What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-19 compared with 2024-02-20 · 302 added, 186 removed, 1337 unchanged (27% of the section changed)

22 unchanged sentences

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company acquired the operations and related assets of two franchise entities that owned 216 KFC restaurants in the U.K.

and Ireland (“KFC U.K.

& Ireland”) during 2024, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, KFC U.K.

& Ireland’s internal control over financial reporting associated with 6% of total assets and 4% of total revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2024.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of KFC U.K.

Basis for Opinions

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A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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( 33 ) ( 30 ) 18

Tax (expense) benefit

( 19 ) ( 16 ) 133

Tax (expense) benefit

( 14 ) ( 12 ) 100

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Capital spending ( 257 ) ( 285 ) ( 279 )

Proceeds from sale of Devyani Investment

Proceeds from sale of KFC Russia

Acquisition of KFC U.K.

and Ireland restaurants

Proceeds from refranchising of restaurants 49 60 73

Maturities (purchases) of Short term investments, net

Other, net ( 53 ) ( 3 ) 4

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Dividends paid on Common Stock ( 752 ) ( 678 ) ( 649 )

Debt issuance costs — ( 11 ) ( 37 )

Other, net ( 73 ) ( 25 ) ( 53 )

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Pension and post-retirement benefit plans (net of tax impact of $ 21 million)

( 60 ) ( 60 )

Net gain on derivative instruments (net of tax impact of $ 33 million)

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Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature 18 18

Reclassification of translation adjustments into income

Pension and post-retirement benefit plans (net of tax impact of $ 1 million)

( 10 ) ( 10 )

Net gain on derivative instruments (net of tax impact of $ 33 million)

Net loss on derivative instruments (net of tax impact of $ 4 million)

( 12 ) ( 12 )

Comprehensive Income 1,664

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Balance at December 31, 2023

281 $ 60 $ ( 7,616 ) $ ( 302 ) $ ( 7,858 )

Net Income 1,486 1,486

Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature ( 37 ) ( 37 )

Reclassification of translation adjustments into income

Pension and post-retirement benefit plans (net of tax impact of $ 13 million )

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Repurchase of shares of Common Stock (1)

( 3 ) ( 73 ) ( 370 ) ( 443 )

Employee share-based award exercises 1 ( 70 ) ( 70 )

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279 $ — $ ( 7,256 ) $ ( 392 ) $ ( 7,648 )

(1) Includes excise tax on share repurchases.

See accompanying Notes to Consolidated Financial Statements.

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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 the Habit Burger & Grill (collectively, the “Concepts”).

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

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

The Habit Burger & Grill is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more.

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Our most significant variable interests are in certain entities that operate restaurants under our Concepts’ franchise arrangements.

We do not typically provide significant financial support such as loans or guarantees to our franchisees.

We do not have a significant equity interest in any of our franchisee businesses.

Additionally, we do not typically provide significant financial support such as loans or guarantees to our franchisees.

Thus, our most significant variable interests in franchisees result from real estate lease arrangements to which we are a party.

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As our franchise arrangements provide our franchisee entities the power to direct the activities that most significantly impact their economic performance, we do not consider ourselves the primary beneficiary of any such entity that might otherwise be considered a VIE.

We do not have a significant equity interest in any of our franchisee businesses except for a minority interest in an entity, Devyani International Limited (“Devyani”), that owns our KFC India and Pizza Hut India master franchisee rights.

This minority interest does not give us the ability to significantly influence this entity.

We account for our investment in Devyani as an equity security.

As the fair value of this equity security is readily determinable we record changes in fair value in Investment (income) expense, net.

We participate in various advertising cooperatives with our franchisees, typically within a country where we have both Company-owned restaurants and franchise restaurants, established to collect and administer funds contributed for use in advertising and promotional programs designed to increase sales and enhance the reputation of the Company and our Concepts.

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We maintain certain variable interests in these cooperatives.

As the cooperatives are required to spend all funds collected on advertising and promotional programs, total equity at risk is not sufficient to permit the cooperatives to finance their activities without additional subordinated financial support.

As the cooperatives are required to spend all funds collected on advertising and promotional programs, total equity at risk is not

sufficient to permit the cooperatives to finance their activities without additional subordinated financial support.

Therefore, these cooperatives are VIEs.

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Our remaining international subsidiaries operate on a monthly calendar similar to that on which YUM operates.

Fiscal year 2024 included 53 weeks for our U.S.

businesses and for our international subsidiaries that reported on a period calendar.

Our next fiscal year scheduled to include a 53rd week for our period calendar reporters is 2030.

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Such payments are capitalized and presented within Prepaid expense and other current assets or Other assets.

These assets are being amortized as a reduction in Franchise and property revenues over the period of expected cash flows from the franchise agreements to which the payment relates.

These assets are being amortized as a reduction in Franchise and property revenues over the period of expected cash flows from the franchise agreements to which the payment relates and are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of these incentive assets may not be recoverable.

Property Revenues

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On a much more limited basis, we provide goods or services to certain franchisees that are individually distinct from the franchise right because they do not require integration with other goods or services we provide.

Such arrangements typically

relate to technology, supply chain and quality assurance services.

Such arrangements typically relate to technology, supply chain and quality assurance services.

The extent to which we provide such goods or services varies by brand, geographic region and, in some instances, franchisee.

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To the extent the advertising cooperatives we are required to consolidate are unable to collect amounts due from franchisees they incur bad debt expense.

In 2023 and 2022, we recorded $ 3 million and $ 6 million in net provisions, respectively, and in 2021, we recorded $ 6 million in net recoveries.

In 2024, 2023 and 2022, such amounts totaled $ 15 million, $ 3 million and $ 6 million in net provisions, respectively.

To the extent our consolidated advertising cooperatives have a provision or recovery for bad debt expense, the cooperative’s advertising spend obligation is adjusted such that there is no net impact within our Financial Statements.

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Long-lived assets, including Property, plant and equipment (“PP&E”) as well as right-of-use operating lease assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable.

The assets are not recoverable if their carrying value is less than the

undiscounted cash flows we expect to generate from such assets.

The assets are not recoverable if their carrying value is less than the undiscounted cash flows we expect to generate from such assets.

If the assets are not deemed to be recoverable, impairment is measured based on the excess of their carrying value over their fair value.

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Individual restaurant-level impairment is recorded within Other (income) expense.

Any right-of-use asset may alternatively be valued at the amount we could receive for such right-of-use asset from a third-party that is not a franchisee through a sublease if doing so would result in less overall impairment of the restaurant assets in total.

Any operating lease right-of-use asset may alternatively be valued at the amount we could receive for such right-of-use asset from a third-party that is not a franchisee through a sublease if doing so would result in less overall impairment of the restaurant assets in total.

In executing our refranchising initiatives, we most often offer groups of restaurants for sale.

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The effect on deferred tax assets and liabilities of a change in tax rates is recognized in our Income tax provision in the period that includes the enactment date.

Additionally, in determining the need for recording a valuation allowance against the carrying amount of deferred tax assets, we consider the amount of taxable income and periods over which it must be earned, actual levels of past taxable income and known trends and events or transactions that are expected to affect future levels of taxable income.

future levels of taxable income.

Where we determine that it is more likely than not that all or a portion of an asset will not be realized, we record a valuation allowance.

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Receivables that are ultimately deemed to be uncollectible, and for which collection efforts have been exhausted, are written off against the allowance for doubtful accounts.

We recorded $ 4 million and $ 5 million of net bad debt expense in 2023 and 2022, respectively, and $ 8 million of net bad debt recoveries in 2021, within Franchise and property expenses related to continuing fees, initial fees and rent receivables from our franchisees.

