Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction and Overview

The following Management's Discussion and Analysis (“MD&A”), should be read in conjunction with the unaudited Condensed Consolidated Financial Statements (“Financial Statements”), the Forward-Looking Statements and our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, (“2021 Form 10-K”). All Note references herein refer to the Notes to the Financial Statements. Tabular amounts are displayed in millions of U.S. dollars except per share and unit count amounts, or as otherwise specifically identified. Percentages may not recompute due to rounding.

Yum! Brands, Inc. and its Subsidiaries (collectively referred to herein as the “Company,” “YUM,” “we,” “us” or “our”) franchise or operate a system of nearly 54,000 restaurants in over 155 countries and territories, primarily under the concepts of KFC, Taco Bell, Pizza Hut and The Habit Burger Grill (collectively, the “Concepts”). The Company’s KFC, Taco Bell and Pizza Hut brands are global leaders of the chicken, Mexican-style and pizza food categories, respectively. The Habit Burger Grill, is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more. Of the nearly 54,000 restaurants, 98% are operated by franchisees.

YUM currently consists 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

Through our Recipe for Growth and Good we intend to unlock the growth potential of our Concepts and YUM, drive increased collaboration across our Concepts and geographies and consistently deliver better customer experiences, improved unit economics and higher rates of growth. Key enablers include accelerated use of technology and better leverage of our systemwide scale.

Our Recipe for Growth is based on four key drivers:

• Unrivaled Culture and Talent: Leverage our culture and people capability to fuel brand performance and franchise success

• Unmatched Operating Capability: Recruit and equip the best restaurant operators in the world to deliver great customer experiences

• Relevant, Easy and Distinctive Brands: Innovate and elevate iconic restaurant brands people trust and champion

• Bold Restaurant Development: Drive market and franchise expansion with strong economics and value

Our global citizenship and sustainability strategy, called the Recipe for Good, reflects our priorities for social responsibility, risk management and sustainable stewardship of our people, food and planet.

We intend for this MD&A to provide the reader with information that will assist in understanding our results of operations, including performance metrics that management uses to assess the Company's performance. Throughout this MD&A, we commonly discuss the following performance metrics:

• Same-store sales growth is the estimated percentage change in system sales of all restaurants that have been open and in the YUM system for one year or more, including those temporarily closed. From time-to-time restaurants may be temporarily closed due to remodeling or image enhancement, rebuilding, natural disasters, health epidemic or pandemic, landlord disputes or other issues. The system sales of restaurants we deem temporarily closed remain in our base for purposes of determining same-store sales growth and the restaurants remain in our unit count (see below). Throughout 2021 we had a significant number of restaurants that were temporarily closed including restaurants closed due to government and landlord restrictions as a result of COVID-19. We believe same-store sales growth is useful to investors because our results are heavily dependent on the results of our Concepts' existing store base. Additionally, same-store sales growth is reflective of the strength of our Brands, the effectiveness of our operational and advertising initiatives and local economic and consumer trends.

• Gross unit openings reflects new openings by us and our franchisees. Net new unit growth reflects gross unit openings offset by permanent store closures, by us and our franchisees. To determine whether a restaurant meets the definition of a unit we consider whether the restaurant has operations that are ongoing and independent from another YUM unit, serves the primary product of one of our Concepts, operates under a separate franchise agreement (if operated by a franchisee) and

has substantial and sustainable sales. We believe gross unit openings and net new unit growth are useful to investors because we depend on new units for a significant portion of our growth. Additionally, gross unit openings and net new unit growth are generally reflective of the economic returns to us and our franchisees from opening and operating our Concept restaurants.

• System sales and System sales excluding the impacts of foreign currency translation (“FX”) reflect the results of all restaurants regardless of ownership, including Company-owned and franchise restaurants. Sales at franchise restaurants typically generate ongoing franchise and license fees for the Company at a rate of 3% to 6% of sales. Increasingly, customers are paying a fee to a third party to deliver or facilitate the ordering of our Concepts' products. We also include in System sales any portion of the amount customers pay these third parties for which the third party is obligated to pay us a license fee as a percentage of such amount. Franchise restaurant sales and fees paid by customers to third parties to deliver or facilitate the ordering of our Concepts' products are not included in Company sales on the Condensed Consolidated Statements of Income; however, any resulting franchise and license fees we receive are included in the Company's revenues. We believe System sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates our primary revenue drivers, Company and franchise same-store sales as well as net unit growth.

As of the beginning of the second quarter, as a result of our progress towards exiting Russia and our decision to reclass net operating profits attributable to Russia from the operating segments in which those profits were earned to Unallocated Other income (see Notes 1 and 8), we elected to remove all Russia units from our unit count as well as to exclude those units' associated sales from our system sales totals. We removed 1,112 units and 53 units in Russia from our global KFC and Pizza Hut unit counts, respectively. These units were treated similar to permanent store closures for purposes of our same-store sales calculations and thus they were removed from our same-store sales calculations beginning April 1, 2022.

In addition to the results provided in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”), the Company provides the following non-GAAP measurements:

• Diluted Earnings Per Share excluding Special Items (as defined below);

• Effective Tax Rate excluding Special Items;

• Core Operating Profit. Core Operating Profit excludes Special Items and FX and we use Core Operating Profit for the purposes of evaluating performance internally;

• Company restaurant profit and Company restaurant margin as a percentage of sales (as defined below).

These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of these non-GAAP measurements provide additional information to investors to facilitate the comparison of past and present operations.

Special Items are not included in any of our Division segment results as the Company does not believe they are indicative of our ongoing operations due to their size and/or nature. Our chief operating decision maker does not consider the impact of Special Items when assessing segment performance.

Company restaurant profit is defined as Company sales less Company restaurant expenses, both of which appear on the face of our Condensed Consolidated Statements of Income. Company restaurant expenses include those expenses incurred directly by our Company-owned restaurants in generating Company sales, including cost of food and paper, cost of restaurant-level labor, rent, depreciation and amortization of restaurant-level assets and advertising expenses incurred by and on behalf of that Company restaurant. Company restaurant margin as a percentage of sales (“Company restaurant margin %”) is defined as Company restaurant profit divided by Company sales. We use Company restaurant profit for the purposes of internally evaluating the performance of our Company-owned restaurants and we believe Company restaurant profit provides useful information to investors as to the profitability of our Company-owned restaurants. In calculating Company restaurant profit, the Company excludes revenues and expenses directly associated with our franchise operations as well as non-restaurant-level costs included in General and administrative expenses, some of which may support Company-owned restaurant operations. The Company also excludes restaurant-level asset impairment and closures expenses, which have historically not been significant, from the determination of Company restaurant profit as such expenses are not believed to be indicative of ongoing operations. Company restaurant profit and Company restaurant margin % as presented may not be comparable to other similarly titled measures of other companies in the industry.

