What changed in this filing

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Item 1. Financial Statements

2025-11-07 compared with 2025-08-07 · 123 added, 86 removed, 656 unchanged (24% of the section changed)

34 unchanged sentences

Net Income $ 397 $ 382 $ 1,024 $ 1,063

Other comprehensive income, net of tax

Other comprehensive income (loss), net of tax

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

9 unchanged sentences

Tax (expense) benefit

( 1 ) — ( 1 ) —

Changes in derivative instruments

89 unchanged sentences

AND SUBSIDIARIES

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

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

(in millions)

2 unchanged sentences

Shares Amount

Balance at March 31, 2025

Balance at June 30, 2025

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

1 unchanged sentence

Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature ( 6 ) ( 6 )

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

Derivative instruments

Comprehensive Income 394

4 unchanged sentences

Share-based compensation events 19 19

Balance at June 30, 2025

Balance at September 30, 2025

278 $ — $ ( 7,183 ) $ ( 322 ) $ ( 7,505 )

3 unchanged sentences

Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature 71 71

Pension and post-retirement benefit plans

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

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

5 unchanged sentences

Share-based compensation events 62 62

Balance at June 30, 2025

Balance at September 30, 2025

278 $ — $ ( 7,183 ) $ ( 322 ) $ ( 7,505 )

Balance at March 31, 2024

Balance at June 30, 2024

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

3 unchanged sentences

Derivative instruments (net of tax impact of $ 3 million)

( 10 ) ( 10 )

Comprehensive Income 406

3 unchanged sentences

Share-based compensation events 15 15

Balance at June 30, 2024

Balance at September 30, 2024

280 $ — $ ( 7,389 ) $ ( 285 ) $ ( 7,674 )

4 unchanged sentences

Pension and post-retirement benefit plans

Derivative instruments (net of tax impact of $ 3 million)

( 10 ) ( 10 )

Comprehensive Income 1,080

3 unchanged sentences

Share-based compensation events 65 65

Balance at June 30, 2024

Balance at September 30, 2024

280 $ — $ ( 7,389 ) $ ( 285 ) $ ( 7,674 )

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 62,000 restaurants in more than 155 countries and territories.

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

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

As of September 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 and year to date ended June 30, 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 September 30, 2025.

These reclassifications had no effect on previously reported Net Income.

2 unchanged sentences

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.

27 unchanged sentences

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").

In addition to the acquisition discussed above, we acquired 8 and 71 restaurants from franchisees in the quarter and year to date ended September 30, 2025, respectively, including 19 KFC, 16 Taco Bell and 36 Pizza Hut restaurants (the "Other restaurant acquisitions").

Total cash consideration paid in connection with these acquisitions was $ 100 million, net of cash acquired.

8 unchanged sentences

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.

During the quarter ended September 30, 2025, we executed purchase agreements with a franchisee to acquire 128 Taco Bell restaurants across the Southeast U.S.

for approximately $ 670 million in cash.

These acquisitions are expected to close in the quarter ended December 31, 2025.

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

11 unchanged sentences

Note 4 - Shareholders' Deficit

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.

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

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

6 unchanged sentences

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

As of September 30, 2025 we have remaining capacity to repurchase up to $ 1.2 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 March 31, 2025, net of tax

Balance at June 30, 2025, net of tax

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

1 unchanged sentence

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

( 6 ) — 4 ( 2 )

(Gains) losses reclassified from AOCI, net of tax

( 6 ) 3 1 ( 2 )

Balance at June 30, 2025, net of tax

Balance at September 30, 2025, net of tax

$ ( 167 ) $ ( 139 ) $ ( 15 ) $ ( 322 )

6 unchanged sentences

71 4 ( 5 ) 71

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

Balance at September 30, 2025, net of tax $ ( 167 ) $ ( 139 ) $ ( 15 ) $ ( 322 )

Note 5 - Other (Income) Expense

33 unchanged sentences

Other assets $ 1,428 $ 1,329

(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.

(a) Non-current operating lease liabilities of $ 926 million and $ 862 million as of September 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

13 unchanged sentences

Our estimated effective tax rate for the full fiscal year is expected to be higher than the U.S.

federal statutory rate of 21 %, due to state income taxes and U.S.

federal statutory rate of 21 %, primarily due to state income taxes and U.S.

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

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.

Additionally, our third quarter and year to date effective tax rates are higher than the prior year primarily due to the following unfavorable factors:

• The impact of recording $ 3 million and $ 105 million in the quarter and year to date ended September 30, 2025, 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.

1 unchanged sentence

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.

• 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 a result of the enactment, during the quarter ended September 30, 2025 we recorded $ 90 million of tax expense primarily associated with a change in management's judgment regarding our ability to utilize U.S.

foreign tax credit related deferred tax assets prior to their expiration.

Of this amount, $ 76 million related to taxable events and related positions prior to enactment with the remaining $ 14 million attributable to the post-enactment period.

The above unfavorable factors were partially offset by the following favorable factors:

• The impact of recognizing $ 63 million in tax benefit in the quarter ended September 30, 2025, associated with releasing reserves due to the favorable resolution of an audit.

• The impact of recognizing $ 6 million in tax benefit in the quarter ended September 30, 2025, as compared to $ 3 million of tax expense recognized in the quarter ended September 30, 2024, associated with adjustments related to prior year taxes.

Note 8 - Revenue Recognition

13 unchanged sentences

Franchise contributions for advertising and other services 150 4 18 — 172

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

$ 879 $ 730 $ 240 $ 134 $ 1,983 (a)

(a) Does not include a charge of $ 4 million to Unallocated Franchise revenues during the quarter ended September 30, 2025.

Quarter ended 9/30/2024

22 unchanged sentences

$ 2,501 $ 2,098 $ 710 $ 395 $ 5,704 (a)

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

(a) Does not include a charge of $ 5 million to Unallocated Franchise revenues during the year to date ended September 30, 2025.

Year to date 9/30/2024

17 unchanged sentences

Increase for upfront fees associated with contracts that became effective during the period, net of amounts recognized as revenue during the period 49

Balance at June 30, 2025

Balance at September 30, 2025

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

17 unchanged sentences

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

Company Sales (a)

Company Sales

$ 259 $ 298 $ 9 $ 130 $ 697

Franchise and property revenues (a)

Franchise and property revenues

459 254 146 3 861

Franchise contributions for advertising and other services (a)

Franchise contributions for advertising and other services

161 178 85 1 426

5 unchanged sentences

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

Division Operating Profit

Division Operating Profit (Loss)

$ 392 $ 267 $ 84 $ ( 2 ) $ 741

Unallocated amounts:

Corporate and unallocated G&A expenses (c)

Unallocated Company restaurant expenses (d)

Corporate and unallocated G&A expenses (b)

Unallocated Company restaurant expenses (c)

Unallocated Franchise and property revenues

8 unchanged sentences

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

Depreciation and Amortization (e)

Depreciation and Amortization (d)

$ 14 $ 17 $ 6 $ 7 $ 8 $ 50

2 unchanged sentences

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

Company Sales (a)

Company Sales

$ 220 $ 267 $ 1 $ 133 $ 621

Franchise and property revenues (a)

Franchise and property revenues

417 234 150 3 804

Franchise contributions for advertising and other services (a)

Franchise contributions for advertising and other services

148 165 87 1 401

8 unchanged sentences

Unallocated amounts:

Corporate and unallocated G&A expenses (c)

Unallocated Company restaurant expenses (d)

Corporate and unallocated G&A expenses (b)

Unallocated Company restaurant expenses (c)

Unallocated Refranchising gain (loss) 12

7 unchanged sentences

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

Depreciation and Amortization (e)

Depreciation and Amortization (d)

$ 9 $ 15 $ 4 $ 7 $ 9 $ 44

3 unchanged sentences

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

Company Sales (a)

Company Sales

$ 721 $ 848 $ 20 $ 385 $ 1,974

Franchise and property revenues (a)

Franchise and property revenues

1,303 735 436 8 2,482

Franchise contributions for advertising and other services (a)

Franchise contributions for advertising and other services

478 514 255 2 1,249

8 unchanged sentences

Unallocated amounts:

Corporate and unallocated G&A expenses (c)

Unallocated Company restaurant expenses (d)

Corporate and unallocated G&A expenses (b)

Unallocated Company restaurant expenses (c)

Unallocated Franchise and property revenues

8 unchanged sentences

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

Depreciation and Amortization (e)

Depreciation and Amortization (d)

$ 35 $ 49 $ 15 $ 20 $ 22 $ 139

2 unchanged sentences

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

Company Sales (a)

Company Sales

$ 488 $ 775 $ 5 $ 399 $ 1,667

Franchise and property revenues (a)

Franchise and property revenues

1,219 678 446 7 2,350

Franchise contributions for advertising and other services (a)

Franchise contributions for advertising and other services

427 477 264 2 1,170

8 unchanged sentences

Unallocated amounts:

Corporate and unallocated G&A expenses (c)

Unallocated Company restaurant expenses (d)

Unallocated Franchise and property revenues

Corporate and unallocated G&A expenses (b)

Unallocated Company restaurant expenses (c)

Unallocated Refranchising gain (loss) 31

1 unchanged sentence

Consolidated Operating Profit 1,746

Investment income (expense), net (f)

Investment income (expense), net (e)

Other pension income (expense) 5

3 unchanged sentences

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

Depreciation and Amortization (e)

Depreciation and Amortization (d)

$ 19 $ 44 $ 11 $ 22 $ 24 $ 120

1 unchanged sentence

32 57 9 28 25 151

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 $ 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 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.

Revenues by Country ( f)

Quarter ended Year to date

2025 2024 2025 2024

United States $ 1,063 $ 995 $ 3,085 $ 2,928

United Kingdom 245 216 683 492

Other 672 615 1,931 1,766

$ 1,979 $ 1,826 $ 5,699 $ 5,187

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

(b) Corporate and unallocated G&A expenses include charges of $ 5 million and $ 11 million in the quarters ended September 30, 2025 and 2024, respectively, related to our resource optimization program and $ 3 million in the quarter

ended September 30, 2025 related to our brand headquarters consolidation.

Corporate and unallocated G&A expenses include charges of $ 37 million and $ 57 million in the years to date ended September 30, 2025 and 2024, respectively, related to our resource optimization program and $ 20 million in the year to date ended September 30, 2025, related to our brand headquarters consolidation.

(d) 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 .

(e) 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 September 30, 2024.

(f) The United States and United Kingdom represented 10% or more of our total revenues for certain periods presented.

Note 10 - Pension Benefits

39 unchanged sentences

Long-term debt $ 11,506 $ 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.

Taco Bell Funding, LLC (the “Issuer”), a special purpose limited liability company and a direct, wholly-owned subsidiary of Taco Bell Corp.

(“TBC”), through a series of securitization transactions, has previously issued fixed rate senior secured notes collectively referred to as the “Securitization Notes” (details can be found within our 2024 Form 10-K).

On September 24, 2025, the Issuer completed refinancing certain of such notes through the issuance of additional Securitization Notes totaling $ 1.5 billion (the “2025-1 Notes”).

The net proceeds from the issuance of the 2025-1 Notes were used to repay in full an existing series of Securitization Notes totaling $ 938 million with an Anticipated Repayment Date (as defined in the Base Indenture) of May 2026.

The remaining net proceeds were used to pay certain transaction-related expenses and for general corporate purposes (including, without limitation, purchases of franchised restaurants in the quarter ended December 31, 2025).

The following table summarizes the series of Securitization Notes issued in the quarter ended September 30, 2025:

Interest Rate

Issuance Date Anticipated Repayment Date (a)

Outstanding Principal (in millions) Stated Effective (b)

September 2025 August 2030 $ 1,000 4.821 % 5.039 %

September 2025 August 2032 $ 500 5.049 % 5.213 %

(a) The legal final maturity date of the 2025-1 Notes is in August 2055.

However, if the Issuer has not repaid or refinanced any series of these or previously existing Securitization Notes, prior to their respective Anticipated Repayment Dates, the rapid amortization of principal of all Securitization Notes may occur, in which event additional interest will accrue on all Securitization Notes, as provided in the Base Indenture for the Securitization Notes.

(b) Includes the effects of the amortization of any debt issuance costs.

Payments of interest and principal on the 2025-1 Notes are made from the continuing fees paid pursuant to the franchise and license agreements with all U.S.

Taco Bell restaurants, including both company and franchise operated restaurants.

Interest on and principal payments of the 2025-1 Notes are due on a quarterly basis.

In general, no amortization of principal of the 2025-1 Notes is required prior to their Anticipated Repayment Dates unless as of any quarterly measurement date the consolidated leverage ratio (the ratio of total debt to Net Cash Flow (as defined in the Base Indenture)) for the preceding four fiscal quarters of either the Company and its subsidiaries or the Issuer and its subsidiaries exceeds 5.5:1, in which case amortization payments of 1% per year of the outstanding principal as of the closing of the related 2025-1 Notes are required.

As a result of the issuance of the 2025 Notes, $ 14 million of fees were capitalized as debt issuance costs.

The debt issuance costs are being amortized to Interest expense, net through the Anticipated Repayment Dates of the Securitization Notes utilizing the effective interest rate method.

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 years to date ended June 30, 2025 and 2024, was $ 256 million and $ 254 million, respectively.

Cash paid for interest during the years to date ended September 30, 2025 and 2024, was $ 364 million and $ 356 million, respectively.

Note 12 - Derivative Instruments

1 unchanged sentence

Foreign Currency Contracts

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

During the quarter ended September 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.

This foreign currency forward contract did not have a material impact on our Condensed Consolidated Financial Statements for the quarter and year to date ended September 30, 2025, and will mature in March 2026.

Interest Rate Swaps

2 unchanged sentences

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.

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 results in a fixed rate of 5.09 % on the swapped portion of the Term Loan B Facility (excluding debt issuance costs).

Through September 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.

5 unchanged sentences

Income tax benefit/(expense) — 1 1 2 ( 2 ) ( 3 ) 3 6

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.

As of September 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 $ 4 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 June 30, 2025 and December 31, 2024, was not significant.

The fair value associated with the total return swaps as of both September 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 June 30, 2025, all of the counterparties to our derivative instruments had investment grade ratings according to the three major ratings agencies.

At September 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 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.

As of September 30, 2025, the carrying values of cash and cash equivalents, restricted cash, accounts receivable, short-term borrowings and accounts payable 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.

26 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 $1.6 billion through the second quarter of 2025.

Additionally, interest on the underpayment is estimated to be approximately $1.7 billion through the third 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.

3 unchanged sentences

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

On June 4, 2025, we filed a petition in the United States Tax Court 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 and the IRS filed its Answer on September 12, 2025.

The litigation is ongoing.

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

5 unchanged sentences

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

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.

As of September 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 September 30, 2025, was approximately $ 275 million.

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

1 unchanged sentence

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 June 30, 2025, was not material.

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

Legal Proceedings

14 unchanged sentences

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.

A hearing scheduled for August 19, 2025, before the Delhi High Court has been continued to December 10, 2025, and the stay order remains in effect.

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

4 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-Q

Item 1. Financial Statements