We recorded $ 28 million, $ 4 million and $ 5 million of net bad debt expense in 2024, 2023 and 2022, respectively, within Franchise and property expenses related to continuing fees, upfront fees and rent receivables from our franchisees.

Accounts and notes receivable as well as the Allowance for doubtful accounts, including balances attributable to our consolidated advertising cooperatives, as of December 31, 2024 and 2023, respectively, are as follows:

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Our lessor and sublease portfolio primarily consists of stores that have been leased to franchisees subsequent to refranchising transactions.

Our most significant leases with lease and non-lease components are leases with our franchisees that include both the right to use a restaurant as well as a license of

the intellectual property associated with our Concepts’ brands.

Our most significant leases with lease and non-lease components are leases with our franchisees that include both the right to use a restaurant as well as a license of the intellectual property associated with our Concepts’ brands.

For these leases, which are primarily classified as operating leases, we account for the lease and non-lease components separately.

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We state capitalized software at cost less accumulated amortization within Intangible assets, net on our Consolidated Balance Sheets.

We calculate amortization on a straight line basis over the estimated useful life of the software which ranges from 3 to 7 years upon initial capitalization.

Software development costs primarily include costs to develop software to be used solely to meet internal needs and cloud-based applications used to deliver our software services for use in our Company restaurants or by our franchisees.

We capitalize development costs related to software developed for our internal needs and such cloud-based applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended.

We calculate amortization on a straight line basis over the estimated useful life of the software which generally ranges from 3 to 5 years upon initial capitalization.

Customer facing software is typically amortized over a useful life at the shorter end of this range, while back office and corporate systems may have a longer useful life.

Derivative Financial Instruments.

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Accordingly, $ 368 million, $ 26 million and $ 1,131 million in share repurchases in 2024, 2023 and 2022, respectively, were recorded as an addition to Accumulated deficit.

Additionally, we recorded $ 2 million of excise tax related to share repurchases in 2024 as an addition to Accumulated deficit.

See Note 17 for additional information on our share repurchases.

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We measure and recognize the overfunded or underfunded status of our pension and post-retirement plans as an asset or liability in our Consolidated Balance Sheet as of our fiscal year end.

The funded status represents the difference between the projected benefit obligations and the fair value of plan assets, which is calculated on a plan-by-plan basis.

The projected benefit obligation and related funded status are determined using assumptions as of the end of each year.

The projected benefit obligation is the present value of benefits earned to date by plan participants, including the effect of future salary increases, as applicable.

The difference between the projected benefit obligations and the fair value of plan assets that has not previously been recognized in our Consolidated Statement of Income is recorded as a component of AOCI.

The net periodic benefit costs associated with the Company’s defined benefit pension and post-retirement medical plans are determined using assumptions regarding the projected benefit obligation and, for funded plans, the market-related value of plan assets as of the beginning of each year, or remeasurement period if applicable.

The funded status represents the difference between the projected benefit obligations (“PBOs”) and the fair value of plan assets, which is calculated on a plan-by-plan basis.

The PBO and related funded status are determined using assumptions as of the end of each year.

The PBO is the present value of benefits earned to date by plan participants, including the effect of future salary increases, as applicable.

The difference between the PBO and the fair value of plan assets that has not previously been recognized in our Consolidated Statement of Income is recorded as a component of AOCI.

The net periodic benefit costs associated with the Company’s defined benefit pension and post-retirement medical plans are determined using assumptions regarding the PBO and, for funded plans, the market-related value of plan assets as of the beginning of each year, or remeasurement period if applicable.

The service cost component of net periodic benefit costs is primarily recorded in G&A.

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We have elected to use a market-related value of plan assets to calculate the expected return on assets, net of administrative and investment fees paid from plan assets, in net periodic benefit costs.

For each individual plan we amortize into pension expense the net amounts in AOCI, as adjusted for the difference between the fair value and market-related value of plan assets, to the extent that such amounts exceed 10% of the greater of a plan’s projected benefit obligation or market-related value of assets, over the remaining service period of active participants in the plan or, for plans with no active participants, over the expected average life expectancy of the inactive participants in the plan.

For each individual plan we amortize into pension expense the net amounts in AOCI, as adjusted for the difference between the fair value and market-related value of plan assets, to the extent that such amounts exceed 10% of the greater of a plan’s PBO or market-related value of assets, over the remaining service period of active participants in the plan or, for plans with no active participants, over the expected average life expectancy of the inactive participants in the plan.

The market-related value of plan assets is the fair value of plan assets as of the beginning of each year adjusted for variances between actual returns and expected returns.

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We recognize settlement gains or losses only when we have determined that the cost of all settlements in a year will exceed the sum of the service and interest costs within an individual plan.

Note 3 - Divestitures and Acquisitions

Recent Accounting Pronouncements.

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.

We adopted this standard for the fiscal year ended December 31, 2024.

See Note 19 for additional disclosures.

Note 3 - Acquisitions and Divestitures

KFC United Kingdom ("U.K.") and Ireland Restaurant Acquisition

On April 29, 2024, we completed the acquisition of all of the issued shares of two franchisee entities that owned 216 KFC restaurants in the U.K.

The acquisition creates a significant opportunity to accelerate KFC's growth strategy in the large and growing U.K.

and Ireland chicken market.

The purchase price to be allocated for accounting purposes of $ 177 million consisted of cash, net of cash acquired, in the amount of $ 180 million, which included $174 million paid in 2024 and $6 million paid in 2025, offset by the settlement of a liability of $ 3 million related to our preexisting contractual relationship with the franchisee.

The acquisition was accounted for as a business combination using the acquisition method of accounting.

The preliminary allocation of the purchase price is based on management's analysis, including preliminary work performed by third party valuation specialists, as of April 29, 2024.

During the quarter ended December 31, 2024, we adjusted our preliminary estimate of the fair value of net assets acquired and the purchase price to be allocated.

The components of the preliminary purchase price allocation, subsequent to the adjustments to the allocation in the quarter ended December 31, 2024, were as follows:

Total Current Assets $ 2

Property, plant and equipment, net 96

Reacquired franchise rights (included in Intangible assets, net) 47

Operating lease right-of-use assets (included in Other assets) 124

Total Identifiable Assets 269

Total Current Liabilities ( 30 )

Operating lease liabilities (included in Other liabilities and deferred credits) ( 115 )

Other liabilities ( 39 )

Total Liabilities Assumed ( 184 )

Total identifiable net assets 85

Purchase price to be allocated $ 177

The adjustments to the preliminary estimate of identifiable net assets acquired and consideration transferred (as recorded in the June 30, 2024 quarter of acquisition) resulted in a corresponding $ 16 million increase in estimated goodwill due to the following changes to the preliminary purchase price allocation.

Increase (Decrease) in Goodwill

Increase in Property, plant and equipment, net

Increase in Operating lease right-of-use assets

Increase in Total Current Liabilities

Increase in Operating lease liabilities

Increase in Other liabilities

Increase in consideration

Total increase in Goodwill $ 16

We will continue to obtain information to assist in determining the fair value of net assets acquired during the remaining measurement period.

Reacquired franchise rights, which were valued based on after-royalty cash flows expected to be earned by the acquired restaurants over the remaining term of their then-existing franchise agreements, have an estimated weighted average useful life of 5 years.

The excess of the purchase price over the preliminary estimated fair value of the net, identifiable assets acquired was recorded as goodwill.

The goodwill recognized represents expected benefits of the acquisition that do not qualify for recognition as intangible assets.

This includes value arising from cash flows expected to be earned in years subsequent to the expiration of the terms of franchise agreements existing upon acquisition.

The goodwill is expected to be partially deductible for income tax purposes and has been allocated to our KFC U.K.

reporting unit.

