What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-07 compared with 2025-08-07 · 104 added, 75 removed, 463 unchanged (28% of the section changed)

86 unchanged sentences

Additionally:

• Foreign currency translation favorably impacted Divisional Operating Profit by $4 million for the quarter ended June 30, 2025 and unfavorably impacted Divisional Operating Profit by $7 million for the year to date ended June 30, 2025.

Second Quarter

• Foreign currency translation favorably impacted Divisional Operating Profit by $7 million and $1 million for the quarter and year to date ended September 30, 2025, respectively.

Third Quarter

2025 2024 % Change 2025 2024 % Change

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EPS Excluding Special Items $1.58 $1.37 +15 $4.32 $3.87 +11

• Foreign currency translation favorably impacted our diluted EPS, excluding Special Items, by approximately $0.01 and unfavorably impacted our diluted EPS, excluding Special Items, by approximately $0.02 for the quarter and year to date ended June 30, 2025, respectively.

Our diluted EPS, excluding Special Items, for the year to date ended June 30, 2024 was unfavorably impacted by $0.08 from after-tax investment losses.

• Gross unit openings for the quarter were 871 units.

Gross unit openings for the year to date were 1,622 units.

◦ Total units decreased by 74 for the year to date, primarily driven by unit closures in Turkey.

• Our diluted EPS, excluding Special Items, for the year to date ended September 30, 2024, was unfavorably impacted by $0.08 from after-tax investment losses.

• Gross unit openings for the quarter were 1,131 units resulting in 744 net new units.

Gross unit openings for the year to date were 2,753 units resulting in 670 net new units.

◦ Net new unit growth for the year to date was impacted by unit closures in Turkey.

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., after failure by IS Gida to meet our standards.

As a result, 283 KFC restaurants and 254 Pizza Hut restaurants in Turkey were closed in January.

As a result, 283 KFC and 254 Pizza Hut restaurants in Turkey were closed in January.

Quarter ended Year to date

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Diluted EPS Growth %, excluding Special Items

15 (5) 11 (1)

Effective Tax Rate excluding Special Items 20.8 % 23.9 % 21.4 % 22.9 %

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Detail of Special Items:

Loss associated with market-wide refranchisings (a)

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

Charges associated with Resource Optimization (b)

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German acquisition and Turkey termination-related costs (d)

Pizza Hut Strategic Options Review (e)

Special Items Expense - Operating Profit

(Positive) Negative Foreign Currency Impact on Division Operating Profit

(Positive) Foreign Currency Impact on Division Operating Profit

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

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Increase in Refranchising (gain) loss

Increase in Other income

Increase in Other (income) expense

Special Items Expense - Operating Profit

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Special Items Expense - Operating Profit

Special Items Tax Expense (Benefit) (e)

Special Items Tax Expense (Benefit) (f)

28 (2) 116 (19)

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

During the quarter and year to date ended June 30, 2024, we recorded net refranchising losses of $1 million and $4 million, respectively, that have been reflected as Special Items.

Additionally, we recorded net refranchising gains of $11 million and $15 million during quarters ended June 30, 2025 and 2024, respectively, that have not been reflected as Special Items.

During the years to date ended June 30, 2025 and 2024, we recorded net refranchising gains of $16 million and $23 million, respectively, that have not been reflected as Special Items.

During the quarter and year to date ended September 30, 2024, we recorded net refranchising gains of $1 million and net refranchising losses of $3 million, respectively, that have been reflected as Special Items.

Additionally, we recorded net refranchising gains of $17 million and $11 million during the quarters ended September 30, 2025 and 2024, respectively, that have not been reflected as Special Items.

During the years to date ended September 30, 2025 and 2024, we recorded net refranchising gains of $33 million and $34 million, respectively, that have not been reflected as Special Items.

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

(b) We recorded charges of $14 million and $32 million during the quarter and year to date ended June 30, 2025, respectively, and $25 million and $46 million during the quarter and year to date ended June 30, 2024, respectively, to Corporate and unallocated General and administrative expenses related to a resource optimization program.