Certain performance metrics and non-GAAP measurements are presented excluding the impact of FX. These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the FX impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.

Results of Operations

Summary

All comparisons within this summary are versus the same period a year ago. The Quarterly and Year to date Financial Highlights tables below reflect the impact of removing all Russian units from our unit count and their associated sales from our system sales totals as of the beginning of the second quarter.

Quarterly Financial Highlights:

			% Change
			System Sales, ex FX			Same-Store Sales			Units			GAAP Operating Profit			Core Operating Profit
KFC Division			+8			+7			+2			(3)			+7
Taco Bell Division			+9			+6			+5			+10			+11
Pizza Hut Division			+4			+1			+4			(8)			(3)
YUM			+7			+5			+4			+4			+8

Year to date Financial Highlights:

			% Change
			System Sales, ex FX			Same-Store Sales			Units			GAAP Operating Profit			Core Operating Profit
KFC Division			+6			+3			+2			(5)			+2
Taco Bell Division			+9			+6			+5			+8			+8
Pizza Hut Division			+3			Even			+4			(6)			(3)
YUM			+6			+3			+4			(2)			Even

Additionally:

• As of the beginning of the second quarter, we have elected to remove 1,165 Russia units from our unit count and their associated sales from our total system sales. We removed 1,112 units and 53 units in Russia from our KFC and Pizza Hut units counts, respectively. As a result:

◦YUM and KFC Division year-over-year unit growth as shown above were negatively impacted by two and five percentage points, respectively.

◦YUM system sales growth excluding foreign currency as shown above was negatively impacted by three and one percentage points for the quarter and year to date ended September 30, 2022, respectively. YUM Core Operating Profit as shown above was negatively impacted by 3 and 2 percentage points for the quarter and year to date ended September 30, 2022, respectively.

◦KFC Division system sales growth excluding foreign currency as shown above was negatively impacted by four and three percentage points for the quarter and year to date ended September 30, 2022, respectively. KFC Division Core Operating Profit as shown above was negatively impacted by five and four percentage points for the quarter and year to date ended September 30, 2022, respectively.

• Foreign currency translation negatively impacted Divisional Operating Profit for the quarter and year to date by $39 million and $76 million, respectively.

			Third-Quarter									Year-to-Date
			2022			2021			% Change			2022			2021			% Change
GAAP EPS			$1.14			$1.75			(35)			$3.28			$4.10			(20)
Special Items EPS			$0.05			$0.53			NM			$0.08			$0.66			NM
EPS Excluding Special Items			$1.09			$1.22			(11)			$3.20			$3.44			(7)

• Our diluted EPS, excluding Special Items reflects a $0.23 and $0.35 negative impact for the quarter and year to date ended September 30, 2022, respectively, from a higher current year tax rate, lower investment gains and the removal of Russia-based profits. Foreign currency translation also unfavorably impacted our diluted EPS, excluding Special Items, by approximately $0.10 and $0.20 for the quarter and year to date ended September 30, 2022, respectively.

• Gross unit openings for the quarter were 979 units resulting in 644 net new units. Gross unit openings for the year to date were 2,757 units resulting in 1,735 net new units.

Worldwide

GAAP Results

			Quarter ended																					Year to date
			2022						2021						% B/(W)									2022						2021						% B/(W)
Company sales			$	479					$	513					(7)									$	1,448					$	1,509					(4)
Franchise and property revenues			760						716						6									2,211						2,080						6
Franchise contributions for advertising and other services			401						377						6									1,164						1,105						5
Total revenues			1,640						1,606						2									4,823						4,694						3
Company restaurant expenses			402						421						5									1,219						1,230						1
G&A expenses			261						253						(3)									768						689						(12)
Franchise and property expenses			28						31						8									89						81						(12)
Franchise advertising and other services expense			396						375						(6)									1,153						1,090						(6)
Refranchising (gain) loss			(3)						1						NM									(15)						(21)						(26)
Other (income) expense			10						(2)						NM									—						(12)						NM
Total costs and expenses, net			1,094						1,079						(1)									3,214						3,057						(5)
Operating Profit			546						527						4									1,609						1,637						(2)
Investment (income) expense, net			(27)						(51)						(49)									(19)						(52)						(64)
Other pension (income) expense			2						1						NM									3						6						48
Interest expense, net			124						126						1									390						416						6
Income before income taxes			447						451						(1)									1,235						1,267						(3)
Income tax provision (benefit)			116						(77)						NM									281						22						NM
Net Income			$	331					$	528					(37)									$	954					$	1,245					(23)
Diluted EPS(a)			$	1.14					$	1.75					(35)									$	3.28					$	4.10					(20)
Effective tax rate			25.8		%				(17.0)		%				(42.8)			ppts.						22.7		%				1.8		%				(20.9)			ppts.

(a)See Note 2 for the number of shares used in this calculation.