The financial results of the acquired restaurants have been included in our Consolidated Financial Statements since the date of the acquisition but did not significantly impact our results for the year ended December 31, 2024.

The pro forma impact on our results of operations if the acquisition had been completed as of the beginning of 2023 would not have been material.

The direct transaction costs associated with the acquisition were also not material and were expensed as incurred.

Russia Invasion of Ukraine

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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 April 2023, we completed our exit from the Russian market by selling the KFC business in Russia to Smart Service Ltd., including all Russian company owned KFC restaurants, operating system, and master franchise rights as well as the trademark

for the Rostik's brand.

Under the sale and purchase agreement, the buyer agreed to lead the process to rebrand KFC restaurants in Russia to Rostik's and to retain the Company's employees in Russia.

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Note 5 – Items Affecting Comparability of Net Income and Cash Flows

Extra Week in 2024

Fiscal year 2024 included 53 weeks for our U.S.

businesses and for our international subsidiaries that reported on a period calendar.

The 53rd week added $ 96 million to Total revenues, $ 36 million to Operating Profit and $ 25 million to Net Income in our Consolidated Statement of Income for the year ended December 31, 2024.

Refranchising (Gain) Loss

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As such, we do not allocate such gains and losses to our Divisional segments for performance reporting purposes.

During the years ended December 31, 2023, 2022 and 2021, we refranchised 15 , 22 and 83 restaurants, respectively.

Additionally, during the years ended December 31, 2023, 2022 and 2021, we sold certain restaurant assets associated with existing franchise restaurants to the franchisee.

During the years ended December 31, 2024, 2023 and 2022, we refranchised 1 , 15 and 22 restaurants, respectively, and we sold certain restaurant assets (primarily land) associated with existing franchise restaurants to the franchisee.

We received $ 49 million, $ 60 million and $ 73 million in pre-tax cash refranchising proceeds in 2024, 2023 and 2022, respectively, as a result of the sales of these restaurants and restaurant assets.

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Worldwide $ ( 34 ) $ ( 29 ) $ ( 27 )

German Acquisition and Turkey Termination

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.

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.

The amount of consideration paid related to the German acquisition was not significant.

Resource Optimization

During the third quarter of 2020, we initiated a resource optimization program that has allowed us to reallocate significant resources to accelerate our digital, technology and innovation capabilities to deliver a modern, world-class team member and customer experience and improve unit economics.

We are currently exploring expanding the program to identify further opportunities to optimize the company’s spending and identify additional, critical areas in which to potentially reallocate resources, both with a goal to enable the acceleration of the Company’s growth rate.

During 2024, we 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 primarily include severance associated with positions that have been eliminated or relocated and consultant fees.

As a result of this program, we recorded charges of $ 21 million, $ 11 million and $ 8 million in the years ended 2023, 2022 and 2021, respectively.

As a result of this program, we recorded charges of $ 79 million, $ 21 million and $ 11 million in the years ended December 31, 2024, 2023 and 2022, respectively.

These charges were primarily recorded as General and administrative expenses.

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Investment in Devyani

In 2020, we received an approximate 5 % minority interest in 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, $ 11 million and $ 87 million in the years ended December 31, 2023, 2022 and 2021, respectively (see Note 14).

Long-term Debt Redemptions

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 (see Note 14).

Refinancing of Credit Agreement and Long-term Debt Redemptions

On April 26, 2024, certain subsidiaries of the Company completed a refinancing of our Credit Agreement.

See Note 11 for further discussion of the Credit Agreement refinancing.

On February 23, 2022, the Company issued a notice of redemption for April 1, 2022, for $ 600 million aggregate principal amount of 7.75 % YUM Senior Unsecured Notes due in 2025.

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We recognized the call premium and the write-off of $ 5 million of unamortized debt issuance costs associated with the notes within Interest expense, net.

On April 23, 2021, certain subsidiaries of the Company issued a notice of redemption for June 1, 2021, for $ 1,050 million aggregate principal amount of 5.25 % Subsidiary Senior Unsecured Notes due in 2026.

The redemption amount was equal to 102.625 % of the $ 1,050 million aggregate principal amount redeemed, reflecting a $ 28 million call premium.

We recognized the call premium and the write-off of $ 6 million of unamortized debt issuance costs associated with the notes within Interest expense, net.

See Note 11 for further discussion of the YUM and Subsidiary Senior Unsecured Notes.

Income Tax Matters

Our effective tax rates in the years ended 2023, 2022 and 2021 have been significantly impacted by upfront recognition of and subsequent adjustments to amounts associated with recently completed intra-entity transfers of intellectual property ("IP") rights, as well as adjustments related to prior years.

Our effective tax rates in the years ended 2024, 2023 and 2022 have been significantly impacted by upfront recognition of and subsequent adjustments to amounts associated with recently completed intra-entity transfers of intellectual property ("IP") rights.

As a result, our effective tax rates have fluctuated significantly and were 21.8 %, 12.1 % and 20.3 % for the years ended December 31, 2024, 2023 and 2022, respectively.

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$ 3,099 $ 2,860 $ 1,008 $ 600 $ 7,567

Additionally, we recorded charges of $ 18 million to Unallocated Franchise revenues associated with the Turkey termination during the year ended December 31, 2024.

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

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Increase for upfront fees associated with contracts that became effective during the period, net of amounts recognized as revenue during the period 101

Deferred franchise fees related to KFC Russia reclassified to liabilities held for sale (see Note 9)

Balance at December 31, 2023

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Balance at December 31, 2024

(a) Includes impact of foreign currency translation, as well as, in 2023, the recognition of deferred franchise fees into Refranchising (gain) loss upon the termination of existing franchise agreements when entering into master franchise agreements.

(a) Includes impact of foreign currency translation and the recognition of deferred franchise fees into Refranchising (gain) loss upon the termination of existing franchise agreements when entering into master franchise agreements.

(b) Primarily includes the settlement of a preexisting contractual relationship related to the KFC U.K.

and Ireland restaurant acquisition (see Note 3) and the impact of foreign currency translation.

We expect to recognize contract liabilities as revenue over the remaining term of the associated franchise agreement as follows:

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Cash, Cash Equivalents and Restricted Cash as presented in Consolidated Statements of Cash Flows $ 807 $ 724 $ 647

(a) Amounts exclude payments of $ 23 million in 2022 and $ 28 million in 2021 classified as Interest expense in our Consolidated Statements of Income which are included in Repayments of long-term debt within financing activities in our Consolidated Statements of Cash Flows (see Note 11).

(a) Amounts exclude payments of $ 23 million in 2022 classified as Interest expense in our Consolidated Statements of Income which are included in Repayments of long-term debt within financing activities in our Consolidated Statements of Cash Flows (see Note 5).

(b) Restricted cash within Prepaid expenses and other current assets reflects the cash related to advertising cooperatives which we consolidate that can only be used to settle obligations of the respective cooperatives and cash held in reserve for Taco Bell Securitization interest payments (see Note 11).

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Impairment and closure expense 13 12 8

Other ( 3 ) 8 ( 22 )

Other (income) expense $ 34 $ 14 $ 7

(a) The year ended December 31, 2024, includes a charge of $ 37 million related to the German acquisition and Turkey termination (see Note 5).

Note 9 – Supplemental Balance Sheet Information

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Restricted cash 155 177

Short term investments

Assets held for sale (a)

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Accounts payable and other current liabilities $ 1,211 $ 1,169

(a) Assets and liabilities held for sale reflect the carrying value of restaurants we have offered for sale to franchisees, excess properties that we do not intend to use for restaurant operations in the future and, at December 31, 2022, the assets and liabilities of KFC Russia.

KFC Russia assets held for sale accounted for $ 185 million, including property, plant and equipment of $ 59 million, of the $ 190 million, while KFC Russia liabilities held for sale accounted for all of the $ 65 million as of December 31, 2022.

