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Item 7. Management’s Discussion and Analysis

2025-02-19 compared with 2024-02-20 · 235 added, 148 removed, 502 unchanged (43% of the section changed)

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Percentages may not recompute due to rounding.

and its subsidiaries (collectively referred to herein as the “Company”, “YUM”, “we”, “us” or “our”) franchise or operate a system of over 58,000 restaurants in more than 155 countries and territories, primarily under the concepts of KFC, Taco Bell, Pizza Hut and The Habit Burger Grill (collectively, the “Concepts”).

and its subsidiaries (collectively referred to herein as the “Company”, “YUM”, “we”, “us” or “our”) franchise or operate a system of over 61,000 restaurants in more than 155 countries and territories, primarily under the concepts of KFC, Taco Bell, Pizza Hut and Habit Burger & Grill (collectively, the “Concepts”).

The Company’s KFC, Taco Bell and Pizza Hut brands are global leaders of the chicken, Mexican-style food and pizza categories, respectively.

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• The Habit Burger & Grill Division which includes our worldwide operations of the Habit Burger & Grill concept

Through our Recipe for Good Growth we intend to unlock the growth potential of our Concepts and YUM, drive increased collaboration across our Concepts and geographies and consistently deliver better customer experiences, improved unit economics and higher rates of growth.

Key enablers include accelerated use of digital and technology and better leverage of our systemwide scale.

Our global citizenship and sustainability strategy is reflected in our Good agenda, which includes our priorities for social responsibility, risk management and sustainable stewardship of our people, food and planet.

Our Growth agenda is based on four key drivers:

• Unrivaled Culture and Talent:

Leverage our culture and people capability to fuel brand performance and franchise success

• Unmatched Operating Capability:

Recruit and equip the best restaurant operators in the world to deliver great customer experiences

• Relevant, Easy and Distinctive Brands:

Innovate and elevate iconic restaurant brands people trust and champion

• Bold Restaurant Development:

Drive market and franchise unit expansion with strong economics and value

Through our Recipe for Good Growth we intend to deliver iconic restaurant brands and consistently drive better customer experiences, improved unit economics and higher rates of growth.

Key enablers include accelerated use of digital and technology, increased collaboration and better leverage of our systemwide scale.

This is done through a framework of three pillars:

being Loved, Trusted and Connected.

We grow by delighting customers with craveable food and a distinctive experience.

We innovate and elevate our iconic restaurant brands that people trust and champion, resulting in relevant, easy and distinctive brands.

We operate responsibly with consistency and efficiency in our restaurants, across our system and in our communities.

This includes a commitment to our priorities for social responsibility, risk management and sustainable stewardship of our people, food and planet.

We use our teamwork, technology and global scale to serve every customer, everywhere, anytime.

Our unmatched operating capability allows us to recruit and equip the best restaurant operators in the world to deliver great customer experiences.

And our commitment to bold restaurant development drives market and franchise unit expansion with strong economics.

Our unrivaled culture and talent and leading with smart, heart and courage are key to our success, fueling brand performance and franchise success.

We intend to drive long-term growth and shareholder returns primarily through consistent same-store sales growth and new unit development across all of our Concepts.

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• Allocates G&A in an efficient manner that provides leverage to operating profit growth while at the same time opportunistically investing in strategic growth initiatives;

• Maximize shareholder return through a combination of paying a competitive dividend and returning excess free cash flow through debt paydowns and share repurchases;

• Targets a consolidated net leverage ratio that balances shareholder returns, cost of capital and flexibility against various risk factors;

• Maximizes shareholder return through a combination of paying a competitive dividend and returning excess free cash flow through share repurchases.

We intend for this MD&A to provide the reader with information that will assist in understanding our results of operations, including performance metrics that management uses to assess the Company’s performance.

Throughout this MD&A, we commonly discuss the following performance metrics:

• Same-store sales growth is the estimated percentage change in system sales of all restaurants that have been open and in the YUM system for one year or more (except as noted below), including those temporarily closed.

From time-to-time restaurants may be temporarily closed due to remodeling or image enhancement, rebuilding, natural disasters, health epidemic or pandemic, landlord disputes or other issues.

• Same-store sales growth is the estimated percentage change in system sales of all restaurants that have been open and in the YUM system for one year or more, including those temporarily closed.

From time-to-time restaurants may be temporarily closed due to remodeling or image enhancement, rebuilding, natural disasters, health epidemic or pandemic, landlord disputes, boycotts, social or civil unrest or other issues.

The system sales of restaurants we deem temporarily closed remain in our base for purposes of determining same-store sales growth and the restaurants remain in our unit count (see below).

Same-store sales growth excludes, for subsidiaries operating on a monthly calendar, the extra day resulting from a leap year and excludes, for subsidiaries operating on a weekly periodic calendar, the last week of the year in fiscal years with 53 weeks.

We believe same-store sales growth is useful to investors because our results are heavily dependent on the results of our Concepts' existing store base.

Additionally, same-store sales growth is reflective of the strength of our Brands, the effectiveness of our operational and advertising initiatives and local economic and consumer trends.

In 2021, when calculating respective same-store sales growth we also included in our prior year base the sales of stores that were added as a result of our acquisition of The Habit Restaurants, Inc.

on March 18, 2020, and that were open for one year or more.

• Gross unit openings reflects new openings by us and our franchisees.

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Additionally, gross unit openings and net new unit growth are generally reflective of the economic returns to us and our franchisees from opening and operating our Concept restaurants.

• System sales and System sales excluding the impacts of foreign currency translation (“FX”) reflect the results of all restaurants regardless of ownership, including Company-owned and franchise restaurants.

• System sales, System sales excluding the impacts of foreign currency translation (“FX”) and, in 2024, System sales excluding FX and the 53rd week for our U.S.

subsidiaries and certain international subsidiaries that operate on a weekly periodic calendar, reflect the results of all restaurants regardless of ownership, including Company-owned and franchise restaurants.

