What changed in this filing

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Item 1. Financial Statements

2026-08-05 compared with 2026-05-06 · 230 added, 60 removed, 495 unchanged (37% of the section changed)

3 unchanged sentences

(in millions, except per share data)

Quarter ended

Quarter ended Year to date

Revenues 6/30/2026 6/30/2025 6/30/2026 6/30/2025

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Income Before Income Taxes 533 499 1,049 929

Income tax provision 84 176

Income tax (benefit) provision ( 320 ) 125 ( 236 ) 301

Net Income $ 853 $ 374 $ 1,285 $ 628

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(in millions)

Quarter ended

Quarter ended Year to date

6/30/2026 6/30/2025 6/30/2026 6/30/2025

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Adjustments and gains (losses) arising during the period

2 51 ( 2 ) 76

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

2 51 ( 2 ) 76

Tax (expense) benefit

2 51 ( 2 ) 76

Changes in pension and post-retirement benefits

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Reclassification of (gains) losses into Net Income

4 ( 3 ) ( 2 ) ( 11 )

14 — 19 ( 7 )

Tax (expense) benefit

( 4 ) — ( 5 ) 2

10 — 14 ( 5 )

Other comprehensive income (loss), net of tax

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(in millions)

Quarter ended

6/30/2026 6/30/2025

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Other, net 10 ( 13 )

Net Cash (Used in) Provided by Investing Activities

Net Cash Used in Investing Activities ( 169 ) ( 130 )

Cash Flows – Financing Activities

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Effect of Exchange Rates on Cash and Cash Equivalents ( 4 ) 31

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

( 34 ) ( 25 )

Net (Decrease) Increase in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, including Balances Classified within Assets held for sale ( 7 ) 11

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents Classified within Assets held for sale ( 32 ) —

Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents ( 39 ) 11

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

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Prepaid expenses and other current assets 498 489

Assets held for sale 746 1

Total Current Assets 2,541 2,040

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Short-term borrowings 2,813 38

Liabilities held for sale 262 —

Total Current Liabilities 4,292 1,516

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AND SUBSIDIARIES

Quarters ended March 31, 2026 and 2025

Quarters and years to date ended June 30, 2026 and 2025

(in millions)

2 unchanged sentences

Shares Amount

Balance at March 31, 2026

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

Net Income 853 853

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

Pension and post-retirement benefit plans 1 1

Derivative instruments (net of tax impact of $ 4 million)

Comprehensive Income 866

Dividends declared ( 206 ) ( 206 )

Repurchase of shares of Common Stock (1)

( 3 ) ( 6 ) ( 484 ) ( 490 )

Employee share-based award exercises — ( 6 ) ( 6 )

Share-based compensation events 12 12

Balance at June 30, 2026

273 $ — $ ( 6,809 ) $ ( 298 ) $ ( 7,107 )

Balance at December 31, 2025

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Share-based compensation events 40 40

Balance at June 30, 2026

273 $ — $ ( 6,809 ) $ ( 298 ) $ ( 7,107 )

Balance at March 31, 2025

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

Net Income 374 374

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

Comprehensive Income 426

Dividends declared ( 198 ) ( 198 )

Repurchase of shares of Common Stock (1)

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

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

Share-based compensation events 17 17

Balance at June 30, 2025

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

Balance at December 31, 2024

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Share-based compensation events 43 43

Balance at March 31, 2025

Balance at June 30, 2025

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

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and its Subsidiaries (collectively referred to herein as the “Company,” “YUM,” “we,” “us” or “our”) franchise or operate a system of over 64,000 restaurants in 157 countries and territories.

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

As of June 30, 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 March 31, 2026, YUM consisted of four operating segments:

As of June 30, 2026, YUM consisted of four operating segments:

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

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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.

The objective of the review was 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.

In June 2026, we entered into two definitive agreements to sell the Pizza Hut brand thereby completing this review (see Note 3 for discussion regarding the agreements).

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

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

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

We have reclassified certain items in the Financial Statements for the prior periods to be comparable with the classification for the quarter ended June 30, 2026.

These reclassifications had no effect on previously reported Net Income.

Note 2 - Restaurant Acquisitions

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.

During 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.

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

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.

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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.

During the quarter ended June 30, 2026, we finalized our preliminary estimate of the fair value of identifiable net assets acquired.

The cumulative adjustments to the preliminary estimate of identifiable net assets acquired (as recorded in the December 31, 2025 quarter of acquisition) were not significant.

Note 3 - Pizza Hut Divestitures

On June 16, 2026, we entered into definitive agreements to sell Pizza Hut in two separate transactions.

Pizza Hut excluding Mainland China (“Pizza Hut Ex-China”) will be acquired by LongRange Capital, a private equity firm, and Pizza Hut in Mainland China will be acquired by Yum China Holdings, Inc., which will remain YUM’s master franchisee for KFC and Taco Bell in Mainland China.

We anticipate both transactions will close in August 2026, subject to customary closing conditions, including receipt of required regulatory approvals.

Across the two transactions, we expect to receive approximately $ 2.3 billion of net proceeds after taxes, closing adjustments and transaction-contingent fees.

Additionally, YUM has the opportunity to receive an earn-out from LongRange Capital of $ 75 million by 2030.

We will continue to provide Byte by Yum!, our proprietary technology platform, to Pizza Hut Ex-China subsequent to the sale.

Additionally, following the closing of the transaction, we will provide certain enterprise technology and finance services to Pizza Hut Ex-China under a transition services agreement.

During the quarter ended June 30, 2026, we determined that certain assets and liabilities met the criteria for classification as held for sale as a result of the signing of the definitive agreements.

The planned sale of Pizza Hut does not represent a strategic shift that will have a major effect on YUM’s operations and financial results and, therefore, has not been presented as a discontinued operation.

We suspend certain depreciation and amortization on assets that are held for sale, the impact of which was not significant during the quarter ended June 30, 2026.

The detail of assets and liabilities related to Pizza Hut that were classified as assets and liabilities held for sale in the Condensed Consolidated Balance Sheets are presented below.

Assets held for sale

Cash and cash equivalents $ 25

Accounts and notes receivable, net 197

Prepaid expenses and other current assets 45

Property, plant and equipment, net 26

Intangible assets, net 77

Other assets 104

Total Assets held for sale $ 730

Liabilities held for sale

Accounts payable and other current liabilities $ 155

Other liabilities and deferred credits 107

Total Liabilities held for sale $ 262

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

Quarter ended

Quarter ended Year to date

2026 2025 2026 2025

Net Income $ 853 $ 374 $ 1,285 $ 628

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

1.2 1.5 1.1 1.5

(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 5 - Shareholders' Deficit

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.

Under the authority of our Board of Directors, we repurchased shares of our Common Stock during the years to date ended June 30, 2026 and 2025 as indicated below.

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

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4,345 2,296 $ 670 $ 336 $ 389

June 2026 — — — — 4,000

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

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

As of June 30, 2026 we have remaining capacity to repurchase up to $ 0.4 billion of Common Stock under the May 2024 authorization.

In June 2026, our Board of Directors authorized share repurchases of up to $ 4 billion (excluding applicable transaction fees and excise taxes) of our outstanding Common Stock from the earlier of the exhaustion or expiration of the May 2024 authorization through June 30, 2028.

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

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

Balance at March 31, 2026, net of tax

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

OCI, net of tax

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

(Gains) losses reclassified from AOCI, net of tax

Balance at June 30, 2026, net of tax

$ ( 163 ) $ ( 131 ) $ ( 4 ) $ ( 298 )

Balance at December 31, 2025, net of tax

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( 2 ) 1 14 13

Balance at March 31, 2026, net of tax

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

Balance at June 30, 2026, net of tax $ ( 163 ) $ ( 131 ) $ ( 4 ) $ ( 298 )

Note 6 - Other (Income) Expense

Quarter ended

Quarter ended Year to date

6/30/2026 6/30/2025 6/30/2026 6/30/2025

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Impairment and closure expense 8 1 9 1

( 6 ) ( 4 ) ( 52 ) ( 9 )

Other (income) expense $ 6 $ ( 7 ) $ ( 39 ) $ ( 15 )

(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.

(a) The year to date ended June 30, 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.

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Other assets $ 1,629 $ 1,708

(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.

(a) Non-current operating lease liabilities of $ 1,139 million and $ 1,174 million as of June 30, 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

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Note 8 - Income Taxes

Quarter ended

Income tax provision

Quarter ended Year to date

2026 2025 2026 2025

Income tax (benefit) provision $ ( 320 ) $ 125 $ ( 236 ) $ 301

Effective tax rate ( 60.1 ) % 25.1 % ( 22.5 ) % 32.4 %

Our first quarter 2026 effective tax rate was impacted by:

Our second quarter and year to date 2026 effective tax rate was impacted by:

• A net deferred tax benefit of $ 359 million recorded in the quarter ended June 30, 2026, reflecting the recognition of certain tax basis in entities that are expected to be sold with the Pizza Hut business.

Such recognition was triggered upon entering into definitive agreements during the quarter ended June 30, 2026 to sell Pizza Hut.

The Pizza Hut sales are expected to close at significant book gains in the quarter ended September 30, 2026 resulting in the utilization of these deferred tax benefits.

• Tax benefits of $ 91 million and $ 113 million in the quarter and year to date ended June 30, 2026, respectively, associated with the continued internal reorganization to consolidate the 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.

The tax benefits were the result of establishing deferred tax assets associated with a step-up in amortizable tax basis in intellectual property rights that were transferred to international subsidiaries as well as releasing valuation allowances against tax attributes which will be utilized to partially offset the taxable gains recognized in such transfers.

• 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.

Our second quarter and year to date 2025 effective tax rate was impacted by $ 10 million and $ 102 million of tax expense, respectively, related to a reserve associated with a Mexican subsidiary's ability to utilize certain losses to offset recapture gains.

Note 9 - Revenue Recognition

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

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

Year to date 6/30/2026

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

Company sales $ 53 $ 762 $ 26 $ 260 $ 1,101

Franchise revenues 85 472 114 4 675

Property revenues 6 16 2 2 25

Franchise contributions for advertising and other services 22 351 129 2 505

Franchise revenues 150 — 38 — 188

Company sales 477 7 37 — 521

Franchise revenues 673 34 131 — 838

Property revenues 24 — 1 — 25

Franchise contributions for advertising and other services 312 9 30 — 351

$ 1,802 $ 1,650 $ 507 $ 269 $ 4,228

Year to date 6/30/2025

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

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

Franchise revenues 85 436 126 4 650

Property revenues 6 17 2 2 27

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

Franchise revenues 134 — 34 — 168

Company sales 415 4 — — 419

Franchise revenues 598 29 128 — 755

Property revenues 21 — 1 — 22

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

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

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

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

Contract Liabilities

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Increase for upfront fees associated with contracts that became effective during the period, net of amounts recognized as revenue during the period 30

Balance at March 31, 2026

Deferred franchise fees related to Pizza Hut reclassified to Liabilities held for sale (see Note 3) ( 61 )

Balance at June 30, 2026

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

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Unallocated Refranchising gain (loss) 1

Unallocated Other income (expense) (d)

Unallocated Other income (expense) ( 6 )

Consolidated Operating Profit 655

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Unallocated Company restaurant expenses (c)

Unallocated Refranchising gain (loss) 11

Unallocated Other income (expense)

Consolidated Operating Profit 622

Investment income (expense), net

Other pension income (expense) 1

Interest expense, net ( 123 )

Income before income taxes $ 499

Other Segment Disclosures

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

Depreciation and Amortization (e)

$ 11 $ 16 $ 4 $ 6 $ 6 $ 44

Capital Spending

19 18 10 12 12 71

Year to Date 6/30/2026

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

Company Sales

$ 530 $ 768 $ 63 $ 260 $ 1,622

Franchise and property revenues

938 522 285 6 1,751

Franchise contributions for advertising and other services

334 360 159 2 856

1,802 1,650 507 269 4,228

Company restaurant expenses 471 578 62 242 1,353

General and administrative expenses 174 106 116 25 421

Franchise and property expenses 37 15 31 2 85

Franchise advertising and other services expense 329 361 171 2 863

Other (income) expense ( 2 ) — ( 6 ) 8 —

Division Operating Profit (Loss) $ 793 $ 591 $ 135 $ ( 11 ) $ 1,507

Unallocated amounts:

Corporate and unallocated G&A expenses (b)

Unallocated Company restaurant expenses (c)

Unallocated Refranchising gain (loss) 2

Unallocated Other income (expense) (d)

Consolidated Operating Profit 1,299

Investment income (expense), net 6

Other pension income (expense) —

Interest expense, net ( 257 )

Income before income taxes $ 1,049

Other Segment Disclosures

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

Depreciation and Amortization (e)

$ 26 $ 57 $ 11 $ 14 $ 12 $ 119

Capital Spending 50 61 4 35 25 175

Year to Date 6/30/2025

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

Company Sales

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

Franchise and property revenues

844 482 290 5 1,621

Franchise contributions for advertising and other services

316 336 169 1 823

1,622 1,368 470 262 3,721

Company restaurant expenses 411 421 11 230 1,074

General and administrative expenses 169 98 109 26 401

Franchise and property expenses 36 13 21 2 73

Franchise advertising and other services expense 311 333 179 1 824

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

Division Operating Profit (Loss)

$ 694 $ 502 $ 155 $ 2 $ 1,353

Unallocated amounts:

Corporate and unallocated G&A expenses (b)

Unallocated Company restaurant expenses (c)

Unallocated Franchise and property revenues

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Revenues by Country (f )

Quarter ended

Quarter ended Year to date

2026 2025 2026 2025

United States $ 1,186 $ 1,043 $ 2,306 $ 2,023

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

(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.

(b) Corporate and unallocated G&A expenses include charges of $ 44 million and $ 81 million in the quarter and year to date ended June 30, 2026, respectively, related to our Pizza Hut strategic options review.

Corporate and unallocated G&A expenses include charges of $ 14 million and $ 32 million in the quarter and year to date ended June 30, 2025, respectively, related to our resource optimization program and charges of $ 10 million during the quarter ended June 30, 2025 and $ 1 million and $ 17 million for the years to date ended June 30, 2026 and 2025, respectively, related to our brand headquarters consolidation.

(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.

(d) Unallocated Other income (expense) includes income of $ 44 million, net of legal expenses, in the year to date ended June 30, 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 .

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pension plans are as follows:

Quarter ended

Quarter ended Year to date

2026 2025 2026 2025

Service cost $ 1 $ 1 $ 2 $ 2

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

Amortization of prior service costs — 1 — 1

Net periodic benefit cost (income)

$ — $ — $ — $ ( 1 )

Additional loss recognized due to settlements (a)

$ — $ — $ — $ 1

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

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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.

Given the $750 million in Subsidiary Senior Unsecured Notes outstanding at June 30, 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.

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 quarters ended March 31, 2026 and 2025, was $ 107 million and $ 102 million, respectively.

Cash paid for interest during the years to date ended June 30, 2026 and 2025, was $ 267 million and $ 256 million, respectively.

Note 13 - Derivative Instruments

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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.

At June 30, 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.

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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.

These foreign currency forward contracts did not have a material impact on our Condensed Consolidated Financial Statements for the quarter or year to date ended June 30, 2026.

Interest Rate Swaps

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

Quarter ended

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

Quarter ended Year to date

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

2026 2025 2026 2025 2026 2025 2026 2025

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Income tax benefit/(expense) ( 3 ) ( 1 ) — 1 ( 5 ) ( 1 ) 1 2

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.

As of June 30, 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 $ 9 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 March 31, 2026 and December 31, 2025, was not significant.

The fair value associated with the total return swaps as of both June 30, 2026 and December 31, 2025, was not significant.

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

Note 14 - Fair Value Disclosures

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.

As of June 30, 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 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.

The Company has interest rate swaps 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 the fair values for those interest rate swaps 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 6/30/2026 12/31/2025

Interest Rate Swaps Prepaid expenses and other current assets 2 $ 9 $ 1

Interest Rate Swaps Other assets 2 7 —

Interest Rate Swaps Other liabilities and deferred credits 2 — ( 3 )

The fair value of the Company's interest rate swaps was 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.

Note 15 - Contingencies

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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.

Both amounts are subject to interest, with interest of approximately $2.3 billion accruing through June 30, 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.

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

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.

As of June 30, 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 $ 300 million.

The present value of these potential payments discounted at our pre-tax cost of debt at June 30, 2026, was approximately $ 250 million.

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

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

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

The liability recorded for our expected losses under such leases as of June 30, 2026, was not material.

Legal Proceedings

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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