What changed in this filing

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Item 1. Financial Statements

2025-08-07 compared with 2025-05-07 · 229 added, 62 removed, 513 unchanged (36% of the section changed)

3 unchanged sentences

(in millions, except per share data)

Quarter ended

Quarter ended Year to date

Revenues 6/30/2025 6/30/2024 6/30/2025 6/30/2024

25 unchanged sentences

(in millions)

Quarter ended

Quarter ended Year to date

6/30/2025 6/30/2024 6/30/2025 6/30/2024

3 unchanged sentences

Adjustments and gains (losses) arising during the period

51 2 76 ( 8 )

Reclassification of adjustments and (gains) losses into Net Income — — —

51 2 76 ( 8 )

Tax (expense) benefit

51 2 76 ( 8 )

Changes in pension and post-retirement benefits

5 unchanged sentences

Reclassification of (gains) losses into Net Income

( 3 ) ( 8 ) ( 11 ) ( 16 )

— ( 4 ) ( 7 ) —

Tax (expense) benefit

— ( 3 ) ( 5 ) —

Other comprehensive income (loss), net of tax

51 — 73 ( 7 )

Comprehensive Income $ 426 $ 367 $ 701 $ 674

3 unchanged sentences

(in millions)

Quarter ended

6/30/2025 6/30/2024

15 unchanged sentences

Proceeds from sale of Devyani Investment — 104

Acquisition of KFC U.K.

and Ireland restaurants

Other restaurant acquisitions ( 98 ) —

Proceeds from refranchising of restaurants 32 30

1 unchanged sentence

Other, net ( 13 ) 2

Net Cash Provided By Investing Activities

Net Cash Used in Investing Activities

( 130 ) ( 253 )

Cash Flows – Financing Activities

Proceeds from long-term debt — 237

Repayments of long-term debt ( 12 ) ( 463 )

Revolving credit facility, three months or less, net 50 175

Short-term borrowings by original maturity

More than three months - proceeds

More than three months - payments

Three months or less, net

Repurchase shares of Common Stock ( 338 ) ( 50 )

42 unchanged sentences

AND SUBSIDIARIES

Quarters ended March 31, 2025 and 2024

Quarters and years to date ended June 30, 2025 and 2024

(in millions)

2 unchanged sentences

Shares Amount

Balance at March 31, 2025

278 $ — $ ( 7,434 ) $ ( 371 ) $ ( 7,804 )

Net Income 374 374

Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature 51 51

Comprehensive Income 426

Dividends declared ( 198 ) ( 198 )

Repurchase of shares of Common Stock (1)

( 1 ) ( 4 ) ( 105 ) ( 109 )

Employee share-based award exercises — ( 13 ) ( 13 )

Share-based compensation events 17 17

Balance at June 30, 2025

278 $ — $ ( 7,361 ) $ ( 319 ) $ ( 7,680 )

Balance at December 31, 2024

2 unchanged sentences

Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature 76 76

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

Pension and post-retirement benefit plans

Derivative instruments (net of tax impact of $ 2 million)

5 unchanged sentences

Share-based compensation events 43 43

Balance at June 30, 2025

278 $ — $ ( 7,361 ) $ ( 319 ) $ ( 7,680 )

Balance at March 31, 2024

281 $ 45 $ ( 7,492 ) $ ( 309 ) $ ( 7,756 )

Net Income 367 367

Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature 2 2

Pension and post-retirement benefit plans 1 1

Derivative instruments (net of tax impact of $ 1 million)

Comprehensive Income 367

Dividends declared ( 190 ) ( 190 )

Repurchase of shares of Common Stock — ( 44 ) ( 6 ) ( 50 )

Employee share-based award exercises — ( 19 ) ( 19 )

Share-based compensation events 18 18

Balance at June 30, 2024

281 $ — $ ( 7,321 ) $ ( 309 ) $ ( 7,630 )

Balance at December 31, 2023

3 unchanged sentences

Pension and post-retirement benefit plans

Derivative instruments (net of tax impact of $ 1 million)

Comprehensive Income 674

3 unchanged sentences

Share-based compensation events 50 50

Balance at March 31, 2024

Balance at June 30, 2024

281 $ — $ ( 7,321 ) $ ( 309 ) $ ( 7,630 )

8 unchanged sentences

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.