Sales at franchise restaurants typically generate ongoing franchise and license fees for the Company at a rate of 3% to 6% of sales.

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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.

As of the beginning of the second quarter of 2022, as a result of our progress towards exiting Russia and our decision to reclass future net profits attributable to Russia subsequent to the date of invasion of Ukraine from the Division segments in which those profits were earned to Unallocated Other income (see Notes 3 and 19), we elected to remove all Russia units from our unit count as well as to begin excluding those units’ associated sales from our system sales totals.

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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.

• Diluted Earnings Per Share excluding Special Items (as defined below);

• Effective Tax Rate excluding Special Items;

• Core Operating Profit.

• Diluted Earnings Per Share ("EPS") excluding Special Items (as defined below) and, in 2024, Diluted EPS excluding Special Items and the 53rd week;

• Effective Tax Rate excluding Special Items and, in 2024, Effective Tax Rate excluding Special Items and the 53rd week;

• Core Operating Profit and, in 2024, Core Operating Profit excluding the 53rd week.

Core Operating Profit excludes Special Items and FX and we use Core Operating Profit for the purposes of evaluating performance internally;

• Net Income excluding Special Items and, in 2024, Net Income excluding Special Items and the 53rd week;

• Company restaurant profit and Company restaurant margin as a percentage of sales (as defined below).

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The Company also excludes restaurant-level asset impairment and closures expenses, which have historically not been significant, from the determination of Company restaurant profit as such expenses are not believed to be indicative of ongoing operations.

Further, while we generally include depreciation and amortization of restaurant-level assets within Divisional Company restaurant expenses used to derive Divisional Company restaurant profit, we record amortization of reacquired franchise rights arising from acquisition accounting within Corporate and unallocated Company restaurant expenses as such amortization is not believed to be indicative of ongoing Divisional results as well as to enhance comparability of acquired stores’ margins with those of existing restaurants within Divisional results.

Company restaurant profit and Company restaurant margin % as presented may not be comparable to other similarly titled measures of other companies in the industry.

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We believe the elimination of the FX impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.

For 2024 we provided System sales excluding FX and the 53rd week, Core Operating Profit excluding the 53rd week, Net Income excluding Special Items and the 53rd week, Diluted EPS excluding Special Items and the 53rd week and Effective Tax Rate excluding Special Items and the 53rd week to further enhance the comparability given the 53rd week that was part of our fiscal calendar in 2024.

Results of Operations

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Worldwide +4 (1) +4 +4 +9

Results Excluding 53rd Week in 2024

System Sales, ex FX Core Operating Profit

KFC Division +3 +5

Taco Bell Division

Pizza Hut Division

Worldwide +3 +8

Additionally:

• Foreign currency translation unfavorably impacted Divisional Operating Profit by $49 million for the year ended December 31, 2023.

• Foreign currency translation negatively impacted Divisional Operating Profit by $28 million for the year ended December 31, 2024.

This included a negative impact to our KFC Division Operating Profit of $22 million for the year ended December 31, 2024.

2024 2023 % Change

GAAP EPS $5.22 $5.59 (7)

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• Gross unit openings for the year were 4,535 units resulting in 2,757 net new units.

• Full-year EPS excluding Special Items and 53rd Week was $5.39.

Amount % B/(W)

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Same-Store Sales Growth (Decline) % (1) 6 4

System Sales Growth (Decline) %, reported 8 2 16

System Sales Growth (Decline) %, excluding FX 10 6 13

System Sales Growth %, reported

System Sales Growth %, excluding FX

System Sales Growth %, excluding FX and 53rd week

Our system sales breakdown by Company and franchise sales was as follows:

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System sales, excluding FX 66,104 64,958 59,283

Impact of 53rd week (568) N/A

System sales, excluding FX and the 53rd Week

$ 65,536 $ 64,958 $ 59,283

Company sales (a)

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Negative (Positive) Foreign Currency Impact (b)

965 2,102 N/A

System sales, excluding FX 34,967 34,828 31,116

Impact of 53rd week (171) N/A N/A

System sales, excluding FX and the 53rd Week

$ 34,796 $ 34,828 $ 31,116

Taco Bell Division

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System sales, excluding FX 17,192 15,912 14,653

Impact of 53rd week (279) N/A N/A

System sales, excluding FX and the 53rd Week

$ 16,913 $ 15,912 $ 14,653

Pizza Hut Division

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System sales, excluding FX 13,232 13,522 12,853

Impact of 53rd week (107) N/A N/A

System sales, excluding FX and the 53rd Week

$ 13,125 $ 13,522 $ 12,853

Habit Burger & Grill Division

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System sales, excluding FX 713 696 661

Impact of 53rd Week

System sales, excluding FX and the 53rd Week

$ 702 $ 696 $ 661

(a) Company sales represents sales from our Company-operated stores as presented on our Consolidated Statements of Income.

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Core Operating Profit Growth % 9 12 5

Core Operating Profit Growth %, excluding the 53rd week 8 N/A N/A

Diluted EPS Growth %, excluding Special Items 6 14 1

Diluted EPS Growth %, excluding Special Items and the 53rd week 4 N/A N/A

Effective Tax Rate excluding Special Items 23.6 % 20.6 % 20.9 %

Effective Tax Rate excluding Special Items and the 53rd week 23.5 % N/A N/A

2024 2023 2022

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2024 2023 2022

Reconciliation of GAAP Operating Profit to Core Operating Profit

Reconciliation of GAAP Operating Profit to Core Operating Profit and Core Operating Profit, excluding the 53rd Week

GAAP Operating Profit $ 2,403 $ 2,318 $ 2,187

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Charges associated with resource optimization (c)

German acquisition and Turkey termination-related costs (d)

Other Special Items (Income) Expense

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Core Operating Profit 2,572 2,406 2,154

Impact of 53rd Week Operating Profit

Core Operating Profit, excluding the 53rd Week

$ 2,536 $ 2,406 $ 2,154

Special Items as shown above were recorded to the financial statement line items identified below:

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Consolidated Statement of Income Line Item

Franchise and property revenues

General and administrative expenses

$ 28 $ 19 $ 7

Franchise and property expenses

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GAAP Operating Profit $ 1,363 $ 1,304 $ 1,198

Negative (Positive) Foreign Currency Impact

Negative (Positive) Foreign Currency Impact 22 41 N/A

Core Operating Profit 1,385 1,345 1,198

Impact of 53rd Week (9) N/A N/A

Core Operating Profit, excluding the 53rd Week $ 1,376 $ 1,345 $ 1,198

Taco Bell Division

GAAP Operating Profit $ 1,049 $ 944 $ 850

Negative (Positive) Foreign Currency Impact

Negative (Positive) Foreign Currency Impact — — N/A

Core Operating Profit 1,049 944 850

Impact of 53rd Week (21) N/A N/A

Core Operating Profit, excluding the 53rd Week $ 1,028 $ 944 $ 850

Pizza Hut Division

GAAP Operating Profit $ 373 $ 391 $ 387

Negative (Positive) Foreign Currency Impact

Negative (Positive) Foreign Currency Impact 6 8 N/A

Core Operating Profit 379 399 387

Impact of 53rd Week (5) N/A N/A

Core Operating Profit, excluding the 53rd Week $ 374 $ 399 $ 387

Habit Burger & Grill Division

GAAP Operating Profit (Loss) $ — $ (14) $ (24)

Negative (Positive) Foreign Currency Impact

Negative (Positive) Foreign Currency Impact — — N/A

Core Operating Profit (Loss) — (14) (24)

Reconciliation of GAAP Net Income to Net Income excluding Special Items

Impact of 53rd Week (1) N/A N/A

Core Operating Profit (Loss), excluding the 53rd Week $ (1) $ (14) $ (24)

Reconciliation of GAAP Net Income to Net Income excluding Special Items and Net Income excluding Special Items and the 53rd week

GAAP Net Income $ 1,486 $ 1,597 $ 1,325

$ 1,597 $ 1,325 $ 1,575

Special Items (Income) Expense - Operating Profit 141 39 (33)

Special Items (Income) Expense - Interest Expense, net (d)

Special Items (Income) Expense - Other Pension Income

Special Items Tax (Benefit) Expense (e)

Special Items (Income) Expense - Interest Expense, net (e)

Special Items Tax (Benefit) Expense (f)

(66) (161) (8)

Net Income excluding Special Items 1,561 1,475 1,312

$ 1,475 $ 1,312 $ 1,354

Reconciliation of Diluted EPS to Diluted EPS excluding Special Items

Impact of 53rd Week

Net Income excluding Special Items and the 53rd Week $ 1,536 $ 1,475 $ 1,312

Reconciliation of Diluted EPS to Diluted EPS excluding Special Items and Diluted EPS excluding Special Items and the 53rd Week

Diluted EPS $ 5.22 $ 5.59 $ 4.57

Less Special Items Diluted EPS (0.26) 0.42 0.04

0.42 0.04 0.73

Diluted EPS excluding Special Items 5.48 5.17 4.53

Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate, excluding Special Items

Less Impact of 53rd Week 0.09 — —

Diluted EPS excluding Special Items and the 53rd Week $ 5.39 $ 5.17 $ 4.53

Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items and Effective Tax Rate excluding Special Items and the 53rd Week

GAAP Effective Tax Rate 21.8 % 12.1 % 20.3 %

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Effective Tax Rate excluding Special Items 23.6 % 20.6 % 20.9 %

Impact on Tax Rate as a result of the 53rd Week 0.1 % N/A N/A

Effective Tax Rate excluding Special Items and the 53rd Week 23.5 % 20.6 % 20.9 %

(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.

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During the second quarter of 2022, we completed the transfer of ownership of the Pizza Hut Russia business to a local operator.

In the second quarter of 2023, we completed our exit from the Russia market by selling the KFC business in Russia.

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 and Pizza Hut prior to the dates of sale or transfer, within their historical financial statement line items and operating segments.

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Due to their scope and size, the charges over the life of the program, which have primarily resulted from severance associated with positions that have been eliminated or relocated and consultant fees, are being recorded as Special Items.

(d) Amounts recorded in connection with redemptions of long-term debt.

(d) On January 8, 2025, we terminated our franchise agreements with franchisee IS Gida A.S.

(IS Gida), the owner and operator of KFC and Pizza Hut restaurants in Turkey and a subsidiary of IS Holding A.S.

(IS Holding), after failure by IS Gida to meet our standards.

The termination affects 284 KFC restaurants and 254 Pizza Hut restaurants in Turkey.

We also re-acquired the master franchise rights in Germany for KFC and Pizza Hut from the owner of IS Holding in December 2024.

There is no impact in Germany from the termination in Turkey.

As a result, we recorded charges of $37 million to Unallocated Other (income) expense, $18 million to Unallocated Franchise and property revenues and $6 million to Corporate and unallocated General and administrative expenses consisting primarily of transaction costs associated with the German acquisition and termination-related costs associated with the Turkey business in the year ended December 31, 2024, that have been reflected as Special Items.

(e) Amounts recorded in connection with redemptions of long-term debt.

Due to their size and the fact that they are not indicative of our ongoing interest expense, these amounts have been reflected as Special Items.

(e) The below table includes the detail of Special Items Tax (Benefit) Expense:

(f) The below table includes the detail of Special Items Tax (Benefit) Expense:

2024 2023 2022

Tax (Benefit) Expense on Special Items Operating Profit and Interest Expense

$ (28) $ (8) $ 2

Tax (Benefit) Expense - Other Income tax impacts from decision to exit Russia

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(32) (183) (82)

Tax Expense - Other Income tax impacts recorded as Special

Tax (Benefit) Expense - Other Income tax impacts recorded as Special

Special Items Tax (Benefit) Expense $ (66) $ (161) $ (8)

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Special Items Tax (Benefit) Expense includes $32 million, $183 million and $82 million of tax benefit recorded in the years ended December 31, 2024, 2023 and 2022 respectively, associated with intra-entity transfers and valuations of certain IP rights.