(a) Assets and liabilities held for sale reflect the carrying value of restaurants we have offered for sale to franchisees and excess properties that we do not intend to use for restaurant operations in the future.

Note 10 – Goodwill and Intangible Assets

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Disposals and other, net (b)

( 7 ) — ( 8 ) ( 4 ) ( 19 )

Goodwill, net as of December 31, 2023 (a)

$ 226 $ 98 $ 252 $ 66 $ 642

Acquisitions (c)

Disposals and other, net (b)

( 3 ) — ( 1 ) — ( 4 )

Goodwill, net as of December 31, 2024 (a)

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(b) Disposals and other, net includes the impact of foreign currency translation on existing balances and goodwill write-offs associated with refranchising.

Intangible assets, net for the years ended 2024 and 2023 are as follows:

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Amortization expense for finite-lived intangible assets, based on existing intangible assets as of December 31, 2024, is expected to approximate $ 89 million in 2025, $ 70 million in 2026, $ 53 million in 2027, $ 32 million in 2028 and $ 16 million in 2029.

At December 31, 2022, KFC Russia finite-lived intangible assets of $ 23 million were classified as held for sale and are included in Prepaid expenses and other current assets in our Consolidated Balance Sheet (see Note 9) and thus are not included in the table above.

Note 11 – Short-term Borrowings and Long-term Debt

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Once the required reserve obligations are satisfied, there are no further restrictions, including payment of dividends, on the cash flows of the Securitization Entities.

Additional cash reserves are required if any of the rapid amortization events occur, as noted above, or in the event that as of any quarterly measurement date the Securitization Entities fail to maintain a debt service coverage ratio (or the ratio of Net Cash Flow to all debt service payments for the preceding four fiscal quarters) of at least 1.75:1 .

The amount of weekly securitization cash flow collections that exceed the required weekly allocations is generally remitted to the Company.

During the most recent quarter ended December 31, 2024, the Securitization Entities maintained a debt service coverage ratio significantly in excess of the 1.75:1 requirement .

Term Loan Facilities, Revolving Facility and Subsidiary Senior Unsecured Notes

KFC Holding Co., Pizza Hut Holdings, LLC, and TBA, each of which is a wholly-owned subsidiary of the Company, as co-borrowers (the “Borrowers”) have entered into a credit agreement providing for senior secured credit facilities and a $ 1.25 billion revolving facility maturing March 15, 2026 (the “Revolving Facility”).

KFC Holding Co., Pizza Hut Holdings, LLC, and TBA, each of which is a wholly-owned subsidiary of the Company, as co-borrowers (the “Borrowers”) have entered into a credit agreement providing for senior secured credit facilities and a $ 1.5 billion revolving facility (the “Revolving Facility”).

The senior secured credit facilities, which include a Term Loan A Facility and a Term Loan B Facility, and the Revolving Facility are collectively referred to as the “Credit Agreement”.

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The following table summarizes borrowings outstanding under the Credit Agreement, as well as our Subsidiary Senior Unsecured Notes as of December 31, 2024.

There were no outstanding borrowings under the Revolving Facility and $ 2 million of letters of credit outstanding as of December 31, 2023.

There were $ 350 million in outstanding borrowings under the Revolving Facility as of December 31, 2024.

Interest Rate

Issuance Date Maturity Date Outstanding Principal

(in millions) Stated Effective (b)

Term Loan A Facility March 2021 March 2026 $ 717 (a) 6.34 %

Term Loan B Facility March 2021 March 2028 $ 1,459 (a) 5.06 %

(in millions) Stated Effective (c)

Term Loan A Facility April 2024 (a) $ 500 (b) 5.35 %

Term Loan B Facility March 2021 March 2028 $ 1,444 (b) 5.06 %

Subsidiary Senior Unsecured Notes June 2017 June 2027 $ 750 4.75 % 4.90 %

(a) The interest rates applicable to the Term Loan A Facility as well as the Revolving Facility range from 0.75 % to 1.50 % plus Secured Overnight Financing Rate ("SOFR") or from 0.00 % to 0.50 % plus the Base Rate (as defined in the Credit Agreement), at the Borrowers’ election, based upon the total leverage ratio (as defined in the Credit Agreement).

As of December 31, 2023, the interest rate spreads on the SOFR and Base Rate applicable to our Term Loan A Facility were 0.75 % and 0.00 %, respectively.

(a) The Term Loan A Facility and the Revolving Facility will mature on the earliest of (i) April 26, 2029, (ii) the date that is 91 days prior to the March 15, 2028 maturity of the Borrowers' existing Term Loan B Facility if more than $250 million of such Term Loan B remains outstanding as of such date or (iii) the date that is 91 days prior to the June 1, 2027 maturity of the Borrowers' existing Subsidiary Senior Unsecured Notes if more than $250 million of such Subsidiary Senior Unsecured Notes remains outstanding as of such date.

(b) The interest rates applicable to the Term Loan A Facility as well as the Revolving Facility range from 0.75 % to 1.50 % plus Secured Overnight Financing Rate ("SOFR") or from 0.00 % to 0.50 % plus the Base Rate (as defined in the Credit Agreement), at the Borrowers’ election, based upon the total leverage ratio (as defined in the Credit Agreement).

As of December 31, 2024, the interest rate spreads on the SOFR and Base Rate applicable to both our Term Loan A Facility and borrowings under the Revolving Facility were 0.75 % and 0.00 %, respectively.

The interest rates applicable to the Term Loan B Facility are 1.75 % plus SOFR or 0.75 % plus the Base Rate, at the Borrowers’ election.

We transitioned to SOFR as the benchmark reference rate under the Credit Agreement during 2023 following the cease of publication of remaining LIBOR tenors on June 30, 2023.

(b) Includes the effects of the amortization of any discount and debt issuance costs as well as the impact of the interest rate swaps on the Term Loan A and Term Loan B Facilities (see Note 13).

(c) Includes the effects of the amortization of any discount and debt issuance costs as well as the impact of the interest rate swaps on the Term Loan A and Term Loan B Facilities (see Note 13).

The effective rates related to our Term Loan A and B Facilities are based on SOFR-based interest rates at December 31, 2024.

The Term Loan A Facility is subject to quarterly amortization payments in an amount equal to 0.625 % of the principal amount of the facility as of the issuance date of $ 750 million.

These quarterly amortization payments increase to 1.25 % of this principal amount beginning with the second quarter of 2024 with the balance payable at maturity on March 15, 2026.

On April 26, 2024, the Borrowers completed the refinancing of the then outstanding $ 713 million under the term loan A facility and $ 1.25 billion capacity under the revolving facility through the issuance of a new $ 500 million term loan A facility (the "Term Loan A Facility") and a $ 1.5 billion revolving facility (the "Revolving Facility") pursuant to an amendment to the Credit Agreement.

The amendment also removed the excess cash flow mandatory prepayment requirement with respect to the Term Loan A Facility.

As a result of this refinancing, $ 8 million of fees were capitalized as debt issuance costs, $ 6 million of which were paid directly to lenders.

During the year ended December 31, 2024, previously recorded unamortized debt issuance costs of $ 1 million were written off and recognized within Interest expense, net due to this refinancing.

The refinanced Term Loan A Facility is subject to quarterly amortization payments in an amount equal to 0.625 % of the principal amount of the facility as of the refinance date of $ 500 million, now beginning with the third quarter of 2025.

The Term Loan A Facility quarterly amortization payments increase to 1.25 % of the principal amount of the facility as of the refinance date, beginning with the third quarter of 2027.

All other material provisions of the Credit Agreement remained unchanged.