As of March 31, 2025, 98 % of these restaurants were owned and operated by franchisees.

As of June 30, 2025, 98 % of these restaurants were owned and operated by franchisees.

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

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

As of March 31, 2025, YUM consisted of four operating segments:

As of June 30, 2025, YUM consisted of four operating segments:

• The KFC Division which includes our worldwide operations of the KFC concept

15 unchanged sentences

Our significant interim accounting policies include the recognition of advertising and marketing costs, generally in proportion to revenue, and the recognition of income taxes using an estimated annual effective tax rate.

We have reclassified certain items in the Financial Statements for the prior periods to be comparable with the classification for the quarter ended March 31, 2025.

We have reclassified certain items in the Financial Statements for the prior periods to be comparable with the classification for the quarter and year to date ended June 30, 2025.

These reclassifications had no effect on previously reported Net Income.

Note 2 - KFC United Kingdom ("U.K.") and Ireland Restaurant Acquisition

Note 2 - Restaurant Acquisitions

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

The acquisition created a significant opportunity to accelerate KFC's growth strategy in the

large and growing U.K.

and Ireland chicken market.

paid in 2025, offset by the settlement of a liability of $ 3 million related to our preexisting contractual relationship with the franchisee.

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 March 31, 2025, we adjusted our preliminary estimate of the fair value of net assets acquired.

The components of the preliminary purchase price allocation, subsequent to the adjustments to the allocation in the quarter ended March 31, 2025 and prior quarters were as follows:

During the quarter ended June 30, 2025, we finalized our preliminary estimate of the fair value of net assets acquired.

The components of the final purchase price allocation, subsequent to the adjustments to the allocation in the quarter ended June 30, 2025 and prior quarters were as follows:

Total Current Assets $ 2

19 unchanged sentences

Total increase in Goodwill $ 14

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.

Other Restaurant Acquisitions

In addition to the acquisition discussed above, we acquired 58 and 63 restaurants from franchisees in the quarter and year to date ended June 30, 2025, respectively, including 12 KFC, 15 Taco Bell and 36 Pizza Hut restaurants (the "Other restaurant acquisitions").

Total cash consideration paid in connection with these acquisitions was $ 98 million, net of cash acquired.

These restaurant acquisitions were accounted for as business combinations using the acquisition method of accounting.

The primary assets recorded as a result of the preliminary purchase price allocations were operating lease right-of-use assets (and corresponding lease liabilities) of $ 44 million, reacquired franchise rights of $ 43 million and goodwill of $ 42 million.

Reacquired franchise rights, which were valued similarly to those in the KFC U.K.

and Ireland restaurant acquisition, have estimated weighted average useful lives of 5 years for the KFCs, 17 years for the Taco Bells and 6 years for the Pizza Huts.

For both the KFC U.K.

and Ireland restaurant acquisition and the Other restaurant acquisitions, t he excess of the purchase price over the estimated fair value of the net, identifiable assets acquired was recorded as goodwill.

The goodwill recognized represents expected benefits of the acquisitions 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 Condensed Consolidated Financial Statements since the date of the acquisition but did not significantly impact our results for the quarter ended March 31, 2025.

Pro forma financial information of the combined entities for the periods prior to acquisition is not presented due to the immaterial impact of the acquisition on our Condensed Consolidated Financial Statements.

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

The goodwill is expected to be partially deductible for income tax purposes and has been allocated to the respective reporting units.

The financial results of all acquired restaurants have been included in our Condensed Consolidated Financial Statements since the respective dates of acquisition, which individually and in the aggregate, did not significantly impact our results for the quarter and year to date ended June 30, 2025.

Pro forma financial information of the combined entities for the periods prior to acquisition is not presented due to the immaterial impact of the restaurant acquisitions on our Condensed Consolidated Financial Statements.