Performance Metrics

Unit Count			9/30/2022						9/30/2021						% Increase (Decrease)
Franchise			53,014						51,070						4
Company-owned			980						1,081						(9)
Total			53,994						52,151						4

						Quarter ended												Year to date
						2022						2021						2022						2021
Same-store Sales Growth (Decline) %						5						5						3						12
System Sales Growth (Decline) %, reported						1						11						2						18
System Sales Growth (Decline) %, excluding FX						7						8						6						15

Our system sales breakdown by Company and franchise sales was as follows:

						Quarter ended												Year to date
						2022						2021						2022						2021
Consolidated
Company sales(a)						$	479					$	513					$	1,448					$	1,509
Franchise sales						14,064						13,828						41,197						40,341
System sales						14,543						14,341						42,645						41,850
Foreign Currency Impact on System sales(b)						(859)						N/A						(1,688)						N/A
System sales, excluding FX						$	15,402					$	14,341					$	44,333					$	41,850
KFC Division
Company sales(a)						$	112					$	143					$	353					$	423
Franchise sales						7,712						7,735						22,456						22,366
System sales						7,824						7,878						22,809						22,789
Foreign Currency Impact on System sales(b)						(677)						N/A						(1,332)						N/A
System sales, excluding FX						$	8,501					$	7,878					$	24,141					$	22,789
Taco Bell Division
Company sales(a)						$	234					$	225					$	691					$	656
Franchise sales						3,183						2,918						9,343						8,556
System sales						3,417						3,143						10,034						9,212
Foreign Currency Impact on System sales(b)						(17)						N/A						(36)						N/A
System sales, excluding FX						$	3,434					$	3,143					$	10,070					$	9,212
Pizza Hut Division
Company sales(a)						$	4					$	13					$	14					$	39
Franchise sales						3,142						3,157						9,331						9,370
System sales						3,146						3,170						9,345						9,409
Foreign Currency Impact on System sales(b)						(165)						N/A						(320)						N/A
System sales, excluding FX						$	3,311					$	3,170					$	9,665					$	9,409
Habit Burger Grill Division
Company sales(a)						$	129					$	132					$	390					$	391
Franchise sales						27						18						67						49
System sales						156						150						457						440
Foreign Currency Impact on System sales(b)						—						N/A						—						N/A
System sales, excluding FX						$	156					$	150					$	457					$	440

(a)Company sales represents sales from our Company-operated stores as presented on our Condensed Consolidated Statements of Income.

(b) The foreign currency impact on System sales is presented in relation only to the immediately preceding year presented. When determining applicable System sales growth percentages, the System sales excluding FX for the current year should be compared to the prior year System sales.

Non-GAAP Items
Non-GAAP Items, along with the reconciliation to the most comparable GAAP financial measure, as presented below.
						Quarter ended												Year to date
						2022						2021						2022						2021
Core Operating Profit Growth (Decline) %						8						3						Even						26
Diluted EPS Growth (Decline) %, excluding Special Items						(11)						21						(7)						39
Effective Tax Rate excluding Special Items						26.7		%				18.9		%				23.8		%				19.7		%

						Quarter ended												Year to date
						2022						2021						2022						2021
Company restaurant profit						$	77					$	92					$	229					$	279
Company restaurant margin %						16.2		%				17.9		%				15.8		%				18.5		%

						Quarter ended												Year to date
Detail of Special Items						2022						2021						2022						2021
Refranchising gain (loss)(a)						$	1					$	—					$	5					$	4
Operating profit impact from decision to exit Russia(b)						16						—						37						—
Charges associated with resource optimization(c)						(2)						(4)						(2)						(7)
Other Special Items Income (Expense)						—						1						(1)						2
Special Items Income (Expense) - Operating Profit						15						(3)						39						(1)
Charges associated with resource optimization - Other pension (expense) income(c)						—						—						—						1
Interest expense, net(d)						—						—						(28)						(34)
Special Items Income (Expense) before Income Taxes						15						(3)						11						(34)
Tax (Expense) Benefit on Special Items(e)						(2)						11						(2)						18
Tax Benefit - Intra-entity transfers of intellectual property(f)						—						152						—						216
Tax Benefit - Newly issued U.S. foreign tax credit regulations(g)						—						—						82						—
Tax (Expense) Benefit - Income tax impacts from decision to exit Russia(h)						2						—						(69)						—
Special Items Income (Expense), net of tax						$	15					$	160					$	22					$	200
Average diluted shares outstanding						289						302						291						304
Special Items diluted EPS						$	0.05					$	0.53					$	0.08					$	0.66

(a)Due to their size and volatility, we have reflected as Special Items those refranchising gains and losses that were recorded in connection with our previously announced plans to have at least 98% franchise restaurant ownership by the end of 2018. As such, refranchising gains and losses recorded during 2022 and 2021 as Special Items are directly associated with restaurants that were refranchised prior to the end of 2018.

During the quarter ended September 30, 2022, we recorded net refranchising gains of $1 million that have been reflected as Special Items. During the years to date ended September 30, 2022 and 2021, we recorded net refranchising gains of $5 million and $4 million, respectively, that have been reflected as Special Items.

Additionally, we recorded net refranchising gains of $2 million and net refranchising losses of $1 million during the quarters ended September 30, 2022 and 2021, respectively, that have not been reflected as Special Items. During the years to date ended September 30, 2022 and 2021, we recorded net refranchising gains of $10 million and $17 million, respectively, that have not been reflected as Special Items. These net refranchising gains and losses relate to refranchising of restaurants in 2022 and 2021 that were not part of our aforementioned plans to achieve 98% franchise ownership and that we believe are now more indicative of our expected ongoing refranchising activity.

(b)In the first quarter of 2022, as a result of the Russian invasion of Ukraine, we suspended all investment and restaurant development in Russia. We also suspended all operations of our 70 company-owned KFC restaurants in Russia and began finalizing an agreement to suspend all Pizza Hut operations in Russia, in partnership with our master franchisee. Further, we pledged to redirect any future net profits attributable to Russia to humanitarian efforts.

Our GAAP operating results continue to reflect royalty revenues and expenses to support the Russian operations for Pizza Hut prior to the date of transfer and for KFC for the entire quarter and year to date ended September 30, 2022 within their historical financial statement line items and operating segments. However, given our decision to exit Russia and our pledge to direct any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts, we have reclassed such net operating profits from the Division segment results in which they were earned to Corporate and unallocated. Additionally, we have incurred certain expenses related to the transfer of the businesses and other one-time costs related to our exit from Russia which we have recorded within Corporate and unallocated. The resulting net Operating Profit within Corporate and unallocated of $16 million and $37 million for the

quarter and year to date ended September 30, 2022, respectively, has been reflected as a Special Item as the amounts are not indicative of our ongoing results.

