What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-02-20 compared with 2025-02-19 · 331 added, 272 removed, 1367 unchanged (31% of the section changed)

22 unchanged sentences

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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

and Ireland (“KFC U.K.

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

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

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

Basis for Opinions

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

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

dispositions of the assets of the company;

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

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• Evaluating the Company’s interpretation of tax laws and court rulings by developing an independent assessment;

• Performing an independent assessment to identify tax positions that may not be sustained upon examination by the respective taxing authority and comparing the results to the Company’s assessment.

• Performing an independent assessment to identify tax positions that may not be sustained upon examination by the respective tax authority and comparing the results to the Company’s assessment.

We have served as the Company’s auditor since 1997.

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Adjustments and gains (losses) arising during the year

( 37 ) 18 ( 84 )

Reclassifications of adjustments and (gains) losses into Net Income

( 37 ) 89 ( 84 )

Tax (expense) benefit

( 37 ) 89 ( 84 )

Changes in pension and post-retirement benefits

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Proceeds from sale of KFC Russia

Acquisition of KFC U.K.

and Ireland restaurants

Acquisitions of franchise restaurants ( 782 ) (208) —

Proceeds from refranchising of restaurants 78 49 60

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Revolving credit facilities, three months or less, net ( 50 ) 345 ( 279 )

Short-term borrowings, by original maturity

More than three months – proceeds 89 — —

More than three months – payments ( 86 ) — —

Three months or less, net — — —

Repurchase shares of Common Stock ( 552 ) ( 441 ) ( 50 )

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Effect of Exchange Rate on Cash and Cash Equivalents 32 ( 21 ) 10

Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents 83 77 ( 124 )

Net Increase in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents – Beginning of Year 807 724 647

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

Reclassification of translation adjustments into income

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

( 10 ) ( 10 )

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

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

( 12 ) ( 12 )

Comprehensive Income 1,664

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Balance at December 31, 2023

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

Net Income 1,486 1,486

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

Reclassification of translation adjustments into income

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

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Repurchase of shares of Common Stock (1)

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

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

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Pension and post-retirement benefit plans (net of tax impact of $ 3 million )

( 39 ) ( 39 )

Net loss on derivative instruments (net of tax impact of $ 2 million)

( 14 ) ( 14 )

Comprehensive Income 1,640

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Note 1 – Description of Business

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

and its Subsidiaries (collectively referred to herein as the “Company,” “YUM,” “we,” “us” or “our”) franchise or operate a system of over 63,000 restaurants in 155 countries and territories primarily under the concepts of KFC, Taco Bell, Pizza Hut and the Habit Burger & Grill (collectively, the “Concepts”).

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

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Actual results could differ from these estimates.

In the first quarter of 2025, the Company prospectively changed its basis of presentation to round financial figures in the Financial Statements and as presented in the tabular presentations in these Notes to the nearest whole number in millions in all instances.

As a result, some totals and percentages may not recompute based on rounded figures as presented within the Financial Statements and these Notes.

Previously, amounts were presented to ensure that all numbers herein recomputed, resulting in the presentation of certain figures inconsistent with their underlying rounding.

Principles of Consolidation and Basis of Preparation.

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

At the end of 2024, YUM has future lease payments due from certain franchisees, on a nominal basis, of approximately $ 650 million, and we are secondarily liable on certain other lease agreements that have been assigned to certain franchisees.

See the Lease Guarantees section in Note 20.

At the end of 2025, YUM has future lease payments due from certain franchisees, on a nominal basis, of approximately $ 525 million, and we are secondarily liable on certain other lease agreements that have been assigned to certain franchisees (see the Lease Guarantees section in Note 20).

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

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We maintain certain variable interests in these cooperatives.

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

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

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

Therefore, these cooperatives are VIEs.

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

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

Foreign Currency.

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Expenses related to the provisioning of goods or services for which we receive reimbursement for all or substantially all of the expense amount from a franchisee are recorded in Franchise advertising and other services expense (the associated revenue is recorded within Franchise contributions for advertising and other services as described above).

The majority of these expenses relate to advertising and are incurred on behalf of franchisees by the advertising cooperatives we are required to consolidate.

The majority of these reimbursed expenses relate to advertising and are incurred on behalf of franchisees by the advertising cooperatives we are required to consolidate.

These expenses are accounted for as described in the Advertising Costs policy below.

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

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

In 2025, 2024 and 2023, such amounts totaled $ 11 million, $ 15 million and $ 3 million, respectively.

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

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The related expense and any subsequent changes are included in Refranchising (gain) loss.

Any expense and subsequent changes in the guarantees for other franchise support guarantees not associated with a refranchising transaction are included in Franchise and property expenses.

Any expense and subsequent changes in the guarantee liability for other franchise support guarantees not associated with a refranchising transaction are included in Franchise and property expenses.

Income Taxes.

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

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

future levels of taxable income.

Additionally, in determining the need for recording a valuation allowance against the carrying amount of deferred tax assets, we consider the amount of taxable income and periods over which

it must be earned, actual levels of past taxable income and known trends and events or transactions that are expected to affect future levels of taxable income.

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

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Cash equivalents represent funds we have temporarily invested (with original maturities not exceeding three months), including short-term, highly liquid debt securities.

Cash and overdraft balances that meet the criteria for right of setoff are presented net on our Consolidated Balance Sheet.

The Company’s receivables are primarily generated from ongoing business relationships with our franchisees as a result of franchise agreements, including contributions due to advertising cooperatives we consolidate.

Cash and overdraft balances that meet the criteria for right of setoff, including balances related to our notional pooling arrangements, are presented net on our Consolidated Balance Sheets and Statements of Cash Flows.

The Company’s receivables are primarily generated based on our franchisees' sales, including contributions due to advertising cooperatives we consolidate.

These receivables from franchisees are generally due within 30 days of the period in which the corresponding sales occur and are classified as Accounts and notes receivable, net on our Consolidated Balance Sheet and are presented net of expected credit losses.

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Current conditions we consider include pre-defined aging criteria as well as specified events that indicate we may not collect the balance due, including foreign currency control restrictions that may exist.

Reasonable and supportable forecasts used in determining the probability of future collection consider publicly available data regarding default probability.

Reasonable and supportable forecasts used in determining the probability of future collection may also consider publicly available data regarding default probability.

While we use the best information available in making our determination, the ultimate recovery of recorded receivables is dependent upon future economic events and other conditions that may be beyond our control.

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If a qualitative assessment is not performed, or if as a result of a qualitative assessment it is not more likely than not that the fair value of a reporting unit exceeds its carrying value, then the reporting unit’s fair value is compared to its carrying value.

An impairment charge is recognized based on the excess of a reporting unit’s carrying amount over its fair value.

An impairment charge to goodwill is recognized based on the excess of a reporting unit’s carrying amount over its fair value.

If we record goodwill upon acquisition of a restaurant(s) from a franchisee and such restaurant(s) is then sold within two years of acquisition, the goodwill associated with the acquired restaurant(s) is written off in its entirety.

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If a qualitative assessment is not performed, or if as a result of a qualitative assessment it is not more likely than not that the fair value of an indefinite-lived intangible asset exceeds its carrying value, then the asset’s fair value is compared to its carrying value.

An impairment charge is recognized based on the excess of an indefinite-lived intangible asset's carrying amount over its fair value.

Our finite-lived intangible assets, including capitalized software, that are not allocated to an individual restaurant are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable.

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

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

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

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

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

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

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Accordingly, $ 519 million, $ 368 million and $ 26 million in share repurchases in 2025, 2024 and 2023, respectively, were recorded as an addition to Accumulated deficit.

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

Additionally, we recorded $ 4 million and $ 2 million of excise tax related to share repurchases in 2025 and 2024, respectively, as additions to Accumulated deficit.

See Note 17 for additional information on our share repurchases.

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Recent Accounting Pronouncements.

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

Improvements to Reportable Segment Disclosures, which updates reportable

segment disclosure requirements through enhanced disclosures about significant segment expenses.

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.

We adopted this standard for the fiscal year ended December 31, 2025.

See Note 19 for additional disclosures.

Note 3 - Acquisitions and Divestitures

Note 3 - Restaurant Acquisitions

In 2025 and 2024, we completed restaurant acquisitions from franchisees as detailed below.

In each transaction, t he acquisition was accounted for as a business combination using the acquisition method of accounting.

The allocation of the purchase price for each acquisition is based on management's analysis, which may include analysis performed by third party valuation specialists, as of the respective acquisition dates.

In completing our purchase price allocations, we continue to obtain information to assist in determining the fair value of assets acquired and liabilities assumed and the classification of acquired leases during a one-year measurement period subsequent to the acquisition.

For all of these restaurant acquisitions, reacquired franchise rights are the primary intangible asset we recognize when acquiring restaurants from franchisees and 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.

The 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 acquisition that do not qualify for recognition as intangible assets.

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

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

The financial results of all acquired restaurants have been included in our Consolidated Financial Statements since the respective dates of the acquisitions, which individually and in the aggregate, did not significantly impact our results for the year ended December 31, 2025.

Pro forma financial information for the periods prior to acquisition is not presented due to the immaterial impact of the restaurant acquisitions on our Consolidated Financial Statements for both the 2025 and 2024 reporting periods.

The direct transaction costs associated with the acquisitions were expensed as incurred, including $ 7 million associated with the Taco Bell Southeast U.S.

restaurant acquisition in 2025.

Taco Bell Southeast U.S.

Restaurant Acquisition

During the fourth quarter of 2025, we completed the acquisition of 128 Taco Bell restaurants across the Southeast U.S.

from a franchisee.

The acquisition provides YUM with an opportunity to improve and accelerate Taco Bell profitability, expand strategic leadership within the Taco Bell system and unlock significant unit development in the region.

The purchase price to be allocated for accounting purposes was $ 666 million, which consisted of cash in the amount of $ 667 million, offset by the settlement of a net liability of $ 1 million related to our preexisting contractual relationship with the franchisee.

The components of the preliminary purchase price allocation upon the acquisition dates were as follows:

Total Current Assets $ 2

Property, plant and equipment, net (including finance lease right-of-use assets of $71 million) 118

Reacquired franchise rights (included in Intangible assets, net) 428

Operating lease right-of-use assets (included in Other assets) 218

Total Identifiable Assets 765

Total Current Liabilities ( 9 )

Operating lease liabilities (included in Other liabilities and deferred credits) ( 213 )

Finance lease liabilities (included in Short-term borrowings and Long-term debt) ( 69 )

Total Liabilities Assumed ( 291 )

Total identifiable net assets 475

Purchase price to be allocated $ 666

Reacquired franchise rights have an estimated weighted average useful life of 15 years.

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

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

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

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

and Ireland chicken market.

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

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

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

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

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

During the quarter ended June 30, 2025, we finalized our preliminary estimate of the fair value of net assets acquired and the purchase price to be allocated.

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

Total Current Assets $ 2

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Purchase price to be allocated $ 177

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

The cumulative adjustments to the preliminary estimate of identifiable net assets acquired and consideration transferred (as recorded in the June 30, 2024 quarter of acquisition) resulted in a corresponding $ 14 million increase in estimated goodwill due to the following changes to the preliminary purchase price allocation.

Increase (Decrease) in Goodwill

Increase in Property, plant and equipment, net

Increase in Reacquired franchise rights

Increase in Operating lease right-of-use assets

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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.

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

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

reporting unit.

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

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

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

Russia Invasion of Ukraine

In the first quarter of 2022, as a result of the Russian invasion of Ukraine, we suspended all investment and restaurant development in Russia.

We also suspended all operations of our 70 company-owned KFC restaurants in Russia and began finalizing an agreement to suspend all Pizza Hut operations in Russia, in partnership with our master franchisee.

Further, we pledged to redirect any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts.

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

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

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

We recorded a charge of $ 3 million to Other income (expense) during the year ended December 31, 2023 as the write-off of our net investment in KFC Russia, including the related cumulative foreign currency translation losses of $ 60 million, exceeded the consideration received from the sale which primarily included cash proceeds of $ 121 million.

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

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

Reacquired franchise rights have an estimated weighted average useful life of 5 years.

Other 2025 Restaurant Acquisitions

In addition to the acquisitions discussed above, we acquired 153 restaurants from franchisees in the year ended December 31, 2025, including 19 KFC, 16 Taco Bell and 118 Pizza Hut restaurants (the "Other restaurant acquisitions").