The Term Loan B Facility is subject to quarterly amortization payments in an amount equal to 0.25 % of the principal amount of the facility as of the issuance date of $ 1.5 billion, with the balance payable at maturity on March 15, 2028.

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The Credit Agreement is subject to certain mandatory prepayments in the event certain covenants are not met, including an amount equal to 50% of excess cash flow (as defined in the Credit Agreement) on an annual basis and the proceeds of certain asset sales, casualty events and issuances of indebtedness, subject to customary exceptions and reinvestment rights .

The Credit Agreement's covenants include two financial maintenance covenants which require the Borrowers to maintain a total leverage ratio (defined as the ratio of Consolidated Total Debt to Consolidated EBITDA (as these terms are defined in the Credit Agreement)) of 5.0:1 or less and a fixed charge coverage ratio (defined as the ratio of EBITDA minus capital expenditures to fixed charges (inclusive of rental expense and scheduled amortization)) of at least 1.5:1 , each as of the last day of each fiscal quarter.

Credit Agreement)) of 5.0:1 or less and a fixed charge coverage ratio (defined as the ratio of EBITDA minus capital expenditures to fixed charges (inclusive of rental expense and scheduled amortization)) of at least 1.5:1 , each as of the last day of each fiscal quarter.

The Credit Agreement includes other affirmative and negative covenants and events of default that are customary for facilities of this type.

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Financing cash flows from finance leases 8 7 5

Right-of-use assets obtained in exchange for lease obligations

Right-of-use assets obtained in exchange for lease obligations (a)

Operating leases 247 127 93

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Finance lease and other debt obligations transferred through refranchising ( 1 ) ( 5 ) —

(a) The year ended December 31, 2024, includes $ 124 million and $ 22 million of operating and finance lease right-of-use assets, respectively, acquired as part of the U.K.

and Ireland restaurant acquisition (see Note 3).

Supplemental Balance Sheet Information

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Total right-of-use assets (a)

$ 79 $ 79 Accounts payable and other current liabilities

8 8 Short-term borrowings

757 731 Other liabilities and deferred credits

42 49 Long-term debt

Operating $ 91 $ 79 Accounts payable and other current liabilities

Finance 8 8 Short-term borrowings

Operating 862 757 Other liabilities and deferred credits

Finance 59 42 Long-term debt

Total lease liabilities (a)

$ 1,020 $ 886

Weighted-average Remaining Lease Term (in years)

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These amounts primarily related to Taco Bell U.S.

and the Habit Burger Grill including leases related to Company-operated restaurants, leases related to franchise-operated restaurants we sublease and the Taco Bell and Habit Burger Grill restaurant support center.

and Habit Burger & Grill including leases related to Company-operated restaurants, leases related to franchise-operated restaurants we sublease and the Taco Bell and Habit Burger & Grill restaurant support center.

Maturity of Lease Payments and Receivables

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Through December 31, 2024, the swaps were highly effective cash flow hedges.

Gains and losses on these interest rate swaps recognized in OCI and reclassifiied from AOCI into Net Income were as follows:

Gains and losses on these interest rate swaps recognized in OCI and reclassified from AOCI into Net Income were as follows:

Gains/(Losses) Recognized in OCI (Gains)/Losses Reclassified from AOCI into Net Income

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Note 14 – Fair Value Disclosures

As of December 31, 2023, the carrying values of cash and cash equivalents, restricted cash, short-term investments, accounts receivable, short-term borrowings and accounts payable approximated their fair values because of the short-term nature of these

As of December 31, 2024, the carrying values of cash and cash equivalents, restricted cash, short-term investments, accounts receivable, short-term borrowings, accounts payable and borrowings under our Revolving Facility approximated their fair

values because of the short-term nature of these instruments.

The fair value of notes receivable net of allowances and lease guarantees less subsequent amortization approximates their carrying value.

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The fair value of the Company’s interest rate swaps were determined based on the present value of expected future cash flows considering the risks involved, including nonperformance risk, and using discount rates appropriate for the duration based on observable inputs.

Investments as of December 31, 2023 and 2022, primarily include our approximate 5 % minority interest in Devyani, a publically-traded entity, with a fair value of $ 124 million and $ 116 million, respectively.

Investments as of December 31, 2023, primarily included our approximate 5 % minority interest in Devyani, a publicly-traded entity, with a fair value of $ 124 million.

Non-Recurring Fair Value Measurements

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These amounts exclude fair value measurements made for assets that were subsequently disposed of prior to those respective year end dates.

The remaining net book value of restaurant assets measured at fair value during the years ended December 31, 2023 and 2022, was $ 21 million and $ 20 million, respectively.

During the year ended December 31, 2021, we recognized non-recurring fair value measurements of $ 6 million related to refranchising related impairment.

Refranchising related impairment results from writing down the assets of restaurants or restaurant groups offered for refranchising, including certain instances where a decision has been made to refranchise

restaurants that are deemed to be impaired.

The fair value measurements used in our impairment evaluation were based on actual bids received from potential buyers (Level 2).

The remaining net book value of restaurant assets measured at fair value during the years ended December 31, 2024 and 2023 as of the end of both years, was $ 21 million.

Note 15 – Pension, Retiree Medical and Retiree Savings Plans

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Obligation and Funded Status at Measurement Date:

The following chart summarizes the balance sheet impact, as well as benefit obligations, assets, and funded status associated with our two significant U.S.

The following charts summarize the balance sheet impact, as well as benefit obligations, assets, and funded status associated with our two significant U.S.

pension plans.

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Benefits paid ( 45 ) ( 34 )

Settlement payments — ( 59 )

Actuarial (gain) loss ( 3 ) 11

Benefit obligation at end of year $ 776 $ 778

A significant component of the overall decrease in the Company's benefit obligation for the year ended December 31, 2024, was due to benefits paid during the year partially offset by interest cost on the benefit obligation.

A significant component of the overall increase in the Company's benefit obligation for the year ended December 31, 2023, was due to interest cost on the benefit obligation partially offset by benefits paid during the year.

A significant component of the overall decrease in the Company’s benefit obligation for the year ended December 31, 2022, was due to an actuarial gain, which was primarily due to an increase in the discount rate used to measure our benefit obligation from 3.00 % at December 31, 2021 to 5.60 % at December 31, 2022.

Change in plan assets:

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Benefits paid ( 45 ) ( 34 )

Settlement payments — ( 59 )

Fair value of plan assets at end of year $ 644 $ 680

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Net periodic benefit cost (income) $ ( 3 ) $ ( 4 ) $ 9

$ ( 4 ) $ 9 $ 17

Additional (gain) loss recognized due to:

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Beginning of year $ ( 87 ) $ ( 74 )

Net actuarial gain (loss) ( 13 ) ( 54 )

Amortization of net (gain) loss

Net actuarial (loss) gain

( 42 ) ( 13 )

Amortization of net loss (gain)

Amortization of prior service cost 1 1

Settlement charges — 6

End of year $ ( 127 ) $ ( 87 )

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Fixed income securities at December 31, 2024, primarily consist of a diversified portfolio of long duration instruments that are intended to mitigate interest rate risk or reduce the interest rate duration mismatch between the assets and liabilities of the Plan.

A smaller allocation (constituting 40 % of the fixed income target allocation) is to diversified credit investments in a range of

public and credit securities, including below investment grade rated bonds and loans, securitized credit and emerging market debt.

A smaller allocation (constituting 40 % of the fixed income target allocation) is to diversified credit investments in a range of public and credit securities, including below investment grade rated bonds and loans, securitized credit and emerging market debt.

Equity securities at December 31, 2024, consist primarily of investments in publicly traded common stocks and other equity-type securities issued by companies throughout the world, including convertible securities, preferred stock, rights and warrants.