• The benefit recorded in the year ended December 31, 2024, resulted primarily from the tax liquidation of certain subsidiaries in Israel and Australia as well as the intra-entity transfer of software from those subsidiaries to subsidiaries in the U.S.

• The benefit recorded in the year ended December 31, 2023, resulted primarily from $99 million of deferred tax benefit arising from the remeasurement of deferred tax assets associated with previously transferred IP rights in Switzerland as a result of an increase in our jurisdictional tax rate, as well as a $29 million deferred tax benefit associated with credits granted by local Swiss tax authorities.

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The annual valuation supported an increase to tax basis of Swiss IP rights associated with parts of our business that 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 associated with such IP rights as a result of our decision to exit the Russia market.

• The benefit recorded in the year ended December 31, 2021, resulted primarily from $187 million of tax benefit as a result of concentration of management responsibility for European (excluding the UK) KFC franchise development, support operations and management oversight in Switzerland.

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, and later, additional European IP rights from subsidiaries in the U.S.

to subsidiaries in Switzerland.

With the transfers of these rights, we received a step-up in amortizable basis of those IP rights to current fair value under Swiss law.

The benefit recorded in the year ended December 31, 2021, also includes $64 million of benefit resulting from the remeasurement of deferred tax assets associated with previously transferred IP rights in the UK as a result of an increase in our jurisdictional tax rate.

Other Income Tax impacts recorded as Special in the year ended December 31, 2023 include $41 million of expense associated with a correction in the timing of capital loss utilization related to refranchising gains previously recorded as Special Items to tax years with a lower statutory tax rate.

Other Income Tax impacts recorded as Special in the year ended December 31, 2023 included $41 million of expense associated with a correction in the timing of capital loss utilization related to refranchising gains previously recorded as Special Items to tax years with a lower statutory tax rate.

Reconciliation of GAAP Operating Profit to Company Restaurant Profit

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Other (income) expense (3) (1) (16) 10 44 34

Company restaurant profit $ 67 $ 252 $ — $ 49 — $ 368

Company restaurant profit (loss)

$ 98 $ 283 $ — $ 59 (8) $ 432

Company sales $ 801 $ 1,155 $ 8 $ 588 — $ 2,552

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See also the Detail of Special Items section of this MD&A for other items similarly impacting results.

Extra Week in 2024

Fiscal 2024 included a 53rd week for all of our U.S.

and certain international subsidiaries that operate on a period calendar.

See Note 2 for additional details related to our fiscal calendar.

The following table summarizes the estimated impact of the 53rd week on Revenues and Operating Profit for the year ended December 31, 2024.

The 53rd week in 2024 favorably impacted Diluted EPS by approximately $0.09 per share.

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

Company sales $ 16 $ 21 $ — $ 9 $ 46

Franchise and property revenues 8 16 6 — 30

Franchise contributions for advertising and other services 4 11 5 — 20

Total revenues $ 28 $ 48 $ 11 $ 9 $ 96

Operating Profit

Franchise and property revenues $ 8 $ 16 $ 6 $ — $ 30

Franchise contributions for advertising and other services 4 11 5 — 20

Restaurant profit 3 7 — 1 11

Franchise for advertising and other services expenses (4) (11) (5) — (20)

G&A expenses (2) (2) (1) — (5)

Operating Profit $ 9 $ 21 $ 5 $ 1 $ 36

Middle East Conflict

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.

As a result, our sales were impacted to varying degrees in markets across the Middle East, Malaysia and Indonesia.

This represented a low single-digit headwind to fourth-quarter same-store sales growth.

This trend has continued into the first quarter of 2024, and we expect the sales impact to decrease over the course of 2024.

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 $49 million for the year ended December 31, 2023.

This included a negative impact to our KFC Division Operating Profit of $41 million for the year ended December 31, 2023.

For 2024, we currently expect changes in foreign currency to negatively impact Divisional Operating Profit by approximately $10 to $30 million, primarily in the first half of the year.

Our sales continued to be impacted during 2024, most significantly in markets across the Middle East, Malaysia and Indonesia.

The impact in these markets represented an approximate one-point headwind to YUM's overall same-store sales growth in the year ended December 31, 2024.

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

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

On January 8, 2025, we terminated our franchise agreements with franchisee IS Gida A.S.

(IS Gida), the owner and operator of KFC and Pizza Hut restaurants in Turkey and a subsidiary of IS Holding A.S.

(IS Holding), after failure by IS Gida to meet our standards.

The termination affects 284 KFC restaurants and 254 Pizza Hut restaurants in Turkey, which will be reflected as a reduction in the Company’s reported unit counts at the end of the first quarter of 2025.

We also re-acquired the master franchise rights in Germany for KFC and Pizza Hut from the owner of IS Holding in December 2024.

There is no impact in Germany from the termination in Turkey.

We recorded a charge of approximately $61 million in the year ended December 31, 2024, consisting primarily of transaction costs associated with the German acquisition and termination-related costs associated with the Turkey business.

Due to issues specific to this franchisee and market, the recent sales in the Turkey restaurants were significantly below the global average sales per restaurant for each brand.

As a result, the loss of royalties from the store closures will have no material impact to the Company’s Core Operating Profit in 2025 and beyond.

We are actively searching for the right franchise partner to reopen the Turkey market and drive future success.

While we began to see some recovery in the markets most impacted by the Middle East conflict in the fourth quarter of 2024, the conflict is ongoing, and its dynamic nature makes it difficult to forecast any impacts on the Company’s 2025 revenues, operating profit, including the impacts of any bad debt expense, and unit count with any certainty.

Investment in Devyani

In 2020, we received an approximate 5% minority interest in Devyani International Limited (“Devyani”), an entity that owns our KFC India and Pizza Hut India master franchisee rights.

The minority interest was received in lieu of cash proceeds upon the refranchising of approximately 60 KFC restaurants in India.