Total cash consideration paid in connection with these acquisitions w as $ 116 million, net of cash acquired.

The primary assets recorded as a result of the preliminary purchase price allocations were operating lease right-of-use assets (and corresponding lease liabilities) o f $ 54 million, reacquired franchise rights of $ 87 million and goodwill of $ 28 million.

Reacquired franchise rights have estimated weighted average useful lives of 5 years for the KFCs, 17 years for the Taco Bells and 10 years for the Piz za Huts.

Note 4 – Earnings Per Common Share (“EPS”)

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

Refranchising (Gain) Loss

The Refranchising (gain) loss by our Divisional reportable segments is presented below.

Given the size and volatility of refranchising initiatives, our chief operating decision maker (“CODM”) does not consider the impact of Refranchising (gain) loss when assessing Divisional segment performance.

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

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

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

A summary of Refranchising (gain) loss is as follows:

Refranchising (gain) loss

KFC Division $ 1 $ 2 $ ( 3 )

Taco Bell Division ( 32 ) ( 33 ) ( 13 )

Pizza Hut Division ( 2 ) 2 ( 1 )

Habit Burger & Grill Division ( 1 ) — ( 10 )

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

Pizza Hut Strategic Options Review

In 2025, we began a review of strategic options for the Pizza Hut brand.

The objective of the review is to create value for YUM, Pizza Hut and its franchise partners by determining the optimal approach to best capitalize on Pizza Hut's structural advantages — strong brand equity, experienced franchise partners and meaningful scale — in the highly fragmented pizza market.

We currently intend to complete this strategic options review in 2026, and there can be no assurance this review will result in any specific outcome or transaction.

During the year ended December 31, 2025, we incurred charges of approximately $ 36 million, primarily in third-party advising costs associated with this strategic options review and wrote-off approximately $ 5 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 Unallocated franchise and property revenues, respectively.

Brand HQ Consolidation

During the year ended December 31, 2025, we recorded charges of approximately $ 27 million 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.

corporate office to the KFC Global headquarters and requiring the majority of our U.S.-based remote employees to relocate to an appropriate headquarter office.

These charges were comprised of $ 21 million recorded to Corporate and unallocated General and administrative expenses, primarily for severance for employees who chose not to relocate and consultant fees, and $ 6 million recorded to Unallocated Other (income) expense representing the write-off of the net book value of our YUM corporate headquarters in Louisville, Kentucky as a result of the donation of that headquarters subsequent to the relocation of the KFC U.S.

corporate office relocation.

German Acquisition and Turkey Termination

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

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

As a result, 283 KFC restaurants and 254 Pizza Hut restaurants in Turkey were closed in the first quarter of 2025.

The loss of royalties from the store closures did not have a material impact to KFC and Pizza Hut Divisional Operating Profit.

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

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

We recorded charges of $ 37 million to Unallocated Other (income) expense, $ 18 million to Unallocated Franchise and property revenues and $ 6 million to Corporate and unallocated General and administrative expenses consisting primarily of transaction costs associated with the German acquisition and termination-related costs associated with the Turkey business in the year ended December 31, 2024.

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

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

We recorded a credit of $ 1 million and charges of $ 1 million and $ 9 million to Unallocated Other (income) expense, Unallocated Franchise and property revenues and Corporate and unallocated General and administrative expenses, respectively, during the year ended December 31, 2025, consisting primarily of transaction costs associated with re-acquiring the master franchise rights in Germany including severance.

Resource Optimization

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

During 2024, we expanded the program to identify further opportunities to optimize the company’s spending and identify additional, critical areas in which to potentially reallocate resources, both with a goal to enable the acceleration of the Company’s growth rate.

We expanded the program in 2024 to identify further opportunities to optimize the company’s spending and identify additional, critical areas in which to potentially reallocate resources, both with a goal to enable the acceleration of the Company’s growth rate.

Costs incurred to date related to the program primarily include severance associated with positions that have been eliminated or relocated and consultant fees.

As a result of this program, we recorded charges of $ 38 million, $ 79 million and $ 21 million in the years ended December 31, 2025, 2024 and 2023, respectively.

These charges were primarily recorded as General and administrative expenses.

Due to their scope and size, these costs were not allocated to any of our segment operating results for performance reporting purposes.

These charges were primarily recorded to Corporate and unallocated General and administrative expenses.

Investment in Devyani

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

Changes in the fair value of our ownership interest in Devyani prior to the date of sale resulted in pre-tax investment losses of $ 20 million in the year ended December 31, 2024 and pre-tax investment income of $ 8 million and $ 11 million in the years ended December 31, 2023 and 2022, respectively (see Note 14).

Refinancing of Credit Agreement and Long-term Debt Redemptions

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

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

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

The redemption amount was equal to 103.875 % of the $ 600 million aggregate principal amount redeemed, reflecting a $ 23 million call premium, plus accrued and unpaid interest to the date of redemption.

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

Income Tax Matters

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Franchise contributions for advertising and other services 632 14 68 — 714

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

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

$ 3,542 $ 3,095 $ 1,013 $ 570 $ 8,220 (a)

(a) Does not include charges of $ 7 million to Unallocated franchise and property revenues primarily associated with our Pizza Hut Strategic Options Review during the year ended December 31, 2025.

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

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Franchise contributions for advertising and other services 568 11 63 — 642

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

$ 3,099 $ 2,860 $ 1,008 $ 600 $ 7,567 (b)

(b) Does not include charges of $ 18 million to Unallocated franchise and property revenues associated with the Turkey termination during the year ended December 31, 2024.

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

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Balance at December 31, 2025

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

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

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

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

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

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

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$ 516 $ 510 $ 526

Income taxes 494 432 371

Income taxes (a)

Reconciliation of Cash and cash equivalents to Consolidated Statements of Cash Flows:

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Restricted cash and restricted cash equivalents included in Other assets (c)

Cash and restricted cash related to KFC Russia included in assets held for sale (see Note 3)

Cash, Cash Equivalents and Restricted Cash as presented in Consolidated Statements of Cash Flows $ 923 $ 807 $ 724

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

(a) Cash paid for income taxes include withholding taxes paid on behalf of YUM by franchisees of $ 139 million, $ 138 million and $ 129 million during the years ended December 31, 2025, 2024 and 2023, respectively.