(b) We recorded charges of $5 million and $37 million during the quarter and year to date ended September 30, 2025, respectively, and $12 million and $58 million during the quarter and year to date ended September 30, 2024, respectively, primarily to Corporate and unallocated General and administrative expenses related to a resource optimization program.

Over the past several years, this program has allowed us to reallocate significant resources to accelerate our digital, technology and innovation capabilities to deliver a modern, world-class team member and customer experience and improve unit economics.

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

(c) During the quarter and year to date ended June 30, 2025, we recorded charges of approximately $10 million and $17 million, respectively, to Corporate and unallocated General and administrative expenses associated with our decision to designate two brand headquarters in the U.S., located in Plano, Texas and Irvine, California, to foster greater collaboration among brands and employees.

(c) During the quarter and year to date ended September 30, 2025, we recorded charges of approximately $3 million and $20 million, respectively, to Corporate and unallocated General and administrative expenses associated with our decision to designate two brand headquarters in the U.S., located in Plano, Texas and Irvine, California, to foster greater collaboration among brands and employees.

This involved relocating the KFC U.S.

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

We recorded charges of $5 million and $7 million during the quarter and year to date ended June 30, 2025, respectively, to Corporate and unallocated General and administrative expenses consisting primarily of severance costs associated with re-acquiring the master franchise rights in Germany.

We recorded charges of $1 million and $8 million during the quarter and year to date ended September 30, 2025, respectively, to Corporate and unallocated General and administrative expenses consisting primarily of severance costs associated with re-acquiring the master franchise rights in Germany.

Consistent with prior charges related to the matter, these charges have been reflected as Special Items.

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

(e) We have begun a review of strategic options for the Pizza Hut brand.

During the quarter ended September 30, 2025, we incurred approximately $4 million in third-party advising costs associated with this strategic options review and wrote-off approximately $4 million of franchise incentive assets associated with rationalizing the Pizza Hut estate in preparation for a potential transaction.

These charges were recorded to Corporate and unallocated General and administrative expenses and Corporate and unallocated franchise and property revenues, respectively.

significance of the costs expected to be incurred through the course of this strategic options review, we have reflected such amounts as Special Items.

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

Quarter ended Year to date

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$ (4) $ (2) $ (18) $ (15)

Tax Expense - Foreign tax audit

Tax Expense - Foreign tax reserve

Tax Expense - U.S.

OBBBA 76 — 76 —

Tax (Benefit) - Tax audit

(47) — (47) —

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

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

Tax Expense - Foreign tax audit in the quarter and year to date ended June 30, 2025 reflects a reserve associated with a change in management's judgement around a Mexican subsidiary's ability to utilize losses to offset recapture gains triggered by a historical tax deconsolidation in Mexico (see Note 7).

This tax expense was reflected as a Special Item due to its size and the years to which the reserve relates.

Other Income tax impacts recorded as Special in the year to date ended June 30, 2024 include benefits related to the reversal of a reserve due to the favorable resolution of a tax audit in a foreign jurisdiction.

Tax Expense - Foreign tax reserve in the year to date ended September 30, 2025, is associated with a reserve, and the ongoing foreign exchange and inflationary adjustments, associated with a change in management's judgment around a Mexican subsidiary's ability to utilize losses to offset recapture gains triggered by a historical tax deconsolidation in Mexico (see Note 7).

This tax expense was reflected as a Special Item due to its size and the time elapsed since the years to which the reserve relates.

Tax Expense - U.S.

OBBBA in the quarter and year to date ended September 30, 2025, reflects the tax expense recorded upon the July 4, 2025, enactment of H.R.1, commonly known as the One Big Beautiful Bill Act (“OBBBA”) in the United States.

The tax expense was primarily associated with a change in management's judgment regarding our ability to utilize U.S.

foreign tax credit related deferred tax assets that existed at the date of enactment and has been reflected as a Special Item due to the size of the non-recurring adjustment necessary upon enactment of the legislation.