On August 16, 2021, Devyani executed an initial public offering and subsequently the fair value of this investment became readily determinable.

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 and $11 million in the years ended December 31, 2023 and 2022, respectively.

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 ended December 31, 2024 and pre-tax investment income of $ 8 million and $ 11 million in the years ended December 31, 2023 and 2022, respectively.

The KFC Division has 31,981 units, 89% of which are located outside the U.S.

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% B/(W) % B/(W)

2023 2022 2021 Reported Ex FX Reported Ex FX

2024 2023 2022 Reported Ex FX Ex FX and 53rd Week in 2024

Reported Ex FX

System Sales $ 34,452 $ 33,863 $ 31,116 2 3 3 9 12

Same-Store Sales Growth (Decline) % 7 % 4 % 11 % N/A N/A N/A N/A

Same-Store Sales Growth (Decline) % (2) % 7 % 4 % N/A N/A N/A N/A N/A

Company sales $ 801 $ 484 $ 491 66 64 60 (2) 2

Franchise and property revenues 1,698 1,645 1,557 3 6 6 12

Franchise and property revenues 1,685 1,698 1,645 (1) 1 Even 3 6

Franchise contributions for advertising and other services 613 648 698 (5) (6) (6) (7) (6)

Total revenues $ 2,830 $ 2,834 $ 2,793 — 2 1 8

Total revenues $ 3,099 $ 2,830 $ 2,834 10 10 9 Even 2

Company restaurant profit $ 98 $ 67 $ 65 48 47 43 2 7

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Company sales and Company restaurant margin %

In 2023, the increase in Company sales, excluding the impact of foreign currency translation, was driven by Company same-store sales growth of 5%, partially offset by the suspension of operations of our 70 company owned KFC restaurants in Russia.

In 2023, the increase in Company restaurant margin percentage was driven by Company same-store sales growth, partially offset by commodity inflation.

In 2024, the increase in Company sales, excluding the impacts of foreign currency translation and the 53rd week, was driven by the KFC U.K.

and Ireland restaurant acquisition (see Note 3) in the second quarter of 2024, partially offset by a Company same-store sales decline of 3%.

In 2024, the decrease in Company restaurant margin percentage was driven by higher labor and restaurant operating costs, partially offset by commodity deflation.

Franchise and property revenues

In 2023, the increase in Franchise and property revenues, excluding the impact of foreign currency translation, was driven by franchise same-store sales growth of 7% and unit growth, partially offset by a 5% negative impact from the sale of our KFC Russia business.

In 2023, the decrease in G&A, excluding the impact of foreign currency translation, was driven by the impact of the sale of our KFC Russia business, partially offset by higher headcount and salaries, and higher expenses related to our annual incentive compensation programs.

In 2024, Franchise and property revenues, excluding the impacts of foreign currency translation and the 53rd week, were flat as unit growth was offset by a franchise same-store sales decline of 2% and a 1% negative impact from the KFC U.K.

and Ireland restaurant acquisition.

In 2024, the decrease in G&A, excluding the impacts of foreign currency translation and the 53rd week, was driven by lower expenses related to our annual incentive compensation programs, lower travel related costs, refranchising and the impact of the sale of our KFC Russia business in 2023, partially offset by higher expenses related to the operation of acquired KFC U.K.

and Ireland restaurants.

Operating Profit

In 2023, the increase in Operating Profit, excluding the impact of foreign currency translation, was driven by same-store sales growth and unit growth, partially offset by higher restaurant operating costs and the negative impact of 1 percentage point on operating profit growth as a result of lower profits in Russia.

In 2024, the increase in Operating Profit, excluding the impacts of foreign currency translation and the 53rd week, was driven by unit growth and lower G&A, partially offset by a same-store sales decline.

Taco Bell Division

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% B/(W) % B/(W)

2023 2022 2021 Reported Ex FX Reported Ex FX

2024 2023 2022 Reported Ex FX Ex FX and 53rd Week in 2024

Reported Ex FX

System Sales $ 17,193 $ 15,915 $ 14,653 8 8 6 9 9

Same-Store Sales Growth (Decline) % 5 % 8 % 11 % N/A N/A N/A N/A

Same-Store Sales Growth %

4 % 5 % 8 % N/A N/A N/A N/A N/A

Company sales $ 1,155 $ 1,069 $ 1,002 8 8 6 7 7

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Company sales and Company restaurant margin %

In 2023, the increase in Company sales was driven by company same-store sales growth of 5% and unit growth partially offset by refranchising.

In 2023, the increase in Company restaurant margin percentage was driven by same-store sales growth partially offset by higher labor costs, commodity inflation and increases in other restaurant operating costs.

In 2024, the increase in Company sales, excluding the impacts of the 53rd week, was driven by company same-store sales growth of 3% and unit growth.

In 2024, the increase in Company restaurant margin percentage, excluding the impacts of the 53rd week, was driven by same-store sales growth partially offset by higher labor costs, commodity inflation and an increase in other restaurant operating costs.

Franchise and property revenues

In 2023, the increase in Franchise and property revenues was driven by franchise same-store sales growth of 6% and unit growth.

In 2023, the increase in G&A was driven by higher digital and technology expenses and higher headcount and salaries, partially offset by lower expenses related to our annual incentive compensation programs.

In 2024, the increase in Franchise and property revenues, excluding the impacts of the 53rd week, was driven by franchise same-store sales growth of 4% and unit growth.

In 2024, the decrease in G&A, excluding the impacts of the 53rd week, 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.

Operating Profit

In 2023, the increase in Operating Profit was driven by same-store sales growth and unit growth partially offset by higher restaurant operating costs and higher G&A.

In 2024, the increase in Operating Profit, excluding the impacts of the 53rd week, was driven by same-store sales growth, unit growth and lower G&A partially offset by higher restaurant operating costs.

Pizza Hut Division

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% B/(W) % B/(W)

2023 2022 2021 Reported Ex FX Reported Ex FX

2024 2023 2022 Reported Ex FX Ex FX and 53rd Week in 2024

Reported Ex FX

System Sales $ 13,108 $ 13,315 $ 12,853 (2) (1) (1) 4 5

Same-Store Sales Growth (Decline) % 2 Even 7 % N/A N/A N/A N/A

Same-Store Sales Growth (Decline) % (4) % 2 % Even N/A N/A N/A N/A N/A

Company sales $ 8 $ 14 $ 21 (45) (45) (47) (33) (33)

Franchise and property revenues 622 607 597 3 4 2 5

Franchise and property revenues 622 622 607 Even 1 Even 3 4

Franchise contributions for advertising and other services 378 383 376 (1) (1) (3) 2 2

Total revenues $ 1,008 $ 1,019 $ 1,004 (1) (1) (2) 1 2

Company restaurant profit $ — $ — $ 3 NM NM NM NM

Company restaurant margin % 0.1 % (2.2) % 6.8 % 2.3 ppts.

Company restaurant profit $ — $ — $ — NM NM NM NM NM

Company restaurant margin %

(0.6) % 0.1 % (2.2) % (0.7) ppts.

G&A expenses $ 219 $ 221 $ 211 1 1 2 (5) (5)

Franchise and property expenses 34 15 13 (122) (121) (118) (16) (15)

Franchise advertising and other services expense 389 382 395 (2) (2) 3 2

Operating Profit $ 391 $ 387 $ 387 1 3 Even 4

Franchise advertising and other services expense 390 389 382 Even Even 1 (2) (2)

Operating Profit $ 373 $ 391 $ 387 (5) (3) (4) 1 3

% Increase (Decrease)

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Franchise 20,202 19,859 19,013 2 4

Company-owned 7 21 22 (67) (5)

Company-owned 23 7 21 NM (67)

Total 20,225 19,866 19,034 2 4

Franchise and property revenues

In 2023, the increase in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by unit growth and franchise same-store sales growth of 2%, partially offset by lapping the prior year recognition of franchise fees related to unexercised development rights arising from a master franchise agreement.

In 2023, the increase in G&A, excluding the impacts of foreign currency translation, was driven by higher headcount and salaries, higher professional fees and higher travel related expenses.

In 2024, Franchise and property revenues, excluding the impacts of foreign currency translation and the 53rd week, were flat, as a franchise same-store sales decline of 4% was offset by unit growth.

Operating Profit

In 2023, the increase in Operating Profit, excluding the impacts of foreign currency translation, was driven by unit growth and same-store sales growth, partially offset by higher G&A and lapping the prior year recognition of franchise fees related to unexercised development rights arising from a master franchise agreement.

In 2024, the decrease in Operating Profit, excluding the impacts of foreign currency translation and the 53rd week, was driven by higher bad debt expense and a same-store sales decline, partially offset by unit growth.

Habit Burger & Grill Division

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

as of December 31, 2023.

as of the end of 2024.

% B/(W) % B/(W)

2021 Reported Ex FX Reported Ex FX

2022 Reported Ex FX Ex FX and 53rd Week in 2024 Reported Ex FX

System Sales $ 713 $ 696 $ 661 2 2 1 6 6

Same-Store Sales Growth (Decline) % (3) % (1) % 16 % N/A N/A N/A N/A

Same-Store Sales Growth (Decline) % (4) % (3) % (1) % N/A N/A N/A

Total revenues $ 600 $ 586 $ 567 2 2 1 3 3

Operating Profit (Loss) $ (14) $ (24) $ 2 42 42 NM NM

Operating Profit (Loss) $ — $ (14) $ (24) 99 99 90 42 42

% Increase (Decrease)

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Corporate and unallocated G&A $ (346) $ (326) $ (297) (6) (10)

Unallocated Franchise and property income (expense)

Unallocated Company restaurant expenses (See Note 19)

(8) — — NM NM

Unallocated Franchise and property revenues (See Note 19)

Unallocated Franchise and property expenses

Unallocated Refranchising gain (loss) (See Note 5)

34 29 27 NM NM

Unallocated Other income (expense) (9) 52 (14) NM NM

Unallocated Other income (expense) (See Note 19)

(44) (9) 52 NM

Investment income (expense), net (See Note 5)

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Corporate and unallocated G&A

In 2023, the increase in Corporate and Unallocated G&A expenses was driven by higher costs associated with our resource optimization program, higher current year expenses related to our annual incentive compensation programs and costs associated with the previously disclosed January 2023 ransomware attack.

Unallocated Other income (expense)

Unallocated Other income (expense) for the year ended December 31, 2022, includes Russia net operating profits of $44 million reclassed from KFC and Pizza Hut Division Other income due to our decision to exit Russia (see Note 19).

In 2024, the year to date increase in Corporate and unallocated G&A expense was driven by higher costs associated with our resource optimization program (see Note 5), partially offset by lower current year expenses related to our annual incentive

compensation programs, lower share based compensation expense and lapping net costs related to the prior year ransomware attack.

Interest expense, net

The decrease in Interest expense, net for 2023 was primarily driven by lapping $28 million of expense in the prior year relating to the call premium and unamortized debt issuance costs written-off associated with the redemption of the 2025 Notes (as discussed in our 2022 Form 10-K) and higher interest income.

This was partially offset by a higher weighted average interest rate.

The decrease in Interest expense, net for 2024 was primarily driven by lower average outstanding borrowings and higher interest income.

Consolidated Cash Flows

Net cash provided by operating activities was $1,689 million in 2024 versus $1,603 million in 2023.

The increase was largely driven by an increase in Operating profit and a decrease in incentive compensation payments, partially offset by higher tax payments.

The increase was primarily driven by an increase in Operating Profit before Special Items, 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 $422 million in 2024 versus $107 million in 2023.

The change was primarily driven by proceeds from the current year sale of KFC Russia, partially offset by lower refranchising proceeds.

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

and Ireland restaurant acquisition, lapping proceeds from the prior year sale of KFC Russia and 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 $1,163 million in 2024 versus $1,429 million in 2023.

The change was primarily driven by lower net borrowings, partially offset by lower current year share repurchases.

The change was primarily driven by net borrowings in the current year as compared to net debt repayments in the prior year, partially offset by higher current year share repurchases.

Liquidity and Capital Resources

We have historically generated substantial cash flows from our extensive franchise operations, which require a limited YUM investment, and from the operations of our Company-owned stores.

Our annual operating cash flows have been in excess of $1.3 billion in each of the past five years and we expect that to continue to be the case in 2024.

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 debt paydowns and share repurchases.

To the extent operating cash flows plus other sources of cash do not cover our anticipated cash needs, we maintain a $1.25 billion Revolving Facility under our Credit Agreement (see Note 11) that was undrawn as of December 31, 2023.

Our annual operating cash flows have been in excess of $1.4 billion in each of the past four years and we expect that to continue to be the case in 2025.

Subject to market conditions, we expect to maintain our consolidated net leverage ratio at its current level of approximately 4.0x Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") over the medium term by issuing incremental debt as our business grows.

As a result, we plan to deliver materially higher capital returns going forward as compared to the past two years when we were using significant amounts of excess cash to reduce our debt outstanding.

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 (see Note 11) which had $350 million outstanding as of December 31, 2024.

We believe that our ongoing cash from operations, cash on hand, which was approximately $600 million at December 31, 2024, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months.

Borrowings under our Revolving Facility in 2024 had original maturities of three months or less.

Our material cash requirements include the following contractual and other obligations.

Debt Obligations and Interest Payments

As of December 31, 2023, approximately 94%, including the impact of interest rate swaps, of our $11.2 billion of total debt outstanding, excluding finance leases and debt issuance costs and discounts, is fixed with an effective overall interest rate of approximately 4.6%.

We ended 2023 with a consolidated net leverage ratio of 4.2x EBITDA .

We continually reassess our optimal leverage ratio to maximize shareholder returns.

As of December 31, 2024, approximately 96%, including the impact of interest rate swaps, of our $11.0 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 target a capital structure which we believe provides an attractive balance between optimized interest rates, duration and flexibility with diversified sources of liquidity and maturities spread over multiple years, and as mentioned above, we expect to maintain our net leverage ratio at approximately 4.0x EBITDA over the medium term by issuing incremental debt as our business grows.

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

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Credit Agreement $ 21 27 34 1,424 438 1,944

Revolving Facility 350 350

Subsidiary Senior Unsecured Notes 750 750

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• Run-rate capital expenditures consisting of company restaurant repairs, maintenance and remodels, support of our digital and technology initiatives and project-specific capital expenditures,

• Targeted new company unit development to spur additional growth that is largely funded through refranchising a comparable number of existing company units, and

• Targeted new company unit development to spur additional growth that is partially funded through refranchising a comparable number of existing company units, and

• Strategic investments that create incremental value for shareholders and franchisees.

In 2024, we expect that company store investments will exceed refranchising proceeds by $85 to $95 million, primarily driven by our strategy to accelerate growth of Habit Burger Grill company units and continued investments in Taco Bell company restaurants.

This will result in net capital expenditures of approximately $275 million, reflecting up to $315 million of gross capital expenditures and $40 million of refranchising proceeds.

Additionally, on December 6th, 2023, the Company announced that it had entered into a definitive agreement to acquire 218 KFC restaurants in the U.K.

and Ireland from a franchisee.

The transaction will be funded from the Company’s cash on hand and is expected to close early in 2024.

In 2025, we expect gross capital expenditures of approximately $350 million driven by technology initiatives and continued investments in Taco Bell, Habit Burger & Grill and KFC company restaurants.

Additionally, we expect approximately $55 million of refranchising proceeds, resulting in net capital expenditures of approximately $295 million.

Purchase Obligations

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Dividends and Share Repurchases

In January 2024, our Board of Directors declared a dividend of $0.67 per share of Common Stock, a 11% increase from the quarterly dividend of $0.605 per share of Common Stock paid in 2023.

In February 2025, our Board of Directors declared a quarterly dividend of $0.71 per share of Common Stock, a 6% increase from the quarterly dividend of $0.67 per share of Common Stock paid in 2024.

This quarterly dividend will be distributed March 7, 2025, to shareholders of record at the close of business on February 21, 2025, and will total approximately $200 million.

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.

This authorization took effect during the fourth quarter of 2022 upon the exhaustion of a prior authorization approved in May 2021.

As of December 31, 2023, we have remaining capacity to repurchase up to $1.7 billion of Common Stock under the September 2022 authorization.

In May 2024, our Board of Directors authorized share repurchases of up to $2 billion (excluding applicable transaction fees and excise taxes) of our outstanding Common Stock through December 31, 2026.

This authorization took effect on July 1, 2024 upon the exhaustion of a prior authorization approved in September 2022.

As of December 31, 2024, we have remaining capacity to repurchase up to $1.6 billion of Common Stock under this authorization.

This authorization does not obligate the Company to acquire any specific number of shares.

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In September 2022, we filed a Protest with the IRS Examination Division disputing on multiple grounds the proposed underpayment of tax and penalties.

We have received the IRS Examination Division’s Rebuttal to our Protest and the case has been accepted by the IRS Office of Appeals.

We have received the IRS Examination Division’s Rebuttal to our Protest and the matter is proceeding with the IRS Office of Appeals.

Also, as discussed in Note 20, on January 29, 2020, we received an order from the Special Director of the Directorate of Enforcement (“DOE”) in India imposing a penalty on Yum!

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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.

A hearing with the administrative tribunal that had been scheduled for December 4, 2023 has been rescheduled to March 4, 2024.

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.

A hearing with the administrative tribunal has been rescheduled to March 18, 2025.

The stay order remains in effect, and the next in the Delhi High Court has been rescheduled to April 29, 2025.

We deny liability and intend to continue vigorously defending this matter.

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New Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements through enhanced disclosures about significant segment expenses.