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We also sponsor various defined benefit plans covering certain of our non-U.S.

employees, the most significant of which are in the UK.

Both of our UK plans have previously been frozen such that they are closed to new participants and existing participants can no longer earn future service credits.

At the end of 2023 and 2022, the projected benefit obligations of these UK plans totaled $ 190 million and $ 179 million, respectively and plan assets totaled $ 226 million and $ 209 million, respectively.

employees, the most significant of which are in the U.K.

Both of our U.K.

plans have previously been frozen such that they are closed to new participants and existing participants can no longer earn future service credits.

At the end of 2024 and 2023, the projected benefit obligations of these U.K.

plans totaled $ 170 million and $ 190 million, respectively, and plan assets totaled $ 197 million and $ 226 million, respectively.

These plans were both in a net overfunded position at the end of 2024 and 2023.

Total actuarial pre-tax losses related to the UK plans of $ 63 million and $ 64 million were recognized in AOCI at the end of both 2023 and 2022, respectively.

The total net periodic cost or benefit recorded was $ 2 million of cost in 2023, and net periodic benefit income of $ 2 million in 2022 and less than $ 1 million in 2021.

Total actuarial pre-tax losses related to the U.K.

plans of $ 72 million and $ 63 million

were recognized in AOCI at the end of 2024 and 2023, respectively.

The total net periodic cost or benefit recorded was less than $ 1 million of benefit in 2024, $ 2 million of cost in 2023 and $ 2 million of benefit in 2022.

The benefits expected to be paid associated with our U.K.

plans in each of the next five years are approximately $ 4 million and in aggregate for the five years thereafter are $ 22 million.

The funding rules for our pension plans outside of the U.S.

vary from country to country and depend on many factors including discount rates, performance of plan assets, local laws and regulations.

We do not plan to make significant contributions to either of our UK plans in 2024.

We do not plan to make significant contributions to either of our U.K.

plans in 2025.

Retiree Medical Benefits

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Actuarial pre-tax gains of $ 13 million and $ 15 million were recognized in AOCI at the end of 2024 and 2023, respectively.

The net periodic benefit cost or benefit recorded was less than $ 1 million of benefit in 2023, and $ 1 million of cost in 2022 and 2021.

The net periodic benefit cost or benefit recorded was less than $ 1 million of benefit in both 2024 and 2023 and $ 1 million of cost in 2022.

The weighted-average assumptions used to determine benefit obligations and net periodic benefit cost for the post-retirement medical plan are identical to those as shown for the U.S.

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We do not recognize compensation expense for the appreciation or the depreciation, if any, of investments in phantom shares of our Common Stock.

Our EID plan also allows certain participants to defer incentive compensation to purchase phantom shares of our Common Stock and receive a 33 % Company match on the amount deferred.

Our EID plan also allows certain participants to

defer incentive compensation to purchase phantom shares of our Common Stock and receive a 33 % Company match on the amount deferred.

Deferrals receiving a match are similar to an RSU award in that participants will generally forfeit both the match and incentive compensation amounts deferred if they voluntarily separate from employment during a vesting period that is two years from the date of deferral.

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As of December 31, 2024, $ 29 million of unrecognized compensation cost related to unvested stock options and SARs, which will be reduced by any forfeitures that occur, is expected to be recognized over a remaining weighted-average period of approximately 1.6 years.

The total fair value at grant date of awards held by YUM employees that vested during 2023, 2022 and 2021 was $ 31 million, $ 31 million and $ 35 million, respectively.

The total fair value at grant date of stock options and SARs held by YUM employees that vested during 2024, 2023 and 2022 was $ 28 million, $ 31 million and $ 31 million, respectively.

RSUs and PSUs

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Under the authority of our Board of Directors, we repurchased shares of our Common Stock during 2024, 2023 and 2022.

All amounts exclude applicable transaction fees.

All amounts exclude applicable transaction fees and excise taxes on share repurchases.

Shares Repurchased

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Authorization Date 2024 2023 2022 2024 2023 2022

2,916 — — $ 391 $ — $ —

September 2022 366 387 1,967 50 50 250

May 2021 — — 8,116 — — 950

November 2019 — — 4,746 — — 530

Total 387 10,083 12,981 (a)

$ 50 $ 1,200 $ 1,580 (a)

(a) 2021 amount excludes the effect of $ 11 million in share repurchases ( 0.1 million shares) with trade dates on, or prior to, December 31, 2020, but settlement dates subsequent to December 31, 2020.

In September 2022, our Board of Directors authorized share repurchases of up to $ 2 billion (excluding applicable transaction fees) of our outstanding Common Stock through June 30, 2024.

The new 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.

Total 3,282 387 10,083 $ 441 $ 50 $ 1,200

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.

The new authorization took effect on July 1, 2024 upon the expiration 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 the May 2024 authorization.

Changes in AOCI are presented below.

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Balance at December 31, 2023, net of tax

$ ( 201 ) $ ( 104 ) $ 3 $ ( 302 )

OCI, net of tax

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$ ( 238 ) $ ( 143 ) $ ( 11 ) $ ( 392 )

(a) Amounts reclassified from AOCI for pension and post-retirement benefit plans losses during 2023 include amortization of prior service cost of $ 1 million.

Amounts reclassified from AOCI for pension and post-retirement benefit plans losses during 2022 include amortization of net losses of $ 22 million , amortization of prior service cost of $ 5 million, settlement charges of $ 7 million and related income tax benefit of $ 6 million.

(a) Amounts reclassified from AOCI for pension and post-retirement benefit plans losses during 2024 include amortization of net losses of $ 2 million and amortization of prior service cost of $ 1 million.

Amounts reclassified from AOCI for pension and post-retirement benefit plans losses during 2023 include amortization of prior service cost of $ 1 million.

(b) See Note 13 for details on amounts reclassified from AOCI.

Amounts include previously cash settled treasury locks relating to our Senior Unsecured Notes due in 2037 which are being reclassified into earnings through 2037 to interest expense.

Note 18 – Income Taxes

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Intercompany restructuring and Valuations of Intellectual Property ( 1.5 ) ( 9.1 ) ( 4.9 )

Nondeductible interest — — 1.4

Impact of tax law changes — — ( 3.8 )

Other, net — ( 0.1 ) 0.3

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foreign tax credits.

In 2023, this item was unfavorably impacted by a statutory tax rate increase in Switzerland.

The unfavorability in 2024 as compared to prior years was largely driven by shifts in income to higher-rate jurisdictions and increased rates in certain, existing foreign jurisdictions.

Adjustments to reserves and prior years.

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and (2) the effects of reconciling income tax amounts recorded in our Consolidated Statements of Income to amounts reflected on our tax returns, including any adjustments to the Consolidated Balance Sheets.

In 2023, this item was unfavorably impacted by $ 41 million of newly established reserves associated with a correction in the timing of capital loss utilization related to historical refranchising gains to tax years with a lower statutory tax rate, partially offset by $ 18 million of reserve releases associated with prior year

filing positions in various jurisdictions.

In 2022, this item was unfavorably impacted by $ 17 million of adjustments made to current and deferred tax accounts in various jurisdictions to align with balances supported by 2021 and prior tax filings.

Additionally, in 2022 this item was unfavorably impacted by $ 9 million of reserves established associated with prior year filing positions in various jurisdictions.

In 2021, this item was unfavorably impacted by a $ 22 million reserve established due to a challenge of a prior year filing position in a foreign jurisdiction.

Change in valuation allowances.

This item relates to changes for deferred tax assets generated or utilized during the current year and changes in our judgment regarding the likelihood of using deferred tax assets that existed at the beginning of the year.

In 2022, this item was favorably impacted by $ 13 million of tax benefit associated with a valuation allowance release in a foreign jurisdiction resulting from a change in management’s judgement as to the realizability of deferred tax assets in that jurisdiction.