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

Note 3 - Earnings Per Common Share (“EPS”)

Quarter ended

Quarter ended Year to date

2025 2024 2025 2024

Net Income $ 374 $ 367 $ 628 $ 681

5 unchanged sentences

Unexercised employee SARs, RSUs, PSUs and stock options (in millions) excluded from the diluted EPS computation (a)

1.5 1.9 1.5 1.8

(a) These unexercised employee stock appreciation rights (“SARs”), restricted stock units (“RSUs”), performance share units (“PSUs”) and stock options were not included in the computation of diluted EPS because to do so would have been antidilutive for the periods presented.

Note 4 - Shareholders' Deficit

Under the authority of our Board of Directors, we repurchased shares of our Common Stock during the quarters ended March 31, 2025 and 2024 as indicated below.

Under the authority of our Board of Directors, we repurchased shares of our Common Stock during the years to date ended June 30, 2025 and 2024 as indicated below.

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

4 unchanged sentences

2,296 — $ 336 $ — $ 1,274

Total 1,556 —

September 2022 — 366 — 50 —

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.

As of March 31, 2025, we have remaining capacity to repurchase up to $ 1.4 billion of Common Stock under the May 2024 authorization.

As of June 30, 2025, we have remaining capacity to repurchase up to $ 1.3 billion of Common Stock under the May 2024 authorization.

Changes in Accumulated other comprehensive loss (“AOCI”) are presented below.

Translation Adjustments and Gains (Losses) From Intra-Entity Transactions of a Long-Term Nature Pension and Post-Retirement Benefits Derivative Instruments Total

Balance at December 31, 2024, net of tax

Balance at March 31, 2025, net of tax

$ ( 213 ) $ ( 141 ) $ ( 16 ) $ ( 371 )

3 unchanged sentences

— — ( 2 ) ( 2 )

Balance at June 30, 2025, net of tax

$ ( 162 ) $ ( 141 ) $ ( 16 ) $ ( 319 )

Balance at March 31, 2025, net of tax

Balance at December 31, 2024, net of tax

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

OCI, net of tax

Gains (losses) arising during the period classified into AOCI, net of tax

(Gains) losses reclassified from AOCI, net of tax

— 2 ( 8 ) ( 6 )

76 2 ( 5 ) 73

Balance at June 30, 2025, net of tax $ ( 162 ) $ ( 141 ) $ ( 16 ) $ ( 319 )

Note 5 - Other (Income) Expense

Quarter ended

Quarter ended Year to date

6/30/2025 6/30/2024 6/30/2025 6/30/2024

31 unchanged sentences

Other assets $ 1,400 $ 1,329

(a) Non-current operating lease liabilities of $ 869 million and $ 862 million as of March 31, 2025 and December 31, 2024, respectively, are included in Other liabilities and deferred credits in our Condensed Consolidated Balance Sheets.

(a) Non-current operating lease liabilities of $ 921 million and $ 862 million as of June 30, 2025 and December 31, 2024, respectively, are included in Other liabilities and deferred credits in our Condensed Consolidated Balance Sheets.

Reconciliation of Cash and Cash Equivalents for Condensed Consolidated Statements of Cash Flows

7 unchanged sentences

Note 7 - Income Taxes

Quarter ended

Quarter ended Year to date

2025 2024 2025 2024

Income tax provision

$ 125 $ 120 $ 301 $ 189

Effective tax rate 25.1 % 24.7 % 32.4 % 21.8 %

2 unchanged sentences

taxes on foreign earnings partially offset by taxes on income earned in foreign jurisdictions with statutory tax rates below 21 %.

Additionally, in the quarter ended March 31, 2025, we have recorded the reserve as discussed below.

Our first quarter effective tax rate was higher than the prior year primarily due to the unfavorable impact of recording a $ 92 million reserve.

The reserve was the result of a change in management's judgment around a Mexican subsidiary's ability to utilize certain losses to offset recapture gains triggered by a tax deconsolidation in Mexico in 2009.

Additionally, in the quarter and year to date ended June 30, 2025, we have recorded the reserves as discussed below.

Our second quarter and year to date effective tax rate is higher than the prior year primarily due to the unfavorable impact of recording $ 10 million and $ 102 million, respectively, related to a reserve associated with a Mexican subsidiary's ability to utilize certain losses to offset recapture gains triggered by a tax deconsolidation in Mexico in 2009.

During the quarter ended March 31, 2025, a Mexican court ruled that such losses could not be utilized to offset the recapture gain.

As such, the Company recorded the reserve and continues to record the ongoing foreign exchange and inflationary adjustments associated with the reserve.

The Company is appealing the decision and does not expect resolution of this matter within twelve months.

Subsequent to the end of the second quarter, on July 4, 2025, H.R.1, commonly known as the One Big Beautiful Bill Act ("OBBBA") was enacted into law in the U.S.

As the legislation was enacted into law after June 30, 2025, it had no impact on our income tax provision for the quarter and year to date ended June 30, 2025.

The Company is in the process of evaluating the effects of the legislation on our ability to utilize approximately $70 million of existing foreign tax credit related deferred tax assets prior to their expiration.

We anticipate that any change in management's judgment regarding our ability to use these foreign tax credits would be recorded through our Income tax provision in the quarter ended September 30, 2025.

Note 8 - Revenue Recognition

13 unchanged sentences

Franchise contributions for advertising and other services 156 3 17 — 177

$ 773 $ 657 $ 231 $ 128 $ 1,788 (a)

(a) Does not include a charge of $ 1 million to Unallocated Franchise revenues during the quarter ended March 31, 2025.

$ 849 $ 711 $ 239 $ 134 $ 1,933

Quarter ended 6/30/2024

10 unchanged sentences

$ 717 $ 666 $ 239 $ 141 $ 1,763

Year to date 6/30/2025

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

Company sales $ 47 $ 546 $ 10 $ 255 $ 858

Franchise revenues 85 436 126 4 650

Property revenues 6 17 2 2 27

Franchise contributions for advertising and other services 20 330 136 1 488

Franchise revenues 134 — 34 — 168

Company sales 415 4 — — 419

Franchise revenues 598 29 128 — 755

Property revenues 21 — 1 — 22

Franchise contributions for advertising and other services 296 6 33 — 335

$ 1,622 $ 1,368 $ 470 $ 262 $ 3,721 (a)

(a) Does not include a charge of $ 1 million to Unallocated Franchise revenues during the year to date ended June 30, 2025.

Year to date 6/30/2024

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

Company sales $ 28 $ 508 $ 4 $ 266 $ 806

Franchise revenues 90 397 134 3 624

Property revenues 6 19 2 1 28

Franchise contributions for advertising and other services 20 307 146 1 474

Franchise revenues 130 — 34 — 164

Company sales 240 — — — 240

Franchise revenues 554 28 125 — 707

Property revenues 22 — 1 — 23

Franchise contributions for advertising and other services 259 5 31 — 295

$ 1,349 $ 1,264 $ 477 $ 271 $ 3,361

Contract Liabilities

5 unchanged sentences

Increase for upfront fees associated with contracts that became effective during the period, net of amounts recognized as revenue during the period 33

Balance at March 31, 2025

Balance at June 30, 2025

(a) Primarily includes the impact of foreign currency translation.

10 unchanged sentences

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

Our CODM manages assets on a consolidated basis.

52 unchanged sentences

Corporate and unallocated G&A expenses (c)

Unallocated Company restaurant expenses (d)

Unallocated Refranchising gain (loss) 14

1 unchanged sentence

Consolidated Operating Profit 607

Investment income (expense), net

Other pension income (expense) 1

Interest expense, net ( 121 )

Income before income taxes $ 487

Other Segment Disclosures

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

Depreciation and Amortization (e)

$ 8 $ 15 $ 4 $ 7 $ 8 $ 41

Capital Spending

10 20 3 9 8 50

Year to date 6/30/2025

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

Company Sales (a)

$ 461 $ 550 $ 10 $ 255 $ 1,277

Franchise and property revenues (a)

844 482 290 5 1,621

Franchise contributions for advertising and other services (a)

316 336 169 1 823

1,622 1,368 470 262 3,721

Company restaurant expenses 411 421 11 230 1,074

General and administrative expenses 166 98 109 26 399

Franchise and property expenses 36 13 21 2 73

Franchise advertising and other services expense 311 333 179 1 824

Other (income) expense — — ( 5 ) — ( 4 )

Division Operating Profit

$ 697 $ 502 $ 155 $ 2 $ 1,355

Unallocated amounts:

Corporate and unallocated G&A expenses (c)

Unallocated Company restaurant expenses (d)

Unallocated Franchise and property revenues

Unallocated Refranchising gain (loss) 16

Unallocated Other income (expense)

Consolidated Operating Profit 1,170

Investment income (expense), net 1

Other pension income (expense) 1

Interest expense, net ( 243 )

Income before income taxes $ 929

Other Segment Disclosures

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

Depreciation and Amortization (e)

$ 22 $ 32 $ 9 $ 13 $ 14 $ 89

Capital Spending 37 49 15 18 23 142

Year to date 6/30/2024

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

Company Sales (a)

$ 268 $ 508 $ 4 $ 266 $ 1,046

Franchise and property revenues (a)

802 444 296 4 1,546

Franchise contributions for advertising and other services (a)

279 312 177 1 769

1,349 1,264 477 271 3,361

Company restaurant expenses 236 385 4 244 869

General and administrative expenses 167 96 102 27 392

Franchise and property expenses 26 16 10 2 54

Franchise advertising and other services expense 276 310 181 1 768

Other (income) expense ( 3 ) ( 1 ) ( 7 ) — ( 11 )

Division Operating Profit (Loss)

$ 647 $ 458 $ 187 $ ( 3 ) $ 1,289

Unallocated amounts:

Corporate and unallocated G&A expenses (c)

Unallocated Company restaurant expenses (d)

Unallocated Franchise and property revenues

Unallocated Refranchising gain (loss) 19

Unallocated Other income (expense)

Consolidated Operating Profit 1,127

Investment income (expense), net (f)

8 unchanged sentences

18 41 6 18 16 99

revenues included in the combined KFC, Taco Bell, Pizza Hut and Habit Burger & Grill Divisions totaled $ 1.0 billion and $ 0.9 billion in the quarters ended March 31, 2025 and 2024, respectively.

revenues included in the combined KFC, Taco Bell, Pizza Hut and Habit Burger & Grill Divisions totaled $ 1.0 billion in both the quarters ended June 30, 2025 and 2024, and $ 2.0 billion and $ 1.9 billion in the years to date ended June 30, 2025 and 2024, respectively.

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

(c) Corporate and unallocated G&A expenses include charges of $ 17 million and $ 21 million in the quarters ended March 31, 2025 and 2024, respectively, related to our resource optimization program and $ 7 million in the quarter ended March 31, 2025 related to our brand headquarters consolidation.

(c) Corporate and unallocated G&A expenses include charges of $ 14 million and $ 25 million in the quarters ended June 30, 2025 and 2024, respectively, related to our resource optimization program and $ 10 million in the quarter ended June 30, 2025 related to our brand headquarters consolidation.

Corporate and unallocated G&A expenses include charges of $ 32 million and $ 46 million in the years to date ended June 30, 2025 and 2024, respectively, related to our resource optimization program and $ 17 million in the year to date ended June 30, 2025 related to our brand headquarters consolidation.

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

(e) 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 .

(f) Investment income (expense), net includes $ 20 million of pre-tax investment losses related to the sale of our approximate 5% minority interest in Devyani International Limited during the quarter ended March 31, 2024.

(f) Investment income (expense), net includes $ 20 million of pre-tax investment losses related changes in fair value of our approximate 5 % minority interest in Devyani International Limited prior to the date of sale during the year to date ended June 30, 2024.