The standard is effective for the Company's Annual Report on Form 10-K for fiscal 2024, and subsequent interim periods, with early adoption permitted.

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.

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

In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which updates income tax disclosure requirements related to the income tax rate reconciliation and requires disclosure of income taxes paid by jurisdiction.

The standard is effective for the Company's Annual Report on Form 10-K for fiscal 2025 with early adoption permitted.

The standard is effective for the Company's Annual Report on Form 10-K for fiscal 2025.

The amendments should be applied prospectively;

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

In March 2024, the SEC issued a final rule under SEC Release Nos.

33-11275 and 34-99678, The Enhancement and Standardization of Climate-Related Disclosures for Investors.

The rule requires disclosure of material climate-related information outside of the audited financial statements and disclosure in the footnotes addressing specified financial statement effects of severe weather events and other natural conditions above certain financial thresholds, certain carbon offsets and renewable energy credits or certificates.

The standard is effective for the Company's Annual Report on Form 10-K for fiscal 2025.

In April 2024, the SEC released an order staying this final rule pending judicial review of all the petitions challenging the rule.

We are in the process of analyzing the impact of the rule on our disclosures should the stay be lifted.

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.

Critical Accounting Policies and Estimates

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We review long-lived assets of restaurants we intend to continue operating as Company restaurants (primarily PP&E, right-of-use operating lease assets and allocated intangible assets subject to amortization) annually for impairment, or whenever events or changes in circumstances indicate that the carrying amount of a restaurant may not be recoverable.

We use two consecutive years of operating losses as our primary indicator of potential impairment for our annual impairment testing of these restaurant

We use two consecutive years of operating losses as our primary indicator of potential impairment for our annual impairment testing of these restaurant assets.

We evaluate recoverability based on the restaurant’s forecasted undiscounted cash flows, which incorporate our best estimate of sales growth and margin improvement based upon our plans for the unit and actual results at comparable restaurants.

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As it relates to our Habit Burger & Grill reporting unit, which includes a goodwill balance of $66 million as of the end of 2024, the assumptions that are most impactful to our fair value estimate include margin improvement, sales growth from net new units and same-store sales growth.

Significant changes in the

assumptions used in our analysis could result in a future goodwill impairment charge.

Significant changes in the assumptions used in our analysis could result in a future goodwill impairment charge.

Circumstances that could result in changes to our assumptions and related fair value estimate include, but are not limited to, expectations of lower than originally estimated margin improvement, which can be caused by a variety of factors including changes in expected labor costs and commodity inflation.

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The fair value of the reporting unit retained is based on the price a willing buyer would pay for the reporting unit retained and includes the value of franchise agreements.

Appropriate adjustments are made to the fair value determinations if such franchise agreement is determined to not be at prevailing market rates.

Appropriate adjustments are made to the fair value determinations if such franchise agreements are determined to not be at prevailing market rates.

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 retained company restaurant operations.

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Due to the relatively long time frame over which benefits earned to date are expected to be paid, our PBOs are highly sensitive to changes in discount rates.

For these U.S.

plans, we measured our PBOs using a discount rate of 5.80% at December 31, 2024.

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plans’ PBOs by approximately $40 million at our measurement date.

Conversely, a 50 basis-point decrease in this discount rate would have increased our U.S.

Conversely, a 50 basis-point decrease in this discount rate would have increased these U.S.

plans’ PBOs by approximately $40 million at our measurement date.

The net periodic benefit cost we will record in 2025 is also impacted by the discount rate, as well as the long-term rates of return on plan assets and mortality assumptions we selected at our measurement date.

We expect net periodic benefit income for our U.S.

plans of $3 million in 2024 compared to $4 million of periodic benefit income in 2023, which represents a decrease in

benefit of $1 million year-over-year.

A 50 basis-point change in our discount rate assumption at our 2023 measurement date would impact our 2024 U.S.

net periodic benefit cost by approximately $5 million.

The impacts of changes in net periodic benefit costs are reflected primarily in Other pension (income) expense.

We expect net periodic benefit income for these U.S.

plans of $2 million in 2025 compared to $3 million of periodic benefit income in 2024, which represents a decrease in benefit of $1 million year-over-year.

A 50 basis-point change in our discount rate assumption at our 2024 measurement date would impact this 2025 U.S.

net periodic benefit income by approximately $1 million.

The impacts of changes in net periodic benefit income are reflected primarily in Other pension (income) expense.

Our estimated long-term rate of return on U.S.

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plans at December 31, 2024.

We will recognize approximately $1 million of loss in net periodic benefit cost in 2024 versus $1 million of gain recognized in 2023.

We will recognize approximately $2 million of this loss in 2025 versus $1 million of loss recognized in 2024.

At December 31, 2024, we had valuation allowances of $369 million to reduce our $1,768 million of deferred tax assets to amounts that are more likely than not to be realized.

The net deferred tax assets primarily relate to temporary differences in profitable U.S.

federal, state and foreign jurisdictions and net operating losses in certain foreign jurisdictions, the majority of which do not expire.

The net deferred tax assets primarily relate to temporary differences and tax credit carryforwards in profitable U.S.

federal, state and foreign jurisdictions and net operating loss carryforwards in certain foreign jurisdictions, the majority of which do not expire.

In evaluating our ability to recover our deferred tax assets, we consider future taxable income in the various jurisdictions, carryforward periods, restrictions on usage and prudent and feasible tax planning strategies.

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At December 31, 2024, we had $126 million of unrecognized tax benefits, $81 million of which would impact the effective income tax rate if recognized.

We evaluate unrecognized tax benefits, including interest thereon, on a quarterly basis to ensure that they have been appropriately adjusted for events, including audit settlements, which may impact our ultimate payment for such exposures.

evaluate unrecognized tax benefits, including interest thereon, on a quarterly basis to ensure that they have been appropriately adjusted for events, including audit settlements, which may impact our ultimate payment for such exposures.

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.

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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-K

Item 7. Management’s Discussion and Analysis