In 2021, this item was favorably impacted by $ 15 million of tax benefit associated with a valuation allowance release resulting from a change in management’s judgment as to the realizability of foreign tax credit carryforwards in the U.S.

In 2023, this item was unfavorably impacted by $ 41 million of

newly established reserves associated with a correction in the timing of capital loss utilization related to historical refranchising gains to tax years with a lower statutory tax rate.

Impact of Russia Exit.

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Intercompany Restructuring and Valuations of Intellectual Property.

In July 2021, we concentrated management responsibility for European (excluding the UK) KFC franchise development, support operations and management oversight in Switzerland (the “KFC Europe Reorganization”).

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.

In December 2021, we continued our KFC Europe Reorganization and completed intra-entity transfers of additional European KFC IP rights from subsidiaries in the U.S.

In 2021, we concentrated management responsibility for European (excluding the U.K.) KFC franchise development, support operations and management oversight in Switzerland (the “KFC Europe Reorganization”).

Concurrent with this change in management responsibility, we completed intra-entity transfers of certain KFC IP rights from subsidiaries in the U.K.

to subsidiaries in Switzerland.

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

As a result of these transfers, we recorded a net one-time tax benefit of $ 187 million in 2021.

In the year ended December 31, 2022, we performed an annual valuation under Swiss laws of these Swiss IP rights, incorporating current assumptions around the expected future cash flows attributable to the IP.

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Consistent with the objectives of the IP restructuring transactions discussed above, in December 2023, we completed intra-entity transfers of certain Asia region IP rights to Singapore.

In addition, certain remaining Asian IP rights were transferred to the U.S.

In addition, certain remaining Asia region IP rights were transferred to the U.S.

As a result of these transfers, we recorded a net tax benefit of $ 30 million comprised of $ 14 million of current tax expense and a one-time deferred tax benefit of $ 44 million primarily associated with establishing deferred tax assets on amortizable tax basis in the U.S.

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We also recorded a $ 29 million deferred tax benefit associated with tax credit which represents the portion of the $ 38 million tax credit that we anticipate utilizing against income tax before expiration.

Nondeductible Interest.

As a result of the enactment of the Tax Cuts and Jobs Act of 2017 (“Tax Act”) on December 22, 2017, deductibility of U.S.

interest expense was limited to 30 % of U.S.

Earnings Before Interest, Taxes, Depreciation and Amortization.

Beginning in 2022, deductibility of U.S.

interest expense is limited to 30% of U.S.

Earnings Before Interest and Taxes.

Although the disallowed interest can be carried forward indefinitely, in management’s judgment interest carried forward will not be realizable in the future.

In 2021, the Company recorded $ 23 million of related tax expense while in 2023 and 2022, the Company did not record any tax expense associated with disallowed U.S.

interest expense.

Impact of Tax Law Changes.

UK Tax Rate Change – On June 10, 2021, the UK Finance Act 2021 was enacted resulting in an increase in the UK corporate tax rate from 19 % to 25 %.

As such, the Company recognized a $ 64 million tax benefit in the quarter ended June 30, 2021, associated with remeasuring its deferred tax assets in the UK, which primarily related to amortizable tax basis that arose as a result of previous IP transfers to the UK.

In December 2024, to facilitate business needs and centralize digital and technology assets in the U.S., we filed tax elections which resulted in the deemed liquidation of certain foreign subsidiaries in Australia and Israel.

In addition, we completed the intra-entity transfer of software from these subsidiaries to subsidiaries in the U.S.

As a result of these transactions, we recorded a net tax benefit of $ 28 million comprised of $ 15 million of current tax benefit associated with U.S.

federal and state tax deductions, and a one-time net deferred tax benefit of $ 13 million primarily associated with establishing deferred tax assets on amortizable tax basis in the U.S.

Companies subject to the Global Intangible Low-Taxed Income provision (“GILTI”) have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for outside basis temporary differences expected to reverse as GILTI.

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Foreign tax credits (US Tax Return) 164 164 ( 117 ) 2025-2034

150 150 ( 117 ) 2026-2032

Foreign country tax credits 36 36 ( 13 ) 2031

38 38 ( 9 ) 2031

State interest deduction carryforward - Indefinite 758 32 ( 30 ) None

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End of Year $ 126 $ 151

The Company believes it is reasonably possible that its unrecognized tax benefits as of December 31, 2023, may decrease by approximately $ 23 million in the next 12 months due to settlements or statute of limitations expirations.

During 2023, 2022, and 2021 the Company recognized $ 20 million, less than $ 1 million, and $ 4 million of net expense, respectively, for interest and penalties in our Consolidated Statements of Income as components of its Income tax provision.

The Company has recorded $ 16 million of net tax payables and $ 3 million of net tax receivables, as of December 31, 2023 and 2022, respectively, associated with interest and penalties.

During 2024, 2023, and 2022 the Company recognized $ 3 million, $ 20 million, and less than $ 1 million of net expense, respectively, for interest and penalties in our Consolidated Statements of Income as components of its Income tax provision.

The Company has recorded $ 20 million and $ 16 million of net tax payables, as of December 31, 2024 and 2023, respectively, associated with interest and penalties.

The Company’s income tax returns are subject to examination in the U.S.

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See Note 1 for a description of our operating segments.

The Company's operating segments maintain separate financial information, and the CODM, the Company's Chief Executive Officer, evaluates the operating segments' operating results on a regular basis in deciding how to allocate resources among the segments and in assessing segment performance.

The CODM evaluates the performance of the Company's segments based on Divisional Operating Profit and is involved in determining and reviewing forecasted Divisional Operating Profit as part of the annual plan process.

Throughout the year, the CODM considers forecast to actual results and variances on a monthly and quarterly basis to allocate resources for the segments' operations.

The CODM also considers this information in determining how to prioritize capital allocation, including investments in restaurant development, technology and human capital, maintaining a strong and flexible balance sheet, offering a competitive dividend and returning excess cash to shareholders.

The significant expense categories and amounts presented in the tables below align with the segment-level information that is regularly provided to the CODM.

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

Company Sales (a)

$ 801 $ 1,155 $ 8 $ 588 $ 2,552

KFC Division (a)

Franchise and property revenues (a)

1,685 997 622 9 3,313

Taco Bell Division (a)

Franchise contributions for advertising and other services (a)

613 708 378 3 1,702

Pizza Hut Division (a)

3,099 2,860 1,008 600 7,567

Habit Burger Grill Division (a)

Company restaurant expenses 703 872 8 529 2,112

General and administrative expenses 363 199 219 54 835

Franchise and property expenses 63 33 34 4 134

Franchise advertising and other services expense 610 708 390 3 1,711

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

Division Operating Profit

$ 1,363 $ 1,049 $ 373 $ — $ 2,785

Operating Profit

Unallocated amounts:

Corporate and unallocated G&A expenses (c)(d)

Unallocated Company restaurant expenses (e)

Unallocated Franchise and property revenues (c)

Unallocated Refranchising gain (loss) 34

Unallocated Other income (expense) (c)

Consolidated Operating Profit 2,403

Investment income (expense), net ( 21 )

Other pension income (expense) 7

Interest expense, net ( 489 )

Income before income taxes $ 1,900

Other Segment Disclosures

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

Depreciation and Amortization (f)

$ 37 $ 76 $ 24 $ 31 $ 7 $ 175

KFC Division $ 1,304 $ 1,198 $ 1,230

Capital Spending 73 98 15 39 32 257

Identifiable Assets (g)

2,611 1,626 732 613 1,145 6,727

Long-Lived Assets (h)

1,269 991 365 548 164 3,337

Taco Bell Division

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Habit Burger & Grill Division

Corporate and unallocated G&A expenses (b)(c)

Company Sales (a)

$ 484 $ 1,069 $ 14 $ 575 $ 2,142

Unallocated Franchise and property expenses (b)(c)

Franchise and property revenues (a)

1,698 918 622 9 3,247

Unallocated Refranchising gain (loss) (b)

Unallocated Other income (expense) (b)(c)

Franchise contributions for advertising and other services (a)

648 654 383 2 1,687

Operating Profit 2,318 2,187 2,139

Investment income (expense), net (b)

Other pension income (expense) (b)

2,830 2,641 1,019 586 7,076

Interest expense, net (b)

Company restaurant expenses 417 817 14 526 1,774

General and administrative expenses 383 204 221 59 867

Franchise and property expenses 72 32 15 3 122

Franchise advertising and other services expense 648 644 389 2 1,683

Other (income) expense 6 — ( 11 ) 10 5

Division Operating Profit (Loss)

$ 1,304 $ 944 $ 391 $ ( 14 ) $ 2,625

Unallocated amounts:

Corporate and unallocated G&A expenses (d)(i)

Unallocated Franchise and property expenses (i)

Unallocated Refranchising gain (loss) 29

Unallocated Other income (expense) (i)

Consolidated Operating Profit 2,318

Investment income (expense), net 7

Other pension income (expense) 6

Interest expense, net ( 513 )

Income before income taxes $ 1,818

Depreciation and Amortization

2023 2022 2021

KFC Division $ 22 $ 23 $ 28

Other Segment Disclosures

Taco Bell Division

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Habit Burger & Grill Division

Corporate 20 27 23

Corporate and Unallocated

Depreciation and Amortization (f)

$ 22 $ 61 $ 20 $ 30 $ 20 $ 153

Capital Spending 73 101 12 64 35 285

Identifiable Assets (g)

2,281 1,544 814 630 962 6,231

KFC Division $ 73 $ 71 $ 60

Taco Bell Division 101 101 62

Pizza Hut Division 12 22 18

Habit Burger Grill Division 64 56 56

Corporate 35 29 34

Long-Lived Assets (h)

891 975 378 580 156 2,980

Identifiable Assets (e)

KFC Division $ 2,281 $ 2,227

Taco Bell Division

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Habit Burger & Grill Division

Corporate (d)

Company Sales (a)

$ 491 $ 1,002 $ 21 $ 558 $ 2,072

Long-Lived Assets (f)

KFC Division $ 891 $ 893

Franchise and property revenues (a)

1,645 837 607 7 3,096

Franchise contributions for advertising and other services (a)

698 598 376 2 1,674

2,834 2,437 1,004 567 6,842

Company restaurant expenses 426 766 21 532 1,745

General and administrative expenses 390 191 211 51 843

Franchise and property expenses 69 33 13 2 117

Franchise advertising and other services expense 684 599 382 2 1,667

Other (income) expense 67 ( 2 ) ( 10 ) 4 59

Division Operating Profit (Loss)

$ 1,198 $ 850 $ 387 $ ( 24 ) $ 2,411

Unallocated amounts:

Corporate and unallocated G&A expenses (d)(i)

Unallocated Franchise and property expenses (i)

Unallocated Refranchising gain (loss) 27

Unallocated Other income (expense) (i)

Consolidated Operating Profit 2,187

Investment income (expense), net 11

Other pension income (expense) ( 9 )

Interest expense, net ( 527 )

Income before income taxes $ 1,662

Other Segment Disclosures

Taco Bell Division

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Habit Burger & Grill Division

Corporate 156 128

Corporate and Unallocated

Depreciation and Amortization (f)

$ 23 $ 48 $ 19 $ 29 $ 27 $ 146

Capital Spending 71 101 22 56 29 279

revenues included in the combined KFC, Taco Bell, Pizza Hut and Habit Burger & Grill Divisions totaled $ 4.3 billion in 2024, $ 4.1 billion in 2023 and $ 3.9 billion in 2022.

(b) Amounts have not been allocated to any segment for performance reporting purposes.

(c) Our operating results presented herein reflect revenues from and expenses to support the Russian operations for KFC and Pizza Hut prior to the dates of sale or transfer (see Note 3), within their historical financial statement line items and operating segments.

(c) As a result of our acquisition of the master franchise rights in Germany for KFC and Pizza Hut and the termination of our franchise agreements with the owner and operator of KFC and Pizza Hut restaurants in Turkey (see Note 5), 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 G&A 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 (see Note 5).

(d) Corporate and unallocated G&A expenses include charges of $ 78 million, $ 21 million and $ 11 million in the years ended December 31, 2024, 2023 and 2022, respectively, related to our resource optimization program (see Note 5).

(e) Unallocated Company restaurant expenses include amortization of reacquired franchise rights.

(f) The amounts of depreciation and amortization disclosed by reportable segment are primarily included within the segment expense captions of Company restaurant expenses and G&A expenses.

identifiable assets included in the combined Corporate and unallocated and KFC, Taco Bell, Pizza Hut, and Habit Burger & Grill Divisions totaled $ 2.9 billion at 2024 and $ 2.8 billion at 2023.

Corporate and unallocated identifiable assets primarily include cash and deferred tax assets.

(h) Includes PP&E, net, goodwill, intangible assets, net and Operating lease-right-of-use assets.

(i) Our operating results presented herein reflect revenues from and expenses to support the Russian operations for KFC and Pizza Hut prior to the dates of sale or transfer (see Note 3), within their historical financial statement line items and operating segments.

However, given our decision to exit Russia and our pledge to direct any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts, we reclassed such net profits and losses subsequent to that date from the Division segment results in which they were earned to Unallocated Other income (expense).

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We recorded similar charges of $ 7 million to Corporate and Unallocated G&A expenses and $ 6 million to Unallocated Franchise and property expenses during the year ended December 31, 2022.

(d) Primarily includes cash and deferred tax assets.

identifiable assets included in the combined Corporate and KFC, Taco Bell, Pizza Hut, and Habit Burger Grill Divisions totaled $ 2.8 billion at both 2023 and 2022.

(f) Includes PP&E, net, goodwill, intangible assets, net and Operating lease right-of-use assets.

Excludes KFC Russia long-lived assets of $ 108 million as of December 31, 2022 which were classified as held for sale and are included in Prepaid expenses and other current assets in our Consolidated Balance Sheet (see Note 9).

Note 20 – Contingencies

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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.

The Company does not expect resolution of this matter within twelve months and cannot predict with certainty the timing of such resolution.

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These leases have varying terms, the latest of which expires in 2065 .

As of December 31, 2023, the potential amount of undiscounted payments we could be required to make in the event of non-payment by the primary lessee was approximately $ 375 million.

As of December 31, 2024, the potential amount of undiscounted payments we could be required to make in the event of non-payment by the primary lessee was approximately

$ 350 million.

The present value of these potential payments discounted at our pre-tax cost of debt at December 31, 2024, was approximately $ 300 million.

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Due to the inherent volatility of actuarially determined property and casualty loss estimates, it is reasonably possible that we could experience changes in estimated losses which could be material.

We believe that we have recorded reserves for property

and casualty losses at a level which has substantially mitigated the potential negative impact of adverse developments and/or volatility.

We believe that we have recorded reserves for property and casualty losses at a level which has substantially mitigated the potential negative impact of adverse developments and/or volatility.

and in certain other countries, we are also self-insured for healthcare claims and long-term disability for eligible participating employees subject to certain deductibles and limitations.

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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 that had been scheduled for January 21, 2025 has been rescheduled to March 18, 2025.

A hearing scheduled for February 4, 2025, before the Delhi High Court has been continued to April 29, 2025, and the stay order remains in effect.

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

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data