What changed in this filing

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Item 1. Financial Statements

2026-05-06 compared with 2025-11-07 · 97 added, 321 removed, 458 unchanged (48% of the section changed)

3 unchanged sentences

(in millions, except per share data)

Quarter ended Year to date

Quarter ended

Revenues 3/31/2026 3/31/2025

25 unchanged sentences

(in millions)

Quarter ended Year to date

Quarter ended

3/31/2026 3/31/2025

3 unchanged sentences

Adjustments and gains (losses) arising during the period

( 6 ) 34 71 26

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

( 6 ) 34 71 26

Tax (expense) benefit

( 6 ) 34 71 26

Changes in pension and post-retirement benefits

2 unchanged sentences

Tax (expense) benefit

( 1 ) — ( 1 ) —

Changes in derivative instruments

1 unchanged sentence

Reclassification of (gains) losses into Net Income

( 4 ) ( 9 ) ( 15 ) ( 25 )

1 ( 13 ) ( 6 ) ( 13 )

Tax (expense) benefit

1 ( 10 ) ( 5 ) ( 10 )

Other comprehensive income (loss), net of tax

( 2 ) 24 71 17

Comprehensive Income $ 432 $ 275

3 unchanged sentences

(in millions)

Quarter ended

3/31/2026 3/31/2025

3 unchanged sentences

Refranchising (gain) loss ( 1 ) ( 5 )

Investment (income) expense, net ( 1 ) 21

Deferred income taxes 13 8

8 unchanged sentences

Capital spending ( 75 ) ( 71 )

Proceeds from sale of Devyani Investment — 104

Acquisition of KFC U.K.

and Ireland restaurants

Other restaurant acquisitions ( 100 ) ( 31 )

Acquisitions of franchise restaurants

Proceeds from refranchising of restaurants — 15

1 unchanged sentence

Other, net — ( 16 )

Net Cash Used in Investing Activities

( 208 ) ( 292 )

Net Cash (Used in) Provided by Investing Activities

Cash Flows – Financing Activities

Proceeds from long-term debt 1,493 237

Repayments of long-term debt ( 8 ) ( 5 )

Revolving credit facility, three months or less, net 50 24

Short-term borrowings by original maturity

More than three months - proceeds

More than three months - payments

Three months or less, net

Repurchase shares of Common Stock ( 185 ) ( 229 )

4 unchanged sentences

Effect of Exchange Rates on Cash and Cash Equivalents 5 10

Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash and Restricted Cash

Equivalents 393 ( 97 )

Net Decrease in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

( 34 ) ( 25 )

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - Beginning of Period 923 807

34 unchanged sentences

AND SUBSIDIARIES

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

Quarters ended March 31, 2026 and 2025

(in millions)

2 unchanged sentences

Shares Amount

Balance at June 30, 2025

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

Net Income 397 397

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

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

Derivative instruments

Comprehensive Income 394

Dividends declared ( 197 ) ( 197 )

Repurchase of shares of Common Stock (1)

— ( 16 ) ( 20 ) ( 36 )

Employee share-based award exercises — ( 2 ) — ( 2 )

Share-based compensation events 19 19

Balance at September 30, 2025

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

Balance at December 31, 2025

10 unchanged sentences

Share-based compensation events 28 28

Balance at September 30, 2025

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

Balance at June 30, 2024

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

Net Income 382 382

Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature 34 34

Pension and post-retirement benefit plans — —

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

( 10 ) ( 10 )

Comprehensive Income 406

Dividends declared ( 188 ) ( 188 )

Repurchase of shares of Common Stock ( 2 ) ( 15 ) ( 262 ) ( 277 )

Employee share-based award exercises 1 — —

Share-based compensation events 15 15

Balance at September 30, 2024

Balance at March 31, 2026

276 $ — $ ( 6,971 ) $ ( 312 ) $ ( 7,283 )

5 unchanged sentences

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

( 10 ) ( 10 )

Comprehensive Income 275

1 unchanged sentence

Repurchase of shares of Common Stock (1)

( 2 ) — ( 229 ) ( 229 )

Employee share-based award exercises 1 ( 26 ) ( 3 ) ( 29 )

Share-based compensation events 26 26

Balance at September 30, 2024

Balance at March 31, 2025

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

7 unchanged sentences

Therefore, we suggest that the accompanying Financial Statements be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (“2025 Form 10-K”).

and its Subsidiaries (collectively referred to herein as the “Company,” “YUM,” “we,” “us” or “our”) franchise or operate a system of over 62,000 restaurants in more than 155 countries and territories.