(c)During the quarter and year to date ended September 30, 2022, we recorded charges of $1 million to General and administrative expenses and $1 million to Other (income) expense related to a resource optimization program initiated in the third quarter of 2020. During the quarter ended September 30, 2021, we recorded a charge of $4 million to General and administrative expenses related to the program. During the year to date ended September 30, 2021, we recorded a charge of $7 million to General and administrative and a credit of $1 million to Other pension (income) expense related to the program. This program is part of our efforts to optimize our resources, reallocating them toward critical areas of the business that will drive future growth. These critical areas include accelerating our digital, technology and innovation capabilities to deliver a modern, world-class team member and customer experience and improve unit economics. Due to the size and scope of the resource optimization program, these charges have been reflected as Special Items.

(d)During the quarter ended June 30, 2022, the Company redeemed $600 million aggregate principal amount of 7.75% YUM Senior Unsecured Notes due in 2025 (the “2025 Notes”). The redemption amount was equal to 103.875% of the $600 million aggregate principal amount redeemed, reflecting a $23 million call premium. We recognized the call premium and the write-off of $5 million of unamortized debt issuance costs associated with the 2025 Notes within Interest expense, net.

During the quarter ended June 30, 2021, certain subsidiaries of the Company redeemed $1,050 million aggregate principal amount of 5.25% Subsidiary Senior Unsecured Notes due in 2026 (the “2026 Notes”). The redemption amount was equal to 102.625% of the $1,050 million aggregate principal amount redeemed, reflecting a $28 million call premium. We recognized the call premium and the write-off of $6 million of unamortized debt issuance costs associated with the 2026 Notes within Interest expense, net.

Due to their collective size and the fact that the amounts are not indicative of our ongoing interest expense, we reflected these charges as Special Items.

(e) Tax (Expense) Benefit on Special Items was determined based upon the impact of the nature, as well as the jurisdiction of the respective individual components within Special Items. Additionally, during the quarter ended September 30, 2021, we recorded as a Special Item a $10 million tax benefit related to prior refranchisings for which the associated pre-tax gain or loss was recorded as Special.

(f) During the quarter ended June 30, 2021, the United Kingdom (“UK”) Finance Act 2021 was enacted resulting in an increase in the UK corporate income tax rate from 19% to 25%. As a result, in the quarter ended June 30, 2021, we remeasured the deferred tax assets originally recorded as a Special Item as part of a fourth quarter 2019 intercompany restructuring of intellectual property (“IP”) rights into the UK, which resulted in the recognition of an additional $64 million deferred tax benefit as a Special Item.

In July 2021, we concentrated management responsibility for European (excluding the UK) KFC franchise development, support operations and management oversight in Switzerland. Concurrent with this change in management responsibility, we completed intra-entity transfers of certain KFC IP rights from subsidiaries in the UK to subsidiaries in Switzerland. With the transfer of these rights, we received a step-up in amortizable tax basis to current fair value under applicable Swiss tax law. As a result of this transfer, we recorded a net, one-time benefit of $152 million as a Special Item in the quarter ended September 30, 2021.

(g) In January 2022, the U.S. Treasury published new regulations impacting foreign tax credit utilization beginning in the Company’s 2022 tax year. These regulations make foreign taxes paid to certain countries no longer creditable in the U.S. As a result, we reversed a valuation allowance associated with existing foreign tax credit carryforwards that we now believe will be used to offset these now non-creditable taxes in 2022 and future years. This valuation allowance reversal resulted in a one-time tax benefit of $82 million in the year to date ended September 30, 2022 that was reflected as a Special Item.

(h) Our decision to exit the Russia market is anticipated to result in a reduction in the tax basis of IP rights held in Switzerland due to the expected loss of the associated Russian royalty income associated with such rights going forward. As a result, we have remeasured and reassessed the need for a valuation allowance on those deferred tax assets. In addition, we have reassessed certain deferred tax liabilities associated with the Russia business given the expectation that the existing basis difference will now reverse by way of sale. Primarily as a result of these items, we

recorded a net tax benefit of $2 million and net tax expense of $69 million in the quarter and year to date ended September 30, 2022, respectively, that were reflected as Special Items.

Reconciliation of GAAP Operating Profit to Core Operating Profit						Quarter ended												Year to date
						2022						2021						2022						2021
Consolidated
GAAP Operating Profit						$	546					$	527					$	1,609					$	1,637
Special Items Income (Expense)						15						(3)						39						(1)
Foreign Currency Impact on Divisional Operating Profit(a)						(39)						N/A						(76)						N/A
Core Operating Profit						$	570					$	530					$	1,646					$	1,638
KFC Division
GAAP Operating Profit						$	304					$	314					$	888					$	932
Foreign Currency Impact on Divisional Operating Profit(a)						(33)						N/A						(64)						N/A
Core Operating Profit						$	337					$	314					$	952					$	932
Taco Bell Division
GAAP Operating Profit						$	204					$	184					$	604					$	560
Foreign Currency Impact on Divisional Operating Profit(a)						(1)						N/A						(2)						N/A
Core Operating Profit						$	205					$	184					$	606					$	560
Pizza Hut Division
GAAP Operating Profit						$	92					$	101					$	287					$	306
Foreign Currency Impact on Divisional Operating Profit(a)						(5)						N/A						(10)						N/A
Core Operating Profit						$	97					$	101					$	297					$	306
Habit Burger Grill Division
GAAP Operating Profit (Loss)						$	(4)					$	1					$	(14)					$	6
Foreign Currency Impact on Divisional Operating Profit(a)						—						N/A						—						N/A
Core Operating Profit (Loss)						$	(4)					$	1					$	(14)					$	6
Reconciliation of Diluted EPS to Diluted EPS excluding Special Items
Diluted EPS						$	1.14					$	1.75					$	3.28					$	4.10
Special Items Diluted EPS						0.05						0.53						0.08						0.66
Diluted EPS excluding Special Items						$	1.09					$	1.22					$	3.20					$	3.44
Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items
GAAP Effective Tax Rate						25.8		%				(17.0)		%				22.7		%				1.8		%
Impact on Tax Rate as a result of Special Items						(0.9)		%				(35.9)		%				(1.1)		%				(17.9)		%
Effective Tax Rate excluding Special Items						26.7		%				18.9		%				23.8		%				19.7		%

(a) The foreign currency impact on reported Operating Profit is presented in relation only to the immediately preceding year presented. When determining applicable Core Operating Profit growth percentages, the Core Operating Profit for the current year should be compared to the prior year GAAP Operating Profit adjusted only for any prior year Special Items Income (Expense).

Reconciliation of GAAP Operating Profit to Company Restaurant Profit
						Quarter ended 9/30/2022
						KFC Division						Taco Bell Division						Pizza Hut Division						Habit Burger Grill Division						Corporate and Unallocated						Consolidated
GAAP Operating Profit (Loss)						$	304					$	204					$	92					$	(4)					$	(50)					$	546
Less:
Franchise and property revenues						418						196						145						1						—						760
Franchise contributions for advertising and other services						174						138						88						1						—						401
Add:
General and administrative expenses						96						41						45						12						67						261
Franchise and property expenses						15						8						5						—						—						28
Franchise advertising and other services expense						166						139						91						—						—						396
Refranchising (gain) loss						—						—						—						—						(3)						(3)
Other (income) expense						26						(1)						(1)						—						(14)						10
Company restaurant profit						$	15					$	57					$	(1)					$	6					$	—					$	77
Company sales						$	112					$	234					$	4					$	129					$	—					$	479
Company restaurant margin %						13.6		%				23.9		%				(5.4)		%				5.2		%				N/A						16.2		%

						Quarter ended 9/30/2021
						KFC Division						Taco Bell Division						Pizza Hut Division						Habit Burger Grill Division						Corporate and Unallocated						Consolidated
GAAP Operating Profit (Loss)						$	314					$	184					$	101					$	1					$	(73)					$	527
Less:
Franchise and property revenues						391						177						147						1						—						716
Franchise contributions for advertising and other services						158						132						87						—						—						377
Add:
General and administrative expenses						86						40						45						12						70						253
Franchise and property expenses						20						9						2						—						—						31
Franchise advertising and other services expense						154						131						90						—						—						375
Refranchising (gain) loss						—						—						—						—						1						1
Other (income) expense						1						(2)						(3)						—						2						(2)
Company restaurant profit						$	26					$	53					$	1					$	12					$	—					$	92
Company sales						$	143					$	225					$	13					$	132					$	—					$	513
Company restaurant margin %						18.9		%				23.4		%				6.0		%				8.6		%				N/A						17.9		%

						Year to date 9/30/2022
						KFC Division						Taco Bell Division						Pizza Hut Division						Habit Burger Grill Division						Corporate and Unallocated						Consolidated
GAAP Operating Profit (Loss)						$	888					$	604					$	287					$	(14)					$	(156)					$	1,609
Less:
Franchise and property revenues						1,195						574						438						4						—						2,211
Franchise contributions for advertising and other services						493						406						264						1						—						1,164
Add:
General and administrative expenses						269						116						145						35						203						768
Franchise and property expenses						53						22						9						1						4						89
Franchise advertising and other services expense						480						406						266						1						—						1,153
Refranchising (gain) loss						—						—						—						—						(15)						(15)
Other (income) expense						44						(2)						(6)						—						(36)						—
Company restaurant profit						$	46					$	166					$	(1)					$	18					$	—					$	229
Company sales						$	353					$	691					$	14					$	390					$	—					$	1,448
Company restaurant margin %						13.1		%				23.9		%				(4.7)		%				4.8		%				N/A						15.8		%

						Year to date 9/30/2021
						KFC Division						Taco Bell Division						Pizza Hut Division						Habit Burger Grill Division						Corporate and Unallocated						Consolidated
GAAP Operating Profit (Loss)						$	932					$	560					$	306					$	6					$	(167)					$	1,637
Less:
Franchise and property revenues						1,124						518						435						3						—						2,080
Franchise contributions for advertising and other services						452						380						273						—						—						1,105
Add:
General and administrative expenses						239						104						128						35						183						689
Franchise and property expenses						49						23						9						—						—						81
Franchise advertising and other services expense						438						377						275						—						—						1,090
Refranchising (gain) loss						—						—						—						—						(21)						(21)
Other (income) expense						(5)						(5)						(7)						—						5						(12)
Company restaurant profit						$	77					$	161					$	3					$	38					$	—					$	279
Company sales						$	423					$	656					$	39					$	391					$	—					$	1,509
Company restaurant margin %						18.3		%				24.5		%				6.9		%				9.7		%				N/A						18.5		%

Items Impacting Reported Results and Reasonably Likely to Impact Future Results

The following items impacted reported results in 2022 and/or 2021 and/or are reasonably likely to impact future results. See also the Detail of Special Items section of this MD&A for other items similarly impacting results.

Russia Invasion of Ukraine

In the first quarter of 2022, as a result of the Russian invasion of Ukraine, we suspended all investment and restaurant development in Russia. We also suspended all operations of our 70 company-owned KFC restaurants in Russia and began finalizing an agreement to suspend all Pizza Hut operations in Russia, in partnership with our master franchisee. Further, we pledged to redirect any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts.

During the second quarter, we completed the transfer of ownership of the Pizza Hut Russia business to a local operator who has initiated the process of re-branding locations to a non-YUM concept.

In October 2022, we announced that we have entered into a sale and purchase agreement to transfer ownership of our KFC Russia restaurants, operating system and master franchise rights, including the network of KFC franchised restaurants, to Smart Service Ltd., a business operated by one of our existing KFC franchisees in Russia. Under the agreement, the buyer will be responsible for re-branding locations to a non-YUM concept and retaining the Company's employees in Russia. Completion of the transaction is subject to regulatory and governmental approvals, as well as other conditions. Following the completion of the transaction, we will have ceased our corporate presence in Russia.

As of the beginning of the second quarter, we elected to remove all Russia units from our unit count and their associated sales from our total system sales. We removed 1,112 units and 53 units in Russia from our global KFC and Pizza Hut units counts, respectively. This negatively impacted YUM and KFC Division year-over-year unit growth by two and five percentage points, respectively at September 30, 2022. This also negatively impacted our system sales growth for YUM and KFC Division by three and four percentage points, respectively, during the quarter ended September 30, 2022, and negatively impacted our system sales growth for YUM and KFC Division by one and three percentage points, respectively, for the year to date September 30, 2022. Russia units were removed from our same-store sales calculations as of the beginning of the second quarter.

Historically, our Russian business has constituted approximately 3% of our total operating profit and 2% of our total system sales. During the quarter ended September 30, 2022, our Core Operating Profits in Russia declined versus the third quarter of last year, negatively impacting YUM and KFC Division Core Operating Profit growth by three and five percentage points. During the year to date ended September 30, 2022, our Core Operating Profits in Russia declined versus the prior year, negatively impacting YUM and KFC Division Core Operating Profit growth by two and four percentage points, respectively.

See Note 1 for a discussion regarding our net asset base in Russia.

Impact of Foreign Currency Translation on Operating Profit

Changes in foreign currency exchange rates negatively impacted the translation of our foreign currency denominated Divisional Operating Profit by $39 million and $76 million for the quarter and year to date ended September 30, 2022, respectively. This included a negative impact to our KFC Division Operating Profit of $33 million and $64 million for the quarter and year to date ended September 30, 2022, respectively. For the full year 2022 we currently expect changes in foreign currency to negatively impact Divisional Operating Profit by approximately $100 million.

COVID-19

In late 2019, a novel strain of coronavirus, COVID-19, was first detected and in March 2020, the World Health Organization declared COVID-19 a global pandemic. As a result of COVID-19, governmental authorities around the world implemented measures to reduce the spread of COVID-19, some of which remain in place today. These measures have included and in some instances continue to include restrictions on travel outside the home and other limitations on business and other activities as well as encouraging social distancing. As a result of COVID-19, we and our franchisees have experienced store closures and instances of reduced store-level operations, including reduced operating hours and dining-room closures. The impact on our sales in each of our markets has been dependent on the timing, severity and duration of the outbreak, measures implemented by government authorities to reduce the spread of COVID-19, as well as our reliance on dine-in sales in the market.

Throughout 2022, COVID-19 outbreaks and resulting government restrictions limiting mobility have continued to impact sales in a few key markets, primarily in China. Excluding China, our YUM same-store sales growth was 7% and our KFC Division same-store sales growth was 9% for the quarter ended September 30, 2022. Excluding China, our YUM same-store sales growth was 6% and our KFC Division same-store sales growth was 9% for the year to date ended September 30, 2022.

The COVID-19 situation is ongoing, and its dynamic nature makes it difficult to forecast any impacts on the Company's results for the balance of 2022.

Investment in Devyani

In 2020, we received a minority interest in Devyani International Limited (“Devyani”), an entity that operates KFC and Pizza Hut franchised units in India. The minority interest was received in lieu of cash proceeds upon the refranchising of approximately 60 KFC restaurants in India. At the time of the refranchisings, the fair value of this minority interest was estimated to be approximately $31 million. On August 16, 2021, Devyani executed an initial public offering and subsequently the fair value of this investment became readily determinable. As a result, concurrent with the initial public offering we began recording changes in fair value in Investment (income) expense, net in our Condensed Consolidated Statements of Income and recognized pre-tax investment income of $27 million and $20 million, in the quarter and year to date ended September 30, 2022, respectively, and pre-tax investment income of $52 million in both the quarter and year to date ended September 30, 2021.

KFC Division

The KFC Division has 26,872 units, 85% of which are located outside the U.S. Additionally, 99% of the KFC Division units were operated by franchisees as of September 30, 2022.

						Quarter ended																														Year to date
																		% B/(W)																														% B/(W)
						2022						2021						Reported									Ex FX									2022						2021						Reported									Ex FX
System Sales						$	7,824					$	7,878					(1)									8									$	22,809					$	22,789					Even									6
Same-Store Sales Growth (Decline) %						7						6						N/A									N/A									3						14						N/A									N/A
Company sales						$	112					$	143					(22)									(14)									$	353					$	423					(17)									(11)
Franchise and property revenues						418						391						7									15									1,195						1,124						6									12
Franchise contributions for advertising and other services						174						158						10									16									493						452						9									15
Total revenues						$	704					$	692					2									9									$	2,041					$	1,999					2									8
Company restaurant profit						$	15					$	26					(44)									(38)									$	46					$	77					(40)									(35)
Company restaurant margin %						13.6		%				18.9		%				(5.3)			ppts.						(5.2)			ppts.						13.1		%				18.3		%				(5.2)			ppts.						(5.0)			ppts.
G&A expenses						$	96					$	86					(10)									(13)									$	269					$	239					(12)									(15)
Franchise and property expenses						15						20						27									19									53						49						(8)									(18)
Franchise advertising and other services expense						166						154						(8)									(14)									480						438						(10)									(15)
Operating Profit						$	304					$	314					(3)									7									$	888					$	932					(5)									2

																		% Increase (Decrease)
Unit Count						9/30/2022						9/30/2021
Franchise						26,652						25,932						3
Company-owned						220						290						(24)
Total						26,872						26,222						2

Company sales and Company restaurant margin %

The quarterly and year to date decreases in Company sales, excluding the impacts of foreign currency translation, were driven by the suspension of operations of our 70 company-owned KFC restaurants in Russia. Company same-store sales grew 2% and

were flat for the quarter and year to date, respectively. As discussed in the Introduction and Overview section of this MD&A, all units in Russia, both Company and franchised, were removed from our same-store sales calculations beginning April 1, 2022.

The quarterly and year to date decreases in Company restaurant margin percentage were driven by commodity and wage inflation.

Franchise and property revenues

The quarterly and year to date increases in Franchise and property revenues, excluding the impacts of foreign currency translation, were driven by franchise same-store sales growth of 7% and 3%, respectively, and unit growth.

As discussed in the Introduction and Overview section of this MD&A, all units in Russia, both Company and franchised, were removed from our same-store sales calculations beginning April 1, 2022.

G&A

The quarterly increase in G&A, excluding the impact of foreign currency translation, was driven by higher headcount and salaries and higher travel related costs, partially offset by lower expenses related to our annual incentive compensation program.

The year to date increase in G&A, excluding the impact of foreign currency translation, was driven by higher headcount and salaries, higher travel related costs and higher professional fees, partially offset by lower expenses related to our annual incentive compensation program.

Operating Profit

The quarterly increase in Operating Profit, excluding the impact of foreign currency translation, was driven by same-store sales growth and unit growth, partially offset by the negative impact of 5 percentage points on year-over-year operating profit growth as a result of lower profits in Russia, higher G&A and higher restaurant operating costs.

The year to date increase in Operating Profit, excluding the impact of foreign currency translation, was driven by same-store sales growth and unit growth, partially offset by higher G&A, the negative impact of 4 percentage points on year-over-year operating profit growth as a result of lower profits in Russia and higher restaurant operating costs.

Taco Bell Division

The Taco Bell Division has 7,974 units, 89% of which are in the U.S. The Company owned 7% of the Taco Bell units in the U.S. as of September 30, 2022.

						Quarter ended																														Year to date
																		% B/(W)																														% B/(W)
						2022						2021						Reported									Ex FX									2022						2021						Reported									Ex FX
System Sales						$	3,417					$	3,143					9									9									$	10,034					$	9,212					9									9
Same-Store Sales Growth %						6						5						N/A									N/A									6						12						N/A									N/A
Company sales						$	234					$	225					4									4									$	691					$	656					5									5
Franchise and property revenues						196						177						11									11									574						518						11									11
Franchise contributions for advertising and other services						138						132						5									5									406						380						7									7
Total revenues						$	568					$	534					6									7									$	1,671					$	1,554					8									8
Company restaurant profit						$	57					$	53					6									6									$	166					$	161					3									3
Company restaurant margin %						23.9		%				23.4		%				0.5			ppts.						0.5			ppts.						23.9		%				24.5		%				(0.6)			ppts.						(0.6)			ppts.
G&A expenses						$	41					$	40					(2)									(3)									$	116					$	104					(11)									(12)
Franchise and property expenses						8						9						10									10									22						23						2									3
Franchise advertising and other services expense						139						131						(6)									(6)									406						377						(8)									(8)
Operating Profit						$	204					$	184					10									11									$	604					$	560					8									8

																		% Increase (Decrease)
Unit Count						9/30/2022						9/30/2021
Franchise						7,510						7,143						5
Company-owned						464						476						(3)
Total						7,974						7,619						5

Company sales and Company restaurant margin %

The quarterly and year to date increases in Company sales were driven by same-store sales growth of 6% and 8% for the quarter and year to date, respectively, and unit growth partially offset by refranchising.

The quarterly increase in Company restaurant margin percentage was driven by Company same-store sales growth partially offset by commodity and wage inflation.

The year to date decrease in Company restaurant margin percentage was driven by commodity and wage inflation partially offset by Company same-store sales growth.

Franchise and property revenues

The quarterly and year to date increases in Franchise and property revenues were driven by franchise same-store sales growth of 6% for both the quarter and year to date and unit growth.

G&A

The quarterly increase in G&A was driven by higher headcount and salaries and higher travel related costs partially offset by lower professional fees.

The year to date increase in G&A was driven by higher headcount and salaries and higher travel related costs.

Operating Profit

The quarterly and year to date increases in Operating Profit were driven by same-store sales growth and unit growth partially offset by higher restaurant operating costs and higher G&A costs.

Pizza Hut Division

The Pizza Hut Division has 18,807 units, 65% of which are located outside the U.S. The Pizza Hut Division uses multiple distribution channels including delivery, dine-in and express (e.g. airports) and includes units operating under both the Pizza Hut and Telepizza brands. Additionally, over 99% of the Pizza Hut Division units were operated by franchisees as of September 30, 2022.

						Quarter ended																														Year to date
																		% B/(W)																														% B/(W)
						2022						2021						Reported									Ex FX									2022						2021						Reported									Ex FX
System Sales						$	3,146					$	3,170					(1)									4									$	9,345					$	9,409					(1)									3
Same-Store Sales Growth (Decline) %						1						4						N/A									N/A									Even						9						N/A									N/A
Company sales						$	4					$	13					(63)									(63)									$	14					$	39					(64)									(64)
Franchise and property revenues						145						147						(2)									3									438						435						1									4
Franchise contributions for advertising and other services						88						87						—									2									264						273						(3)									(2)
Total revenues						$	237					$	247					(4)									(1)									$	716					$	747					(4)									(2)
Company restaurant profit						$	(1)					$	1					NM									NM									$	(1)					$	3					NM									NM
Company restaurant margin %						(5.4)		%				6.0		%				(11.4)			ppts.						(11.4)			ppts.						(4.7)		%				6.9		%				(11.6)			ppts.						(11.6)			ppts.
G&A expenses						$	45					$	45					(2)									(4)									$	145					$	128					(13)									(15)
Franchise and property expenses						5						2						(103)									(133)									9						9						4									(7)
Franchise advertising and other services expense						91						90						(1)									(3)									266						275						3									2
Operating Profit						$	92					$	101					(8)									(3)									$	287					$	306					(6)									(3)

																		% Increase (Decrease)
Unit Count						9/30/2022						9/30/2021
Franchise						18,786						17,954						5
Company-owned						21						53						(60)
Total						18,807						18,007						4

Company sales

The quarterly and year to date decreases in Company sales, excluding the impacts of foreign currency translation, were driven by the refranchising of stores in the United Kingdom.

Franchise and property revenues

The quarterly increase in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by unit growth and franchise same-store sales growth of 1%.

The year to date increase in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by unit growth and the recognition of franchise fees related to unexercised development rights arising from a master franchise agreement.

G&A

The quarterly and year to date increases in G&A, excluding the impacts of foreign currency translation, were driven by higher headcount and salaries and higher travel related expenses.

Operating Profit

The quarterly decrease in Operating Profit, excluding the impacts of foreign currency translation, was driven by current year net bad debt expense lapping prior year net bad debt recoveries and higher G&A partially offset by unit growth.

The year to date decrease in Operating Profit, excluding the impacts of foreign currency translation, was driven by higher G&A partially offset by unit growth.

Habit Burger Grill Division

The Habit Burger Grill Division has 341 units, the vast majority of which are in the U.S. The Company owned 84% of the Habit Burger Grill units in the U.S. as of September 30, 2022.

						Quarter ended																								Year to date
																		% B/(W)																								% B/(W)
						2022						2021						Reported												2022						2021						Reported
System Sales(a)						$	156					$	150					4												$	457					$	440					4
Same-Store Sales Growth %						(1)						11						N/A												(1)						18						N/A
Total revenues						$	131					$	133					(1)												$	395					$	394					—
Operating Profit (Loss)						$	(4)					$	1					NM												$	(14)					$	6					NM

(a) Beginning with the quarter ended March 31, 2022, our Habit Burger Grill Division adopted a reporting calendar change as discussed in Note 1. The impact of this change in reporting calendar was not significant, and accordingly, prior year amounts in these Condensed Consolidated Financial Statements and accompanying Management's Discussion and Analysis have not been restated. System sales growth, excluding the impact of the reporting calendar change, was 12% and 13% for the quarter and year to date ended September 30, 2022, respectively.