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

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Impairment and closure expense 16 13 12

( 9 ) 15 ( 3 )

Other (income) expense $ 2 $ 34 $ 14

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Assets held for sale (a)

Other prepaid expenses and current assets 158 159

Prepaid expenses

Other current assets

Prepaid expenses and other current assets $ 490 $ 480

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Franchise incentives 209 144

Investment in Devyani International Limited — 124

Other 286 304

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$ 226 $ 98 $ 252 $ 66 $ 642

Disposals and other, net (b)

Acquisitions (b)

Disposals and other, net (c)

( 3 ) — ( 1 ) — ( 4 )

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

$ 321 $ 98 $ 251 $ 66 $ 736

Acquisitions (c)

Disposals and other, net (b)

Acquisitions (d)

16 202 1 — 220

Disposals and other, net (c)

12 — 3 ( 2 ) 14

Goodwill, net as of December 31, 2025 (a)

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(a) Goodwill, net includes $ 144 million of accumulated impairment losses related to our Habit Burger & Grill segment and $ 17 million of accumulated impairment losses related to our Pizza Hut segment for each year presented.

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

(b) Primarily relates to the acquisition from a franchisee of KFC restaurants in the U.K.

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

(d) Primarily relates to the acquisition from a franchisee of Taco Bell restaurants in the Southeast U.S.

Intangible assets, net for the years ended 2025 and 2024 are as follows:

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Amortization expense for all finite-lived intangible assets was $ 98 million in 2025, $ 82 million in 2024 and $ 74 million in 2023.

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

Amortization expense for finite-lived intangible assets, based on existing intangible assets as of December 31, 2025, is expected to approximate in $ 127 million in 2026, $ 111 million in 2027, $ 85 million in 2028, $ 66 million in 2029 and $ 54 million in 2030.

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

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(in millions) Stated Effective (b)

May 2016 May 2026 $ 938 4.970 % 5.14 %

November 2018 November 2028 $ 595 4.940 % 5.06 %

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August 2021 August 2031 $ 737 2.542 % 2.64 %

(a) The legal final maturity dates of the Securitization Notes issued in 2016, 2018 and 2021 are May 2046, November 2048 and August 2051, respectively.

September 2025 August 2030 $ 1,000 4.821 % 5.04 %

September 2025 August 2032 $ 500 5.049 % 5.21 %

(a) The legal final maturity dates of the Securitization Notes issued in 2018, 2021 and 2025 are November 2048, August 2051 and August 2055, respectively.

If the Issuer has not repaid or refinanced a series of Securitization Notes prior to its respective Anticipated Repayment Dates, rapid amortization of principal on all Securitization Notes will occur and additional interest will accrue on the Securitization Notes.

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The Securitization Notes are secured by substantially all of the assets of the Securitization Entities, and include a lien on all existing and future U.S.

Taco Bell franchise and license agreements and the royalties payable thereunder, existing and future U.S.

Taco Bell franchise and license agreements and the royalties payable

thereunder, existing and future U.S.

Taco Bell intellectual property, certain transaction accounts and a pledge of the equity interests in asset-owning Securitization Entities.

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Taco Bell assets, the Company, or any other subsidiary of the Company.

On September 24, 2025, the Issuer completed refinancing certain Securitization 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 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 franchise restaurants).

As a result of the issuance of the 2025-1 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 2025-1 Securitization Notes utilizing the effective interest method.

Payments of interest and principal on the Securitization 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 Securitization Notes are due on a quarterly basis.

In general, no amortization of principal of the Securitization 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 related indenture)) for the preceding four fiscal quarters of either the Company and its subsidiaries or the Issuer and its subsidiaries exceeds 5.0:1, in which case amortization payments of 1% per year of the outstanding principal as of the closing of the Securitization Notes are required.

Interest on and any principal payments of the Securitization Notes are due on a quarterly basis.

In general, no amortization of principal of the Securitization 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 related indenture)) for the preceding four fiscal quarters of either the Company and its subsidiaries or the Issuer and its subsidiaries exceeds 5.0:1 (or 5.5:1 for the 2025-1 Notes), in which case amortization payments of 1% per year of the outstanding principal as of the closing of the Securitization Notes are required.

As of the most recent quarterly measurement date the consolidated leverage ratio for the Issuer and its subsidiaries did not exceed 5.0:1 and, as a result, amortization payments are not required.

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

Additionally, the Borrowers through a series of transactions have issued Subsidiary Senior Unsecured Notes (collectively referred to as the “Subsidiary Senior Unsecured Notes”).

Additionally, the

Borrowers through a series of transactions have issued Subsidiary Senior Unsecured Notes (collectively referred to as the “Subsidiary Senior Unsecured Notes”).

The following table summarizes borrowings outstanding under the Credit Agreement, as well as our Subsidiary Senior Unsecured Notes as of December 31, 2025.

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

There were $ 300 million in outstanding borrowings under the Revolving Facility and $ 12 million of letters of credit outstanding as of December 31, 2025.

Interest Rate

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The effective rates related to our Term Loan A and B Facilities are based on SOFR-based interest rates at December 31, 2025.

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

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

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

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

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

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

All other material provisions of the Credit Agreement remained unchanged.

The Term Loan A Facility is subject to quarterly amortization payments in an amount equal to 0.625 % of the principal amount of the facility as of the issuance date of $ 500 million.

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

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

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

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

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

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

The Credit Agreement contains, among other things, limitations on certain additional indebtedness and liens, and certain other transactions specified in the agreement.

The Credit Agreement contains, among other things, limitations on certain additional

indebtedness and liens, and certain other transactions specified in the agreement.

We were in compliance with all debt covenants as of December 31, 2025 .

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Total $ 11,828

Interest expense on Short-term borrowings, Long-term debt and gross interest on cash pooling arrangements was $ 542 million, $ 602 million and $ 558 million in 2024, 2023 and 2022, respectively.

Interest expense on Short-term borrowings, Long-term debt and cash pooling arrangements was $ 544 million, $ 542 million and $ 602 million in 2025, 2024 and 2023, respectively.

Note 12 – Lease Accounting

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

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

(a) The year ended December 31, 2025, includes $ 218 million and $ 71 million of operating and finance lease right-of-use assets, respectively, acquired as part of the Taco Bell Southeast U.S.

restaurant acquisition (see Note 3).

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

and Ireland restaurant acquisition (see Note 3).

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Total right-of-use assets (a)

$ 1,341 $ 930

Operating $ 105 $ 91 Accounts payable and other current liabilities

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These amounts primarily related to Taco Bell U.S.

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

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

Maturity of Lease Payments and Receivables

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Note 13 - Derivative Instruments

We use derivative instruments to manage certain of our market risks related to fluctuations in interest rates, deferred compensation liabilities 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 deferred compensation liabilities.

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 December 31, 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.

Foreign Currency Contracts

In September 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 Consolidated Financial Statements for the year ended December 31, 2025, and will mature in March 2026.

Interest Rate Swaps

We have entered into interest rate swaps with the objective of reducing our exposure to interest rate risk for a portion of our variable-rate debt interest payments.

On May 14, 2018, we entered into forward-starting interest rate swaps to fix the interest rate on $ 1.5 billion of borrowings, primarily under our Term Loan B Facility from July 2021 through March 2025.

These interest rate swaps result in a fixed rate of 4.87 % on the swapped portion of the Term Loan B Facility.

These interest rate swaps are 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.

In March 2025, interest rates swaps which reduced our historical exposure to interest rate risk for $ 1.5 billion of our variable-rate debt payments primarily under our Term Loan B Facility expired.

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

On April 4, 2025, we entered into a new interest rate swap ("2025 interest rate swap") to fix the interest 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 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).

There were no other interest rate swaps outstanding as of December 31, 2025.

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

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

Through December 31, 2025, the 2025 interest rate swap was a highly effective cash flow hedge.

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

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The fair value associated with the total return swaps as of both December 31, 2025 and 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.

At December 31, 2024, 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.

See Note 14 for the fair value of our derivative assets and liabilities.

Note 14 – Fair Value Disclosures

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

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

As of December 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.

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

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Recurring Fair Value Measurements

The Company has interest rate swaps and investments, all of which are required to be measured at fair value on a recurring basis (see Note 13 for discussion regarding derivative instruments).

The following table presents fair values for those assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the measurements fall.

Consolidated Balance Sheet Level 2024

Investments Other assets 1 $ 1 $ 125

Investments Other assets 3 7 7

Interest Rate Swaps Prepaid expenses and other current assets 2 5 24

Interest Rate Swaps Other assets 2 — 2

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

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

The fair values of the assets and liabilities of the Company that are required to be measured at fair value on a recurring basis (see Note 13 for discussion regarding derivative instruments) were not significant at December 31, 2025 or 2024.

Non-Recurring Fair Value Measurements

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

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

The remaining net book value of restaurant assets measured at fair value during the years ended December 31, 2025 and 2024 was $ 19 million and $ 21 million, respectively.

Note 15 – Pension, Retiree Medical and Retiree Savings Plans

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Our two significant U.S.

plans, including the Plan and a supplemental plan, were previously amended such that any salaried employee hired or rehired by YUM after September 30, 2001, is not eligible to participate in those plans.

plans, including the Plan and a supplemental plan, were previously amended such that any salaried

employee hired or rehired by YUM after September 30, 2001, is not eligible to participate in those plans.

Additionally, these two significant U.S.

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Benefits paid ( 55 ) ( 45 )

Settlement payments ( 17 ) —

Actuarial (gain) loss 22 ( 3 )

Benefit obligation at end of year $ 774 $ 776

A significant component of the overall decrease in the Company's benefit obligation for the year ended December 31, 2025, was due to benefits paid and settlement payments during the year partially offset by interest cost and actuarial loss on the benefit obligation.

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

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

Change in plan assets:

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Benefits paid ( 55 ) ( 45 )

Settlement payments ( 17 ) —

Fair value of plan assets at end of year $ 670 $ 644

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Amounts recognized in the Consolidated Balance Sheet:

Accrued benefit asset - non-current $ — $ —

Accrued benefit liability - current $ ( 8 ) $ ( 11 )

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Beginning of year $ ( 127 ) $ ( 87 )

Net actuarial (loss) gain

( 42 ) ( 13 )

Amortization of net loss (gain)

Net actuarial gain (loss)

Amortization of net (gain) loss

Amount recognized in earnings due to settlement

Amortization of prior service cost 1 1

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2031 - 2035 277

Expected benefit payments are estimated based on the same assumptions used to measure our benefit obligation on the measurement date and include benefits attributable to estimated future employee service.

Expected benefit payments are estimated based on the same assumptions, including projected participant retirement dates, used to measure our benefit obligation on the measurement date and include benefits attributable to estimated future employee service.

International Pension Plans

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

plans of $ 72 million and $ 63 million

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

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

plans of $ 70 million and $ 72 million were recognized in AOCI at the end of 2025 and 2024, respectively.

The total net periodic cost or benefit recorded was $ 2 million of cost in 2025, less than $ 1 million of benefit in 2024 and $ 2 million of cost in 2023.

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

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We fund our post-retirement plan as benefits are paid.

At the end of 2024 and 2023, the accumulated post-retirement benefit obligation was $ 25 million and $ 27 million, respectively.

At the end of both 2025 and 2024, the accumulated post-retirement benefit obligation was $ 25 million.

Actuarial pre-tax gains of $ 11 million and $ 13 million were recognized in AOCI at the end of 2025 and 2024, respectively.

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

The net periodic benefit cost or benefit recorded was less than $ 1 million of benefit in each of 2025, 2024 and 2023.

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

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Under the LTIP, the exercise price of stock options and SARs granted must be equal to or greater than the average market price or the ending market price of the Company’s stock on the date of grant.

While awards under the LTIP can have varying vesting provisions and exercise periods, outstanding awards under the LTIP vest in periods ranging from immediate to five years.

While awards under the LTIP can have varying vesting provisions and exercise periods, outstanding awards under the LTIP vest in periods ranging from immediate to four years.

Stock options and SARs generally expire ten years after grant.

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

Our EID plan also allows certain participants to

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

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

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

is two years from the date of deferral.

We expense the intrinsic value of the match and the incentive compensation amount over the requisite service period which includes the vesting period.

Historically, the Company has repurchased shares on the open market in excess of the amount necessary to satisfy award exercises and expects to continue to do so in 2026.

In connection with the 2016 spin-off of our China business into an independent, publicly-traded company under the name of Yum China Holdings, Inc.

(“Yum China”), under the provisions of our LTIP, employee stock options, SARs, RSUs and PSUs outstanding at that time were adjusted to maintain the pre-spin intrinsic value of the awards.

Depending on the tax laws of the country of employment, awards were modified using either the shareholder method or the employer method.

Share-based compensation as recorded in Net Income was based on the amortization of the fair value for both YUM and Yum China awards held by YUM employees.

The fair value of Yum China awards held by YUM employees became fully amortized to expense in the year ended December 31, 2020.

Share issuances for Yum China awards held by YUM employees will be satisfied by Yum China.

Share issuances for YUM awards held by Yum China employees are being satisfied by YUM.

Award Valuation

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Expected dividend yield 1.9 % 2.1 % 1.8 %

Grants made to executives typically have a graded vesting schedule of 25 % per year over four years and expire ten years after grant.

Stock options and SAR grants made to executives typically have a graded vesting schedule of 25 % per year over four years and expire ten years after grant.

We use a single weighted-average term for our awards that have a graded vesting schedule.

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The fair values of PSU awards with market-based conditions have been valued based on the outcome of a Monte Carlo simulation.

The PSU awards have a vesting period of three years and RSU awards typically have a graded vesting schedule of 25% per year over four years and expire ten years after the grant.

Award Activity

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(a) Outstanding awards include 228 options and 5,747 SARs with weighted average exercise prices of $ 115.88 and $ 109.46 , respectively.

Outstanding awards represent YUM awards held by employees of both YUM and Yum China.

The weighted-average grant-date fair value of stock options and SARs granted during 2025, 2024 and 2023 was $ 35.07 , $ 28.35 and $ 29.93 , respectively.

The total intrinsic value of stock options and SARs exercised during the years ended December 31, 2025, 2024 and 2023, was $ 144 million, $ 158 million and $ 114 million, respectively.

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

As of December 31, 2025, $ 26 million of unrecognized compensation cost related to unvested stock options and SARs, which will be reduced by any forfeitures that occur, is expected to be recognized over a remaining weighted-average period of

approximately 1.6 years.

The total fair value at grant date of stock options and SARs held by YUM employees that vested during 2025, 2024 and 2023 was $ 22 million, $ 28 million and $ 31 million, respectively.

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September 2022 — 366 387 — 50 50

May 2021 — — 8,116 — — 950

Total 3,739 3,282 387 $ 550 $ 441 $ 50

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Balance at December 31, 2023, net of tax

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

OCI, net of tax

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$ ( 161 ) $ ( 132 ) $ ( 18 ) $ ( 311 )

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

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

(a) Amounts reclassified from AOCI for pension and post-retirement benefit plans losses during 2025 include amortization of net losses of $2 million, settlement charges of $ 3 million and related income tax benefit of $1 million.

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

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

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$ 518 $ 414 $ 221

The reconciliation of income taxes calculated at the U.S.

federal statutory rate to our effective tax rate is set forth below:

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

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

The Company has applied ASU 2023-09 beginning in 2025.

As such, our effective tax rate reconciliation for 2025 is reflected in a new table following the requirements set forth in ASU 2023-09, while the 2024 and 2023 effective tax rate reconciliations are presented in the historical format as required by U.S.

Federal Statutory Tax Rate $ 436 21.0 %

Federal Tax Effects

Effect of Cross-Border Tax Laws

Foreign Derived Deduction Eligible Income (“FDDEI”) ( 34 ) ( 1.6 ) %

Net Controlled Foreign Corporation Tested Income (“NCTI”) 178 8.5 %

Other 7 0.3 %

Nontaxable or Nondeductible Items 11 0.5 %

Excess Tax Deductions on Equity Based Compensation ( 23 ) ( 1.1 ) %

Gain/(Loss) on Intellectual Property (“IP”) Transfer

Foreign Tax Credit ( 226 ) ( 10.9 ) %

Other ( 10 ) ( 0.5 ) %

Changes in Tax Laws or Rates 76 3.7 %

Changes in Valuation Allowances ( 212 ) ( 10.2 ) %

Other Adjustments ( 6 ) ( 0.3 ) %

State and Local Income Tax, Net of Federal (National) Income Tax Effect (1)

Foreign Tax Effects

Withholding Tax 34 1.7 %

Cyprus ( 40 ) ( 1.9 ) %

Deferred Tax Benefit on IP Transfer

( 121 ) ( 5.8 ) %

Other 4 0.2 %

Foreign Tax Credit ( 36 ) ( 1.7 ) %

Other 10 0.5 %

Statutory Tax Rate Difference

( 25 ) ( 1.2 ) %

Other 12 0.6 %

United Arab Emirates ( 22 ) ( 1.1 ) %

Other Foreign Jurisdictions 149 7.2 %

Global Changes in Unrecognized Tax Benefits 61 2.9 %

Effective Income Tax Rate $ 518 24.9 %

(1) State taxes in California and New York made up the majority (greater than 50 percent) of the tax effect in this category.

Significant factors impacting our effective tax rate for the year ended December 31, 2025 include:

OBBBA Enactment.

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.

Upon enactment, we recorded $ 76 million of tax expense primarily associated with a change in management’s judgment regarding the Company’s ability to utilize U.S.

foreign tax credit related deferred tax assets existing as of the enactment date.

Intellectual Property Transfer.

In December 2025, as part of our review of strategic options for Pizza Hut, we completed the initial steps of an internal reorganization to consolidate our Pizza Hut legal entities and assets into two isolated ownership structures by aligning the legal ownership, simplifying the organizational footprint and consolidating the Pizza Hut domestic and international business.

As part of this reorganization, certain Pizza Hut IP rights were transferred from the U.S.

As a result of these transactions, we recorded a net tax benefit of $ 89 million primarily due to the net deferred tax benefit associated with a step-up in amortizable tax basis of the IP rights.

tax impacts from the IP transfers included tax on the related gain as well as NCTI tax expense, which were largely offset by deferred tax benefit resulting from the release of valuation allowances against U.S.

foreign tax credit carryforwards that were utilized in the transactions.

Global Changes in Unrecognized Tax Benefits.

$ 108 million of tax expense was recorded 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.

In addition, $ 63 million of tax benefit was recorded associated with releasing reserves due to the favorable resolution of a U.S.

The following table reconciles the U.S.

statutory tax rate to our effective income tax rate for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09:

federal statutory rate 21.0 % 21.0 %

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Effective income tax rate 21.8 % 12.1 %

Statutory rate differential attributable to foreign operations.

This item includes local country taxes, withholding taxes, and shareholder-level taxes, net of U.S.

foreign tax credits.

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

Significant factors impacting our effective tax rate for the years ended December 31, 2024 and December 31, 2023, include:

Adjustments to reserves and prior years.

This item includes:

(1) changes in tax reserves, including interest thereon, established for potential exposure we may incur if a taxing authority takes a position on a matter contrary to our position;

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

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

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

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

Impact of Russia Exit.

Our decision to exit the Russia market resulted in a $ 7 million tax benefit recorded in 2023 to account for the global tax ramification of current and future payments required to be made to the Russia IP rights holder in Switzerland.

In 2022, this item was unfavorably impacted by $ 72 million of tax expense primarily associated with a reduction in the tax basis of KFC IP rights held in Switzerland due to the expected loss of the Russia royalty income associated with such rights going forward.

As a result, we remeasured and reassessed the need for a valuation allowance on the associated deferred tax assets.

In addition, we reassessed certain deferred tax liabilities associated with the Russia business given the expectation that the basis difference would reverse by way of sale.

Intercompany Restructuring and Valuations of Intellectual Property.

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

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

to subsidiaries in Switzerland.

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

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

This valuation supported an increase to tax basis of Swiss IP rights associated with parts of our business that will continue to use these IP rights due to expected royalty growth assumptions in those parts of the business that largely offset the loss of Russia royalty income described above.

Based on the valuation as well as future forecasting of taxable income, we remeasured and reassessed the need for a valuation allowance on the deferred tax assets in Switzerland.

As a result, we recorded a net tax benefit of $ 75 million in 2022.

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

In December 2023, we completed intra-entity transfers of certain Asia region IP rights to Singapore.

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

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

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

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

The Company has elected to account for GILTI as a period cost.

federal and state tax

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

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

The Company has elected to account for NCTI as a period cost.

The details of 2025 and 2024 deferred tax assets (liabilities) are set forth below:

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Net deferred tax assets (liabilities) $ 964 $ 1,070

As a result of the OBBBA, the Company recorded a $ 168 million reduction in net deferred tax assets existing as of the enactment date.

The reduction was the result of recording a valuation allowance on the foreign tax credit related deferred tax assets as well as the impact of accelerating tax deductions for qualified depreciable property and research expenditures.

As a result of the accelerated tax deductions, our cash tax payments for 2025 were significantly reduced.

The details of the 2025 and 2024 valuation allowance activity are set forth below:

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$ 964 $ 1,070

The details of 2025 cash tax payments (net of refunds) are set forth below:

Jurisdictions

California 26

Other States 36

Foreign Taxes

South Africa 17

United Kingdom 58

Other Foreign Jurisdictions 35

Total Taxes Paid (net of refunds) (2)

(1) Include $ 46 million paid to a third party for a transferable tax credit accounted for under ASC 740.

(2) Excludes withholding taxes paid on our behalf by franchisees of $ 139 million .

As of December 31, 2025, we had approximately $ 2 billion of unremitted foreign retained earnings.

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Foreign country tax credits 35 35 ( 13 ) 2031

Foreign deduction carryforward - Indefinite

State interest deduction carryforward - Indefinite 893 41 ( 40 ) None

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Reductions for tax positions - prior years

( 74 ) ( 10 )

Reductions for settlements

End of Year $ 115 $ 126

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

During 2025, 2024, and 2023 the Company recognized $ 36 million, $ 3 million, and $ 20 million of net expense, respectively, for interest and penalties in our Consolidated Statements of Income as components of its Income tax provision.

The Company has recorded $ 57 million and $ 20 million of net tax payables, as of December 31, 2025 and 2024, respectively, associated with interest and penalties.

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state and foreign jurisdictions.

The Company has settled audits with the IRS through fiscal year 2012 and is currently under IRS examination for 2013-2019.

The Company has settled audits with the IRS through fiscal year 2012 and for fiscal years 2016 through 2019 and is currently under IRS examination for fiscal years 2013 through 2015 and 2020 through 2022.

Our operations in certain foreign jurisdictions are currently under audit and remain subject to examination for tax years as far back as 2009.

See Note 20 for discussion of an Internal Revenue Service Proposed Adjustment.

See Note 20 for discussion of an Internal Revenue Service Proposed Adjustment associated with the 2013 through 2015 examination period.

Note 19 – Reportable Operating Segments

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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.

Accordingly, segment assets are not reported to our CODM or used in his decisions to allocate resources or assess performance of the segments.

Therefore, total segment assets and long-lived assets have not been disclosed.

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

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

Company Sales (a)

Company Sales

$ 1,057 $ 1,281 $ 51 $ 555 $ 2,945

Franchise and property revenues (a)

Franchise and property revenues

1,807 1,060 602 12 3,480

Franchise contributions for advertising and other services (a)

Franchise contributions for advertising and other services

679 754 360 3 1,796

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Other (income) expense 1 — ( 14 ) 12 —

Division Operating Profit

Division Operating Profit (Loss)

$ 1,503 $ 1,129 $ 340 $ ( 13 ) $ 2,959

Unallocated amounts:

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

Unallocated Company restaurant expenses (e)

Unallocated Franchise and property revenues (c)

Unallocated Refranchising gain (loss) 34

Unallocated Other income (expense) (c)

Corporate and unallocated G&A expenses

Unallocated Company restaurant expenses (b)

Unallocated Franchise and property revenues

Unallocated Refranchising gain (loss) (c)

Unallocated Other income (expense)

Consolidated Operating Profit 2,574

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

Depreciation and Amortization (f)

Depreciation and Amortization (d)

$ 50 $ 78 $ 23 $ 29 $ 26 $ 206

Capital Spending 109 131 27 60 44 371

Identifiable Assets (g)

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

Long-Lived Assets (h)

1,269 991 365 548 164 3,337

Taco Bell Division

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Habit Burger & Grill Division

Company Sales (a)

Company Sales

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

Franchise and property revenues (a)