Tax (Benefit) - Tax audit in the quarter and year to date ended September 30, 2025, reflects the benefit associated with the reversal of a reserve due to a favorable audit resolution.

Such reserve was established in prior years and was originally recorded as a Special Item.

Other Income tax impacts recorded as Special in the year to date ended September 30, 2024, include benefits related to the reversal of a reserve due to the favorable resolution of a tax audit in a foreign jurisdiction.

Such reserve was established in prior years related to income tax liabilities originally recorded as a Special Item as part of an intercompany restructuring of intellectual property.

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

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

Company restaurant profit (loss)

$ 28 $ 62 $ — $ 11 $ (3) $ 98

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

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

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

Company restaurant profit (loss)

$ 60 $ 185 $ — $ 33 $ (4) $ 274

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

1 unchanged sentence

Items Impacting Reported Results and Reasonably Likely to Impact Future Results

The following item impacted reported results in 2024 and/or are reasonably likely to impact future results.

The following items impacted reported results in 2025 and/or 2024 and/or are reasonably likely to impact future results.

See also the Detail of Special Items in this MD&A for other items impacting results in 2025 or 2024.

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

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

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

Impact of Tax Law Changes

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.

The OBBBA includes a broad range of domestic and international tax reform provisions, including extending and modifying certain key provisions from the Tax Cuts and Jobs Act, as well as provisions allowing accelerated tax deductions for qualified depreciable property and research expenditures.

The OBBBA has multiple effective dates, with certain provisions becoming effective in 2025 and others effective through 2027.

We currently anticipate the OBBBA will have a favorable impact on our ongoing effective tax rate beginning in 2026.

Pizza Hut Strategic Options Review

We have begun a review of strategic options for the Pizza Hut brand.

We have not set a deadline or definitive timetable for the completion of the strategic options review, and there can be no assurance this review will result in any specific outcome or transaction.

We incurred certain costs during the quarter ended September 30, 2025 associated with this strategic options review (see Detail of Special Items section of this MD&A) and expect to incur further costs of a currently indeterminate amount as this strategic options review progresses.

The KFC Division has 32,951 units, 89% of which are located outside the U.S.

Additionally, 99% of the KFC Division units were operated by franchisees as of June 30, 2025.

Additionally, 99% of the KFC Division units were operated by franchisees as of September 30, 2025.

Quarter ended Year to date

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Company sales and Company restaurant margin %

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

The quarterly increase in Company sales, excluding the impacts of foreign currency translation, was driven by restaurant acquisitions and Company same-store sales growth of 6%.

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

and Ireland restaurant acquisition (see Note 2) in the second quarter of 2024 and Company same-store sales growth of 4%.

The quarterly increase in Company restaurant margin percentage was driven by lower food costs in certain markets, partially offset by the margin percentages of the units included in the KFC U.K.

and Ireland restaurant acquisition.

The quarterly increase in Company restaurant margin percentage was driven by Company same-store sales growth.

The year to date decrease in Company restaurant margin percentage was driven by the margin percentages of the units included in the KFC U.K.

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Franchise and property revenues

The quarterly and year to date increases in Franchise and property revenues, excluding the impacts of foreign currency translation, were driven by unit growth and franchise same-store sales growth of 2%, partially offset by a 1% negative impact from the KFC U.K.

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

The year to date increase in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by franchise same-store sales growth of 2% and unit growth, partially offset by a 1% negative impact from the KFC U.K.

and Ireland restaurant acquisition.

The quarterly increase in G&A, excluding the impacts of foreign currency translation, was driven by higher expenses related to our annual incentive compensation programs, partially offset by lapping higher prior year professional fees.

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

G&A, excluding the impacts of foreign currency translation, was flat year to date as higher expenses related to our annual incentive compensation programs and the operation of acquired KFC U.K.

and Ireland restaurants was offset by lapping higher prior year professional fees.

and Ireland restaurants were offset by lower headcount and salaries.