Unit Count						9/30/2022						9/30/2021						% Increase (Decrease)
Franchise						66						41						61
Company-owned						275						262						5
Total						341						303						13

Corporate & Unallocated

						Quarter ended																					Year to date
(Expense) / Income						2022						2021						% B/(W)									2022						2021						% B/(W)
Corporate and unallocated G&A						$	(67)					$	(70)					3									$	(203)					$	(183)					(11)
Unallocated Franchise and property expenses (See Note 8)						—						—						NM									(4)						—						NM
Unallocated Refranchising gain (loss)						3						(1)						NM									15						21						(26)
Unallocated Other income (expense) (See Note 8)						14						(2)						NM									36						(5)						NM
Investment income (expense), net (See Note 8)						27						51						(49)									19						52						(64)
Other pension income (expense) (See Note 9)						(2)						(1)						NM									(3)						(6)						48
Interest expense, net						(124)						(126)						1									(390)						(416)						6
Income tax benefit (provision) (See Note 6)						(116)						77						NM									(281)						(22)						NM
Effective tax rate (See Note 6)						25.8		%				(17.0)		%				(42.8)			ppts.						22.7		%				1.8		%				(20.9)			ppts.

Corporate and unallocated G&A

The quarterly decrease in Corporate and Unallocated G&A expense was driven by lower current year expenses related to our annual incentive compensation programs and lower professional fees, offset by higher software costs and amortization, higher headcount and salaries including personnel associated with our 2021 investments in digital and technology companies and higher travel costs.

The year-to-date increase in Corporate and Unallocated G&A expense was driven by higher headcount and salaries including personnel associated with our 2021 investments in digital and technology companies, higher software costs and amortization, higher meeting costs, and higher travel costs, offset by lower current year expenses related to our annual incentive compensation programs.

Interest expense, net

The quarterly decrease in Interest expense, net was primarily driven by a lower weighted average interest rate offset by higher borrowings.

The year to date decrease in Interest expense, net was primarily driven by $12 million of previously unamortized debt issuance costs written-off in the prior year due to the refinancing of our Credit Agreement and $6 million lower expense in the current year relating to the call premium and unamortized debt issuance costs written-off associated with the redemption of the 2025 Notes as compared to the call premium and unamortized debt costs written-off associated with the redemption of the 2026 Notes (as discussed in our 2021 Form 10-K) in the prior year.

Consolidated Cash Flows

Net cash provided by operating activities was $975 million in 2022 versus $1,292 million in 2021. The decrease was primarily driven by an increase in incentive compensation payments, timing of spending on advertising and a decrease in Operating profit before Special Items, which includes the impact of foreign currency translation.

Net cash used in investing activities was $112 million in 2022 versus $123 million in 2021. The change was primarily driven by the lapping of our prior year acquisition of Dragontail Systems Limited, partially offset by the lapping of our prior year sale of certain mutual fund investments and higher current year capital spending.

Net cash used in financing activities was $928 million in 2022 versus $881 million in 2021. The change was primarily driven by lower current year net borrowings and higher dividends paid, partially offset by lower share repurchases.

Liquidity and Capital Resources

We have historically generated substantial cash flows from our extensive franchise operations, which require a limited YUM investment, and from the operations of our Company-owned stores. Our annual operating cash flows have been in excess of $1.3 billion in each of the past three years and we expect that to continue to be the case in 2022. It is our intent to use these operating cash flows to continue to invest in growing our business and pay a competitive dividend, with any remaining excess then returned to shareholders through share repurchases. To the extent operating cash flows plus other sources of cash do not cover our anticipated cash needs, we maintain a $1.25 billion Revolving Facility under our Credit Agreement that was undrawn as of September 30, 2022. We believe that our ongoing cash from operations, cash on hand, which was approximately $400 million at September 30, 2022, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months.

There have been no material changes to the disclosures made in Item 7 of the Company's 2021 Form 10-K regarding our material cash requirements. Due to the ongoing significance of our debt obligations, we are providing the update below.

Debt Instruments

As of September 30, 2022, approximately 94%, including the impact of interest rate swaps, of our $11.6 billion of total debt outstanding, excluding finance leases, is fixed. Our total debt outstanding currently has an effective overall interest rate of approximately 4.4%. We are managing a capital structure which reflects consolidated leverage, net of available cash, in-line with our target of ~5.0x EBITDA, and which we believe provides an attractive balance between optimized interest rates, duration and flexibility with diversified sources of liquidity and maturities spread over multiple years. We have credit ratings of BB+ (Standard & Poor's)/Ba2 (Moody's) with a balance sheet consistent with highly-levered peer restaurant franchise companies.

The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and discounts, as of September 30, 2022.

						2022						2023						2024						2025						2026						2027						2028						2029						2030						2031						2032						2037						2043						Total
Securitization Notes						$	10					$	39					$	39					$	39					$	944					$	875					$	582					$	565					$	7					$	682																							$	3,782
Credit Agreement						9						34						48						53						662						15						1,398																																										2,219
Subsidiary Senior Unsecured Notes																																				750																																																750
YUM Senior Unsecured Notes												325																																										800						1,050						$	2,100					$	325					$	275					4,875
Total						$	19					$	398					$	87					$	92					$	1,606					$	1,640					$	1,980					$	565					$	807					$	1,732					$	2,100					$	325					$	275					$	11,626

See Note 10 for details on the Securitization Notes, the Credit Agreement, Subsidiary Senior Unsecured Notes and YUM Senior Unsecured Notes.

New Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued guidance related to reference rate reform. The pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022. We are currently evaluating the impact of the transition from LIBOR to alternative reference rates, including the impact on our interest rate swaps with notional amounts of $1.5 billion expiring in March 2025. These interest rate swaps are designated cash flow hedges. We do not anticipate the impact of adopting this standard will be material to our Financial Statements.