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

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.

As of March 31, 2026, 97 % of these restaurants were owned and operated by franchisees.

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

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

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

As of March 31, 2026, YUM consisted of four operating segments:

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

2 unchanged sentences

• The Habit Burger & Grill Division which includes our worldwide operations of the Habit Burger & Grill concept

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.

YUM's fiscal year begins on January 1 and ends December 31 of each year, with each quarter comprised of three months.

1 unchanged sentence

subsidiaries and certain international subsidiaries operate on a weekly periodic calendar where the first three quarters of each fiscal year consist of 12 weeks and the fourth quarter consists of 16 weeks in fiscal years with 52 weeks and 17 weeks in fiscal years with 53 weeks.

For subsidiaries that operate on this periodic weekly calendar, 2024 included a 53rd week.

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

3 unchanged sentences

Our results of operations, comprehensive income, cash flows and changes in shareholders' deficit for these interim periods are not necessarily indicative of the results to be expected for the full year.

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.

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

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

We have reclassified certain items in the Financial Statements for the prior periods to be comparable with the classification for the quarter ended March 31, 2026.

These reclassifications had no effect on previously reported Net Income.

Note 2 - Restaurant Acquisitions

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

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

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

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

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

Total Current Assets $ 2

Property, plant and equipment, net 99

Reacquired franchise rights (included in Intangible assets, net)

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

Total Identifiable Assets

Total Current Liabilities ( 30 )

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

Other liabilities ( 41 )

Total Liabilities Assumed

Total identifiable net assets 87

Purchase price to be allocated $ 177

The cumulative adjustments to the preliminary estimate of identifiable net assets acquired (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 Required franchise rights

Increase in Operating lease right-of-use assets

Increase in Total Current Liabilities

Increase in Operating lease liabilities

Increase in Other liabilities

Increase in consideration

Total increase in Goodwill $ 14

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.

Other Restaurant Acquisitions

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

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

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

The primary assets recorded as a result of the preliminary purchase price allocations were operating lease right-of-use assets (and corresponding lease liabilities) of $ 52 million, reacquired franchise rights of $ 55 million and goodwill of $ 31 million.

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

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

For both the KFC U.K.

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

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

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

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

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

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

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

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

for approximately $ 670 million in cash.

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

During the first quarter of 2026 and throughout 2025, we completed various restaurant acquisitions from franchisees, the most significant of which was the Taco Bell Southeast U.S.

restaurant acquisition referenced 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 during a one-year measurement period subsequent to the acquisition.

The financial results of all acquired restaurants have been included in our Condensed Consolidated Financial Statements since the respective dates of the acquisitions, which individually and in the aggregate, did not materially impact our results for the quarters ended March 31, 2026 and 2025, respectively.

Pro forma financial information for the periods prior to acquisition is not presented due to the immaterial impact of the restaurant acquisitions on our Condensed Consolidated Financial Statements for both the 2026 and 2025 reporting periods.

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 provided 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.

During the quarter ended March 31, 2026, we adjusted the preliminary estimate of identifiable net assets acquired (as recorded in the December 31, 2025 quarter of acquisition).

The adjustments were not significant and we will continue to obtain information to assist in determining the fair value of net assets acquired during the remaining measurement period.

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

Quarter ended Year to date

2025 2024 2025 2024

Quarter ended

Net Income $ 432 $ 253

5 unchanged sentences

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

1.2 1.7 1.4 1.8

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

Note 4 - Shareholders' Deficit

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

Under the authority of our Board of Directors, we repurchased shares of our Common Stock during the years to date ended March 31, 2026 and 2025 as indicated below.

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

4 unchanged sentences

1,174 1,556 $ 185 $ 228 $ 874

September 2022 — 366 — 50 —

In May 2024, our Board of Directors authorized share repurchases of up to $ 2 billion (excluding applicable transaction fees and excise taxes) of our outstanding Common Stock through December 31, 2026.

As of September 30, 2025 we have remaining capacity to repurchase up to $ 1.2 billion of Common Stock under the May 2024 authorization.

As of March 31, 2026 we have remaining capacity to repurchase up to $ 0.9 billion of Common Stock under the May 2024 authorization.

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

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

Balance at June 30, 2025, net of tax

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

OCI, net of tax

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

( 6 ) — 4 ( 2 )

(Gains) losses reclassified from AOCI, net of tax

( 6 ) 3 1 ( 2 )

Balance at September 30, 2025, net of tax

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

Balance at December 31, 2025, net of tax

2 unchanged sentences

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

( 4 ) ( 1 ) 8 3

(Gains) losses reclassified from AOCI, net of tax

— 1 ( 4 ) ( 3 )

Balance at March 31, 2026, net of tax

$ ( 166 ) $ ( 132 ) $ ( 14 ) $ ( 312 )

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

Note 5 - Other (Income) Expense

Quarter ended Year to date

Quarter ended

3/31/2026 3/31/2025

1 unchanged sentence

Impairment and closure expense 2 1

Other ( 3 ) ( 1 ) ( 11 ) ( 11 )

Other (income) expense $ ( 45 ) $ ( 8 )

(a) The quarter ended March 31, 2026, includes income of approximately $ 44 million related to a credit card interchange fee litigation settlement, net of legal expenses, in which we were a plaintiff.

This settlement was recorded to Unallocated Other income.

Note 6 - Supplemental Balance Sheet Information

11 unchanged sentences

Restricted cash

Short term investments

Assets held for sale

Prepaid expenses

8 unchanged sentences

Operating lease right-of-use assets (a)

$ 1,231 $ 1,213

Franchise incentives 216 209

1 unchanged sentence

Other assets $ 1,738 $ 1,708

(a) Non-current operating lease liabilities of $ 926 million and $ 862 million as of September 30, 2025 and December 31, 2024, respectively, are included in Other liabilities and deferred credits in our Condensed Consolidated Balance Sheets.

(a) Non-current operating lease liabilities of $ 1,190 million and $ 1,174 million as of March 31, 2026 and December 31, 2025, respectively, are included in Other liabilities and deferred credits in our Condensed Consolidated Balance Sheets.

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

7 unchanged sentences

Note 7 - Income Taxes

Quarter ended Year to date

2025 2024 2025 2024

Quarter ended

Income tax provision

$ 144 $ 120 $ 446 $ 309

Effective tax rate 16.2 % 41.0 %

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

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

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

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

• The impact of recording $ 3 million and $ 105 million in the quarter and year to date ended September 30, 2025, respectively, related to a reserve associated with a Mexican subsidiary's ability to utilize certain losses to offset recapture gains triggered by a tax deconsolidation in Mexico in 2009.

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

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

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

• On July 4, 2025, H.R.1, commonly known as the One Big Beautiful Bill Act ("OBBBA") was enacted into law in the U.S.

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

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

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

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

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

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

Our first quarter 2026 effective tax rate was impacted by:

• Favorable impacts from newly effective provisions of the One Big Beautiful Bill Act;

• The continuation of our 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 businesses.

As a result, we recorded a net tax benefit of $ 22 million primarily resulting from recording a deferred tax asset associated with a step-up in amortizable tax basis in intellectual property rights that were transferred to international subsidiaries;

• A $ 16 million deferred tax benefit associated with releasing valuation allowances against deferred tax assets in certain foreign jurisdictions;

• A $ 13 million unfavorable adjustment to tax expense associated with our decision to exit Russia in 2022.

Our first quarter 2025 effective tax rate was unfavorably impacted by $ 92 million in tax expense related to establishing a reserve associated with a Mexican subsidiary's ability to utilize certain losses to offset recapture gains.

Note 8 - Revenue Recognition

13 unchanged sentences

Franchise contributions for advertising and other services 151 4 14 — 170

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

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

Quarter ended 9/30/2024

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

Company sales $ 17 $ 267 $ 1 $ 133 $ 418

Franchise revenues 44 211 66 2 323

Property revenues 4 8 1 1 14

Franchise contributions for advertising and other services 10 161 71 1 243

Franchise revenues 70 — 17 — 87

Company sales 203 — — — 203

Franchise revenues 288 15 66 — 369

Property revenues 11 — — — 11

Franchise contributions for advertising and other services 138 4 16 — 158

$ 879 $ 797 $ 253 $ 130 $ 2,059

Year to date 9/30/2025

Quarter ended 3/31/2025

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

9 unchanged sentences

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

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

Year to date 9/30/2024

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

Company sales $ 45 $ 775 $ 5 $ 399 $ 1,224

Franchise revenues 134 608 200 5 947

Property revenues 10 27 3 2 42

Franchise contributions for advertising and other services 30 468 217 2 717

Franchise revenues 200 — 51 — 251

Company sales 443 — — — 443

Franchise revenues 842 43 191 — 1,076

Property revenues 33 — 1 — 34

Franchise contributions for advertising and other services 397 9 47 — 453

$ 2,134 $ 1,930 $ 715 $ 408 $ 5,187

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

Contract Liabilities

5 unchanged sentences

Increase for upfront fees associated with contracts that became effective during the period, net of amounts recognized as revenue during the period 14

Balance at September 30, 2025

Balance at March 31, 2026

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

34 unchanged sentences

Unallocated Company restaurant expenses (c)

Unallocated Franchise and property revenues

Unallocated Refranchising gain (loss) 1

Unallocated Other income (expense)

Unallocated Other income (expense) (d)

Consolidated Operating Profit 644

5 unchanged sentences

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

Depreciation and Amortization (d)

Depreciation and Amortization (e)

$ 13 $ 28 $ 6 $ 7 $ 6 $ 60

14 unchanged sentences

Other (income) expense — — ( 2 ) — ( 2 )

Division Operating Profit

$ 339 $ 251 $ 91 $ 1 $ 682

Unallocated amounts:

Corporate and unallocated G&A expenses (b)

Unallocated Company restaurant expenses (c)

Unallocated Refranchising gain (loss) 12

Unallocated Other income (expense)

Consolidated Operating Profit 619

Investment income (expense), net

Other pension income (expense) 2

Interest expense, net ( 120 )

Income before income taxes $ 502

Other Segment Disclosures

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

Depreciation and Amortization (d)

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

Capital Spending

13 16 4 11 8 52

Year to Date 9/30/2025

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

Company Sales

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

Franchise and property revenues

1,303 735 436 8 2,482

Franchise contributions for advertising and other services

478 514 255 2 1,249

2,501 2,098 710 395 5,704

Company restaurant expenses 635 649 21 352 1,657

General and administrative expenses 255 148 159 39 600

Franchise and property expenses 51 22 32 3 107

Franchise advertising and other services expense 472 510 268 2 1,251

Other (income) expense 1 — ( 9 ) 1 ( 8 )

Division Operating Profit

Division Operating Profit (Loss)

$ 331 $ 241 $ 74 $ ( 1 ) $ 646

12 unchanged sentences

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

Depreciation and Amortization (d)

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

Capital Spending 71 75 23 32 35 236

Year to Date 9/30/2024

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

Company Sales

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

Franchise and property revenues

1,219 678 446 7 2,350

Franchise contributions for advertising and other services

427 477 264 2 1,170

2,134 1,930 715 408 5,187

Company restaurant expenses 428 590 5 366 1,389

General and administrative expenses 253 137 153 38 581

Franchise and property expenses 46 22 19 3 90

Franchise advertising and other services expense 424 473 270 2 1,169

Other (income) expense ( 3 ) ( 1 ) ( 10 ) 1 ( 13 )

Division Operating Profit (Loss)

$ 986 $ 709 $ 278 $ ( 2 ) $ 1,971

Unallocated amounts:

Corporate and unallocated G&A expenses (b)

Unallocated Company restaurant expenses (c)

Unallocated Refranchising gain (loss) 31

Unallocated Other income (expense)

Consolidated Operating Profit 1,746

Investment income (expense), net (e)

Other pension income (expense) 5

Interest expense, net ( 358 )

Income before income taxes $ 1,372

Other Segment Disclosures

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

Depreciation and Amortization (d)

Depreciation and Amortization (e)

$ 11 $ 16 $ 4 $ 7 $ 7 $ 45

2 unchanged sentences

Revenues by Country (f )

Quarter ended Year to date

2025 2024 2025 2024

Quarter ended

United States $ 1,120 $ 980

3 unchanged sentences

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

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

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

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

(b) Corporate and unallocated G&A expenses include charges of $ 37 million in the quarter ended March 31, 2026, related to our Pizza Hut strategic options review, a charge of $ 17 million in the quarter ended March 31, 2025, related to our resource optimization program and charges of $ 1 million and $ 7 million in the quarters ended March 31, 2026 and 2025, respectively, related to our brand headquarters consolidation.

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

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

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

(d) Unallocated Other income (expense) includes income of $ 44 million, net of legal expenses, in the quarter ended March 31, 2026, related to a credit card interchange fee litigation settlement in which we were a plaintiff.

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

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

Note 10 - Pension Benefits

9 unchanged sentences

pension plans are as follows:

Quarter ended Year to date

2025 2024 2025 2024

Quarter ended

Service cost $ 1 $ 1

2 unchanged sentences

Amortization of net (gain) / loss 1 —

Amortization of prior service cost — — 1 1

Net periodic benefit cost (income)

$ ( 1 ) $ ( 1 ) $ ( 2 ) $ ( 2 )

Additional loss recognized due to settlements (a)

$ 2 $ — $ 3 $ —

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

17 unchanged sentences

Long-term debt $ 10,213 $ 11,872

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

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

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

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

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

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

Interest Rate

Issuance Date Anticipated Repayment Date (a)

Outstanding Principal (in millions) Stated Effective (b)

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

September 2025 August 2032 $ 500 5.049 % 5.213 %

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

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

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

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

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

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

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

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

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

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

Given the $750 million in Subsidiary Senior Unsecured Notes outstanding at March 31, 2026, the maturity date of the Term Loan A Facility and Revolving Facility will occur less than 12 months from the balance sheet date of these Condensed Consolidated Financial Statements if the Company has not paid nor refinanced at least $500 million of the Subsidiary Senior Unsecured Notes 91 days prior to June 1, 2027.

As such, the outstanding borrowings of the Term Loan A Facility and the Revolving Facility have been classified as Short-term borrowings in the Condensed Consolidated Balance Sheets as of March 31, 2026.

Details of our Short-term borrowings and Long-term debt as of December 31, 2025 can be found within our 2025 Form 10-K.

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

Cash paid for interest during the quarters ended March 31, 2026 and 2025, was $ 107 million and $ 102 million, respectively.

Note 12 - Derivative Instruments

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

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 March 31, 2026, 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

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

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

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

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

We utilized foreign currency forward contracts with a U.S.

dollar notional amount of approximately $ 75 million to reduce the foreign currency exposure relating to our net investment in certain Indian rupee functional currency operations during the quarter ended March 31, 2026.

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

These foreign currency forward contracts did not have a material impact on our Condensed Consolidated Financial Statements for the quarter ended March 31, 2026.

Interest Rate Swaps

In March 2025, interest rate swaps which reduced our historical exposure to interest rate risk for $ 1.5 billion of our variable-rate debt interest 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 rate on $ 1.5 billion of borrowings, primarily under our Term Loan B Facility, from April 2025 to March 2028.

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

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

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

We have utilized interest rate swaps to fix the interest rate on $ 1.5 billion of borrowings, primarily under our Term Loan B Facility, through March 2028.

The interest rate swaps have been designated as a cash flow hedge and to date have been highly effective.

The current rate on the swapped portion of the Term Loan B Facility (excluding debt issuance costs) is 5.09 %.

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

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

Quarter ended Year to date

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

Quarter ended

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

2026 2025 2026 2025

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

As of September 30, 2025, the estimated net gain included in AOCI related to our cash flow hedges that will be reclassified into earnings in the next 12 months is $ 4 million, based on current Secured Overnight Financing (“SOFR”) interest rates.

As of March 31, 2026, the estimated net gain included in AOCI related to our interest rate swaps that will be reclassified into earnings in the next 12 months is $ 4 million, based on current Secured Overnight Financing (“SOFR”) interest rates.

Total Return Swaps

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

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

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

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

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

The fair value associated with the total return swaps as of both March 31, 2026 and December 31, 2025, was not significant.

See Note 13 for the fair value of our derivative assets and liabilities.

Note 13 - Fair Value Disclosures

As of September 30, 2025, the carrying values of cash and cash equivalents, restricted cash, accounts receivable, short-term borrowings and accounts payable approximated their fair values because of the short-term nature of these instruments.

As of March 31, 2026, the carrying values of cash and cash equivalents, restricted cash, accounts receivable, short-term borrowings, accounts payable and borrowings under our Revolving Facility approximated their fair values because of the short-term nature of these instruments.

The fair value of our notes receivable, net of allowances, and lease guarantees, less reserves for expected losses, approximates their carrying value.

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Recurring Fair Value Measurements

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.

Condensed Consolidated Balance Sheet Level 9/30/2025 12/31/2024

Investments Other assets 1 $ 1 $ 1

Investments Other assets 3 7 7

Interest Rate Swaps Prepaid expenses and other current assets 2 4 5

Interest Rate Swaps Other liabilities and deferred credits

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

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 12 for discussion regarding derivative instruments) were not significant at March 31, 2026 or December 31, 2025.

Note 14 - 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 $1.7 billion through the third quarter of 2025.

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

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 $2.2 billion accruing through March 31, 2026.

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 the proposed underpayment of tax and penalties, and our matter was referred to the IRS Office of Appeals.

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

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

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.

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

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

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

As of March 31, 2026, 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 March 31, 2026, was approximately $ 275 million.

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

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

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

The liability recorded for our expected losses under such leases as of March 31, 2026, was not material.

Legal Proceedings

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

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

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

Hearings before an administrative tribunal as well as the Delhi High Court have been continued and rescheduled, 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-Q

Item 1. Financial Statements