Note 10 - Pension Benefits

9 unchanged sentences

pension plans are as follows:

Quarter ended

Quarter ended Year to date

2025 2024 2025 2024

Service cost $ 1 $ 1 $ 2 $ 2

1 unchanged sentence

Expected return on plan assets ( 14 ) ( 13 ) ( 27 ) ( 26 )

Amortization of net (gain) / loss 1 1 1 1

Amortization of prior service cost 1 1 1 1

Net periodic benefit cost (income)

1 unchanged sentence

Additional loss recognized due to settlements (a)

$ — $ — $ 1 $ —

(a) Loss is a result of settlement transactions which exceeded the sum of annual service and interest costs for the applicable plan.

17 unchanged sentences

Long-term debt $ 10,418 $ 11,306

The anticipated repayment date for $ 938 million in Securitization Notes is in May of 2026 (the “ May 2016 Securitization Notes ”) and accordingly, these notes have been classified as Short-term borrowings in our Condensed Consolidated Balance Sheet as of June 30, 2025.

The Company expects to refinance the May 2016 Securitization Notes prior to the anticipated repayment date.

If the Company does not repay or refinance the May 2016 Securitization Notes prior to the anticipated repayment date, we are subject to rapid amortization of principal on all Securitization Notes and additional interest of at least 7% will accrue on the Securitization Notes.

Details of our Short-term borrowings and Long-term debt as of December 31, 2024 can be found within our 2024 Form 10-K.

Cash paid for interest during the quarters ended March 31, 2025 and 2024, was $ 102 million and $ 101 million, respectively.

Cash paid for interest during the years to date ended June 30, 2025 and 2024, was $ 256 million and $ 254 million, respectively.

Note 12 - Derivative Instruments

We use derivative instruments to manage certain of our market risks related to fluctuations in interest rates, equity prices and foreign currency exchange rates.

Our use of foreign currency contracts to manage foreign currency exchange rates associated with certain foreign currency denominated intercompany receivables and payables is currently not significant.

We use derivative instruments to manage certain of our market risks related to fluctuations in foreign currency exchange rates, interest rates and equity prices.

Foreign Currency Contracts

During the quarter ended June 30, 2025, we entered into a foreign currency forward contract with a U.S.

dollar notional amount of approximately $ 80 million to reduce the foreign currency exposure relating to our net investment in certain Indian rupee functional currency operations.

This forward contract is designated as a net investment hedge and the related mark-to-market adjustments are being recorded as a cumulative translation adjustment within AOCI.

This foreign currency forward contract did not have a material impact on our Condensed Consolidated Financial Statements for the quarter ended June 30, 2025, and will mature in October 2025.

Interest Rate Swaps

1 unchanged sentence

Through their expiration in March 2025, these interest rate swaps were highly effective cash flow hedges.

Subsequent to the end of the first quarter, on April 4, 2025, we entered into new interest rate swaps ("2025 interest rate swaps") to fix the interest rate on $ 1.5 billion of borrowings, primarily under our Term Loan B Facility, from April 2025 to March 2028.

Like the expired interest rate swaps, the 2025 interest rate swaps were designated cash flow hedges as the changes in the future cash flows of the swaps are expected to offset changes in expected future interest payments on the related variable-rate debt.

The 2025 interest rate swaps will result in a fixed rate of 5.09 % on the swapped portion of the Term Loan B Facility (excluding debt issuance costs).

On April 4, 2025, we entered into a new interest rate swap ("2025 interest rate swap") to fix the interest rate on $ 1.5 billion of borrowings, primarily under our Term Loan B Facility, from April 2025 to March 2028.

Like the expired interest rate swaps,

the 2025 interest rate swap was designated as a cash flow hedge as the changes in the future cash flows of the swap are expected to offset changes in expected future interest payments on the related variable-rate debt.

The 2025 interest rate swap will result in a fixed rate of 5.09 % on the swapped portion of the Term Loan B Facility (excluding debt issuance costs).

Through June 30, 2025, the swap was a highly effective cash flow hedge.

Gains or losses on the interest rate swaps are reported as a component of AOCI and reclassified into Interest expense, net in our Condensed Consolidated Statements of Income in the same period or periods during which the related hedged interest payments affect earnings.

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

Quarter ended

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

Quarter ended Year to date

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

2025 2024 2025 2024 2025 2024 2025 2024

1 unchanged sentence

Income tax benefit/(expense) ( 1 ) ( 1 ) 1 2 ( 1 ) ( 4 ) 2 4

As of June 30, 2025, the estimated net gain included in AOCI related to our cash flow hedges that will be reclassified into earnings in the next 12 months is $ 7 million, based on current Secured Overnight Financing (“SOFR”) interest rates.

Total Return Swaps

2 unchanged sentences

As a result, the changes in the fair value of these derivatives are recognized immediately in earnings within General and administrative expenses in our Condensed Consolidated Statements of Income largely offsetting the changes in the associated EID liabilities.

The fair value associated with the total return swaps as of both March 31, 2025 and December 31, 2024, was not significant.

The fair value associated with the total return swaps as of both June 30, 2025 and December 31, 2024, was not significant.

As a result of the use of derivative instruments, the Company is exposed to risk that the counterparties will fail to meet their contractual obligations.

To mitigate the counterparty credit risk, we only enter into contracts with major financial institutions carefully selected based upon their credit ratings and other factors, and continually assess the creditworthiness of counterparties.

At March 31, 2025, all of the counterparties to our derivative instruments had investment grade ratings according to the three major ratings agencies.

At June 30, 2025, all of the counterparties to our derivative instruments had investment grade ratings according to the three major ratings agencies.

To date, all counterparties have performed in accordance with their contractual obligations.

1 unchanged sentence

Note 13 - Fair Value Disclosures

As of March 31, 2025, the carrying values of cash and cash equivalents, restricted cash, 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.

As of June 30, 2025, the carrying values of cash and cash equivalents, restricted cash, 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 our notes receivable, net of allowances, and lease guarantees, less reserves for expected losses, approximates their carrying value.

21 unchanged sentences

Interest Rate Swaps Prepaid expenses and other current assets 2 7 5

Interest Rate Swaps Other liabilities and deferred credits

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.

2 unchanged sentences

As a result of an audit by the Internal Revenue Service (“IRS”) for fiscal years 2013 through 2015, in August 2022 we received a Revenue Agent’s Report (“RAR”) from the IRS asserting an underpayment of tax of $2.1 billion plus $418 million in penalties for the 2014 fiscal year.

Additionally, interest on the underpayment is estimated to be approximately $1.5 billion through the first quarter of 2025.

Additionally, interest on the underpayment is estimated to be approximately $1.6 billion through the second quarter of 2025.

The proposed underpayment relates primarily to a series of reorganizations we undertook during that year in connection with the business realignment of our corporate and management reporting structure along brand lines.

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Upon conclusion of the proceedings with the IRS Office of Appeals without resolution, we received an IRS Notice of Deficiency in March 2025.

We expect to file a petition in the United States Tax Court in the second quarter of 2025 disputing the IRS Notice of Deficiency.

On June 4, 2025, we filed a petition in the United States Tax Court disputing the IRS Notice of Deficiency.

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 March 31, 2025, 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 March 31, 2025, was approximately $ 275 million.

As of June 30, 2025, the potential amount of undiscounted payments we could be required to make in the event of non-payment by the primary lessee was approximately $ 325 million.

The present value of these potential payments discounted at our pre-tax cost of debt at June 30, 2025, was approximately $ 275 million.

Our franchisees are the primary lessees under the vast majority of these leases.

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We believe these cross-default provisions significantly reduce the risk that we will be required to make payments under these leases, although such risk may not be reduced in the context of a bankruptcy or other similar restructuring of a large franchisee or group of franchisees.

The liability recorded for our expected losses under such leases as of March 31, 2025, was not material.

The liability recorded for our expected losses under such leases as of June 30, 2025, was not material.

Legal Proceedings

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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 scheduled for March 18, 2025 has been rescheduled to July 9, 2025.

A hearing with the administrative tribunal scheduled for July 9, 2025 has been rescheduled to January 6, 2026.

A hearing scheduled for April 29, 2025, before the Delhi High Court has been continued to August 19, 2025, and the stay order remains in effect.

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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-Q

Item 1. Financial Statements