Franchise and property revenues

1,685 997 622 9 3,313

Franchise contributions for advertising and other services (a)

Franchise contributions for advertising and other services

613 708 378 3 1,702

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Unallocated amounts:

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

Unallocated Franchise and property expenses (i)

Unallocated Refranchising gain (loss) 29

Unallocated Other income (expense) (i)

Corporate and unallocated G&A expenses

Unallocated Company restaurant expenses (b)

Unallocated Franchise and property revenues

Unallocated Refranchising gain (loss) (c)

Unallocated Other income (expense)

Consolidated Operating Profit 2,403

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Corporate and Unallocated

Depreciation and Amortization (f)

Depreciation and Amortization (d)

$ 33 $ 64 $ 16 $ 31 $ 31 $ 175

Capital Spending 73 98 15 39 32 257

Identifiable Assets (g)

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

Long-Lived Assets (h)

891 975 378 580 156 2,980

Taco Bell Division

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Habit Burger & Grill Division

Company Sales (a)

Company Sales

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

Franchise and property revenues (a)

Franchise and property revenues

1,698 918 622 9 3,247

Franchise contributions for advertising and other services (a)

Franchise contributions for advertising and other services

648 654 383 2 1,687

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Unallocated amounts:

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

Unallocated Franchise and property expenses (i)

Unallocated Refranchising gain (loss) 27

Unallocated Other income (expense) (i)

Corporate and unallocated G&A expenses

Unallocated Franchise and property expenses

Unallocated Refranchising gain (loss) (c)

Unallocated Other income (expense)

Consolidated Operating Profit 2,318

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Corporate and Unallocated

Depreciation and Amortization (f)

Depreciation and Amortization (d)

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

Capital Spending 73 101 12 64 35 285

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

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

(c) As a result of our acquisition of the master franchise rights in Germany for KFC and Pizza Hut and the termination of our franchise agreements with the owner and operator of KFC and Pizza Hut restaurants in Turkey (see Note 5), we recorded charges of $ 37 million to Unallocated Other income (expense), $ 18 million to Unallocated Franchise and property revenues and $ 6 million to Corporate and unallocated G&A expenses consisting primarily of transaction costs associated with the German acquisition and termination-related costs associated with the Turkey business in the year ended December 31, 2024 (see Note 5).

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

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

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

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

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

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

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

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

As a result, we reclassed net operating losses of $ 1 million from KFC Division Other income (expense) to Unallocated Other income (expense) during the year ended December 31, 2023 and net Operating Profit of $ 44 million from Divisional Other income (expense) to Unallocated Other income (expense) during the year ended December 31, 2022, respectively.

Additionally, we recorded a charge of $ 3 million to Unallocated Other income (expense) during the year ended December 31, 2023 from the sale of our KFC Russia business.

Also included in Unallocated Other income (expense) were $ 1 million in foreign exchange losses and $ 13 million in foreign exchange gains attributable to fluctuations in the value of the Russian Ruble during the years ended December 31, 2023 and 2022, respectively.

Additionally, we recorded charges of $ 5 million to Corporate and unallocated G&A expenses and $ 1 million to Unallocated Franchise and property expenses during the year ended December 31, 2023, for certain expenses related to the disposition of the businesses and other costs related to our exit from Russia.

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

Revenues by Country (e)

2025 2024 2023

United States

$ 4,525 $ 4,333 $ 4,106

United Kingdom

1,021 799 506

2,668 2,417 2,464

$ 8,214 $ 7,549 $ 7,076

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

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

Given the size and volatility of refranchising initiatives, our CODM does not consider the impact of Refranchising gain (loss) when assessing

Divisional segment performance.

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

During the years ended December 31, 2025, 2024 and 2023, we refranchised 23 , 1 and 15 restaurants, respectively, and we sold certain restaurant assets (primarily land) associated with existing franchise restaurants to the franchisee.

We received $ 78 million, $ 49 million and $ 60 million in pre-tax cash refranchising proceeds in 2025, 2024 and 2023, respectively, as a result of the sales of these restaurants and restaurant assets.

A summary of Refranchising gain (loss) is as follows:

Refranchising gain (loss)

KFC Division $ 13 $ ( 1 ) $ ( 2 )

Taco Bell Division 33 32 33

Pizza Hut Division — 2 ( 2 )

Habit Burger & Grill Division 2 1 —

Worldwide $ 48 $ 34 $ 29

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

Note 20 – Contingencies

Internal Revenue Service Proposed Adjustment

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 $1.4 billion through December 31, 2024.

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.

Following an Internal Revenue Service (“IRS”) audit for the 2013 to 2015 fiscal years, we were unable to resolve underpayments of tax that the IRS proposed resulting from that audit using the IRS Appeals process, a pre-litigation, alternative dispute resolution tool.

The IRS asserts an underpayment of tax of approximately $2.1 billion plus $418 million in penalties for fiscal year 2014.

Both amounts are subject to interest, with interest of approximately $2.1 billion accruing through December 31, 2025.

Those amounts relate primarily to a series of reorganizations that we undertook in 2014 in connection with the business realignment of our corporate and management reporting structure along brand lines.

The IRS asserts that these transactions resulted in taxable distributions of approximately $6.0 billion.

We disagree with the IRS’s position as asserted in the RAR and intend to contest that position vigorously.

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

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

We disagree with the IRS’s position and are contesting that position vigorously.

On June 4, 2025, we filed a petition in the United States Tax Court disputing the IRS's position as set forth in a Notice of Deficiency.

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.

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

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

$ 350 million.

As of December 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 $ 325 million.

The present value of these potential payments discounted at our pre-tax cost of debt at December 31, 2025, was approximately $ 275 million.

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2024 Activity

$ 48 36 ( 32 ) $ 52

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

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In November 2022, YRIPL was notified that an administrative tribunal bench had been constituted to hear an appeal by DOE of certain findings of the January 2020 order, including claims that certain charges had been wrongly dropped and that an insufficient amount of penalty had been imposed.

A hearing with the administrative tribunal that had been scheduled for January 21, 2025 has been rescheduled to March 18, 2025.

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

A hearing with the administrative tribunal scheduled for February 18, 2026 has been rescheduled to May 21, 2026.

A hearing scheduled for December 10, 2025, before the Delhi High Court has been continued to May 5, 2026, and the stay order remains in effect.

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

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data