Operating Profit

The quarterly and year to date increases in Operating Profit, excluding the impacts of foreign currency translation, were driven by unit growth and same-store sales growth, partially offset by lapping prior year net bad debt recoveries.

The quarterly and year to date increases in Operating Profit, excluding the impacts of foreign currency translation, were driven by same-store sales growth and unit growth.

Taco Bell Division

1 unchanged sentence

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

as of June 30, 2025.

as of September 30, 2025.

Quarter ended Year to date

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The quarterly and year to date increases in Company sales were driven by company same-store sales growth of 6% and 5% for the quarter and year to date, respectively, and unit growth.

The quarterly and year to date restaurant margin percentage decreases were driven by commodity inflation, higher labor and other restaurant operating costs partially offset by same-store sales growth.

The quarterly restaurant margin percentage increase was driven by same store sales growth partially offset by commodity inflation (primarily beef), higher labor and other restaurant operating costs.

The year-to-date restaurant margin percentage decrease was driven by commodity inflation (primarily beef), higher labor and other restaurant operating costs partially offset by same store sales growth.

Franchise and property revenues

The quarterly and year to date increases in Franchise and property revenues were driven by franchise same-store sales growth of 4% and 7% for the quarter and year to date, respectively, and unit growth.

The quarterly increase in G&A was driven by higher digital and technology expenses and professional and legal fees partially offset by lower headcount.

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

The quarterly and year to date increases in Franchise and property revenues were driven by franchise same-store sales growth of 7% for both the quarter and year to date and unit growth.

The quarterly increase in G&A was driven by higher expenses related to our annual incentive compensation programs, higher digital and technology expenses and increased professional and legal fees.

The year-to-date increase in G&A was driven by higher digital and technology expenses, higher expenses related to our annual incentive compensation programs and increased share-based compensation partially offset by lower professional and legal fees.

Operating Profit

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

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

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

Pizza Hut Division

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

Additionally, over 99% of the Pizza Hut Division units were operated by franchisees as of June 30, 2025.

Additionally, over 99% of the Pizza Hut Division units were operated by franchisees as of September 30, 2025.

Quarter ended Year to date

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2025 2024 Reported Ex FX 2025 2024 Reported Ex FX

System Sales $ 3,116 $ 3,140 (1) (1) $ 6,144 $ 6,307 (3) (2)

System Sales $ 3,177 $ 3,184 Even (1) $ 9,321 $ 9,491 (2) (2)

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

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Franchise contributions for advertising and other services 85 87 (2) (2) 255 264 (4) (4)

Total revenues $ 239 $ 239 Even Even $ 470 $ 477 (1) (1)

Total revenues $ 240 $ 238 1 Even $ 710 $ 715 (1) (1)

Company restaurant profit (loss)

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(9.2) % (1.9) % (7.3) ppts.

G&A expenses $ 54 $ 50 (6) (5) $ 109 $ 102 (6) (5)

G&A expenses $ 50 $ 51 Even Even $ 159 $ 153 (4) (4)

Franchise and property expenses 11 9 (12) (9) 32 19 (67) (67)

Franchise advertising and other services expense 90 91 2 2 179 181 1 1

Franchise advertising and other services expense 89 89 Even Even 268 270 1 1

Operating Profit $ 84 $ 91 (8) (8) $ 239 $ 278 (14) (14)

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Company-owned 58 7 729

Total 19,768 19,864 —

Total 19,872 19,927 Even

Franchise and property revenues

The quarterly and year to date decreases in Franchise and property revenues, excluding the impacts of foreign currency translation, were driven by franchise same-store sales declines of (1%).

The quarterly and year to date increases in G&A, excluding the impacts of foreign currency translation, were driven by higher professional and legal expenses, including professional and legal fees associated with franchise entities that have or are transitioning to new ownership.

The quarterly and year to date decreases in Franchise and property revenues, excluding the impact of foreign currency translation, were driven by franchise same-store sales declines of (1%).

G&A, excluding the impact of foreign currency translation, was flat during the quarter.

The year to date increase in G&A, excluding the impact of foreign currency translation, was driven by higher professional and legal fees, including expenses associated with franchise entities that have or are transitioning to new ownership.

Operating Profit

The quarterly decrease in Operating Profit, excluding the impacts of foreign currency translation, was driven by higher current year bad debt expense (including bad debt expense associated with franchise entities that have or are transitioning to new ownership), higher G&A, timing of digital and technology related spending within Franchise advertising and other services expense, expenses associated with our bi-annual Global Franchise Convention and a same store sales decline.

The year to date decrease in Operating Profit, excluding the impacts of foreign currency translation, was driven by higher current year bad debt expense (including bad debt expense associated with franchise entities that have or are transitioning to new ownership), timing of digital and technology related spending within Franchise advertising and other services expense, higher G&A, a same store sales decline and expenses associated with our bi-annual Global Franchise Convention.

The quarterly decrease in Operating Profit, excluding the impact of foreign currency translation, was driven by a same store sales decline and higher current year bad debt expense (including bad debt expense associated with franchise entities that have or are transitioning to new ownership).

The year to date decrease in Operating Profit, excluding the impacts of foreign currency translation, was driven by higher current year bad debt expense (including bad debt expense associated with franchise entities that have or are transitioning to new ownership), higher G&A, a same store sales decline and timing of digital and technology related spending within Franchise advertising and other services expense.

Habit Burger & Grill Division

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The Company owned 80% of the Habit Burger & Grill Division units in the U.S.

as of June 30, 2025.

as of September 30, 2025.

Quarter ended Year to date

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Company-owned 302 313 (4)

Total 379 380 Even

Total 377 381 (1)

Corporate & Unallocated

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Unallocated Company restaurant expenses (See Note 9)

( 4 ) ( 3 ) (56) ( 11 ) ( 4 ) (171)

Unallocated Franchise and property revenues

( 4 ) — NM ( 5 ) — NM

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Corporate and unallocated G&A

The quarterly and year to date increases in Corporate and unallocated G&A expense were driven by costs associated with our brand headquarters consolidation, higher compensation and higher professional fees, partially offset by lower costs associated with our resource optimization program.

The quarterly increase in Corporate and Unallocated G&A expense was driven by higher professional and legal fees and higher current year expenses related to our annual incentive compensation programs, partially offset by lower costs associated with our resource optimization program.

The year to date increase in Corporate and Unallocated G&A expense was driven by higher professional and legal fees, costs associated with our current year brand headquarters consolidation and higher current year expenses related to our annual incentive compensation programs, partially offset by lower costs associated with our resource optimization program.

Consolidated Cash Flows

Net cash provided by operating activities was $1,393 million in 2025 versus $1,176 million in 2024.

The increase was primarily driven by lower incentive compensation payments, lower income tax payments and an increase in Operating Profit before Special Items.

The increase was primarily driven by lower income tax payments in the current year, an increase in Operating Profit before Special Items and lower incentive compensation payments.

Net cash used in investing activities was $208 million in 2025 versus $292 million in 2024.

The change was primarily driven by maturities of short-term investments in the current year compared to net purchases of short-term investments in the prior year and lower current year spending on acquisitions, partially offset by lapping prior year proceeds arising from the sale of our approximate 5% minority investment in Devyani and higher current year capital spending.

The change was primarily driven by maturities of short-term investments in the current year compared to net purchases of short-term investments in the prior year and lower current year spending on restaurant acquisitions, partially offset by lapping prior year proceeds arising from the sale of our approximate 5% minority investment in Devyani and higher current year capital spending.

Net cash used in financing activities was $822 million in 2025 versus $991 million in 2024.

The change was primarily driven by higher current year share repurchases.

The change was primarily driven by net borrowings in the current year compared to net repayments in the prior year.

