YUM BRANDS INC 10-Q

Item 1. Financial Statements 3 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) YUM! BRANDS, INC. AND SUBSIDIARIES (in millions, except per share data) Quarter ended Year to date Revenues 6/30/2026 6/30/2025 6/30/2026 6/30/2025 Company sales $ 837 $ 669 $ 1,622 $ 1,277 Franchise and property revenues 895 835 1,751 1,620 Franchise contributions for advertising and other services 438 428 856 823 Total revenues 2,169 1,933 4,228 3,720 Costs and Expenses, Net Company restaurant expenses 700 560 1,378 1,081 General and administrative expenses 324 302 646 604 Franchise and property expenses 41 39 85 73 Franchise advertising and other services expense 444 428 863 824 Refranchising (gain) loss ( 1 ) ( 11 ) ( 2 ) ( 16 ) Other (income) expense 6 ( 7 ) ( 39 ) ( 15 ) Total costs and expenses, net 1,514 1,311 2,930 2,550 Operating Profit 655 622 1,299 1,170 Investment (income) expense, net ( 6 ) — ( 6 ) ( 1 ) Other pension (income) expense — ( 1 ) — ( 1 ) Interest expense, net 128 123 257 243 Income Before Income Taxes 533 499 1,049 929 Income tax (benefit) provision ( 320 ) 125 ( 236 ) 301 Net Income $ 853 $ 374 $ 1,285 $ 628 Basic Earnings Per Common Share $ 3.10 $ 1.34 $ 4.65 $ 2.25 Diluted Earnings Per Common Share $ 3.08 $ 1.33 $ 4.62 $ 2.23 Dividends Declared Per Common Share $ 0.75 $ 0.71 $ 1.50 $ 1.42 See accompanying Notes to Condensed Consolidated Financial Statements. 4 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) YUM! BRANDS, INC. AND SUBSIDIARIES (in millions) Quarter ended Year to date 6/30/2026 6/30/2025 6/30/2026 6/30/2025 Net Income $ 853 $ 374 $ 1,285 $ 628 Other comprehensive income (loss), net of tax Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature 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 Unrealized gains (losses) arising during the period — — — — Reclassification of (gains) losses into Net Income 1 — 2 2 1 — 2 2 Tax (expense) benefit — — ( 1 ) — 1 — 1 2 Changes in derivative instruments Unrealized gains (losses) arising during the period 10 3 21 4 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 13 51 13 73 Comprehensive Income $ 866 $ 426 $ 1,298 $ 701 See accompanying Notes to Condensed Consolidated Financial Statements. 5 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) YUM! BRANDS, INC. AND SUBSIDIARIES (in millions) Year to date 6/30/2026 6/30/2025 Cash Flows – Operating Activities Net Income $ 1,285 $ 628 Depreciation and amortization 119 89 Refranchising (gain) loss ( 2 ) ( 16 ) Deferred income taxes ( 411 ) 12 Share-based compensation expense 35 37 Changes in accounts and notes receivable 16 34 Changes in prepaid expenses and other current assets ( 43 ) ( 47 ) Changes in accounts payable and other current liabilities ( 71 ) ( 42 ) Changes in income taxes payable ( 17 ) 21 Other, net 12 134 Net Cash Provided by Operating Activities 923 850 Cash Flows – Investing Activities Capital spending ( 175 ) ( 142 ) Acquisitions of franchise restaurants ( 5 ) ( 98 ) Proceeds from refranchising of restaurants 1 32 Maturities (purchases) of Short term investments, net — 91 Other, net 10 ( 13 ) Net Cash Used in Investing Activities ( 169 ) ( 130 ) Cash Flows – Financing Activities Repayments of long-term debt ( 14 ) ( 12 ) Revolving credit facility, three months or less, net 375 50 Repurchase shares of Common Stock ( 674 ) ( 338 ) Dividends paid on Common Stock ( 413 ) ( 395 ) Other, net ( 31 ) ( 46 ) Net Cash Used in Financing Activities ( 757 ) ( 741 ) Effect of Exchange Rates on Cash and Cash Equivalents ( 4 ) 31 Net (Decrease) Increase in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, including Balances Classified within Assets held for sale ( 7 ) 11 Less: 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 Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - End of Period $ 884 $ 818 See accompanying Notes to Condensed Consolidated Financial Statements. 6 CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) YUM! BRANDS, INC. AND SUBSIDIARIES (in millions) 6/30/2026 12/31/2025 ASSETS Current Assets Cash and cash equivalents $ 674 $ 709 Accounts and notes receivable, net 623 841 Prepaid expenses and other current assets 498 489 Assets held for sale 746 1 Total Current Assets 2,541 2,040 Property, plant and equipment, net 1,614 1,605 Goodwill 716 969 Intangible assets, net 807 909 Other assets 1,629 1,708 Deferred income taxes 1,373 965 Total Assets $ 8,682 $ 8,197 LIABILITIES AND SHAREHOLDERS’ DEFICIT Current Liabilities Accounts payable and other current liabilities $ 1,191 $ 1,433 Income taxes payable 26 46 Short-term borrowings 2,813 38 Liabilities held for sale 262 — Total Current Liabilities 4,292 1,516 Long-term debt 9,462 11,872 Other liabilities and deferred credits 2,035 2,133 Total Liabilities 15,789 15,521 Shareholders’ Deficit Common Stock, no par value, 750 shares authorized; 273 shares issued in 2026 and 277 shares issued in 2025 — — Accumulated deficit ( 6,809 ) ( 7,014 ) Accumulated other comprehensive loss ( 298 ) ( 311 ) Total Shareholders’ Deficit ( 7,107 ) ( 7,325 ) Total Liabilities and Shareholders’ Deficit $ 8,682 $ 8,197 See accompanying Notes to Condensed Consolidated Financial Statements. 7 CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (Unaudited) YUM! BRANDS, INC. AND SUBSIDIARIES Quarters and years to date ended June 30, 2026 and 2025 (in millions) Yum! Brands, Inc. Issued Common Stock Accumulated Deficit Accumulated Other Comprehensive Loss Total Shareholders' Deficit 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) 10 10 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 277 $ — $ 7,014 $ ( 311 ) $ ( 7,325 ) Net Income 1,285 1,285 Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature ( 2 ) ( 2 ) Pension and post-retirement benefit plans (net of tax impact of $ 1 million) 1 1 Derivative instruments (net of tax impact of $ 5 million) 14 14 Comprehensive Income 1,298 Dividends declared ( 414 ) ( 414 ) Repurchase of shares of Common Stock (1) ( 4 ) ( 11 ) ( 665 ) ( 676 ) Employee share-based award exercises 1 ( 29 ) ( 29 ) 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 279 $ — $ ( 7,256 ) $ ( 392 ) $ ( 7,648 ) Net Income 628 628 Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature 76 76 Pension and post-retirement benefit plans 2 2 Derivative instruments (net of tax impact of $ 2 million) ( 5 ) ( 5 ) Comprehensive Income 701 Dividends declared ( 397 ) ( 397 ) Repurchase of shares of Common Stock (1) ( 2 ) ( 4 ) ( 334 ) ( 338 ) Employee share-based award exercises 1 ( 39 ) ( 3 ) ( 42 ) Share-based compensation events 43 43 Balance at June 30, 2025 278 $ — $ ( 7,361 ) $ ( 319 ) $ ( 7,680 ) (1) Includes excise tax on share repurchases See accompanying Notes to Condensed Consolidated Financial Statements. 8 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Tabular amounts in millions, except per share data) Note 1 - Financial Statement Presentation We have prepared our accompanying unaudited Condensed Consolidated Financial Statements (“Financial Statements”) in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by Generally Accepted Accounting Principles in the United States (“GAAP”) for complete financial statements. 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”). Yum! Brands, Inc. 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 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 June 30, 2026, YUM consisted of four operating segments: • The KFC Division which includes our worldwide operations of the KFC concept • The Taco Bell Division which includes our worldwide operations of the Taco Bell concept • The Pizza Hut Division which includes our worldwide operations of the Pizza Hut concept • 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 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. The majority of our U.S. 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. Our remaining international subsidiaries operate on a monthly calendar similar to that on which YUM operates. Our preparation of the accompanying Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The accompanying Financial Statements include all normal and recurring adjustments considered necessary to present fairly, when read in conjunction with our 2025 Form 10-K, the results of the interim periods presented. 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. 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 June 30, 2026. These reclassifications had no effect on previously reported Net Income. 9 Note 2 - Restaurant Acquisitions 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 was based on management's analysis, which may have included analysis performed by third party valuation specialists, as of the respective acquisition dates. 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 and years to date ended June 30, 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 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. 10 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. 6/30/2026 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 Goodwill 255 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 Year to date 2026 2025 2026 2025 Net Income $ 853 $ 374 $ 1,285 $ 628 Weighted-average common shares outstanding (for basic calculation) 275 279 276 279 Effect of dilutive share-based employee compensation 2 2 2 2 Weighted-average common and dilutive potential common shares outstanding (for diluted calculation) 277 281 278 282 Basic EPS $ 3.10 $ 1.34 $ 4.65 $ 2.25 Diluted EPS $ 3.08 $ 1.33 $ 4.62 $ 2.23 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. 11 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 June 30, 2026 and 2025 as indicated below. All amounts exclude applicable transaction fees and excise taxes on share repurchases. Shares Repurchased (thousands) Dollar Value of Shares Repurchased Remaining Dollar Value of Shares that may be Repurchased Authorization Date 2026 2025 2026 2025 2026 May 2024 4,345 2,296 $ 670 $ 336 $ 389 June 2026 — — — — 4,000 Total 4,345 2,296 $ 670 $ 336 $ 4,389 In May 2024, our Board of Directors authorized share repurchases of up to $ 2 billion (excluding applicable transaction fees and excise taxes) of our outstanding Common Stock through December 31, 2026. As of June 30, 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 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 2 — 7 9 (Gains) losses reclassified from AOCI, net of tax — 1 3 4 2 1 10 13 Balance at June 30, 2026, net of tax $ ( 163 ) $ ( 131 ) $ ( 4 ) $ ( 298 ) Balance at December 31, 2025, net of tax $ ( 161 ) $ ( 132 ) $ ( 18 ) $ ( 311 ) OCI, net of tax Gains (losses) arising during the period classified into AOCI, net of tax ( 2 ) ( 1 ) 15 12 (Gains) losses reclassified from AOCI, net of tax — 2 ( 1 ) 1 ( 2 ) 1 14 13 Balance at June 30, 2026, net of tax $ ( 163 ) $ ( 131 ) $ ( 4 ) $ ( 298 ) 12 Note 6 - Other (Income) Expense Quarter ended Year to date 6/30/2026 6/30/2025 6/30/2026 6/30/2025 Foreign exchange net (gain) loss $ 4 $ ( 3 ) $ 4 $ ( 7 ) Impairment and closure expense 8 1 9 1 Other (a) ( 6 ) ( 4 ) ( 52 ) ( 9 ) Other (income) expense $ 6 $ ( 7 ) $ ( 39 ) $ ( 15 ) (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. Note 7 - Supplemental Balance Sheet Information Accounts and Notes Receivable, net The Company’s receivables are primarily generated from ongoing business relationships with our franchisees as a result of franchise and lease agreements. Trade receivables consisting of royalties 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 in our Condensed Consolidated Balance Sheets. Accounts and notes receivable, net also includes receivables generated from advertising cooperatives that we consolidate. 6/30/2026 12/31/2025 Accounts and notes receivable, gross $ 667 $ 901 Allowance for doubtful accounts ( 45 ) ( 60 ) Accounts and notes receivable, net $ 623 $ 841 Prepaid Expenses and Other Current Assets 6/30/2026 12/31/2025 Income tax receivable $ 111 $ 114 Restricted cash 187 192 Prepaid expenses 127 119 Other current assets 72 64 Prepaid expenses and other current assets $ 498 $ 489 Property, Plant and Equipment, net 6/30/2026 12/31/2025 Property, plant and equipment, gross $ 3,109 $ 3,091 Accumulated depreciation and amortization ( 1,495 ) ( 1,485 ) Property, plant and equipment, net $ 1,614 $ 1,605 Other Assets 6/30/2026 12/31/2025 Operating lease right-of-use assets (a) $ 1,177 $ 1,213 Franchise incentives 172 209 Other 281 286 Other assets $ 1,629 $ 1,708 (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. 13 Reconciliation of Cash and Cash Equivalents for Condensed Consolidated Statements of Cash Flows 6/30/2026 12/31/2025 Cash and cash equivalents as presented in Condensed Consolidated Balance Sheets $ 674 $ 709 Restricted cash included in Prepaid expenses and other current assets (a) 187 192 Restricted cash and restricted cash equivalents included in Other assets (b) 22 23 Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents as presented in Condensed Consolidated Statements of Cash Flows $ 884 $ 923 (a) 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. (b) Primarily trust accounts related to our self-insurance program. Note 8 - Income Taxes 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 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. 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 Disaggregation of Total Revenues The following tables disaggregate revenue by Concept, for our two most significant markets based on Operating Profit and for all other markets. We believe this disaggregation best reflects the extent to which the nature, amount, timing and uncertainty of our revenues and cash flows are impacted by economic factors. 14 Quarter ended 6/30/2026 KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division Total U.S. Company sales $ 28 $ 393 $ 13 $ 135 $ 569 Franchise revenues 43 245 58 2 348 Property revenues 3 8 1 1 13 Franchise contributions for advertising and other services 11 180 64 1 256 China Franchise revenues 73 — 18 — 92 Other Company sales 247 3 18 — 268 Franchise revenues 346 18 66 — 429 Property revenues 12 — — — 13 Franchise contributions for advertising and other services 160 5 16 — 181 $ 924 $ 853 $ 254 $ 139 $ 2,169 Quarter ended 6/30/2025 KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division Total U.S. Company sales $ 24 $ 285 $ 7 $ 130 $ 446 Franchise revenues 43 225 63 2 332 Property revenues 3 8 1 1 13 Franchise contributions for advertising and other services 11 173 67 1 252 China Franchise revenues 65 — 17 — 82 Other Company sales 222 2 — — 224 Franchise revenues 315 15 67 — 397 Property revenues 11 — — — 11 Franchise contributions for advertising and other services 156 3 17 — 177 $ 849 $ 711 $ 239 $ 134 $ 1,933 15 Year to date 6/30/2026 KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division Total U.S. 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 China Franchise revenues 150 — 38 — 188 Other 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 Total U.S. 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 China Franchise revenues 134 — 34 — 168 Other 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 year to date ended June 30, 2025. Contract Liabilities Our contract liabilities are comprised of unamortized upfront fees received from franchisees and are presented within Accounts payable and other current liabilities and Other liabilities and deferred credits in our Condensed Consolidated Balance Sheets. A summary of significant changes to the contract liability balance during 2026 is presented below. 16 Deferred Franchise Fees Balance at December 31, 2025 $ 443 Revenue recognized that was included in unamortized upfront fees received from franchisees at the beginning of the period ( 43 ) Increase for upfront fees associated with contracts that became effective during the period, net of amounts recognized as revenue during the period 30 Deferred franchise fees related to Pizza Hut reclassified to Liabilities held for sale (see Note 3) ( 61 ) Other (a) ( 1 ) Balance at June 30, 2026 $ 367 (a) 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: Less than 1 year $ 62 1 - 2 years 55 2 - 3 years 49 3 - 4 years 43 4 - 5 years 37 Thereafter 121 Total $ 367 Note 10 - Reportable Operating Segments The Company's operating segments maintain separate financial information, and our Chief Operating Decision Maker (“CODM”), the Company's Chief Executive Officer, evaluates the operating segments' operating results on a regular basis in deciding how to allocate resources among the segments and in assessing segment performance. The CODM evaluates the performance of the Company's segments based on Divisional Operating Profit and is involved in determining and reviewing forecasted Divisional Operating Profit as part of the annual plan process. 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, 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. 17 Quarter ended 6/30/2026 KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division Total Company Sales $ 275 $ 396 $ 31 $ 135 $ 837 Franchise and property revenues 477 271 143 3 895 Franchise contributions for advertising and other services 172 185 80 1 438 924 853 254 139 2,169 Less: Company restaurant expenses 242 294 30 121 687 General and administrative expenses 88 53 56 12 210 Franchise and property expenses 18 9 13 1 41 Franchise advertising and other services expense 169 187 87 1 444 Other (income) expense ( 2 ) ( 1 ) ( 3 ) 6 — Division Operating Profit (Loss) $ 410 $ 311 $ 70 $ ( 4 ) $ 787 Unallocated amounts: (a) Corporate and unallocated G&A expenses (b) $ ( 114 ) Unallocated Company restaurant expenses (c) ( 13 ) Unallocated Refranchising gain (loss) 1 Unallocated Other income (expense) ( 6 ) Consolidated Operating Profit 655 Investment income (expense), net 6 Other pension income (expense) — Interest expense, net ( 128 ) Income before income taxes $ 533 Other Segment Disclosures KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division Corporate and Unallocated Total Depreciation and Amortization (e) $ 13 $ 29 $ 5 $ 7 $ 6 $ 60 Capital Spending 25 39 2 20 13 100 18 Quarter ended 6/30/2025 KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division Total Company Sales $ 245 $ 287 $ 7 $ 130 $ 669 Franchise and property revenues 437 248 147 3 835 Franchise contributions for advertising and other services 167 176 85 1 428 849 711 239 134 1,933 Less: Company restaurant expenses 216 217 7 116 557 General and administrative expenses 89 49 54 13 205 Franchise and property expenses 20 7 10 1 39 Franchise advertising and other services expense 162 176 90 1 428 Other (income) expense — — ( 3 ) — ( 3 ) Division Operating Profit (Loss) $ 363 $ 262 $ 80 $ 3 $ 707 Unallocated amounts: (a) Corporate and unallocated G&A expenses (b) $ ( 97 ) Unallocated Company restaurant expenses (c) ( 4 ) Unallocated Refranchising gain (loss) 11 Unallocated Other income (expense) 4 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 19 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 Less: 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: (a) Corporate and unallocated G&A expenses (b) $ ( 225 ) Unallocated Company restaurant expenses (c) ( 25 ) Unallocated Refranchising gain (loss) 2 Unallocated Other income (expense) (d) 39 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 20 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 Less: 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: (a) Corporate and unallocated G&A expenses (b) $ ( 202 ) Unallocated Company restaurant expenses (c) ( 7 ) Unallocated Franchise and property revenues ( 1 ) Unallocated Refranchising gain (loss) 16 Unallocated Other income (expense) 10 Consolidated Operating Profit 1,170 Investment income (expense), net 1 Other pension income (expense) 1 Interest expense, net ( 243 ) Income before income taxes $ 929 Other Segment Disclosures KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division Corporate and Unallocated Total Depreciation and Amortization (e) $ 22 $ 32 $ 9 $ 13 $ 14 $ 89 Capital Spending 37 49 15 18 23 142 21 Revenues by Country (f ) Quarter ended Year to date 2026 2025 2026 2025 United States $ 1,186 $ 1,043 $ 2,306 $ 2,023 United Kingdom 269 232 523 438 Other 714 658 1,399 1,259 $ 2,169 $ 1,933 $ 4,228 $ 3,720 (a) Amounts have not been allocated to any segment for performance reporting purposes. (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. (c) Unallocated Company restaurant expenses include amortization of reacquired franchise rights. (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 . (f) The United States and United Kingdom represented 10% or more of our total revenues for all periods presented. Note 11 - Pension Benefits We sponsor qualified and supplemental (non-qualified) noncontributory defined benefit pension plans covering certain full-time salaried and hourly U.S. employees. The most significant of these plans, the YUM Retirement Plan (the “Plan”), is funded. We fund our other U.S. plans as benefits are paid. 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. Additionally, these two plans in the U.S. are currently closed to new hourly participants. The components of net periodic benefit cost associated with our U.S. pension plans are as follows: Quarter ended Year to date 2026 2025 2026 2025 Service cost $ 1 $ 1 $ 2 $ 2 Interest cost 11 11 21 22 Expected return on plan assets ( 12 ) ( 14 ) ( 24 ) ( 27 ) 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. This loss was recorded in Other pension (income) expense . 22 Note 12 - Short-term Borrowings and Long-term Debt Short-term Borrowings 6/30/2026 12/31/2025 Current maturities of long-term debt $ 2,823 $ 39 Other — 2 2,823 41 Less current portion of debt issuance costs and discounts ( 10 ) ( 3 ) Short-term borrowings $ 2,813 $ 38 Long-term Debt Securitization Notes $ 4,306 $ 4,306 Subsidiary Senior Unsecured Notes 750 750 Revolving Facility 675 300 Term Loan A Facility 488 494 Term Loan B Facility 1,421 1,429 YUM Senior Unsecured Notes 4,550 4,550 Finance lease obligations 146 148 $ 12,336 $ 11,976 Less long-term portion of debt issuance costs and discounts ( 52 ) ( 66 ) Less current maturities of long-term debt ( 2,823 ) ( 39 ) Long-term debt $ 9,462 $ 11,872 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 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. 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 June 30, 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 June 30, 2026 and 2025, was $ 267 million and $ 256 million, respectively. Note 13 - Derivative Instruments 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 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. Foreign Currency Contracts 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 June 30, 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 or year to date ended June 30, 2026. 23 Interest Rate Swaps 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 2026 2025 2026 2025 2026 2025 2026 2025 Interest rate swaps $ 10 $ 5 $ ( 1 ) $ ( 3 ) $ 20 $ 6 $ ( 3 ) $ ( 8 ) Income tax benefit/(expense) ( 3 ) ( 1 ) — 1 ( 5 ) ( 1 ) 1 2 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 We have entered into total return swap derivative contracts, with the objective of reducing our exposure to market-driven changes in certain of the liabilities associated with compensation deferrals into our Executive Income Deferral (“EID”) plan. While these total return swaps represent economic hedges, we have not designated them as hedges for accounting purposes. As a result, the changes in the fair value of these derivatives are recognized immediately in earnings within General and administrative expenses in our Condensed Consolidated Statements of Income largely offsetting the changes in the associated EID liabilities. The fair value associated with the total return swaps as of both June 30, 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 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. The following table presents the carrying value and estimated fair value of the Company’s debt obligations: 6/30/2026 12/31/2025 Carrying Value Fair Value (Level 2) Carrying Value Fair Value (Level 2) Securitization Notes (a) $ 4,306 $ 4,157 $ 4,306 $ 4,160 Subsidiary Senior Unsecured Notes (b) 750 751 750 753 Term Loan A Facility (b) 488 486 494 492 Term Loan B Facility (b) 1,421 1,430 1,429 1,440 YUM Senior Unsecured Notes (b) 4,550 4,494 4,550 4,581 24 (a) We estimated the fair value of the Securitization Notes using market quotes and calculations. The markets in which the Securitization Notes trade are not considered active markets. (b) We estimated the fair value of the YUM and Subsidiary Senior Unsecured Notes, Term Loan A Facility and Term Loan B Facility using market quotes and calculations based on market rates. Recurring Fair Value Measurements 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. Fair Value Condensed Consolidated Balance Sheet Level 6/30/2026 12/31/2025 Assets Interest Rate Swaps Prepaid expenses and other current assets 2 $ 9 $ 1 Interest Rate Swaps Other assets 2 7 — Liabilities 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 Internal Revenue Service Proposed Adjustment 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 $2.3 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. The IRS asserts that these transactions resulted in taxable distributions of approximately $6.0 billion. 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. The Company believes that it is more likely than not the Company’s tax position will be sustained; therefore, no reserve is recorded with respect to this matter. An unfavorable resolution of this matter could have a material, adverse impact on our Condensed Consolidated Financial Statements in future periods. 25 Lease Guarantees As a result of having assigned our interest in obligations under real estate leases as a condition to the refranchising of certain Company-owned restaurants, and guaranteeing certain other leases, we are frequently secondarily liable on lease agreements. These leases have varying terms, the latest of which expires in 2065 . 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. We generally have cross-default provisions with these franchisees that would put them in default of their franchise agreement in the event of non-payment under the lease. We believe these cross-default provisions significantly reduce the risk that we will be required to make payments under these leases, although such risk may not be reduced in the context of a bankruptcy or other similar restructuring of a large franchisee or group of franchisees. The liability recorded for our expected losses under such leases as of June 30, 2026, was not material. Legal Proceedings We are subject to various claims and contingencies related to lawsuits, real estate, environmental and other matters arising in the normal course of business. An accrual is recorded with respect to claims or contingencies for which a loss is determined to be probable and reasonably estimable. India Regulatory Matter Yum! Restaurants India Private Limited (“YRIPL”), a YUM subsidiary that operates KFC and Pizza Hut restaurants in India, is the subject of a regulatory enforcement action in India (the “Action”). The Action alleges, among other things, that KFC International Holdings, Inc. and Pizza Hut International failed to satisfy certain conditions imposed by the Secretariat for Industrial Approval in 1993 and 1994 when those companies were granted permission for foreign investment and operation in India. The conditions at issue include an alleged minimum investment commitment and store build requirements as well as limitations on the remittance of fees outside of India. The Action originated with a complaint and show cause notice filed in 2009 against YRIPL by the Deputy Director of the Directorate of Enforcement (“DOE”) of the Indian Ministry of Finance following an income tax audit for the years 2002 and 2003. The matter was argued at various hearings in 2015, but no order was issued. Following a change in the incumbent official holding the position of Special Director of DOE (the “Special Director”), the matter resumed in 2018 and several additional hearings were conducted. On January 29, 2020, the Special Director issued an order imposing a penalty on YRIPL and certain former directors of approximately Indian Rupee 11 billion, or approximately $120 million. Of this amount, $115 million relates to the alleged failure to invest a total of $80 million in India within an initial seven-year period. We have been advised by external counsel that the order is flawed and have filed a writ petition with the Delhi High Court, which granted an interim stay of the penalty order on March 5, 2020. 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. 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. We do not consider the risk of any significant loss arising from this order to be probable. Other Matters We are currently engaged in various other legal proceedings and have certain unresolved claims pending, the ultimate liability for which, if any, cannot be determined at this time. However, based upon consultation with legal counsel, we are of the opinion that such proceedings and claims are not expected to have a material adverse effect, individually or in the aggregate, on our Condensed Consolidated Financial Statements. 26