily closed as of September 30, 2024.

Subsequent to the end of the third quarter, we defaulted a franchisee who operates a market in the Middle East under the terms of their franchise agreement.

The number of units impacted by this default comprise less than 1% of our global store count.

We are working closely with our franchisees in markets who have been most heavily impacted by the Middle East conflict to improve their profitability and position their businesses for healthy growth in the future.

Additionally, we are working with the franchisee who we defaulted subsequent to the quarter end in an attempt to help them cure their default and/or transition their franchise agreement to another party.

There is risk that we experience further permanent closures in these markets in the fourth quarter of 2024, which would have a negative impact on our unit growth rate and result in the write-off of cash incentives we have previously provided in connection with these units.

Given the lower volume nature of the units most at risk for potential closure, we do not currently anticipate that any ongoing financial impact would be material.

The Middle East conflict is ongoing, and its dynamic nature makes it difficult to forecast any impacts on the Company’s balance of year 2024 revenues, operating profit, including the impacts of any bad debt expense, and unit count with any certainty.

Impact of Foreign Currency Translation on Operating Profit

Changes in foreign currency exchange rates negatively impacted the translation of our foreign currency denominated Divisional Operating Profit by $12 million and $23 million for the quarter and year to date ended June 30, 2024, respectively.

This included a negative impact to our KFC Division Operating Profit of $10 million and $20 million for the quarter and year to date ended June 30, 2024, respectively.

Changes in foreign currency exchange rates negatively impacted the translation of our foreign currency denominated Divisional Operating Profit by $3 million and $26 million for the quarter and year to date ended September 30, 2024, respectively.

This included a negative impact to our KFC Division Operating Profit of $1 million and $21 million for the quarter and year to date ended September 30, 2024, respectively.

We currently expect changes in foreign currency to negatively impact Divisional Operating Profit by approximately $20 to $30 million on a full-year basis.

1 unchanged sentence

During the quarter ended March 31, 2024, we sold our approximate 5% minority investment in Devyani International Limited ("Devyani"), a franchise entity that operates KFC and Pizza Hut restaurants in India, for pre-tax proceeds of $104 million.

Changes in the fair value of our ownership interest in Devyani prior to the date of sale resulted in pre-tax investment losses of $20 million in the year to date ended June 30, 2024 and pre-tax gains of $28 million and $5 million in the quarter and year to date ended June 30, 2023, respectively.

Changes in the fair value of our ownership interest in Devyani prior to the date of sale resulted in pre-tax investment losses of $20 million in the year to date ended September 30, 2024 and pre-tax gains of $16 million and $21 million in the quarter and year to date ended September 30, 2023, respectively.

The KFC Division has 31,143 units, 88% of which are located outside the U.S.

Additionally, 99% of the KFC Division units were operated by franchisees as of June 30, 2024.

Additionally, 99% of the KFC Division units were operated by franchisees as of September 30, 2024.

Quarter ended Year to date

4 unchanged sentences

Company sales $ 220 $ 117 88 87 $ 488 $ 342 43 42

Franchise and property revenues 405 416 (3) Even 802 828 (3) (1)

Franchise and property revenues 417 426 (2) (2) 1,219 1,254 (3) (1)

Franchise contributions for advertising and other services 148 157 (5) (6) 427 473 (10) (9)

3 unchanged sentences

12.2 % 13.6 % (1.4) ppts.

G&A expenses $ 84 $ 90 6 6 $ 167 $ 179 7 7

G&A expenses $ 86 $ 86 (1) Even $ 253 $ 265 4 5

Franchise and property expenses 20 15 (38) (42) 46 57 19 18

7 unchanged sentences

Company sales and Company restaurant margin %

The quarterly and year to date increase in Company sales, excluding the impact of foreign currency translation, was driven by the KFC U.K.

and Ireland restaurant acquisition (see Note 2) in the quarter ended June 30, 2024, partially offset by Company same-store sales declines of 4%.

The quarterly and year to date decreases in Company restaurant margin percentage were driven by higher restaurant operating costs and Company same-store sales declines.

The quarterly and year to date increases in Company sales, excluding the impact of foreign currency translation, were driven by the KFC U.K.

and Ireland restaurant acquisition (see Note 2) in the second quarter of 2024, partially offset by Company same-store sales declines of 4%.

The quarterly and year to date decreases in Company restaurant margin percentage were driven by higher restaurant operating and labor costs and Company same-store sales declines.

Franchise and property revenues

Franchise and property revenues, excluding the impacts of foreign currency translation, were flat during the quarter, driven by a franchise same-store sales decline of 3% and a 1% negative impact from the KFC U.K.

The quarterly decrease in Franchise and property revenues, excluding the impact of foreign currency translation, was driven by a franchise same-store sales decline of 3% and a 2% negative impact from the KFC U.K.

and Ireland restaurant acquisition, partially offset by unit growth.

The year to date decrease in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by franchise same-store sales decline of 3% and a 2% negative impact from the sale of our KFC Russia business, partially offset by unit growth.

The quarterly decrease in G&A, excluding the impact of foreign currency translation, was driven by lower expenses related to our annual incentive compensation programs and lower travel related costs, partially offset by higher professional fees.

The year to date decrease in G&A, excluding the impact of foreign currency translation, was driven by lower expenses related to our annual incentive compensation programs, the impact of the sale of our KFC Russia business and lower travel related costs, partially offset by higher professional fees.

The year to date decrease in Franchise and property revenues, excluding the impact of foreign currency translation, was driven by a franchise same-store sales decline of 3% and a 1% negative impact from the sale of our KFC Russia business, partially offset by unit growth.

G&A, excluding the impact of foreign currency translation, was flat during the quarter as higher professional fees and higher salaries and benefits were offset by lower expenses related to our annual incentive compensation programs.

The year to date decrease in G&A, excluding the impact of foreign currency translation, was driven by lower expenses related to our annual incentive compensation programs, refranchising, the impact of the sale of our KFC Russia business and lower travel related costs, partially offset by higher professional fees and higher salaries and benefits.

Operating Profit

The quarterly and year to date increases in Operating Profit, excluding the impact of foreign currency translation, were driven by unit growth, lower bad debt expense and lower G&A, partially offset by same-store sales declines.

The quarterly decrease in Operating Profit, excluding the impact of foreign currency translation, was driven by a same-store sales decline and higher bad debt expense, partially offset by unit growth.

The year to date increase in Operating Profit, excluding the impact of foreign currency translation, was driven by unit growth and lower G&A, partially offset by a same-store sales decline.

Taco Bell Division

1 unchanged sentence

The Company owned 7% of the Taco Bell units in the U.S.

as of June 30, 2024.

as of September 30, 2024.

Quarter ended Year to date

19 unchanged sentences

Company sales and Company restaurant margin %

The quarterly and year to date increases in Company sales were driven by Company same-store sales growth of 4% and 3% for the quarter and year to date, respectively, and unit growth.

Company restaurant margin percentage for the quarter was flat with prior year as same-store sales growth was offset by higher labor and other restaurant operating costs.

The year to date increase in Company restaurant margin percentage was driven by same-store sales growth partially offset by higher labor and other restaurant operating costs.

The quarterly and year to date increases in Company sales were driven by Company same-store sales growth of 2% and unit growth.

The quarterly decrease in Company restaurant margin percentage was driven by higher labor and other restaurant operating costs partially offset by same-store sales growth.

Company restaurant margin percentage was flat for the year to date as Company same-store sales growth was offset by higher labor and other restaurant operating costs.

Franchise and property revenues

The quarterly and year to date increases in Franchise and property revenues were driven by franchise same-store sales growth of 4% and 3% for the quarter and year to date, respectively, and unit growth.

The quarterly decrease in G&A was driven by lower share-based compensation partially offset by higher digital and technology expenses.

The year to date increase in G&A was driven by higher digital and technology expenses and higher headcount and salaries partially offset by lower share-based compensation.

The quarterly decrease in G&A was driven by lower expenses related to our annual incentive compensation programs and lower share-based compensation, partially offset by higher digital and technology expenses.

The year to date decrease in G&A was driven by lower share-based compensation and lower expenses related to our annual incentive compensation programs, partially offset by higher digital and technology expenses, and higher headcount and salaries.

Operating Profit

The quarterly increase in Operating Profit was driven by same-store sales growth and unit growth partially offset by higher restaurant operating costs.

The year to date increase in Operating Profit was driven by same-store sales growth and unit growth partially offset by higher restaurant operating costs and higher Franchise advertising and other service expense primarily related to digital and technology expenses.

The quarterly and year to date increases in Operating Profit were driven by same-store sales growth, unit growth and lower G&A partially offset by higher restaurant operating costs.

Pizza Hut Division

2 unchanged sentences

airports) and includes units operating under both the Pizza Hut and Telepizza brands.

Additionally, over 99% of the Pizza Hut Division units were operated by franchisees as of June 30, 2024.

Additionally, over 99% of the Pizza Hut Division units were operated by franchisees as of September 30, 2024.

Quarter ended Year to date

1 unchanged sentence

2024 2023 Reported Ex FX 2024 2023 Reported Ex FX

System Sales $ 3,140 $ 3,201 (2) Even $ 6,307 $ 6,537 (4) (2)

System Sales $ 3,184 $ 3,243 (2) (1) $ 9,491 $ 9,780 (3) (2)

Same-Store Sales Growth (Decline) % (4) 1 N/A N/A (5) 4 N/A N/A

1 unchanged sentence

Franchise and property revenues 150 150 Even 1 446 454 (2) (1)

Franchise contributions for advertising and other services 89 89 (1) Even 177 183 (3) (3)

Franchise contributions for advertising and other services 87 90 (3) (3) 264 273 (3) (3)

Total revenues $ 238 $ 242 (1) (1) $ 715 $ 738 (3) (2)

12 unchanged sentences

Franchise and property revenues

The quarterly increase in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by unit growth, offset by a franchise same-store sales decline of 3%.

The year to date decrease in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by a franchise same-store sales decline of 5%, partially offset by unit growth.

The quarterly decrease in G&A, excluding the impacts of foreign currency translation, was driven by lower expenses related to our annual incentive compensation programs.

On a year to date basis, G&A, excluding the impacts of foreign currency translation, was largely flat.

The quarterly increase in Franchise and property revenues, excluding the impact of foreign currency translation, was driven by unit growth offset by a franchise same-store sales decline of 4%.

The year to date decrease in Franchise and property revenues, excluding the impact of foreign currency translation, was driven by a franchise same-store sales decline of 5% partially offset by unit growth.

The quarterly and year to date decreases in G&A, excluding the impact of foreign currency translation, were driven by lower expenses related to our annual incentive compensation programs.

Operating Profit

The quarterly increase in Operating Profit, excluding the impacts of foreign currency translation, was driven by unit growth and lower G&A partially offset by a same-store sales decline.

The year to date decrease in Operating Profit, excluding the impacts of foreign currency translation, was driven by a same-store sales decline partially offset by unit growth.

The quarterly decrease in Operating Profit, excluding the impact of foreign currency translation, was driven by higher current year bad debt expense and a same-store sales decline, partially offset by unit growth.

The year to date decrease in Operating Profit, excluding the impact of foreign currency translation, was driven by a same-store sales decline and higher current year bad debt expense, partially offset by unit growth.

Habit Burger & Grill Division

1 unchanged sentence

The Company owned 84% of the Habit Burger & Grill units in the U.S.

as of June 30, 2024.

as of September 30, 2024.

Quarter ended Year to date

2 unchanged sentences

System Sales $ 161 $ 163 (1) (1) $ 483 $ 489 (1) (1)

Same-Store Sales Growth % (6) Even N/A N/A (7) Even N/A N/A

Same-Store Sales Growth % (5) (5) N/A N/A (6) (2) N/A N/A

Total revenues $ 137 $ 137 (1) (1) $ 408 $ 411 (1) (1)

10 unchanged sentences

( 3 ) — NM ( 4 ) — NM

Unallocated Franchise and property expenses

— ( 1 ) NM — ( 2 ) NM

Unallocated Franchise and property expenses — 1 NM — ( 1 ) NM

Unallocated Refranchising gain (loss) 12 19 NM 31 40 NM

Unallocated Other income (expense)

— ( 5 ) NM ( 5 ) ( 9 ) NM

Unallocated Other income (expense) 2 ( 4 ) NM ( 3 ) ( 13 ) NM

Investment income (expense), net (See Note 9) 1 16 NM ( 21 ) 21 NM

6 unchanged sentences

Corporate and unallocated G&A

Corporate and unallocated G&A was flat during the quarter, as higher costs associated with our resource optimization program were offset by lower current year expenses related to our annual incentive compensation programs and lapping costs related to the prior year ransomware attack.

The year to date increases in Corporate and Unallocated G&A expense was driven by higher costs associated with our resource optimization program, partially offset by lapping costs related to the prior year ransomware attack and lower current year expenses related to our annual incentive compensation programs.

The quarterly increase in Corporate and Unallocated G&A expense was driven by higher costs associated with our resource optimization program, lapping net insurance recoveries associated with the prior year ransomware attack and higher meeting costs, partially offset by lower current year expenses related to our annual incentive compensation programs and lower share based compensation expense.

The year to date increase in Corporate and Unallocated G&A expense was driven by higher costs associated with our resource optimization program, partially offset by lower current year expenses related to our annual incentive compensation programs, lower share based compensation expense and lapping net costs associated with the prior year ransomware attack.

Interest expense, net

3 unchanged sentences

Net cash provided by operating activities was $1,176 million in 2024 versus $1,155 million in 2023.

The increase was primarily driven by an increase in Operating Profit before Special Items and timing of accounts receivable collections, partially offset by higher income tax payments.

Net cash used in investing activities was $253 million in 2024 compared to net cash provided by investing activities of $26 million in 2023.

The increase was primarily driven by an increase in Operating Profit before Special Items, a decrease in interest payments and timing of accounts receivable collections, partially offset by higher income tax payments and an increase in payments related to our resource optimization program.

Net cash used in investing activities was $292 million in 2024 versus $4 million in 2023.

The change was primarily driven by outflows in the current year related to the KFC U.K.

and Ireland restaurant acquisition and lapping proceeds from the prior year sale of KFC Russia.

Current year proceeds arising from the sale of our approximate 5% minority investment in Devyani were primarily offset with higher current year purchases of short-term investments.

and Ireland restaurant acquisition, lapping proceeds from the prior year sale of KFC Russia and higher current year purchases of short-term investments, partially offset by current year proceeds arising from the sale of our approximate 5% minority investment in Devyani.

Net cash used in financing activities was $991 million in 2024 versus $921 million in 2023.

The change was primarily driven by lower current year net debt repayments.

The change was primarily driven by higher current year share repurchases offset by lower current year net debt repayments.

Liquidity and Capital Resources

2 unchanged sentences

It is our intent to use these operating cash flows to continue to invest in growing our business and pay a competitive dividend, with any remaining excess then returned to shareholders through share repurchases.

To the extent operating cash flows plus other sources of cash do not cover our anticipated cash needs, we maintain a $1.5 billion Revolving Facility under our Credit Agreement which had $180 million outstanding as of June 30, 2024.

We believe that our ongoing cash from operations, cash on hand, which was approximately $400 million at June 30, 2024, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months.

We believe that our ongoing cash from operations, cash on hand, which was approximately $460 million at September 30, 2024, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months.

There have been no material changes to the disclosures made in Item 7 of the Company's 2023 Form 10-K regarding our material cash requirements.

1 unchanged sentence

Debt Instruments

As of June 30, 2024, approximately 96%, including the impact of interest rate swaps, of our $11 billion of total debt outstanding, excluding the Revolving Facility balance, finance leases and debt issuance costs and discounts, is fixed with an effective overall interest rate of approximately 4.5%.

As of September 30, 2024, approximately 96%, including the impact of interest rate swaps, of our $11 billion of total debt outstanding, excluding the Revolving Facility balance, finance leases and debt issuance costs and discounts, is fixed with an effective overall interest rate of approximately 4.5%.

We ended the quarter with a consolidated net leverage ratio of 4.1x EBITDA.

2 unchanged sentences

We have credit ratings of BB+ (Standard & Poor's)/Ba2 (Moody's).

The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and discounts, as of June 30, 2024.

The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and discounts, as of September 30, 2024.

2024 2025 2026 2027 2028 2029 2030 2031 2032 2037 2043 Total

11 unchanged sentences

The amendments should be applied retrospectively to all prior periods presented in the financial statements.

We are currently evaluating the impact of the standard on our disclosures.

We do not anticipate the impact of the standard will result in significant new disclosures for the Company.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

4 unchanged sentences

We are currently evaluating the impact of the standard on our disclosures.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40), which requires new financial statement disclosures disaggregating prescribed expense categories within relevant income statement expense captions.

The standard is effective for the Company's Annual Report on Form 10-K for fiscal 2027, and subsequent interim periods, with early adoption permitted.

The amendments should be applied prospectively;

however, retrospective application is permitted.

We are currently evaluating the impact of the standard on our disclosures.

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.

What changed 10-Q

Item 2. Management’s Discussion and Analysis