Liquidity and Capital Resources

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

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

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

To the extent operating cash flows plus other sources of cash do not cover our anticipated cash needs, we maintain a $1.5 billion Revolving Facility under our Credit Agreement which had $400 million outstanding as of June 30, 2025.

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

We believe that our ongoing cash from operations, cash on hand, which was approximately $680 million at June 30, 2025, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months.

The May 2016 Securitization Notes in the amount of $938 million have an anticipated repayment date of May 2026.

While we currently anticipate refinancing those Notes prior to that date, we believe that in the event we either cannot or choose not to do so, cash from the aforementioned sources would be sufficient to fully repay the $938 million in May 2026.

There have been no material changes to the disclosures made in Item 7 of the Company's 2024 Form 10-K regarding our material cash requirements.

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

To the extent operating cash flows plus other sources of cash do not cover our anticipated cash needs, we maintain a $1.5 billion Revolving Facility under our Credit Agreement that was undrawn as of September 30, 2025.

Borrowings under our Revolving Facility have original maturities of three months or less.

We believe that our ongoing cash from operations, cash on hand, which was approximately $1,050 million at September 30, 2025, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months.

There have been no material changes to the disclosures made in Item 7 of the Company's 2024 Form 10-K regarding our material cash requirements, except that we executed purchase agreements with a franchisee to acquire 128 Taco Bell restaurants across the Southeast U.S.

during the quarter ended September 30, 2025.

These acquisitions are expected to close in the quarter ended December 31, 2025, with a total cash outlay of approximately $670 million, largely financed with cash on hand.

Due to the ongoing significance of our debt obligations, we are providing the update below.

Debt Instruments

As of June 30, 2025, approximately 96%, including the impact of interest rate swaps, of our $11.0 billion of total debt outstanding, excluding the Revolving Facility balance, finance leases and debt issuance costs and discounts, is fixed with an effective overall interest rate of approximately 4.5%.

As of September 30, 2025, approximately 96%, including the impact of interest rate swaps, of our $11.5 billion of total debt outstanding, excluding finance leases and debt issuance costs and discounts, is fixed with an effective overall interest rate of approximately 4.5%.

We ended the quarter with a consolidated net leverage ratio of 3.7x EBITDA.

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

The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and discounts, as of June 30, 2025.

The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and discounts, as of September 30, 2025.

2025 2026 2027 2028 2029 2030 2031 2032 2037 2043 Total

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Credit Agreement $ 7 $ 28 34 1,424 438 1,930

Revolving Facility 400 400

Subsidiary Senior Unsecured Notes 750 750

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Total $ 7 $ 28 $ 1,668 $ 2,019 $ 1,028 $ 1,800 $ 1,787 $ 2,600 $ 325 $ 275 $ 11,536

See Note 11 for details on the Securitization Notes, the Credit Agreement, Revolving Facility, Subsidiary Senior Unsecured Notes and YUM Senior Unsecured Notes.

See Note 11 for details on the Securitization Notes, the Credit Agreement, Subsidiary Senior Unsecured Notes and YUM Senior Unsecured Notes, including a refinancing of certain Securitization Notes that took place in September 2025.

New Accounting Pronouncements Not Yet Adopted

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

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

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

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

In September 2025, the FASB issued ASU 2025-06, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software, which amends certain aspects of the accounting for software costs, including removing software development project stages and requiring companies to capitalize costs when both 1) management authorizes or commits to funding a software project and 2) it is probable that the project will be completed and the software will be used to perform the function intended.

The standard is effective for the Company in our first quarter of fiscal 2028, with early adoption permitted and can be applied on a prospective, retrospective or modified prospective basis.

We are currently evaluating the impact of the standard on our condensed consolidated financial statements.

Quantitative and Qualitative Disclosures About Market Risk

There were no material changes during the quarter ended June 30, 2025, to the disclosures made in Item 7A of the Company’s 2024 Form 10-K.

There were no material changes during the quarter ended September 30, 2025, to the disclosures made in Item 7A of the Company’s 2024 Form 10-K.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis