Financial Analysis

"Restaurant Acquisitions In 2025 and 2024, we completed restaurant acquisitions from franchisees as detailed below. In each transaction, t he acquisition was accounted for as a business combination using the acquisition method of accounting. The allocation of the purchase price for each acquisition is based on management's analysis, which may include analysis performed by third party valuation specialists, as of the respective acquisition dates. In completing our purchase price allocations, we continue to obtain information to assist in determining the fair value of assets acquired and liabilities assumed and the classification of acquired leases during a one-year measurement period subsequent to the acquisition. For all of these restaurant acquisitions, reacquired franchise rights are the primary intangible asset we recognize when acquiring restaurants from franchisees and were valued based on after-royalty cash flows expected to be earned by the acquired restaurants over the remaining term of their then-existing franchise agreements. The excess of the purchase price over the estimated fair value of the net, identifiable assets acquired was recorded as goodwill. The goodwill recognized represents expected benefits of the acquisition that do not qualify for recognition as intangible assets. This includes value arising from cash flows expected to be earned in years subsequent to the expiration of the terms of franchise agreements existing upon acquisition. The goodwill is expe …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

"Short-term Borrowings and Long-term Debt 2025 2024 Short-term Borrowings Current maturities of long-term debt $ 39 $ 29 Other 2 41 29 Less current portion of debt issuance costs and discounts (3) (2) Short-term borrowings $ 38 $ 27 Long-term Debt Securitization Notes $ 4,306 $ 3,743 Subsidiary Senior Unsecured Notes 750 750 Revolving Facility 300 350 Term Loan A Facility 494 500 Term Loan B Facility 1,429 1,444 YUM Senior Unsecured Notes 4,550 4,550 Finance lease obligations (See Note 12) 148 67 $ 11,976 $ 11,404 Less long-term portion of debt issuance costs and discounts (66) (69) Less current maturities of long-term debt (39) (29) Long-term debt $ 11,872 $ 11,306 Securitization Notes T aco 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 issued fixed rate senior secured notes collectively referred to as the Securitization Notes. The following table summarizes Securitization Notes outstanding at December 31, 2025: Interest Rate Issuance Date Anticipated Repayment Date (a) Outstanding Principal (in millions) Stated Effective (b) November 2018 November 2028 $ 595 4.940 % 5.06 % August 2021 February 2027 $ 884 1.946 % 2.11 % August 2021 February 2029 $ 590 2.294 % 2.42 % August 2021 August 2031 $ 737 2.542 % 2.64 % September 2025 August 2030 $ 1,000 4.821 % 5.04 % September 2025 August 2032 $ 500 5.049 % 5.21 % (a) The legal final maturi …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

2025 KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division Total U.S. Company sales $ 106 $ 1,272 $ 33 $ 555 $ 1,966 Franchise revenues 189 960 263 8 1,421 Property revenues 13 36 4 3 56 Franchise contributions for advertising and other services 47 740 292 3 1,082 China Franchise revenues 274 69 343 Other Company sales 951 8 19 978 Franchise revenues 1,285 63 265 1,613 Property revenues 45 1 47 Franchise contributions for advertising and other services 632 14 68 714 $ 3,542 $ 3,095 $ 1,013 $ 570 $ 8,220 (a) (a) Does not include charges of $7 million to Unallocated franchise and property revenues primarily associated with our Pizza Hut Strategic Options Review during the year ended December 31, 2025. See Note 5. 2024 KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division Total U.S. Company sales $ 75 $ 1,154 $ 8 $ 588 $ 1,825 Franchise revenues 194 899 289 7 1,389 Property revenues 14 39 4 2 59 Franchise contributions for advertising and other services 45 697 315 3 1,060 China Franchise revenues 259 1 67 327 Other Company sales 726 1 727 Franchise revenues 1,172 58 261 1,491 Property revenues 46 1 47 Franchise contributions for advertising and other services 568 11 63 642 $ 3,099 $ 2,860 $ 1,008 $ 600 $ 7,567 (b) (b) Does not include charges of $18 million to Unallocated franchise and property revenues associated with the Turkey termination during the year ended December 31, 2024. See Note 5. 2023 KFC Division Taco B …

DisaggregationOfRevenueTableTextBlock · excerpt; the full note is in the filing

Fair Value Disclosures As of December 31, 2025, the carrying values of cash and cash equivalents, restricted cash, accounts receivable, short-term borrowings, accounts payable and borrowings under our Revolving Facility approximated their fair values because of the short-term nature of these instruments. The fair value of notes receivable net of allowances and lease guarantees less subsequent amortization approximates their carrying value. The following table presents the carrying value and estimated fair value of the Companys debt obligations: 2025 2024 Carrying Value Fair Value (Level 2) Carrying Value Fair Value (Level 2) Securitization Notes (a) $ 4,306 $ 4,160 $ 3,743 $ 3,561 Subsidiary Senior Unsecured Notes (b) 750 753 750 739 Term Loan A Facility (b) 494 492 500 496 Term Loan B Facility (b) 1,429 1,440 1,444 1,451 YUM Senior Unsecured Notes (b) 4,550 4,581 4,550 4,368 (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 fair values of the assets and liabilities of the Company that are required to be measured at fair value on a recurring basis (see Note 13 for discussion regarding derivative instruments) were not sig …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

Goodwill and Intangible Assets The changes in the carrying amount of goodwill are as follows: KFC Taco Bell Pizza Hut Habit Burger & Grill Worldwide Goodwill, net as of December 31, 2023 (a) $ 226 $ 98 $ 252 $ 66 $ 642 Acquisitions (b) 98 98 Disposals and other, net (c) (3) (1) (4) Goodwill, net as of December 31, 2024 (a) $ 321 $ 98 $ 251 $ 66 $ 736 Acquisitions (d) 16 202 1 220 Disposals and other, net (c) 12 3 (2) 14 Goodwill, net as of December 31, 2025 (a) $ 349 $ 300 $ 256 $ 64 $ 969 (a) Goodwill, net includes $144 million of accumulated impairment losses related to our Habit Burger & Grill segment and $17 million of accumulated impairment losses related to our Pizza Hut segment for each year presented. (b) Primarily relates to the acquisition from a franchisee of KFC restaurants in the U.K. and Ireland. See Note 3. (c) Disposals and other, net includes the impact of foreign currency translation on existing balances and goodwill write-offs associated with refranchising. (d) Primarily relates to the acquisition from a franchisee of Taco Bell restaurants in the Southeast U.S. See Note 3. Intangible assets, net for the years ended 2025 and 2024 are as follows: 2025 2024 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Finite-lived intangible assets Capitalized software costs $ 536 $ (324) $ 479 $ (266) Reacquired franchise rights 577 (33) 59 (10) Franchise contract rights 26 (24) 26 (24) Other 20 (17) 20 (16) $ 1,159 $ ( …

GoodwillAndIntangibleAssetsDisclosureTextBlock · excerpt; the full note is in the filing

139 million

IncomeTaxDisclosureTextBlock

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 $2.1 billion accruing through December 31, 2025. Those amounts relate primarily to a series of reorganizations that we undertook in 2014 in connection with the business realignment of our corporate and management reporting structure along brand lines. The IRS asserts that these transactions resulted in taxable distributions of approximately $6.0 billion. We disagree with the IRSs 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 Companys tax position will be sustained; therefore, no reserve is recorded with respect to this matter. An unfavorable resolution of this …

LegalMattersAndContingenciesTextBlock · excerpt; the full note is in the filing

Pension, Retiree Medical and Retiree Savings Plans U.S. Pension Plans We sponsor qualified and supplemental (non-qualified) noncontributory defined benefit plans covering certain full-time salaried and hourly U.S. employees. The qualified plan meets the requirements of certain sections of the Internal Revenue Code and provides benefits to a broad group of employees with restrictions on discriminating in favor of highly compensated employees with regard to coverage, benefits and contributions. The supplemental plans provide additional benefits to certain employees. We fund our supplemental plans as benefits are paid. The most significant of our U.S. plans is the YUM Retirement Plan (the Plan), which is a qualified plan. Our funding policy with respect to the Plan is to contribute amounts necessary to satisfy minimum pension funding requirements, including requirements of the Pension Protection Act of 2006, plus additional amounts from time-to-time as are determined to be necessary to improve the Plans funded status. We do not expect to make any significant contributions to the Plan in 2026. 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 significant U.S. plans are currently closed to new hourly participants. We do not anticipate any plan assets being returned to the Company d …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

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. 2025 KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division Total U.S. Company sales $ 106 $ 1,272 $ 33 $ 555 $ 1,966 Franchise revenues 189 960 263 8 1,421 Property revenues 13 36 4 3 56 Franchise contributions for advertising and other services 47 740 292 3 1,082 China Franchise revenues 274 69 343 Other Company sales 951 8 19 978 Franchise revenues 1,285 63 265 1,613 Property revenues 45 1 47 Franchise contributions for advertising and other services 632 14 68 714 $ 3,542 $ 3,095 $ 1,013 $ 570 $ 8,220 (a) (a) Does not include charges of $7 million to Unallocated franchise and property revenues primarily associated with our Pizza Hut Strategic Options Review during the year ended December 31, 2025. See Note 5. 2024 KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division Total U.S. Company sales $ 75 $ 1,154 $ 8 $ 588 $ 1,825 Franchise revenues 194 899 289 7 1,389 Property revenues 14 39 4 2 59 Franchise contributions for advertising and other services 45 697 315 3 1,060 China Franchise revenues 259 1 67 327 Other Company sales 726 1 727 Franchise revenu …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

Reportable Operating Segments See Note 1 for a description of our operating segments. The Company's operating segments maintain separate financial information, and the 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. 2025 …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

Summary of Significant Accounting Policies Our preparation of the accompanying Consolidated Financial Statements in conformity with Generally Accepted Accounting Principles in the United States of America (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 Consolidated Financial Statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. In the first quarter of 2025, the Company prospectively changed its basis of presentation to round financial figures in the Financial Statements and as presented in the tabular presentations in these Notes to the nearest whole number in millions in all instances. As a result, some totals and percentages may not recompute based on rounded figures as presented within the Financial Statements and these Notes. Previously, amounts were presented to ensure that all numbers herein recomputed, resulting in the presentation of certain figures inconsistent with their underlying rounding. Principles of Consolidation and Basis of Preparation. Intercompany accounts and transactions have been eliminated in consolidation. We consolidate entities in which we have a controlling financial interest, the usual condition of which is ownership of a majority voting interest. We also consider for consolidation an entity, in which we have certain interests, where th …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

Shareholders Deficit Under the authority of our Board of Directors, we repurchased shares of our Common Stock during 2025, 2024 and 2023. All amounts exclude applicable transaction fees and excise taxes on share repurchases. Shares Repurchased (thousands) Dollar Value of Shares Repurchased Authorization Date 2025 2024 2023 2025 2024 2023 May 2024 3,739 2,916 $ 550 $ 391 $ September 2022 366 387 50 50 Total 3,739 3,282 387 $ 550 $ 441 $ 50 In May 2024, our Board of Directors authorized share repurchases of up to $2.0 billion (excluding applicable transaction fees and excise taxes) of our outstanding Common Stock through December 31, 2026. The new authorization took effect on July 1, 2024 upon the expiration of a prior authorization approved in September 2022. As of December 31, 2025, we have remaining capacity to repurchase up to $1.1 billion of Common Stock under the May 2024 authorization. Changes in AOCI are presented below. Translation Adjustments and Gains (Losses) From Intra-Entity Transactions of a Long-Term Nature Pension and Post-Retirement Benefits (a) Derivative Instruments (b) Total Balance at December 31, 2023, net of tax $ (201) $ (104) $ 3 $ (302) OCI, net of tax Gains (losses) arising during the year classified into AOCI, net of tax (37) (42) 10 (69) (Gains) losses reclassified from AOCI, net of tax 3 (24) (21) (37) (39) (14) (90) Balance at December 31, 2024, net of tax $ (238) $ (143) $ (11) $ (392) OCI, net of tax Gains (losses) arising during the year class …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing